SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2007
¨
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 000-551030
OccuLogix,
Inc.
(Exact
name of Registrant as specified in its charter)
DELAWARE
|
59
343 4771
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
2600
Skymark Avenue, Unit 9, Suite 201
Mississauga,
Ontario L4W 5B2
(Address
of principal executive offices)
(905)
602-0887
(Registrant’s
telephone number, including area code)
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON
STOCK, $0.001 PAR VALUE
(Title of
Class)
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
¨
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
¨
No
x
Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
¨
|
Accelerated
filer
x
|
|
|
Non-accelerated
filer
¨
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
¨
|
Indicate
by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
¨
No
x
The
aggregate market value of the voting common stock held by non-affiliates of the
Registrant (assuming officers, directors and 10% stockholders are affiliates),
based on the last sale price for such stock on June 30, 2007: $36,025,308. The
Registrant has no non-voting common stock.
As of
March 13, 2008, there were 57,306,145 shares of the Registrant’s Common Stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders
of the Registrant to be held on June 20, 2008 are incorporated by reference into
Part III of this Form 10-K.
The
Registrant makes available free of charge on or through its website
(http://www.occulogix.com) its Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934. The material is made available through the Registrant’s website as soon
as reasonably practicable after the material is electronically filed with or
furnished to the U.S. Securities and Exchange Commission, or SEC. All of the
Registrant’s filings may be read or copied at the SEC’s Public Reference Room at
100 F Street, N.E., Room 1580, Washington D.C. 20549. Information on the hours
of operation of the SEC’s Public Reference Room can be obtained by calling the
SEC at 1-800-SEC-0330. The SEC maintains a website (
http://www.sec.gov)
that contains reports and proxy and information statements of issuers that file
electronically.
PART
I
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements relating to
future events and our future performance within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. In some cases, you can identify
forward-looking statements by terms such as “may”, “will”, “should”, “could”,
“would”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”,
“projects”, “predicts”, “potential” and similar expressions intended to identify
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results,
performances, time frames or achievements expressed or implied by the
forward-looking statements.
Given
these risks, uncertainties and other factors, you should not place undue
reliance on these forward-looking statements. Information regarding market and
industry statistics contained in this Annual Report on Form 10-K is included
based on information available to us that we believe is accurate. It is
generally based on academic and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources and cannot assure you of the accuracy of the
market and industry data we have included.
Unless
the context indicates or requires otherwise, in this Annual Report on Form 10-K,
references to the “Company” shall mean OccuLogix, Inc. and its subsidiaries.
References to “$” or “dollars” shall mean U.S. dollars unless otherwise
indicated. References to “C$” shall mean Canadian dollars.
Overview
We are an
ophthalmic therapeutic company founded to commercialize innovative treatments
for age-related eye diseases. Until recently, the Company operated two
business divisions, being Retina and Glaucoma.
Retina
Division
Until
recently, the Company’s Retina division was in the business of developing and
commercializing a treatment for dry age-related macular degeneration, or Dry
AMD. Age-related macular degeneration, or AMD, is the leading cause of late
onset visual impairment and legal blindness in people over the age of 50 in the
United States and other Western industrialized societies.
We
believe that Dry AMD, the most common form of the disease, afflicts
approximately 13.0 to 13.5 million people in the United States, representing
approximately 85% to 90% of all AMD cases. Although the exact cause of AMD is
not known, researchers have identified several factors that are associated with
AMD, including poor microcirculation and the gradual build-up of cellular waste
material in the retina. We believe that improved microcirculation increases the
supply of oxygen and nutrients to the compromised retina and facilitates the
removal of cellular waste material from the retina. We believe that a treatment
that improves microcirculation in the retina can help to enhance the metabolic
efficiency of the retina and the removal of waste material and thereby aid in
the treatment of Dry AMD. We believe there is a significant opportunity for such
a treatment.
Our
product for Dry AMD, the RHEO™ System, is designed to improve microcirculation
in the eye by filtering high molecular weight proteins and other macromolecules
from the patient’s plasma. The RHEO™ System is used to perform the Rheopheresis™
procedure, which we refer to under our trade name RHEO™ Therapy. The
Rheopheresis™ procedure is a blood filtration process that selectively removes
molecules from plasma. The RHEO™ System consists of the OctoNova Pump and a
disposable treatment set, containing two filters, through which the patient’s
blood circulates. We believe that the RHEO™ System is the only Dry AMD treatment
to target what we believe to be the underlying cause of AMD rather than its
symptoms and that, based on early data, appeared to demonstrate improved vision
in some patients. The only currently accepted treatment option for persons with
advanced cases of Dry AMD are over-the-counter vitamins, antioxidants and zinc
supplements that can reduce the five-year risk of conversion to Wet AMD, the
other form of the disease, by approximately 25%.
We
conducted a pivotal clinical trial, called MIRA-1, or Multicenter Investigation
of Rheopheresis for AMD, which, if successful, was expected to support our
application to the U.S. Food and Drug Administration, or FDA, to obtain approval
to market the RHEO™ System in the United States. On February 3, 2006, we
announced that, based on a preliminary analysis of the data from MIRA-1, MIRA-1
did not meet its primary efficacy endpoint as it did not demonstrate a
statistically significant difference in the mean change of Best
Spectacle-Corrected Visual Acuity applying the Early Treatment Diabetic
Retinopathy Scale, or ETDRS BCVA, between the treated and placebo groups in
MIRA-1 at 12 months post-baseline. As expected, the treated group demonstrated a
positive result. An anomalous response of the control group is the principal
reason why the primary efficacy endpoint was not met. There were subgroups that
did demonstrate statistical significance in their mean change of ETDRS BCVA
versus control.
Subsequent
to the February 3, 2006 announcement, the Company completed an in-depth analysis
of the MIRA-1 study data identifying subjects that were included in the
intent-to-treat, or ITT, population but who deviated from the MIRA-1 protocol as
well as those patients who had documented losses or gains in vision for reasons
not related to retinal disease such as cataracts. Those subjects in the ITT
population who met the protocol requirements, and who did not exhibit ophthalmic
changes unrelated to retinal disease, comprised the modified per-protocol
population.
In light
of the MIRA-1 study results, we also re-evaluated our Pre-Market Approval
Application, or PMA, submission strategy and then met with representatives of
the FDA, on June 8, 2006 in order to discuss the impact on our PMA submission
strategy of the MIRA-1 study results. In light of MIRA-1’s failure to meet its
primary efficacy endpoint, the FDA advised us that it would require an
additional study of the RHEO™ System to be performed.
On
January 29, 2007, the Company announced that it had obtained Investigational
Device Exemption clearance from the FDA to commence the new pivotal clinical
trial of the RHEO™ System, called RHEO-AMD, or Safety and Effectiveness in a
Multi-center, Randomized, Sham-controlled Investigation for Dry, Non-exudative
Age-Related Macular Degeneration (AMD) Using Rheopheresis.
However,
on November 1, 2007, the Company announced the indefinite suspension of its
RHEO™ System clinical development program. This decision was made following a
comprehensive review of the respective costs and development timelines
associated with the products in the Company’s portfolio and in light of the
Company’s financial position. Between January 29, 2007 and November 1, 2007, the
Company had prepared the RHEO-AMD protocol and had been putting into place all
of the resources required for the conduct for the RHEO-AMD study, including the
securing of clinical trial site commitments. The Company is in the process of
winding down the RHEO-AMD study as there is no reasonable prospect that the
RHEO™ System clinical development program will be relaunched in the foreseeable
future. Subsequent to our fiscal 2007 year-end, as of February 25,
2008, we have terminated our relationship with Asahi Kasei Kuraray Medical Co.,
Ltd. (formerly Asahi Kasei Medical Co., Ltd.), or Asahi Medical. Asahi Medical
manufactures, and supplied us with, the Rheofilter filter and the Plasmaflo
filter, both of which are key components of the RHEO™ System. We also are
engaged in discussions with Diamed Medizintechnik GmbH, or Diamed, and MeSys
GmbH, or MeSys, regarding the termination of our relationship with each of
them. Diamed is the designer, and MeSys is the manufacturer, of the
OctoNova pump, another key component of the RHEO™ System.
Glaucoma
Division
In
anticipation of the delay in the commercialization of the RHEO™ System in the
United States as a result of the MIRA-1 study’s failure to meet its primary
efficacy endpoint and the FDA’s requirement of us to conduct an additional study
of the RHEO™ System, the Company accelerated its diversification plans and, on
September 1, 2006, acquired Solx, Inc., or SOLX, a Boston University Photonics
Center-incubated company that has developed a system for the treatment of
glaucoma, called the SOLX Glaucoma System.
The SOLX
Glaucoma System is a next-generation glaucoma treatment platform designed to
reduce intra-ocular pressure, or IOP, without a bleb (which is a surgically
created flap that serves as a drainage pocket underneath the surface of the
eye), thus avoiding its related complications. The SOLX Glaucoma System consists
of the SOLX 790 Laser, a titanium sapphire laser used in laser trabeculoplasty
procedures, and the SOLX Gold Shunt, a 24-karat gold, ultra-thin drainage device
designed to bridge the anterior chamber and the suprachoroidal space in the eye,
using the pressure differential that exists naturally in the eye in order to
reduce IOP.
On
December 20, 2007, we announced the sale of SOLX to Solx Acquisition, Inc., or
Solx Acquisition, a company wholly owned by Doug P. Adams, the founder of SOLX
and who, until the closing of the sale, had been serving as an executive officer
of the Company in the capacity of President & Founder, Glaucoma
Division.
The
consideration for the purchase and sale of all of the issued and outstanding
shares of the capital stock of SOLX consisted of: (i) on December 19,
2007, the closing date of the sale, the assumption by Solx Acquisition of all of
the liabilities of OccuLogix, as they related to SOLX’s business, incurred on or
after December 1, 2007, and OccuLogix’s obligation to make a $5,000,000 payment
to the former stockholders of SOLX due on September 1, 2008 in satisfaction of
the outstanding balance of the purchase price of SOLX; (ii) on or prior to
February 15, 2008, the payment by Solx Acquisition of all of the expenses that
OccuLogix had paid to the closing date, as they related to SOLX’s business
during the period commencing on December 1, 2007; (iii) during the period
commencing on the closing date and ending on the date on which SOLX achieves a
positive cash flow, the payment by Solx Acquisition of a royalty equal to 3% of
the worldwide net sales of the SOLX 790 Laser and the SOLX Gold Shunt, including
next-generation or future models or versions of these products; and (iv)
following the date on which Solx achieves a positive cash flow, the payment by
Solx Acquisition of a royalty equal to 5% of the worldwide net sales of these
products. In order to secure the obligation of Solx Acquisition to make these
royalty payments, SOLX granted to OccuLogix a subordinated security interest in
certain of its intellectual property. In connection with the sale of SOLX, those
employees of the Company, whose roles and responsibilities related mainly to
SOLX’s business, ceased to be employees of the Company and became employees of
Solx Acquisition or SOLX.
Prior to
the sale of SOLX, we had been in the process of training and certifying
physicians in the use of the SOLX Gold Shunt, for commercial purposes, in
various European and Asian jurisdictions, including Spain, Italy, Germany,
Poland, France, the United Kingdom and Thailand. In addition, in order to
establish and maintain a reliable distribution network for SOLX’s products, we
had been continuing to maintain our relationships with distributors in France,
Germany, Spain, the United Kingdom and Canada and had been engaged in pursuing
relationships with other distributors in Europe.
Both the
SOLX 790 Laser and the SOLX Gold Shunt are currently the subject of randomized,
multi-center clinical trials, the purposes of which are to demonstrate
equivalency to the argon laser, in the case of the SOLX 790 Laser, and to the
Ahmed Glaucoma Valve manufactured by New World Medical, Inc., in the case of the
SOLX Gold Shunt. The results of these clinical trials will be used in support of
applications to the FDA for a 510(k) clearance for each of the SOLX 790 Laser
and the SOLX Gold Shunt, the receipt of which, if any, will enable the marketing
and sale of these products in the United States.
The SOLX
790 Laser received CE Mark approval in December 2004, and the SOLX Gold Shunt
received CE Mark approval in October 2005. The SOLX 790 Laser has a Health
Canada license, and, prior to the sale of SOLX, we had been seeking the
corresponding approval for the SOLX Gold Shunt.
OcuSense,
Inc.
As part
of its accelerated diversification plans, on November 30, 2006, OccuLogix
acquired 50.1% of the capital stock, on a fully diluted basis, of OcuSense,
Inc., or OcuSense, a San Diego-based company that is in the process of
developing technologies that will enable eye care practitioners to test, at the
point-of-care, for highly sensitive and specific biomarkers using nanoliters of
tear film.
OcuSense’s
first product, which is currently under development, is a hand-held tear film
test for the measurement of osmolarity, a quantitative and highly specific
biomarker that has shown to correlate with dry eye disease, or DED, The test is
known as the TearLab™ test for DED. The anticipated innovation of the TearLab™
test for DED will be its ability to measure precisely and rapidly certain
biomarkers in nanoliter volumes of tear samples, using inexpensive
hardware. Historically, eye care researchers have relied on expensive
instruments to perform tear biomarker analysis. In addition to their cost, these
conventional systems are slow, highly variable in their measurement readings and
not categorized as waived by the FDA under regulations promulgated under the
Clinical Laboratory Improvement Amendments, or CLIA.
The
TearLab™ test for DED will require the development of the following three
components: (1) the TearLab™ disposable, which is a single-use
microfluidic labcard; (2) the TearLab™ pen, which is a hand-held device that
interfaces with the TearLab™ disposable; and (3) the TearLab™ reader, which is a
small desktop unit that allows for the docking of the TearLab™ disposable and
the TearLab™ pen and provides a quantitative reading for the
operator. OcuSense is currently engaged in industrial, electrical and
software design efforts for the three components of the TearLab™ test for DED
and, to these ends, is working with two engineering partners, both based in
Melbourne, Australia, one of which is a leader in biomedical instrument
development and the other of which is a leader in customized
microfluidics.
OcuSense’s
objective is to complete product development of the TearLab™ test for DED during
the first half of 2008. Following the completion of product development and
subsequent clinical trials, OcuSense intends to seek a 510(k) clearance and a
CLIA waiver from the FDA for the TearLab™ test for DED. Currently, it
anticipates seeking the 510(k) clearance during the latter half of 2008 and the
CLIA waiver during the latter half of 2009. In addition, OcuSense intends to
seek CE Mark approval for the TearLab™ test for DED during the latter half of
2008.
OccuLogix
acquired its 50.1% ownership stake, on a fully diluted basis, in OcuSense for an
aggregate purchase price of up to $8,000,000. Pursuant to the Series A Preferred
Stock Purchase Agreement, dated as of November 30, 2006, by and among OcuSense
and the Company (which agreement was amended subsequently on October 29, 2007),
or the OcuSense Stock Purchase Agreement, the Company purchased 1,754,589 shares
of OcuSense’s Series A Preferred Stock, par value $0.001 per share. The Company
paid $2,000,000 of the purchase price on the closing of the purchase and made
another $2,000,000 payment on January 3, 2007. A third $2,000,000 payment was
made in June 2007 upon the attainment by OcuSense of the first of two
pre-defined milestones, and the last $2,000,000 installment of the purchase
price will become due and payable upon the attainment by OcuSense of the second
of these two pre-defined milestones, being the successful production and testing
of Beta Lab Cards for Osmolarity and the Beta Reader for Osmolarity, or the
TearLab™ disposable and the TearLab™ reader, respectively. We anticipate that
OcuSense will attain this second milestone during the first half of
2008.
The
OcuSense Stock Purchase Agreement provides for an ability on the part of the
Company to increase its ownership interest in OcuSense for nominal consideration
if OcuSense fails to meet certain other milestones by specified dates. In
addition, pursuant to the OcuSense Stock Purchase Agreement, the Company has
agreed to purchase $3,000,000 of shares of OcuSense’s Series B Preferred Stock
upon OcuSense’s receipt from the FDA, if any, of 510(k) clearance for the
TearLab™ test for DED and to purchase another $3,000,000 of shares of OcuSense’s
Series B Preferred Stock upon OcuSense’s receipt from the FDA, if any, of a CLIA
waiver for the TearLab™ test for DED.
Current
Situation
With the
suspension of the Company’s RHEO™ System clinical development program, and the
consequent winding-down of the RHEO-AMD study, and the Company’s disposition of
SOLX, the Company no longer has any operating business. Its major asset is its
50.1% ownership stake, on a fully diluted basis, in OcuSense.
On
October 9, 2007, we announced that our Board of Directors, or the Board, had
authorized management and the Company’s advisors to explore the full range of
strategic alternatives available to enhance shareholder value. These
alternatives may include, but are not limited to, the raising of capital through
the sale of securities, one or more strategic alliances and the combination,
sale or merger of all or part of OccuLogix. In making the announcement, the
Company stated that there can be no assurance that the exploration of strategic
alternatives will result in a transaction. To date, we have not disclosed, nor
do we intend to disclose, developments with respect to our exploration of
strategic alternatives unless and until the Board, has approved a specific
transaction.
For some
time prior to the October 9, 2007 announcement, the Company had been seeking to
raise additional capital, with the objective of securing funding sufficient to
sustain its operations as it has been clear that, unless we were able to raise
additional capital, the Company would not have had sufficient cash to support
its operations beyond early 2008. The Board’s decisions to suspend the Company’s
RHEO™ System clinical development program and to dispose of SOLX were made and
implemented in order to conserve as much cash as possible while the Company
continues its capital-raising efforts.
On
January 9, 2008, we announced the departure, or pending departure, of seven
members of our executive team and, commencing on February 1, 2008, a 50%
reduction in the salary of each of Elias Vamvakas, our Chairman and Chief
Executive Officer, and Tom Reeves, our President and Chief Operating Officer. By
January 31, 2008, a total of 12 non-executive employees of the Company left the
Company’s employment.
On
February 19, 2008, we announced that the Company secured a bridge loan in an
aggregate principal amount of $3,000,000 from a number of private parties. The
loan bears interest at a rate of 12% per annum and has a 180-day term, which may
be extended to 270 days under certain circumstances. The repayment of the loan
is secured by a pledge by the Company of its shares of the capital stock of
OcuSense.
Under the
terms of the loan agreement, the Company has two pre-payment options available
to it, should it decide to not wait until the maturity date to repay the loan.
Under the first pre-payment option, the Company may repay the loan in full by
paying the lenders, in cash, the amount of outstanding principal and accrued
interest and issuing to the lenders five-year warrants in an aggregate amount
equal to approximately 19.9% of the issued and outstanding shares of the
Company’s common stock (but not to exceed 20% of the issued and outstanding
shares of the Company’s common stock). The warrants would be exercisable into
shares of the Company’s common stock at an exercise price of $0.10 per share and
would not become exercisable until the 180
th
day
following their issuance. Under the second pre-payment option, provided that the
Company has closed a private placement of shares of its common stock for
aggregate gross proceeds of at least $4,000,000, the Company may repay the loan
in full by issuing to the lenders shares of its common stock, in an aggregate
amount equal to the amount of outstanding principal and accrued interest, at a
15% discount to the price paid by the private placement investors. Any exercise
by the Company of the second pre-payment option would be subject to stockholder
and regulatory approval.
Currently,
we anticipate that the net proceeds of the loan, together with the Company’s
other cash and cash-equivalents, will be sufficient to sustain the Company’s
operations only until approximately the end of April 2008 (assuming that the
outstanding obligation of OccuLogix to pay $2,000,000 to OcuSense becomes due
and payable prior to the end of April 2008).
Our
History and Major Relationships
Shortly
after our inception, we began commercialization of therapeutic apheresis by
opening a therapeutic apheresis center in Florida. This site generated revenues
of $900,200 and $1,277,800 for the years ended June 30, 1999 and 1998,
respectively. The therapeutic apheresis center was closed in 1999 pursuant to a
directive issued by the FDA. After obtaining an FDA investigational device
exemption in 1999, we initiated the MIRA-1 pivotal clinical trial to support an
application to the FDA for approval to market the RHEO™ System and completed
this trial in 2005.
Relationship
with TLC Vision Corporation
TLC
Vision Corporation, or TLC Vision, beneficially owns approximately 32.8% of
our outstanding common stock, or 28.9% on a fully diluted basis.
Elias Vamvakas, formerly a director of TLC Vision and its past Chairman and
CEO, became our Chairman in 2003 and is also our CEO. In addition, one of our
other directors, Richard L. Lindstrom, is also a director of TLC
Vision. One of our other directors, Thomas N. Davidson, also was a
director of TLC Vision until December 2007. Mr. Vamvakas beneficially
owns 1,041,795 common shares of TLC Vision, representing approximately
2.08% of TLC Vision’s outstanding shares. Mr. Davidson beneficially
owns 67,127 common shares of TLC Vision, representing
approximately 0.14% of TLC Vision’s outstanding shares, and
Dr. Lindstrom beneficially owns 29,500 common shares of TLC Vision,
representing approximately 0.06% of TLC Vision’s outstanding
shares.
On
December 8, 2004, we purchased TLC Vision’s 50% interest in OccuLogix, L.P. in
exchange for which we issued 19,070,234 shares of our common stock to TLC
Vision. This resulted in OccuLogix, L.P. becoming our wholly-owned subsidiary.
Accordingly, 100% of the results of OccuLogix, L.P.’s operations are included in
the consolidated financial statements since that date. We licensed to OccuLogix,
L.P. all of the distribution and marketing rights for the RHEO™ System for
ophthalmic indications to which we are entitled. Prior to the acquisition, our
only profit stream had come from our share of OccuLogix, L.P.’s earnings. Our
acquisition of TLC Vision’s 50% ownership interest in OccuLogix, L.P.
transferred the earnings potential for sales of the RHEO™ System entirely to
us.
As part
of the formation of OccuLogix, L.P. in July 2002, we licensed certain patent
rights, trademark rights and know-how rights to OccuLogix, L.P. We also provided
OccuLogix, L.P. with licenses to our in-house software as well as sublicensing
software that we have licensed from TLC Vision. TLC Vision agreed to provide
OccuLogix, L.P., upon request, with $200,000 in funding at an annual interest
rate equal to the Bank of America prime rate of interest on the date the loan is
made, plus two percent. As at December 8, 2004, Occulogix, L.P. had not
requested funding from TLC Vision.
On
December 31, 2005, OccuLogix, L.P. transferred all of its assets and
liabilities, including the licensed patent, trademark and know-how rights and
the licensed distribution and marketing rights for the RHEO™ System, to our then
newly incorporated subsidiary, OccuLogix Canada Corp. We completed the wind-up
of OccuLogix, L.P. on February 6, 2006. Whatever residual value exists with
respect to the RHEO™ System resides solely in OccuLogix Canada
Corp.
On June
22, 2007, TLC Vision sold 1,904,762 shares of OccuLogix’s common stock to JEGC
OCC Corp., or JEGC. JEGC is owned by Greybrook Corporation, a private equity
firm controlled by Mr. Vamvakas, and by Jefferson Equicorp Ltd., a private
equity firm controlled by David Folk, Managing General Partner of Jefferson
Partners.
Other
Major Relationships
The
components of the RHEO™ System were developed by our suppliers, Diamed and Asahi
Medical.
Prior to
the Company’s acquisition of SOLX, Doug P. Adams served as the President and
Chief Executive Officer of SOLX and was a significant stockholder of SOLX.
Between September 1, 2006, the closing date of the acquisition, and December 19,
2007, the closing date of OccuLogix’s sale of SOLX to Solx Acquisition, Mr.
Adams served as an executive officer of the OccuLogix. OccuLogix paid Mr. Adams
a total of $1,615,930 and issued to him 1,309,329 shares of our common stock in
consideration of his proportionate share of the purchase price of SOLX. Until
the assumption, on December 19, 2007, by Solx Acquisition of OccuLogix’s
obligation to pay $5,000,000 to the former stockholders of SOLX on September 1,
2008 in satisfaction of the outstanding balance of the purchase price of SOLX,
Mr. Adams was owed $1,024,263
by OccuLogix in
consideration of his proportionate share of the outstanding balance of the
purchase price of SOLX.
In
addition, in connection with the Company’s acquisition of SOLX, OccuLogix paid
Peter M. Adams, Doug P. Adams’ brother, a total of $371,095
and issued to him and
his spouse an aggregate of 300,452 shares of our common stock in consideration
of his proportionate share of the purchase price of SOLX. Until the assumption,
on December 19, 2007, by Solx Acquisition of OccuLogix’s obligation to pay
$5,000,000 to the former stockholders of SOLX on September 1, 2008 in
satisfaction of the outstanding balance of the purchase price of SOLX, OccuLogix
owed Mr. Adams $236,917 in consideration of his proportionate share of the
outstanding balance of the purchase price of SOLX.
On
November 30, 2006, Mr. Vamvakas agreed to provide the Company with a standby
commitment to purchase convertible debentures of the Company in an aggregate
maximum principal amount of up to $8 million. When the Company raised gross
proceeds in the amount of $10,016,000 on February 6, 2007 in a private placement
of shares of its common stock and warrants, the commitment amount under Mr.
Vamvakas’ standby commitment was reduced to zero, thus effectively terminating
the standby commitment. No portion of the standby commitment was ever drawn down
by the Company, and the Company has paid Mr. Vamvakas a total of $29,808 in
commitment fees.
On
December 19, 2007, we sold SOLX to Solx Acquisition, Inc., a company wholly
owned by Doug P. Adams. The consideration for the purchase and sale of all of
the issued and outstanding shares of the capital stock of SOLX consisted
of: (i) on December 19, 2007, the closing date of the sale, the
assumption by Solx Acquisition of all of the liabilities of OccuLogix, as they
related to SOLX’s business, incurred on or after December 1, 2007, and
OccuLogix’s obligation to make a $5,000,000 payment to the former stockholders
of SOLX due on September 1, 2008 in satisfaction of the outstanding balance of
the purchase price of SOLX; (ii) on or prior to February 15, 2008, the payment
by Solx Acquisition of all of the expenses that OccuLogix had paid to the
closing date, as they related to SOLX’s business during the period commencing on
December 1, 2007; (iii) during the period commencing on the closing date and
ending on the date on which SOLX achieves a positive cash flow, the payment by
Solx Acquisition of a royalty equal to 3% of the worldwide net sales of the SOLX
790 Laser and the SOLX Gold Shunt, including next-generation or future models or
versions of these products; and (iv) following the date on which Solx achieves a
positive cash flow, the payment by Solx Acquisition of a royalty equal to 5% of
the worldwide net sales of these products. In order to secure the obligation of
Solx Acquisition to make these royalty payments, SOLX granted to OccuLogix a
subordinated security interest in certain of its intellectual
property.
Marchant
Securities Inc., or Marchant, a firm indirectly beneficially owned as to
approximately 32% by Mr. Vamvakas and members of his family, introduced the
Company to the lenders of the $3,000,000 aggregate principal amount bridge loan
that the Company secured and announced on February 19, 2008. For such service,
Marchant will be paid a commission of $180,000, being 6% of the aggregate
principal amount of the loan. Subject to obtaining any and all requisite
stockholder and regulatory approvals, half of the commission will be paid to
Marchant in the form of equity securities of the Company.
Industry
(OcuSense)
Point-of-care
Testing and Dry Eye Disease, or DED
The
global market for point-of-care testing is currently $4.5 billion annually or
15% of the $30 billion global market for in-vitro diagnostic products.
Approximately 75% of all laboratory tests today are performed at centralized
clinical laboratories. However, there is an increasing frequency of diagnostic
testing being performed at the point-of-care due to several factors, including a
need for rapid testing in acute care situations, the benefits of patient
monitoring and disease management, streamlining therapeutic decision making and
the overall trend toward personalized medicine. Advances in biodetection
technologies that can simplify and accelerate the rate of performing complex
diagnostic tests at the point-of-care, and that are reimbursed, will drive
utilization and overall point-of-care testing market growth.
OcuSense’s
first product, currently under development, is the TearLab™ test for DED which
is a test that can be performed at the point-of-care for the measurement of
osmolarity, a quantitative and highly specific biomarker that has shown to
correlate with DED. There are estimated to be more than 30 million people with
DED in the U.S. alone, and this condition is estimated to account for up to
one-third of all visits to U.S. doctors.
Each time
a person blinks, his or her eyes are resurfaced with a thin layer of a complex
fluid known as the tear film. The tear film works to protect eyes from the
outside world. Bacteria, viruses, sand, freezing winds and salt water will not
damage eyes when the tear film is intact. However, when compromised, a deficient
tear film can be an exceedingly painful and disruptive experience. The tear film
consists of three components: (i) an innermost mucin layer (produced
by the surface cells); (ii) the aqueous layer (the water in tears, produced by
the lacrimal gland); and (iii) an oily lipid layer which limits evaporation of
the tears (produced by the meibomian glands, located at the margins of the
eyelids). The apparatus of the ocular surface forms an integrated unit. When
working correctly, the tear film presents a smooth optical surface essential for
clear vision and proper immunity. However, when the tear film is disrupted, it
leads to the condition known as DED.
DED is
often seen as a result of aging, diabetes, prostate cancer therapy, HIV,
autoimmune diseases such as Sjögren’s syndrome and rheumatoid arthritis, LASIK
surgery, contact lens wear and menopause and as a side effect of hormone
replacement therapy. Numerous commonly prescribed and over-the-counter
medications also can cause, or contribute to, the manifestation of
DED.
As an
individual’s lacrimal glands deteriorate with age or disease, the quantity of
tears is drastically reduced, resulting in an aqueous deficiency. Other forms of
DED are linked to meibomian gland (lid) dysfunction, where a patient’s tears
evaporate so quickly that he or she is unable to retain any moisture on the
surface of his or her eye. The end effect in both cases, aqueous deficiency and
evaporative dry eye, is a very debilitating condition that results in pain,
decreased vision and, in severe cases, even blindness. Consequently, DED has a
significant negative impact on one’s quality of life.
There are
approximately 15 million Americans who suffer from contact lens-induced DED, and
10-15% of these patients revert to frame wear annually due to dryness and
discomfort. There are approximately 1.2 million LASIK procedures performed in
the U.S each year, and about 50% of patients experience DED post-operatively.
Osmolarity testing could provide optometrists with a tool to identify patients
at risk for dropping out of contact lens wear early in disease progression so
that they may be treated, and osmolarity testing could be an invaluable
pre-operative screen used to determine which LASIK patients should be treated
prior to surgery in order to improve post-operative outcomes.
Diagnostic
Alternatives for DED
Existing
diagnostic assays are highly subjective, do not correlate well with symptoms,
are invasive for patients and may require up to an hour of operator time to
perform. All of these factors have constrained the diagnosis and treatment of
the DED patient population. As physicians have not had access to objective,
quantitative diagnostic assays that correlate well with symptoms and disease
pathogenesis, it has been difficult for them to differentiate DED symptoms from
other eye diseases that present with very similar symptoms, such as
non-infectious ocular allergies or infectious bacterial or viral diseases. To
treat DED effectively and to mitigate the emotional and physical effects of this
disease, it will be critical to equip physicians with objective, quantitative
measurements of disease pathogenesis so they can determine more accurately the
most efficacious treatments for their patients.
DED
presents itself as an increase in the salt concentration of the tear film. For
approximately 50 years, studies have shown that tear film osmolarity is an ideal
clinical marker for diagnosing DED, because it provides an objective,
quantitative measurement of disease pathogenesis. Moreover, measuring osmolarity
could serve as an effective disease management tool by providing physicians with
an ability to personalize therapeutic intervention and to track patient outcomes
quantitatively. However, measuring tear biomarkers, such as osmolarity, at the
point-of-care requires a reduction in sample volume to the nanoliter scale in
order to mitigate the risk of reflex tearing, which results in a dilution of the
tear sample and a variability in the test results. Moreover, a point-of-care
system in the U.S. market most likely would require a CLIA waiver classification
in order to gain broad market adoption since most U.S. eye care practitioners do
not possess CLIA certification for their offices. In order to be given CLIA
waiver classification, the user interface of the test would have to be extremely
simple in order to minimize the likelihood of operator error and the risk of
harm to the patient. Conventional technologies for the measurement of osmolarity
are not suitable for the point-of-care market as they are too expensive, too
complex for CLIA waiver classification and unable to measure precisely tear film
osmolarity in nanoliter sample volumes. OcuSense is striving to meet the needs
of the point-of-care market with the TearLab™ test for DED.
Existing
osmometry technologies have proven unable to measure consistently tear samples
in the low nanoliter range, which has presented a critical barrier to their
entry into the DED diagnostic markets. In addition, these instruments are not
particularly suitable for use in a physician’s office, since they require
continual calibration, cleaning and maintenance. Existing osmometers currently
are marketed primarily to reference and hospital laboratories for the
measurement of osmolarity in blood, urine and other serum samples.
OcuSense’s
Product
OcuSense’s
first product, the TearLab™ test for DED, which is currently under development,
is an integrated testing system comprised of: (1) the TearLab™
disposable, which is a single-use microfluidic labcard; (2) the TearLab™ pen,
which is a hand-held device that interfaces with the TearLab™ disposable; and
(3) the TearLab™ reader, which is a small desktop unit that allows for the
docking of the TearLab™ disposable and the TearLab™ pen and provides a
quantitative reading for the operator. The anticipated innovation of the
TearLab™ test for DED will be its ability to measure precisely and rapidly, and
inexpensively, certain biomarkers in nanoliter volumes of tear samples. Current
in-lab testing technologies require a minimum of one microliter volume tear film
sample, or approximately 10 to 100 times more than the tear film volume
typically available before reflex tearing occurs.
The
operator of the TearLab™ test for DED, most likely a technician, will collect
the tear sample from the patient’s eye in the TearLab™ disposable, using the
TearLab™ pen, and then place the TearLab™ disposable into the TearLab™ reader.
The TearLab™ reader then will display an osmolarity reading to the operator.
Following the completion of the test, the TearLab™ disposable will be discarded
and a new TearLab™ disposable will be readied for the next test. The entire
process, from sample to answer, should require approximately two minutes or less
to complete.
OcuSense
is currently engaged in industrial, electrical and software design efforts for
the three components of the TearLab™ test for DED and, to these ends, is working
with two engineering partners, both based in Melbourne, Australia, one of which
is a leader in biomedical instrument development and the other of which is a
leader in customized microfluidics. In June 2007, OcuSense successfully produced
and tested Alpha prototypes of the TearLab™ disposable, pen and reader in order
to demonstrate the viability of the integrated system. OcuSense is working to
achieve the successful production and testing of Beta prototypes of the TearLab™
disposable, pen and reader in order to validate system performance further and
to prepare for commercial manufacturing. We anticipate that this milestone will
be attained during the first half 2008.
OcuSense’s
objective is to complete product development of the TearLab™ test for DED during
the first half of 2008. Following the completion of product development and
subsequent clinical trials, OcuSense intends to seek a 510(k) clearance and a
CLIA waiver from the FDA for the TearLab™ test for DED. Currently, it
anticipates seeking the 510(k) clearance during the latter half of 2008 and the
CLIA waiver during the latter half of 2009.
In addition, OcuSense
intends to seek CE Mark approval for the TearLab™ test for DED during the latter
half of 2008.
In
December 2007, OcuSense entered into a research agreement with a large
ophthalmic company, pursuant to which that company is sponsoring OcuSense’s
clinical studies of the TearLab™ test for DED. Pursuant to this research
agreement, that company has paid for the future acquisition of a number of units
of the beta version of the TearLab™ test for DED and has secured limited
exclusive access to the beta version of the TearLab™ test for DED until OcuSense
obtains a 510(k) clearance for it from the FDA.
Competition
(OcuSense)
To date,
OcuSense has identified one emerging technology that claims to be able to
measure the osmolarity of nanoliter tear samples. This technology is being
developed at the Aborn Eye Clinic in New York. Based on patent claims, it would
appear that this technology uses surface plasmon resonance, an optical
technology, to measure tear film osmolarity.
As there
are no commercially available instruments to measure tear film osmolarity at the
point-of-care, OcuSense views existing DED diagnostic tests, such as the
Schirmer Test and ocular surface staining, as its primary source of
competition.
Tear film
break-up time, or TBUT, is another assay meant as an indication of tear film
stability. However, it is subjective, requires a physician to instill
a carefully controlled amount of fluorescein dye into the eye and requires a
stopwatch to determine the endpoint. TBUT has been shown to be unreliable as a
determinant of DED since shortened TBUT doesn’t always correlate well with other
signs or symptoms.
Tests
like impression cytology and corneal staining, although indicative of relatively
late stage phenomena in DED, are subjective, qualitative and generally don’t
correlate to disease pathogenesis. The Schirmer Test is an imprecise
marker of tear function since its diagnostic results vary
significantly.
Although,
at the present time, there does not appear to be a direct competitor to the
TearLab™ test for DED, many industry participants have much greater resources
than OcuSense has, thus enabling them, among other things, to make greater
research and development investments, and to make more significant investments
in marketing, promotion and sales, than OcuSense is capable of right now or will
be capable of during the foreseeable future.
Patents
and Proprietary Rights (OcuSense)
OcuSense
owns or has exclusive licenses to five U.S. patents relating to the TearLab™
test for DED and related technology and processes and has applied for a number
of other patents in the United States and other jurisdictions.
OcuSense
intends to rely on know-how, continuing technological innovation and
in-licensing opportunities to develop further its proprietary position.
OcuSense’s ability to obtain intellectual property protection for the TearLab™
test for DED and related technology and processes, and its ability to operate
without infringing the intellectual property rights of others and to prevent
others from infringing its intellectual property rights, will have a substantial
impact on its ability to succeed in its business. Although OcuSense intends to
seek to protect its proprietary position by, among other methods, continuing to
file patent applications, the patent position of companies like OcuSense is
generally uncertain and involves complex legal and factual questions. OcuSense’s
ability to maintain and solidify a proprietary position for its technology will
depend on its success in obtaining effective claims and enforcing those claims
once granted. Neither OcuSense nor we know whether any part of its patent
applications will result in the issuance of any patents. Its issued patents or
those that may issue in the future, or those licensed to OcuSense, may be
challenged, invalidated or circumvented, which could limit OcuSense’s ability to
stop would-be competitors from marketing tests identical to the TearLab™ test
for DED.
In
addition to patent protection, OcuSense has registered the TearLab™ trademark in
the U.S.
Government
Regulation
Government
authorities in the United States and other countries extensively regulate, among
other things, the research, development, testing, manufacture, labeling,
promotion, advertising, distribution and marketing of OcuSense’s product, which
is a medical device. In the United States, the FDA regulates medical devices
under the Federal Food, Drug, and Cosmetic Act and implementing regulations.
Failure to comply with the applicable FDA requirements, both before and after
approval, may subject us to administrative and judicial sanctions, such as a
delay in approving or refusal by the FDA to approve pending applications,
warning letters, product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, administrative fines and/or criminal
prosecution.
Unless
exempted by regulation, medical devices may not be commercially distributed in
the United States unless they have been cleared or approved by the FDA. Medical
devices are classified into one of the three classes, Class I, II or III, on the
basis of the controls necessary to reasonably assure their safety and
effectiveness. Class I devices are subject to general controls, such as
labeling, pre-market notification and adherence to good manufacturing practices.
Class II devices are subject to general and specific controls, such as
performance standards, pre-market notification, patient registries and FDA
guidelines. Generally, Class III devices are those which must receive approval
of a PMA by the FDA to provide reasonable assurance of their safety and
effectiveness. For example, life-sustaining, life-supporting and implantable
devices, or new devices which have not been found substantially equivalent to
legally marketed devices, generally require approval of a PMA by the
FDA.
There are
two review procedures by which medical devices can receive clearance or
approval. Some products may qualify for clearance under a Section 510(k)
procedure, in which the manufacturer provides a pre-market notification that it
intends to begin marketing the product, and shows that the product is
substantially equivalent to another legally marketed product, that it has the
same intended use and is as safe and effective as a legally marketed device and
does not raise different questions of safety and effectiveness than does a
legally marketed device. In some cases, the submission must include data from
human clinical studies. Marketing may commence when the FDA issues a clearance
letter finding substantial equivalence.
By
statute and regulation, the FDA is required to clear, deny or request additional
information on a 510(k) pre-market notification within 90 days of its
submission. However, as a practical matter, 510(k) clearance often takes
significantly longer. The FDA may require additional information, including
clinical data, to make a determination regarding substantial equivalence. In
addition, after a device receives 510(k) clearance, any modification to the
device that could significantly affect its safety or effectiveness, or that
would constitute a major change in its intended use, would require a new 510(k)
clearance or an approval of a PMA. Although the FDA requires the manufacturer to
make the initial determination regarding the effect of a modification to the
device that is subject to 510(k) clearance, the FDA can review the
manufacturer’s determination at any time and require the manufacturer to seek
another 510(k) clearance or an approval of a PMA.
The
TearLab™ test for DED is a Class I, non-exempt device and qualifies for the
510(k) procedure.
CLIA is
intended to ensure the quality and reliability of clinical laboratories in the
United States by mandating specific standards in the areas of personnel
qualifications, administration, participation in proficiency testing, patient
test management, quality control, quality assurance and inspections. The
regulations promulgated under CLIA establish three levels of in vitro diagnostic
tests: (1) waiver; (2) moderately complex; and (3) highly complex.
The standards applicable to a clinical laboratory depend on the level of
diagnostic tests it performs. A CLIA waiver is available to clinical laboratory
test systems if they meet certain requirements established by the statute.
Waived tests are simple laboratory examinations and procedures employing
methodologies that are so simple and accurate as to render the likelihood of
erroneous results negligible or to pose no reasonable risk of harm to patients
if the examinations or procedures are performed incorrectly. These tests are
waived from regulatory oversight of the user other than the requirement to
follow the manufacturer’s labeling and directions for use.
We cannot
be sure of when, or whether, OcuSense will be successful in obtaining a 510(k)
clearance or a CLIA waiver for the TearLab™ test for DED.
If the
medical device does not qualify for the 510(k) procedure, either because it is
not substantially equivalent to a legally marketed device or because it is a
Class III device required to have an approved PMA, then the FDA must approve a
submitted PMA before marketing can begin. A PMA must demonstrate, among other
matters, that the medical device is safe and effective. A PMA is typically a
complex submission, usually including the results of preclinical and clinical
studies, and preparing an application is a detailed and time-consuming process.
The PMA must be accompanied by the payment of user fees which currently exceed
$200,000 for most submissions. When modular submissions are used, the entire fee
is due when the first module is submitted to the FDA. Once a PMA has been
submitted, the FDA’s review may be lengthy and may include requests for
additional data. The FDA usually inspects device manufacturers before approval
of a PMA, and the FDA will not approve the PMA unless the manufacturer’s
compliance with the quality systems regulation is satisfactory.
Regardless
of whether a medical device requires FDA clearance or approval, a number of
other FDA requirements apply to the device, its manufacturer and those who
distribute it. Device manufacturers must be registered and their products listed
with the FDA, and certain adverse events and product malfunctions must be
reported to the FDA. The FDA also regulates the product labeling, promotion and,
in some cases, advertising, of medical devices. In addition, manufacturers and
their suppliers must comply with the FDA’s quality system regulation which
establishes extensive requirements for quality and manufacturing procedures.
Thus, suppliers, manufacturers and distributors must continue to spend time,
money and effort to maintain compliance, and failure to comply can lead to
enforcement action. The FDA periodically inspects facilities to ascertain
compliance with these and other requirements.
Employees
On
December 31, 2007, we had 24 full-time employees. Of our full-time workforce at
that time, 12 employees were engaged in clinical trial activities and 12 were
engaged in business development, finance and administration. With the suspension
of the Company’s RHEO System clinical development program, and the consequent
winding-down of the RHEO-AMD study, and the Company’s disposition of SOLX, the
Company has reduced its workforce considerably. At the present time, we have 7
full-time employees. However, we continue to retain outside consultants, some of
whom are our former employees. None of our employees are covered by collective
bargaining arrangements, and our management considers its relationship with our
employees to be good.
We
continue to rely on the resources of one of our major stockholders, TLC Vision,
to provide us with infrastructure support.
Risk
Factors
Risks
Relating to Our Business
Our
financial condition and history of losses have caused our auditors to express
doubt as to whether we will be able to continue as a going concern.
We have
prepared our consolidated financial statements on the basis that we will
continue as a going concern. However, the Company has sustained substantial
losses for each of the years ended December 31, 2007, 2006 and 2005. The
Company’s working capital deficiency at December 31, 2007 is $996,862, which
represents a $14,535,888 reduction in its working capital of $13,539,026 at
December 31, 2006. As a result of the Company’s history of losses and current
financial condition, there is substantial doubt about the Company’s ability to
continue as a going concern.
The
Company realized gross proceeds of $10,016,000 (less transaction costs of
$871,215) on February 6, 2007 from the private placement of shares of its common
stock and warrants. Management believed that these proceeds, together with the
Company’s then existing cash, would be only sufficient to cover its operating
activity and other demands until early 2008. On February 19, 2008, the Company
secured a bridge loan in an aggregate principal amount of $3,000,000 from a
number of private parties and, taking into account transactions costs of
approximately $200,000, realized net proceeds of approximately $2,800,000. The
loan bears interest at a rate of 12% per annum and has a 180-day term, which may
be extended to 270 days under certain circumstances. The repayment of the loan
is secured by a pledge by OccuLogix of its shares of the capital stock of
OcuSense. Management believes that these net proceeds, together with the
Company’s existing cash and cash-equivalents, will be sufficient to cover its
operating activities and other demands only until approximately the end of April
2008 (assuming that the outstanding obligation of OccuLogix to pay $2,000,000 to
OcuSense becomes due and payable prior to the end of April 2008).
Our
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary if the Company were not
able to continue as a going concern.
We
have incurred losses since inception and anticipate that we will incur continued
losses for the foreseeable future.
We have
incurred losses in each year since our inception in 1996. Our net loss for the
fiscal years ended December 31, 2007, 2006, 2005, 2004 and 2003 was $68.1
million, $82.2 million, $162.8 million, $21.8 million and $2.5 million,
respectively. The losses in 2007, 2006 and 2005 include a charge for impairment
of goodwill of $14.4 million, $65.9 million and $147.5 million, respectively. As
of December 31, 2007, we had an accumulated deficit of $356.6 million. These
losses, among other things, have had and will continue to have an adverse effect
on our stockholders’ equity and working capital. We remain indebted to OcuSense
in an aggregate amount of $2 million for the outstanding portion of the purchase
price of the capital stock of OcuSense that we acquired on November 30, 2006.
Currently, we anticipate that that amount will become due and payable during the
first half of 2008. Furthermore, we are legally committed to make an additional
equity investment of $3 million upon receipt, if any, from the FDA of a 510(k)
clearance for the TearLab™ test for DED and another additional equity investment
of $3 million upon receipt, if any, from the FDA of a CLIA waiver for the
TearLab™ test for DED. Because of the numerous risks and uncertainties facing
us, we are unable to predict the extent of any future losses or when we will
become profitable, if ever, or even if we will be able to continue as a going
concern.
We
may not be able to raise the capital necessary to fund our
operations.
Since
inception, we have funded our operations through early private placements of our
equity and debt securities, early stage revenues, a successful initial public
offering, or IPO, a private placement of shares of our common stock and warrants
on February 6, 2007 and, most recently, on February 19, 2008, a bridge loan.
Prior to the IPO, our cash resources were limited. We will need additional
capital in the future, and our prospects for obtaining it are uncertain. On
October 9, 2007, we announced that the Board had authorized management and the
Company’s advisors to explore the full range of strategic alternatives available
to enhance shareholder value, including, but not limited to, the raising of
capital through the sale of securities, one or more strategic alliances and the
combination, sale or merger of all or part of the Company. For some time prior
to the October 9, 2007 announcement, the Company had been seeking to raise
additional capital, with the objective of securing funding sufficient to sustain
its operations as it had been clear that, unless we were able to raise
additional capital, the Company would not have had sufficient cash to support
its operations beyond early 2008. Although the Company secured a bridge loan in
an aggregate principal amount of $3,000,000 from a number of private parties on
February 19, 2008, management believes that these net proceeds, together with
the Company’s existing cash and cash-equivalents, will be sufficient to cover
its operating activities and other demands only until approximately the end of
April 2008 (assuming that the outstanding obligation of OccuLogix to pay
$2,000,000 to OcuSense becomes due and payable prior to the end of April 2008).
Additional capital may not be available on terms favorable to us, or at all. In
addition, future financings could result in significant dilution of existing
stockholders. However, unless we succeed in raising additional capital, we will
be unable to continue our operations. See “Risk Factors—Risks Relating to Our
Business—Our financial condition and history of losses have caused our auditors
to express doubt as to whether we will be able to continue as a going
concern.”
We
no longer operate any business.
With the
suspension of the Company’s RHEO™ System clinical development program, and the
consequent winding-down of the RHEO-AMD study, and the Company’s disposition of
SOLX, the Company no longer has any operating business. Its major asset is its
50.1% ownership stake, on a fully diluted basis, in OcuSense. Accordingly,
unless we acquire other businesses (which, in light of the Company’s financial
condition, is unlikely to occur), our ability to generate any revenues will be
dependent almost entirely upon the success of OcuSense.
The
Company’s major asset is encumbered.
The
repayment of the bridge loan, in the aggregate principal amount of $3,000,000,
which the Company secured on February 19, 2008 from a number of private parties,
is secured by a pledge by OccuLogix of its shares of the capital stock of
OcuSense. If the Company fails to repay this loan and accrued interest by the
loan’s maturity date, which will occur on the 180
th
day
following February 19, 2008 or, under certain circumstances, the 270
th
day
following February 19, 2008, the lenders may realize upon their collateral and
seize OccuLogix’s shares of the capital of OcuSense, thus causing the Company to
lose its major asset. Accordingly, the Company may lose its major asset unless
it succeeds in raising additional capital in an amount sufficient to repay the
loan and accrued interest by the loan’s maturity date—which the Company is
permitted to do through a sale of the collateral, provided that the sale
generates proceeds in an amount sufficient to repay the loan and accrued
interest if full.
The
$3,000,000 aggregate principal amount bridge loan represents a significant
dilution risk for existing stockholders.
Under the
terms of the loan agreement pursuant to which the Company secured a bridge loan,
in the aggregate principal amount of $3,000,000, on February 19, 2008 from a
number of private parties, the Company has two pre-payment options available to
it, should it decide to not wait until the maturity date to repay the loan.
Under the first pre-payment option, the Company may repay the loan in full by
paying the lenders, in cash, the amount of outstanding principal and accrued
interest and issuing to the lenders five-year warrants in an aggregate amount
equal to approximately 19.9% of the issued and outstanding shares of the
Company’s common stock (but not to exceed 20% of the issued and outstanding
shares of the Company’s common stock). The warrants would be exercisable into
shares of the Company’s common stock at an exercise price of $0.10 per share and
would not become exercisable until the 180
th
day
following their issuance. Under the second pre-payment option, provided that the
Company has closed a private placement of shares of its common stock for
aggregate gross proceeds of at least $4,000,000, the Company may repay the loan
in full by issuing to the lenders shares of its common stock, in an aggregate
amount equal to the amount of outstanding principal and accrued interest, at a
15% discount to the price paid by the private placement investors. An exercise
by the Company of either pre-payment option will result in significant dilution
of the holdings of existing stockholders. Any exercise by the Company of the
second pre-payment option would be subject to stockholder and regulatory
approval.
OcuSense
will face challenges in bringing the TearLab™ test for DED to market and may not
succeed in executing its business plan.
At the
present time, OcuSense is relying almost entirely on OccuLogix to fund its
business. Following the payment by OccuLogix of $2,000,000 upon OcuSense’s
successful production and testing of the beta version of the TearLab™ test for
DED, there can be no assurance that OccuLogix will be a reliable source of
future funding for OcuSense, notwithstanding its agreement to purchase
$3,000,000 of shares of OcuSense’s Series B Preferred Stock upon OcuSense’s
receipt from the FDA, if any, of 510(k) clearance for the TearLab™ test for DED
and to purchase another $3,000,000 of shares of OcuSense’s Series B Preferred
Stock upon OcuSense’s receipt from the FDA, if any, of a CLIA waiver for the
TearLab™ test for DED.
There are
numerous risks and uncertainties inherent in the development of new medical
technologies. In addition to OcuSense’s eventual requirement for additional
capital, OcuSense’s ability to bring the TearLab™ test for DED to market and to
execute its business plan successfully is subject to the following risks, among
others:
|
·
|
OcuSense’s
clinical trials may not succeed. Clinical testing is expensive and can
take longer than originally anticipated. The outcomes of clinical trials
are uncertain, and failure can occur at any stage of the testing. OcuSense
could encounter unexpected problems, which could result in a delay in the
submission of its applications for the sought-after FDA approvals or
prevent their submission
altogether.
|
|
·
|
OcuSense
may not receive either the 510(k) clearance or the CLIA waiver for the
TearLab™ test for DED that it will be seeking from the FDA, in which case
OcuSense’s ability to market the TearLab™ test for DED in the United
States will be hindered severely, if not eliminated
altogether.
|
|
·
|
OcuSense
and its suppliers will be subject to numerous FDA requirements covering
the design, testing, manufacturing, quality control, labeling,
advertising, promotion and export of the TearLab™ test for DED and other
matters. If OcuSense or its suppliers fail to comply with these regulatory
requirements, the TearLab™ System could be subject to restrictions or
withdrawals from the market and OcuSense could become subject to
penalties.
|
|
·
|
Even
if it succeeds in obtaining the sought-after FDA approvals, OcuSense may
be unable to commercialize the TearLab™ test for DED successfully in the
United States. Successful commercialization will depend on a number of
factors, including, among other things, achieving widespread acceptance of
the TearLab™ test for DED among physicians, establishing adequate sales
and marketing capabilities, addressing competition effectively, the
ability to obtain and enforce patents to protect proprietary rights from
use by would-be competitors, key personnel retention and ensuring
sufficient manufacturing capacity and inventory to support
commercialization plans.
|
OcuSense’s
patents may not be valid, and OcuSense may not be able to obtain and enforce
patents to protect its proprietary rights from use by would-be competitors.
Patents of other companies could require OcuSense to stop using or pay to use
required technology.
OcuSense’s
owned and licensed patents may not be valid, and it may not be able to obtain
and enforce patents and to maintain trade secret protection for its technology.
The extent to which OcuSense is unable to do so could materially harm its
business.
OcuSense
has applied for, and intends to continue to apply for, patents relating to the
TearLab™ test for DED and related technology and processes. Such applications
may not result in the issuance of any patents, and any patents now held or that
may be issued may not provide adequate protection from competition. Furthermore,
it is possible that patents issued or licensed to OcuSense may be challenged
successfully. In that event, if OcuSense has a preferred competitive position
because of any such patents, any preferred position held by OcuSense would be
lost. If OcuSense is unable to secure or to continue to maintain a preferred
position, the TearLab™ test for DED could become subject to competition from the
sale of generic products.
Patents
issued or licensed to OcuSense may be infringed by the products or processes of
others. The cost of enforcing patent rights against infringers, if such
enforcement is required, could be significant and the time demands could
interfere with OcuSense’s normal operations. There has been substantial
litigation and other proceedings regarding patent and other intellectual
property rights in the pharmaceutical, biotechnology and medical technology
industries. OcuSense could become a party to patent litigation and other
proceedings. The cost to it of any patent litigation, even if resolved in its
favor, could be substantial. Some of OcuSense’s would-be competitors may be able
to sustain the costs of such litigation more effectively than it can because of
their substantially greater financial resources. Litigation may also absorb
significant management time.
Unpatented
trade secrets, improvements, confidential know-how and continuing technological
innovation are important to OcuSense’s future scientific and commercial success.
Although it attempts to, and will continue to attempt to, protect its
proprietary information through reliance on trade secret laws and the use of
confidentiality agreements with corporate partners, collaborators, employees and
consultants and other appropriate means, these measures may not effectively
prevent disclosure of OcuSense’s proprietary information, and, in any event,
others may develop independently, or obtain access to, the same or similar
information.
Certain
of OcuSense’s patent rights are licensed to it by third parties. If OcuSense
fails to comply with the terms of these license agreements, its rights to those
patents may be terminated, and OcuSense will be unable to conduct its
business.
It is
possible that a court may find OcuSense to be infringing upon validly issued
patents of third parties. In that event, in addition to the cost of defending
the underlying suit for infringement, OcuSense may have to pay license fees
and/or damages and may be enjoined from conducting certain activities. Obtaining
licenses under third-party patents can be costly, and such licenses may not be
available at all.
Our
common stock may be delisted from The Nasdaq Global Market.
On
September 18, 2007, OccuLogix received a letter from The Nasdaq Stock Market, or
Nasdaq, indicating that, for the previous 30 consecutive business days, the bid
price of the Company’s common stock closed below the minimum $1.00 per share
requirement for continued inclusion under Marketplace Rule 4450(e)(5), or the
Minimum Bid Price Rule. Therefore, in accordance with Marketplace Rule
4450(e)(2), the Company was provided 180 calendar days, or until March 17, 2008,
to regain compliance. The Nasdaq letter stated that, if, at any time before
March 17, 2008, the bid price of the Company’s common stock closes at $1.00 per
share or more for a minimum of 10 consecutive business days, Nasdaq staff will
provide written notification that it has achieved compliance with the Minimum
Bid Price Rule. The Nasdaq letter also stated that, if the Company does not
regain compliance with the Minimum Bid Price Rule by March 17, 2008, Nasdaq
staff will provide written notification that the Company’s securities will be
delisted, at which time the Company may appeal the Nasdaq staff’s determination
to delist its securities to a Nasdaq Listing Qualifications Panel.
On
February 1, 2008, OccuLogix received a letter from Nasdaq indicating that, for
the previous 30 consecutive trading days, the Company’s common stock did not
maintain a minimum market value of publicly held shares of $5,000,000 as
required for continued inclusion by Marketplace Rule 4450(a)(2), or the MVPHS
Rule. Therefore, in accordance with Marketplace Rule 4450(e)(1), the Company was
provided 90 calendar days, or until May 1, 2008, to regain compliance. The
Nasdaq letter stated that, if at any time before May 1, 2008, the minimum market
value of publicly held shares of the Company’s common stock is $5,000,000 or
greater for a minimum of ten consecutive trading days, Nasdaq staff will provide
written notification that the Company complies with the MVPHS Rule. The Nasdaq
letter also stated that, if the Company does not regain compliance with the
MVPHS Rule by May 1, 2008, Nasdaq staff will provide written notification that
the Company’s securities will be delisted, at which time the Company may appeal
the Nasdaq staff’s determination to delist its securities to a Nasdaq Listing
Qualifications Panel.
The
Company will not have become compliant with the Minimum Bid Price Rule by March
17, 2008. Although we intend to appeal any determination by Nasdaq staff to
delist our common stock to a Nasdaq Listing Qualifications Panel, we may not be
successful in our appeal, in which case our common stock may be transferred to
The Nasdaq Capital Market or be delisted altogether. Should either occur,
existing stockholders will suffer decreased liquidity.
OcuSense
and we may face future product liability claims.
The
testing, manufacturing, marketing and sale of therapeutic and diagnostic
products entail significant inherent risks of allegations of product liability.
Our past use of the RHEO™ System and the components of the SOLX Glaucoma System
in clinical trials and the commercial sale of those products may have exposed us
to potential liability claims. OcuSense’s future use of the TearLab™ test for
DED and its commercial sale could expose it to liability claims also. All of
such claims might be made directly by patients, health care providers or others
selling the products. We carry clinical trials and product liability insurance
to cover certain claims that could arise, or that could have arisen, during our
clinical trials or during the commercial use of our products. We currently
maintain clinical trials and product liability insurance with coverage limits of
$5,000,000 in the aggregate annually. Such coverage, and any coverage obtained
in the future, may be inadequate to protect OcuSense or us in the event of
successful product liability claims, and neither OcuSense nor we may be able to
increase the amount of such insurance coverage or even renew it. A successful
product liability claim could materially harm our business. In addition,
substantial, complex or extended litigation could result in the incurrence of
large expenditures and the diversion of significant resources.
For
as long as TLC Vision owns a substantial portion of our common stock, our other
stockholders may be effectively unable to affect the outcome of stockholder
voting.
TLC
Vision beneficially owns approximately 32.8%
of our outstanding
common stock, or 28.9%
on a fully diluted
basis. Accordingly, TLC Vision, in conjunction with other stockholders, could
possess an effective controlling vote on matters submitted to a vote of the
holders of our common stock.
While it
owns a substantial portion of our common stock, TLC Vision could effectively
control decisions with respect to:
|
•
|
our
business direction and policies, including the election and removal of our
directors;
|
|
•
|
mergers
or other business combinations involving
us;
|
|
•
|
the
acquisition or disposition of assets by
us;
|
|
•
|
amendments
to our certificate of incorporation and
bylaws.
|
Furthermore,
TLC Vision may be able to cause or prevent a change of control of the Company,
and this concentration of ownership may have the effect of discouraging others
from pursuing transactions involving a potential change of control of the
Company, in either case regardless of whether a premium is offered over
then-current market prices.
Conflicts
of interest may arise between us and TLC Vision, which, until December 2007, had
two directors on our board and currently has one director on our board. Our
Chief Executive Officer and Chairman served as Chairman of TLC Vision until June
2006.
TLC
Vision beneficially owns approximately 32.8% of our outstanding common stock, or
28.9% on a fully diluted basis. Our director, Richard Lindstrom, is also a
director of TLC Vision. Until June 2007 and December 2007, respectively, our
directors, Elias Vamvakas and Thomas Davidson, also served as directors of TLC
Vision. Mr. Vamvakas beneficially owns 1,041,795 common shares of TLC
Vision, representing approximately 2.08% of TLC Vision’s outstanding
shares. Mr. Davidson beneficially owns 67,127 common shares of TLC Vision,
representing approximately 0.14% of TLC Vision’s outstanding shares, and
Dr. Lindstrom beneficially owns 29,500 common shares of TLC Vision,
representing approximately 0.06% of TLC Vision’s outstanding shares. Because Dr.
Lindstrom is a director of TLC Vision, a conflict of interest could arise.
Conflicts may arise between TLC Vision and us as a result of our ongoing
agreements. We may not be able to resolve all potential conflicts with TLC
Vision, and even if we do, the resolution may be less favorable to us than if we
were dealing with an unaffiliated third party.
We
have entered into a number of related party transactions with suppliers,
creditors, stockholders, officers and other parties, each of which may have
interests which conflict with those of our public stockholders.
We have
entered into several related party transactions with our suppliers, creditors,
stockholders, officers and other parties, each of which may have interests which
conflict with those of our public stockholders.
In
December 2004, we moved from our previous headquarters which we subleased from
TLC Vision to our current headquarters, which are also in Mississauga. Until
January 31, 2006, we subleased our current headquarters from Echo Online
Internet, Inc. and, between February 1, 2006 to July 31, 2007, leased them from
Penyork Properties III Inc. Since August 1, 2007, we have been leasing them from
2600 Skymark Investments Inc., the successor in interest to Penyork Properties
III Inc. The facility presently consists of approximately 6,600 square feet of
office space utilized for management personnel. Our current arrangement expires
on July 31, 2010. Our current monthly lease obligation for rent for this
facility is approximately C$13,283. The future minimum obligation under this
lease is C$159,390 for 2008. TLC Vision has advised us that it does not have any
ownership interest in our current headquarters.
We also
leased space in a facility in Palm Harbor, Florida consisting of 5,020 square
feet of space used for warehousing the RHEO™ System components and providing
office space for certain members of our clinical trial personnel and John
Cornish, who was formerly our Vice President, Operations, and records. The
facility consisted of office and working space and an approximately 1,700 square
foot warehouse in the back. Our lease on this property expired on December 31,
2007 and has not been renewed. Our monthly lease obligation for rent for this
facility was approximately $2,168. The future minimum obligation under this
lease is therefore nil for 2008. The landlord under this lease was Cornish
Properties, which is owned by Mr. Cornish. Mr. Cornish was also one of our
directors from April 1997 to September 2004.
In
addition, OcuSense leases office space in facilities owned by parties unrelated
to us. The total future minimum obligation under these leases is $40,851 for
2008.
We
believe that if our existing facilities are not adequate to meet our business
requirements for the near-term, additional space will be available on
commercially reasonable terms.
ITEM
3.
|
LEGAL
PROCEEDINGS.
|
We are
not aware of any material litigation involving us that is outstanding,
threatened or pending.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
|
No matter
was submitted during the fourth quarter of the Company’s 2007 fiscal year to a
vote of security holders, through the solicitation of proxies or
otherwise.
PART
II
ITEM
5.
|
MARKET
FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
|
Market
for Common Equity
Our
Common Stock trades on the NASDAQ Global Market (“NASDAQ”) under the symbol
“OCCX” and the Toronto Stock Exchange (“TSX”) under the symbol
“OC”.
The
following table sets forth the range of high and low sales prices per share of
our Common Stock on both the NASDAQ and the TSX for the fiscal periods
indicated.
|
|
Common
Stock Prices
|
|
|
|
Fiscal
2007
|
|
|
Fiscal
2006
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
NASDAQ
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.98
|
|
|
$
|
1.48
|
|
|
$
|
12.85
|
|
|
$
|
3.25
|
|
Second
Quarter
|
|
|
1.68
|
|
|
|
0.76
|
|
|
|
3.70
|
|
|
|
1.86
|
|
Third
Quarter
|
|
|
1.20
|
|
|
|
0.57
|
|
|
|
2.90
|
|
|
|
1.56
|
|
Fourth
Quarter
|
|
|
0.62
|
|
|
|
0.08
|
|
|
|
2.68
|
|
|
|
1.55
|
|
TSX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
C2.35
|
|
|
$
|
C1.75
|
|
|
$
|
C14.99
|
|
|
$
|
C3.76
|
|
Second
Quarter
|
|
|
1.82
|
|
|
|
0.90
|
|
|
|
4.33
|
|
|
|
2.12
|
|
Third
Quarter
|
|
|
1.25
|
|
|
|
0.57
|
|
|
|
3.00
|
|
|
|
1.69
|
|
Fourth
Quarter
|
|
|
0.57
|
|
|
|
0.07
|
|
|
|
3.00
|
|
|
|
1.80
|
|
The
closing share price for our Common Stock on March 13, 2008 as reported by
NASDAQ, was $0.07. The closing share price for our Common Stock on March 13,
2008, as reported by TSX was C$0.08.
As of
March 13, 2008, there were approximately 92 stockholders of record of our Common
Stock.
We have
never declared or paid any cash dividends on shares of our capital stock. We
currently intend to retain all available funds to support operations and to
finance the growth and development of our business. Any determination related to
payments of future dividends will be at the discretion of our board of directors
after taking into account various factors that our board of directors deems
relevant, including our financial condition, operating results, current and
anticipated cash needs, plans for expansion and debt restrictions, if
any.
Unregistered
Issuances of Capital Stock
On
February 6, 2007, we issued an aggregate of 6,677,333 shares of Common Stock and
2,670,933 five-year stock purchase warrants to certain institutional investors
for gross cash proceeds of $10,016,000 (less transaction costs of $871,215). In
part payment of the placement fee payable to Cowen and Company, LLC for the
services it had rendered as the placement agent in connection with the
aforementioned issuances of securities, on February 6, 2007, we also issued
93,483 five-year stock purchase warrants to Cowen and Company, LLC.
On June
25, 2007, we issued an aggregate of 2,250 shares of Common Stock to
Carol Jones as a result of the exercise of options to purchase common
shares at an exercise price per share of $0.99 in consideration for
cash.
Each of
the above issuances was exempt from registration under the Securities Act of
1933, as amended (the “Securities Act”),
and Rule 506 of Regulation
D promulgated thereunder
.
ITEM
6.
|
SELECTED
FINANCIAL DATA.
|
The
following tables set forth our selected historical consolidated financial data
for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 which have been
derived from our consolidated financial statements included elsewhere in this
Annual Report on Form 10-K and our consolidated financial statements included on
Form S-1 for the years ended December 31, 2004 and 2003. The following tables
should be read in conjunction with our financial statements, the related notes
thereto and the information contained in “Item 7 - Management’s Discussion and
Analysis of Financial Condition and Results of Operations”.
|
|
Year Ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
(ii)
|
|
|
2006
(i)(ii)
|
|
|
2007
|
|
|
|
(in
thousands except per share amounts)
|
|
Consolidated
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from related parties
|
|
$
|
390
|
|
|
$
|
732
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Revenue
from unrelated parties
|
|
|
—
|
|
|
|
238
|
|
|
|
1,759
|
|
|
|
174
|
|
|
|
92
|
|
Total
revenue
|
|
|
390
|
|
|
|
970
|
|
|
|
1,840
|
|
|
|
174
|
|
|
|
92
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold to related parties
|
|
|
373
|
|
|
|
689
|
|
|
|
43
|
|
|
|
—
|
|
|
|
—
|
|
Cost
of goods sold to unrelated parties
|
|
|
—
|
|
|
|
134
|
|
|
|
3,251
|
|
|
|
3,429
|
|
|
|
2,298
|
|
Royalty
costs
|
|
|
109
|
|
|
|
135
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Gross
margin (loss)
|
|
|
(92
|
)
|
|
|
12
|
|
|
|
(1,554
|
)
|
|
|
(3,355
|
)
|
|
|
(2,306
|
)
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,565
|
|
|
|
17,530
|
|
|
|
8,670
|
|
|
|
8,407
|
|
|
|
7,374
|
|
Clinical
and regulatory
|
|
|
731
|
|
|
|
3,995
|
|
|
|
5,168
|
|
|
|
4,922
|
|
|
|
8,676
|
|
Sales
and marketing
|
|
|
—
|
|
|
|
220
|
|
|
|
2,165
|
|
|
|
1,625
|
|
|
|
1,413
|
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
147,452
|
|
|
|
65,946
|
|
|
|
—
|
|
Impairment
of intangible asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,923
|
|
Restructuring
charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
820
|
|
|
|
1,313
|
|
|
|
|
2,296
|
|
|
|
21,745
|
|
|
|
163,455
|
|
|
|
81,720
|
|
|
|
39,699
|
|
Other
income (expense)
|
|
|
(82
|
)
|
|
|
(110
|
)
|
|
|
1,536
|
|
|
|
1,544
|
|
|
|
3,640
|
|
Loss
from continuing operations before income taxes
|
|
|
(2,470
|
)
|
|
|
(21,843
|
)
|
|
|
(163,473
|
)
|
|
|
(83,531
|
)
|
|
|
(38,365
|
)
|
Recovery
of income taxes
|
|
|
—
|
|
|
|
24
|
|
|
|
643
|
|
|
|
2,888
|
|
|
|
5,655
|
|
Loss
from continuing operations
|
|
|
(2,470
|
)
|
|
|
(21,819
|
)
|
|
|
(162,830
|
)
|
|
|
(80,643
|
)
|
|
|
(32,710
|
)
|
Loss
from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,542
|
)
|
|
|
(35,429
|
)
|
Net
loss for the year
|
|
$
|
(2,470
|
)
|
|
$
|
(21,819
|
)
|
|
$
|
(162,830
|
)
|
|
$
|
(82,185
|
)
|
|
$
|
(68,139
|
)
|
Per
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations per share — basic and diluted
|
|
$
|
(0.62
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(3.88
|
)
|
|
$
|
(1.79
|
)
|
|
$
|
(0.58
|
)
|
Loss
from discontinued operations per share — basic and diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.04
|
)
|
|
|
(0.62
|
)
|
Net
loss per share — basic and diluted
|
|
$
|
(0.62
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(3.88
|
)
|
|
$
|
(1.83
|
)
|
|
$
|
(1.20
|
)
|
Weighted
average number of shares used in per share calculations — basic and
diluted
|
|
|
3,977
|
|
|
|
7,370
|
|
|
|
41,931
|
|
|
|
44,980
|
|
|
|
56,628
|
|
(i)
|
The
comparative figures for the year ended December 31, 2006 have been
reclassified to reflect the effect of discontinued
operations.
|
(ii)
|
The
comparative figures for the years ended December 31, 2006 and 2005 have
been corrected to reflect the Company’s accounting for stock options
issued to non-employees that were subject to performance
conditions.
|
|
|
As at December 31,
|
|
|
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
(ii)
|
|
|
2006
(i)(ii)
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Consolidated
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash
equivalents of
continuing operations
|
|
$
|
1,237
|
|
|
$
|
17,531
|
|
|
$
|
9,600
|
|
|
$
|
5,705
|
|
|
$
|
2,236
|
|
Cash
and cash equivalents of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36
|
|
|
|
—
|
|
Short-term
investments
|
|
|
—
|
|
|
|
42,500
|
|
|
|
31,663
|
|
|
|
9,785
|
|
|
|
—
|
|
Working
capital (
deficiency) of
continuing operations
|
|
|
(2,538
|
)
|
|
|
58,073
|
|
|
|
44,415
|
|
|
|
13,407
|
|
|
|
(997
|
)
|
Working
capital (deficiency) of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132
|
|
|
|
—
|
|
Total
assets of continuing
operations
|
|
|
1,868
|
|
|
|
301,601
|
|
|
|
137,806
|
|
|
|
46,246
|
|
|
|
9,998
|
|
Total
assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,158
|
|
|
|
—
|
|
Long-term
debt (including current portion due to stockholders)
|
|
|
3,694
|
|
|
|
517
|
|
|
|
158
|
|
|
|
152
|
|
|
|
33
|
|
Other
long-term obligations (including amount classified as current portion of
other liability)
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
6,421
|
|
|
|
—
|
|
Total
liabilities of
continuing operations
|
|
|
4,134
|
|
|
|
13,502
|
|
|
|
11,765
|
|
|
|
16,425
|
|
|
|
4,099
|
|
Total
liabilities of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,574
|
|
|
|
|
|
Minority
interest
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
1,185
|
|
|
|
—
|
|
Common
stock
|
|
|
5
|
|
|
|
42
|
|
|
|
42
|
|
|
|
51
|
|
|
|
57
|
|
Series
A Convertible Preferred Stock
|
|
|
2
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
Series
B Convertible Preferred Stock
|
|
|
1
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
Additional
paid-in capital
|
|
|
23,915
|
|
|
|
336,064
|
|
|
|
336,836
|
|
|
|
354,191
|
|
|
|
362,403
|
|
Accumulated
deficit
|
|
|
(26,188
|
)
|
|
|
(48,007
|
)
|
|
|
(210,837
|
)
|
|
|
(293,022
|
)
|
|
|
(356,561
|
)
|
Total
stockholders’ equity (deficiency)
|
|
|
(2,266
|
)
|
|
|
288,098
|
|
|
|
126,041
|
|
|
|
61,220
|
|
|
|
5,899
|
|
(i)
|
The
balance sheet as at December 31, 2006 has been reclassified to reflect the
assets and liabilities of discontinued
operations.
|
(ii)
|
The
comparative figures as at December 31, 2006 and 2005 have been corrected
to reflect the Company’s accounting for stock options issued to
non-employees that were subject to performance
conditions.
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes, included in Item 8 of this Form 10-K. Unless
otherwise specified, all dollar amounts are U.S. dollars.
Overview
We are an
ophthalmic therapeutic company founded to commercialize innovative treatments
for age-related eye diseases. Until recently, the Company operated two business
divisions, being Retina and Glaucoma. Until recently, the Company’s Retina
division was in the business of developing and commercializing a treatment for
dry age-related macular degeneration, or Dry AMD. The Company’s product for Dry
AMD, the RHEO™ System contains a pump that circulates blood through two filters
and is used to perform the Rheopheresis™ procedure, which is referred to under
the Company’s trade name RHEO™ Therapy. The Rheopheresis™ procedure is a blood
filtration procedure that selectively removes molecules from plasma, which is
designed to treat Dry AMD, the most common form of the disease.
We
conducted a pivotal clinical trial, called MIRA-1, or Multicenter Investigation
of Rheopheresis for AMD, which, if successful, was expected to support our
application to the U.S. Food and Drug Administration, or FDA, to obtain approval
to market the RHEO™ System in the United States. On February 3, 2006, we
announced that, based on a preliminary analysis of the data from MIRA-1, MIRA-1
did not meet its primary efficacy endpoint as it did not demonstrate a
statistically significant difference in the mean change of Best
Spectacle-Corrected Visual Acuity applying the Early Treatment Diabetic
Retinopathy Scale, or ETDRS BCVA, between the treated and placebo groups in
MIRA-1 at 12 months post-baseline. As expected, the treated group demonstrated a
positive result. An anomalous response of the control group is the principal
reason why the primary efficacy endpoint was not met. There were subgroups that
did demonstrate statistical significance in their mean change of
ETDRS BCVA.
Subsequent
to the February 3, 2006 announcement, the Company completed an in-depth analysis
of the MIRA-1 study data identifying subjects that were included in the
intent-to-treat, or ITT, population but who deviated from the MIRA-1 protocol as
well as those patients who had documented losses or gains in vision for reasons
not related to retinal disease such as cataracts. Those subjects in the ITT
population who met the protocol requirements, and who did not exhibit ophthalmic
changes unrelated to retinal disease, comprised the modified per-protocol
population.
In light
of the MIRA-1 study results, we also re-evaluated our Pre-market Approval
Application, or PMA, submission strategy and then met with representatives of
the FDA on June 8, 2006 in order to discuss the impact the MIRA-1 results would
have on our PMA to market the RHEO™ System in the United States. In
light of MIRA-1’s failure to meet its primary efficacy endpoint, the FDA advised
us that it will require an additional study of the RHEO™ System to be
performed.
On
January 29, 2007, the Company announced that it had obtained Investigational
Device Exemption clearance from the FDA to commence the new pivotal clinical
trial of the RHEO™ System, called RHEO-AMD, or Safety and Effectiveness in a
Multi-center, Randomized, Sham-controlled Investigation for Dry, Non-exudative
Age-Related Macular Degeneration (AMD) Using Rheopheresis.
However,
on November 1, 2007, the Company announced the indefinite suspension of its
RHEO™ System clinical development program. This decision was made following a
comprehensive review of the respective costs and development timelines
associated with the products in the Company’s portfolio and in light of the
Company’s financial position. Between January 29, 2007 and November 1, 2007, the
Company had prepared the RHEO-AMD protocol and had been putting into place all
of the resources required for the conduct for the RHEO-AMD study, including the
securing of clinical trial site commitments. The Company is in the process of
winding down the RHEO-AMD study as there is no reasonable prospect that the
RHEO™ System clinical development program will be relaunched in the foreseeable
future. Subsequent to our fiscal 2007 year-end, as of February 25, 2008, we have
terminated our relationship with Asahi Kasei Kuraray Medical Co., Ltd. (formerly
Asahi Kasei Medical Co., Ltd.), or Asahi Medical. Asahi Medical manufactures,
and supplied us with, the Rheofilter filter and the Plasmaflo filter, both of
which are key components of the RHEO™ System. We also are engaged in discussions
with Diamed Medizintechnik GmbH, or Diamed, and MeSys GmbH, or MeSys, regarding
the termination of our relationship with each of them. Diamed is the
designer, and MeSys is the manufacturer, of the OctoNova pump, another key
component of the RHEO™ System.
As a
result of the announcement on February 3, 2006, the per share price of our
common stock as traded on the NASDAQ Global Market, or NASDAQ, decreased from
$12.75 on February 2, 2006 to close at $4.10 on February 3, 2006. The 10-day
average price of the stock immediately following the announcement was $3.65 and
reflected a decrease in our market capitalization from $536.6 million on
February 2, 2006 to $153.6 million based on the 10-day average share price
subsequent to the announcement. On June 12, 2006, we announced that the FDA will
require us to perform an additional study of the RHEO™ System. In addition, on
June 30, 2006, we announced that we had terminated negotiations with Sowood
Capital Management LP (“Sowood”) in connection with a proposed private purchase
of approximately $30,000,000 of zero-coupon convertible notes of the Company.
The per share price of our common stock decreased subsequent to the June 12,
2006 announcement and again after the June 30, 2006 announcement. Based on the
result of the analysis of the data from MIRA-1 and the events that occurred
during the second quarter of fiscal 2006, we concluded that there were
sufficient indicators of impairment leading to an analysis of our intangible
assets and goodwill and resulting in our reporting an impairment charge to
goodwill of $65,945,686 and $147,451,758 in the second quarter of 2006 and in
the fourth quarter of 2005, respectively.
We
considered our announcement of the indefinite suspension of the Company’s RHEO™
System clinical development program for Dry AMD to be a significant event which
may affect the carrying value of our intangible assets. This led to an analysis
of our intangible assets and resulted in our reporting an impairment charge to
intangible assets of $20,923,028 during the third quarter of 2007. We also
believe that we may not be able to sell or utilize the components of the RHEO™
System prior to their expiration dates or before the technologies become
outdated, as the case may be. Accordingly, we set up a provision for
obsolescence of $2,782,494 for treatment sets and OctoNova pumps that are
unlikely to be utilized prior to their expiration dates, in the case of
treatment sets, or before the technologies become outdated. In addition, we have
recorded a reduction to the carrying values of (i) certain of our medical
equipment used in the clinical trials of the RHEO™ System of $431,683 and
(ii) certain of our patents and trademarks related to the RHEO™ System of
$190,873. No other adjustments were made as a result of the November 1, 2007
announcement that impacts the financial results as of December 31,
2007.
On
September 29, 2004, we signed a product purchase agreement with Veris Health
Sciences Inc. (formerly RHEO Therapeutics, Inc.), or Veris, for the purchase and
sale of 8,004 treatment sets over the period from October 2004 to December 2005,
a transaction valued at $6,003,000, after introductory rebates. However, due to
delays in opening its planned number of clinics throughout Canada, Veris no
longer required the contracted-for number of treatment sets in the period. We
agreed to the original pricing for the reduced number of treatment sets required
in the period. In December 2005, by letter agreement, we agreed to the volume
and other terms for the purchase and sale of treatment sets and pumps for the
period ending February 28, 2006. As at December 31, 2005, the Company had
received a total of $1,779,566 from Veris. Included in amounts receivable, net
as at December 31, 2005 was $1,049,297 due from Veris for the purchase of
additional pumps and treatment sets.
We
believed that the announcement on February 3, 2006 made it unlikely that we
would be able to collect on amounts outstanding from Veris as at December 31,
2005. This resulted in a provision for bad debts of $1,049,297 during the year
ended December 31, 2005, of which $518,852 related to revenue recognized prior
to December 31, 2005 and $530,445 related to goods shipped to Veris in December
2005, for which revenue was not recognized. We also recognized an inventory loss
of $252,071 during the year ended December 31, 2005, representing the cost of
goods shipped to Veris in December 2005 which we do not anticipate will be
returned by Veris.
During the year ended
December 31, 2005, we also fully expensed the C$195,000 advance paid to Veris in
connection with clinical trial services to be provided by Veris for MIRA-PS, one
of our clinical trials which we have suspended. In addition, we evaluated our
ending inventories as at December 31, 2005 on the basis that Veris may not be
able to increase its commercial activities in Canada in line with our initial
expectations. Accordingly, we set up a provision for obsolescence of $1,990,830
during the year ended December 31, 2005 for treatment sets that will unlikely be
utilized prior to their expiration dates.
During
the year ended December 31, 2006, we sold a number of treatment sets, with a
negotiated discount, to Veris at a price lower than our cost. Accordingly, the
price which we charged to Veris, net of a negotiated discount, represents the
current net realizable value; therefore, we wrote down the value of our
treatment sets by $1,625,000 to reflect their current net realizable value as at
December 31, 2006. We also set up an additional provision for obsolescence of
$1,679,124 during the year ended December 31, 2006 for treatment sets that will
unlikely be utilized prior to their expiration dates. In addition, based on our
November 1, 2007 announcement of the indefinite suspension of our RHEO™ System
clinical development program, we wrote down the value of our pumps and clinical
inventory by $2,790,209 to reflect their current net realizable value as at
December 31, 2007.
As at
December 31, 2007 and 2006, we had combined inventory reserves of $7,295,545 and
$5,101,394, respectively.
In June
2006, Veris returned four pumps which had been sold to it in December 2005. In
fiscal 2005, we did not recognize revenue on sales made to Veris in December
2005 and had recorded an inventory loss associated with all sales made to Veris
in December 2005. Accordingly, as at December 31, 2006, amounts receivable and
the allowance for doubtful account recorded against the amount due from Veris
have been reduced by the invoiced amount for the four pumps of $143,520. In
addition, the cost of the four pumps returned by Veris, valued at $85,058, was
used to reduce the cost of sales in the period.
On
November 6, 2006, we amended the product purchase agreement with Veris and
agreed to forgive the outstanding amount receivable of $904,101 from Veris which
had been owing for the purchase of treatment sets and pumps and for related
services delivered or provided to Veris from September 14, 2005 to December 31,
2006. In consideration of the forgiveness of this debt, Veris agreed that we do
not owe any amounts whatsoever in connection with (i) our use of the leasehold
premises located at 5280 Solar Drive in Mississauga, Ontario or (ii) legal fees
and expenses incurred by Veris prior to February 14, 2006 with respect to those
trademarks of Veris that were assigned to us on February 14, 2006.
In
November 2006, we sold a total of 348 treatment sets to Veris for $73,776,
including applicable taxes, payment for which was not received by the Company
within the agreed credit period. The sale of these treatment sets was not
recognized as revenue during the year ended December 31, 2006 as we believe that
Veris would not be able to meet its financial obligations to the Company. In
January 2007, we met with the management of Veris and agreed to forgive the
outstanding amount receivable of $73,776 which was owing for the purchase of the
348 treatment sets delivered to Veris in November 2006. We also recognized
an inventory loss of $60,987 during the year ended December 31, 2006,
representing the cost of the 348 treatment sets shipped to Veris in November
2006.
We
entered into a distributorship agreement (the “Distribution Agreement”),
effective October 20, 2006, with Asahi Medical. The Distribution Agreement
replaced the 2001 distributorship agreement between Asahi Medical and us, as
supplemented and amended by the 2003, 2004 and 2005 Memoranda. Pursuant to the
Distribution Agreement, we had distributorship rights to Asahi Medical's
Plasmaflo filter and Asahi Medical's second generation polysulfone Rheofilter
filter on an exclusive basis in the United States, Mexico and certain Caribbean
countries, on an exclusive basis in Canada, on an exclusive basis in Colombia,
Venezuela, New Zealand, Australia and on a non-exclusive basis in
Italy.
On
January 28, 2008, the Company disclosed that it was engaged in discussions with
Asahi Medical to terminate the Distribution Agreement. Subsequent to our 2007
fiscal year end, the Company and Asahi Medical have entered into a termination
agreement to terminate substantially all of their obligations under the
Distribution Agreement on and as of February 25, 2008 (the “Termination
Agreement”). Pursuant to the Termination Agreement, the Company and
Asahi Medical have agreed to a mutual release of claims relating to the
Distribution Agreement, other than any claims relating to certain provisions of
the Distribution Agreement which survived its termination.
In
anticipation of the delay in the commercialization of the RHEO™ System in the
United States as a result of the MIRA-1 study’s failure to meet its primary
efficacy endpoint and the FDA’s requirement of us to conduct an additional study
of the RHEO™ System, the Company accelerated its diversification plans and, on
September 1, 2006, acquired Solx, Inc., or SOLX, for a total purchase price
of $29,068,443 which included acquisition-related transaction costs of $851,279.
SOLX is a Boston University Photonics Center-incubated company that has
developed a system for the treatment of glaucoma, called the SOLX Glaucoma
System. The SOLX Glaucoma Treatment System is a next-generation treatment
platform designed to reduce intra-ocular pressure, or IOP, without a bleb, thus
avoiding its related complications. The SOLX Glaucoma System consists of the
SOLX 790 Laser, a titanium sapphire laser used in laser trabeculoplasty
procedures, and the SOLX Gold Shunt, a 24-karat gold, ultra-thin drainage device
designed to bridge the anterior chamber and the suprachoroidal space in the eye,
using the pressure differential that exists naturally in the eye in order to
reduce IOP.
On
December 20, 2007, we announced the sale of SOLX to Solx Acquisition, Inc., or
Solx Acquisition, a company wholly owned by Doug P. Adams, the founder of SOLX
and who, until the closing of the sale, had been serving as an executive officer
of the Company in the capacity of President & Founder, Glaucoma
Division. The results of operations of SOLX have been included in
discontinued operations in the Company’s consolidated statements of
operations.
The
consideration for the purchase and sale of all of the issued and outstanding
shares of the capital stock of SOLX consisted of: (i) on December 19,
2007, the closing date of the sale, the assumption by Solx Acquisition of all of
the liabilities of the Company, as they related to SOLX’s business, incurred on
or after December 1, 2007, and OccuLogix’s obligation to make a $5,000,000
payment to the former stockholders of SOLX due on September 1, 2008 in
satisfaction of the outstanding balance of the purchase price of SOLX; (ii) on
or prior to February 15, 2008, the payment by Solx Acquisition of all of the
expenses that the Company had paid to the closing date, as they related to
SOLX’s business during the period commencing on December 1, 2007; (iii) during
the period commencing on the closing date and ending on the date on which SOLX
achieves a positive cash flow, the payment by Solx Acquisition of a royalty
equal to 3% of the worldwide net sales of the SOLX 790 Laser and the SOLX Gold
Shunt, including next-generation or future models or versions of these products;
and (iv) following the date on which SOLX achieves a positive cash flow, the
payment by Solx Acquisition of a royalty equal to 5% of the worldwide net sales
of these products. In order to secure the obligation of Solx Acquisition to make
these royalty payments, SOLX granted to OccuLogix a subordinated security
interest in certain of its intellectual property. In connection with the sale of
SOLX, those employees of the Company, whose roles and responsibilities related
mainly to SOLX’s business, ceased to be employees of the Company and became
employees of Solx Acquisition or SOLX.
The sale
transaction established fair values for the Company’s recorded goodwill and the
Company’s shunt and laser technology and regulatory and other intangible assets
that had been acquired by the Company upon its acquisition of SOLX on September
1, 2006. Accordingly, management was required to re-assess whether
the carrying value of the Company’s shunt and laser technology and
regulatory and other intangible assets was recoverable as of December 1, 2007.
Based on management’s estimates of undiscounted cash flows associated with these
intangible assets, we concluded that the carrying value of these intangible
assets was not recoverable as of December 1, 2007. Accordingly, we recorded an
impairment charge of $22,286,383 during the year ended December 31, 2007 to
record the shunt and laser technology and regulatory and other intangible
assets at their fair value as of December 31, 2007
Both the
SOLX 790 Laser and the SOLX Gold Shunt are currently the subject of randomized,
multi-center clinical trials, the purposes of which are to demonstrate
equivalency to the argon laser, in the case of the SOLX 790 Laser, and to the
Ahmed Glaucoma Valve manufactured by the New World Medical, Inc., in the case of
the SOLX Gold Shunt. The results of these clinical trials will be used in
support of applications to the FDA for a 510(k) clearance for each of the SOLX
790 Laser and the SOLX Gold Shunt, the receipt of which, if any, will enable the
marketing and sale of these products in the United States.
As part
of our diversification plan, on November 30, 2006, we acquired 50.1% of the
capital stock of OcuSense, Inc., or OcuSense, measured on a fully diluted basis,
for a total purchase price of $4,171,098 which includes acquisition-related
transaction costs of $171,098. The Company agreed to make additional payments
totaling $4,000,000 upon the attainment of two pre-defined milestones by
OcuSense prior to May 1, 2009. In June 2007, we paid OcuSense a total of
$2,000,000 upon the attainment of the first of the two pre-defined milestones.
The carrying value of the intangible asset acquired upon the acquisition of
OcuSense was increased by $1,663,333 which reflects the minority interest
portion of the $2,000,000 paid to OcuSense in the amount of $998,000 and the
additional deferred tax liability of $665,333 recorded based on the difference
between the increase in the carrying value of the intangible asset and its tax
basis. The balance of the contingent payment of $2,000,000 will be paid upon the
attainment of the second pre-determined milestone, which currently is expected
to occur during the first half of 2008.
OcuSense
is a San Diego-based company that is in the process of developing technologies
that will enable eye care practitioners to test, at the point-of-care, for
highly sensitive and specific biomarkers using nanoliters of tear film. The
results of OcuSense’s operations have been included in our consolidated
financial statements since November 30, 2006. OcuSense’s first product, which is
currently under development, is a hand-held tear film test for the measurement
of osmolarity, a quantitative and highly specific biomarker that has shown to
correlate with dry eye disease, or DED. The test is known as the TearLab™ test
for DED. The anticipated innovation of the TearLab™ test for DED will be its
ability to measure precisely and rapidly certain biomarkers in nanoliter volumes
of tear samples, using inexpensive hardware. Historically, eye care researchers
have relied on expensive instruments to perform tear biomarker analysis. In
addition to their cost, these conventional systems are slow, highly variable in
their measurement readings and not categorized as waived by the FDA under the
regulations promulgated under the Clinical Laboratory Improvement Amendments, or
CLIA.
The
TearLab™ test for DED will require the development of the following three
components: (1) the TearLab™ disposable, which is a single-use
microfluidic labcard; (2) the TearLab™ pen, which is a hand-held device that
interfaces with the TearLab™ disposable; and (3) the TearLab™ reader, which is a
small desktop unit that allows for the docking of the TearLab™ disposable and
the TearLab™ pen and provides a quantitative reading for the operator. OcuSense
is currently engaged in industrial, electrical and software design efforts for
the three components of the TearLab™ test for DED and, to these ends, is working
with two engineering partners, both based in Melbourne, Australia, one of which
is a leader in biomedical instrument development and the other of which is a
leader of customized microfluidics.
OcuSense’s
objective is to complete product development of the TearLab™ test for DED during
the first half of 2008. Following the completion of product development and
subsequent clinical trials, OcuSense intends to seek a 510(k) clearance and a
CLIA waiver from the FDA for the TearLab™ test for DED. Currently, it
anticipates seeking the 510(k) clearance during the latter half of 2008 and the
CLIA waiver during the latter half of 2009. In addition, OcuSense intends to
seek CE Mark approval for the TearLab™ test for DED during the latter half of
2008.
On
November 30, 2006, we announced that Elias Vamvakas, our Chairman and Chief
Executive Officer, had agreed to provide us with a standby commitment to
purchase convertible debentures of the Company (“Convertible Debentures”) in an
aggregate maximum amount of $8,000,000 (the “Total Commitment
Amount”). Pursuant to the Summary of Terms and Conditions, executed
and delivered as of November 30, 2006 by the Company and Mr. Vamvakas, during
the 12-month commitment term commencing on November 30, 2006, upon no less than
45 days’ written notice by the Company to Mr. Vamvakas, Mr. Vamvakas was
obligated to purchase Convertible Debentures in the aggregate principal amount
specified in such written notice. A commitment fee of 200 basis points was
payable by the Company on the undrawn portion of the total $8,000,000 commitment
amount. Any Convertible Debentures purchased by Mr. Vamvakas would have carried
an interest rate of 10% per annum and would have been convertible, at Mr.
Vamvakas’ option, into shares of the Company’s common stock at a conversion
price of $2.70 per share. The Summary of Terms and Conditions of the standby
commitment further provided that if the Company closed a financing with a third
party, whether by way of debt, equity or otherwise and there are no Convertible
Debentures outstanding, then, the Total Commitment Amount was to be reduced
automatically upon the closing of the financing by the lesser of: (i) the Total
Commitment Amount; and (ii) the net proceeds of the financing. On February 6,
2007, the Company raised gross proceeds in the amount of $10,016,000 in a
private placement of shares of its common stock and warrants. The Total
Commitment Amount was therefore reduced to zero, thus effectively terminating
Mr. Vamvakas’ standby commitment. No portion of the standby commitment was ever
drawn down by the Company, and the Company paid Mr. Vamvakas a total of $29,808
in commitment fees in February 2007.
Our
results of operations for the years ended December 31, 2007 and 2006 were
impacted by our adoption of Statement of Financial Accounting Standards (“SFAS”)
No. 123R (revised 2004), “Share-Based Payments” (“SFAS No. 123R”), on January 1,
2006 which requires us to recognize a non-cash expense related to the fair value
of our stock-based compensation awards. We elected to use the modified
prospective transition method of adoption requiring us to include this
stock-based compensation charge in our results of operations beginning on
January 1, 2006 without restating prior periods to include stock-based
compensation expense. Of the $480,971, $2,127,043 and $224,776 stock-based
compensation expense recognized during the years ended December 31, 2007, 2006
and 2005, $65,660, $1,396,609 and $170,576 is included in general and
administrative expenses, $216,246, $203,131 and $53,700 in clinical and
regulatory expenses and $199,065, $527,303 and $500 in sales and marketing
expenses, respectively.
At the
annual meeting of stockholders of the Company held on June 23, 2006, our
stockholders approved the re-pricing of all then out-of-the-money stock options
of the Company. Consequently, the exercise price of all outstanding
stock options that, on June 23, 2006, was greater than $2.05, being the weighted
average trading price of our common stock on NASDAQ during the five-trading day
period immediately preceding June 23, 2006, was adjusted downward to $2.05.
2,585,000 of the outstanding stock options with a weighted average exercise
price of $8.42 were affected by the re-pricing. SFAS No. 123R treats the
re-pricing of equity awards as a modification of the original award and provides
that such a modification is an exchange of the original award for a new
award. SFAS No. 123R considers the modification to be the repurchase
of the old award for a new award of equal or greater value, incurring additional
compensation cost for any incremental value. This incremental
difference in value is measured as the excess, if any, of the fair value of the
modified award determined in accordance with the provisions of SFAS No. 123R
over the fair value of the original award immediately before its terms are
modified, measured based on the share price and other pertinent factors at that
date. SFAS No. 123R provides that this incremental fair value, plus
the remaining unrecognized compensation cost from the original measurement of
the fair value of the old option, must be recognized over the remaining vesting
period. Of the 2,585,000 options affected by the re-pricing,
1,401,073 were vested as at December 31, 2006. Therefore, additional
compensation cost of $423,338 for the 1,401,073 options was recognized and is
included in the stock-based compensation expense for the year ended December 31,
2006.
In
accordance with SFAS No. 123R, we also recorded a compensation expense of $3,363
in the second quarter of fiscal 2006 as our board of directors approved
accelerating the vesting of 1,250 unvested stock options granted to a terminated
employee on April 28, 2006. SFAS No. 123R treats such a modification
as a cancellation of the original unvested award and the grant of a new fully
vested award as of that date.
Prior to
the adoption of SFAS No. 123R, we applied the provisions of SFAS No. 123,
“Accounting for Stock-Based Compensation” (“SFAS No. 123”), which allowed
companies either to expense the estimated fair value of employee stock options
or to follow the intrinsic value method set forth in Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), but
required companies to disclose the pro forma effects on net loss as if the fair
value of the options had been expensed. We elected to apply APB No. 25 in
accounting for employee stock options. As required by SFAS No. 123, prior to the
adoption of SFAS No. 123R, we provided pro forma net loss and pro forma net loss
per share disclosures for stock-based awards as if the fair value of the options
had been expensed.
As at
December 31, 2007, $3,870,931 of total unrecognized compensation cost related to
stock options is expected to be recognized over a weighted-average period of
1.85 years.
On
February 1, 2007, we entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement”) with certain institutional investors, pursuant
to which we agreed to issue to the investors an aggregate of 6,677,333 shares of
our common stock (the “Shares”) and five-year warrants exercisable into an
aggregate of 2,670,933 shares of our common stock (the
“Warrants”). The per share purchase price of the Shares is $1.50, and
the per share exercise price of the Warrants is $2.20, subject to
adjustment. The Warrants became exercisable on August 6, 2007.
Pursuant to the Securities Purchase Agreement, on February 6, 2007, we issued
the Shares and the Warrants. The gross proceeds of sale of the Shares and the
Warrants totaled $10,016,000 (less transaction costs of $871,215). On February
6, 2007, we also issued to Cowen and Company, LLC a five-year warrant
exercisable into an aggregate of 93,483 shares of our common stock (the “Cowen
Warrant”) in part payment of the placement fee payable to Cowen and Company, LLC
for the services it had rendered as the placement agent in connection with the
sale of the Shares and the Warrants. All of the terms and conditions of the
Cowen Warrant (other than the number of shares of our common stock into which it
is exercisable) are identical to those of the Warrants. The estimated grant
date fair value of the Cowen Warrant of $97,222 is included in the transaction
cost of $871,215.
We
account for the Warrants and the Cowen Warrant in accordance with the
provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (“SFAS No. 133”) along with related interpretation
Emerging Issues Task Force
(“EITF”)
00-19 “Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”). SFAS No.
133 requires every derivative instrument within its scope (including certain
derivative instruments embedded in other contracts) to be recorded on the
balance sheet as either an asset or liability measured at its fair value, with
changes in the derivative’s fair value recognized currently in earnings unless
specific hedge accounting criteria are met. Based on the provisions of EITF
00-19, we determined that the Warrants and the Cowen Warrant do not meet
the criteria for classification as equity. Accordingly, we have classified
the Warrants and the Cowen Warrant as a current liability as of December 31,
2007. The estimated fair value of the Warrants and the Cowen Warrant was
determined using the Black-Scholes options pricing model. We initially allocated
the total proceeds received, pursuant to the Securities Purchase Agreement, to
the Shares and the Warrants based on their relative fair values. This resulted
in an allocation of $2,052,578 to the obligation under warrants which includes
the fair value of the Cowen Warrant of $97,222. SFAS No. 133 also requires the
Company to record the outstanding derivatives at fair value at the end of each
reporting period resulting in an adjustment to the recorded liability of the
derivative, with any gain or loss recorded in earnings of the applicable
reporting period. The Company therefore estimated the fair value of the Warrants
and the Cowen Warrant as at December 31, 2007 and determined the aggregate fair
value to be a nominal amount, a decrease of approximately $2,052,578 over the
initial measurement of the aggregate fair value of the Warrants and the Cowen
Warrant on the date of issuance. Accordingly, we recognized a gain of $2,052,578
in our consolidated statements of operations for the year ended December 31,
2007 to reflect the decrease in the Company’s obligation to its warrant holders
to a nominal amount at December 31, 2007. Transaction costs associated with the
issuance of the Warrants of $170,081 was recorded as an expense in the Company’s
consolidated statement of operations for the year ended December 31,
2007.
On March
11, 2007, our Board of Directors approved the grant to the directors of the
Company, other than Mr. Vamvakas, of a total of 165,000 options under the
2002 Stock Option Plan. In exchange for these options, each of the directors of
the Company will forego the cash remuneration which he or she would have been
entitled to receive from us during the financial year ending December 31,
2007 in respect of (i) his or her annual director's fee of $15,000, (ii) in the
case of those directors who chair a committee of the board of directors of the
Company, his or her fee of $5,000 per annum for chairing such committee and
(iii) his or her fee of $2,500 per fiscal quarter for the quarterly in-person
meetings of the board of directors of the Company. The number of options granted
to each of the directors was determined to be 8% higher in value than the cash
remuneration to which the directors would have been entitled during the
financial year ending December 31, 2007 and was determined using the
Black-Scholes option-pricing model. The number of options granted to each
director, calculated using this methodology, was then rounded up to the nearest
1,000. These options are exercisable immediately and will remain exercisable
until the tenth anniversary of the date of their grant, notwithstanding any
earlier disability or death of the holder thereof or any earlier termination of
his or her service to the Company. The exercise price of each option is set
at $1.82, which was the per share closing price of the Company's common
stock on NASDAQ on March 9, 2007, the last trading day prior to the date of
grant.
On May
30, 2007, TLC Vision Corporation (“TLC Vision”) and JEGC OCC Corp. (“JEGC”)
announced that JEGC had agreed to purchase TLC Vision’s ownership stake in the
Company, subject to certain minimum prices and regulatory limitations and
further subject to JEGC obtaining satisfactory financing and other customary
closing conditions. On June 22, 2007, JEGC purchased a portion of TLC Vision’s
ownership stake in the Company, consisting of 1,904,762 shares, at a price of
$1.05 per share. On July 3, 2007, we announced that we had entered into
discussions with JEGC for the private placement of approximately $30,000,000 of
shares of the Company’s common stock at a price based upon the average trading
price at the time of purchase, subject to compliance with regulatory
requirements and to a minimum purchase price of $1.05 per share. On October 15,
2007, TLC Vision announced that JEGC was not able to complete the purchase of
TLC Vision’s remaining ownership stake in the Company by October 12, 2007, being
the deadline previously agreed by TLC Vision and JEGC. In making that
announcement, TLC Vision also stated that JEGC retains a non-exclusive right to
purchase TLC Vision’s remaining ownership stake in the Company, subject to the
right of each of TLC Vision and JEGC to terminate the agreement between
them. It was anticipated that JEGC would have gained a control
position in the Company, if both of these transactions had been completed. Our
discussions with JEGC have not resulted in any agreement. JEGC is owned by
Jefferson EquiCorp Ltd. and by Greybrook Corporation, a firm controlled by
Mr. Vamvakas.
As at
December 31, 2007, we had investments in the aggregate principal amount of
$1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Due to the current lack of liquidity for asset-backed
securities of this type, we concluded that the carrying value of these
investments was higher than its fair value as of December 31, 2007. Accordingly,
these auction rate securities have been recorded at their estimated fair value
of $863,750. We consider this to be an other-than-temporary reduction in the
fair value of these auction rate securities. Accordingly, the loss
associated with these auction rate securities of $1,036,250 has been included as
an impairment of investments in our consolidated statement of operations for the
year ended December 31, 2007. Although we continue to receive payment of
interest earned on these securities, we do not know at the present time when it
will be able to convert these investments into cash. Accordingly,
management has classified these investments as a non-current asset on its
consolidated balance sheet as of December 31, 2007. Management will continue to
closely monitor these investments for future indications of further impairment.
The illiquidity of these investments may have an adverse impact on the length of
time during which we currently expect to be able to sustain its operations in
the absence of an additional capital raise by the Company.
On
September 18, 2007, OccuLogix received a letter from The Nasdaq Stock Market, or
Nasdaq, indicating that, for the previous 30 consecutive business days, the bid
price of the Company’s common stock closed below the minimum $1.00 per share
requirement for continued inclusion under Marketplace Rule 4450(e)(5), or the
Minimum Bid Price Rule. Therefore, in accordance with Marketplace Rule
4450(e)(2), the Company was provided 180 calendar days, or until March 17, 2008,
to regain compliance. The Nasdaq letter stated that, if, at any time before
March 17, 2008, the bid price of the Company’s common stock closes at $1.00 per
share or more for a minimum of 10 consecutive business days, Nasdaq staff will
provide written notification that it has achieved compliance with the Minimum
Bid Price Rule. The Nasdaq letter also stated that, if the Company does not
regain compliance with the Minimum Bid Price Rule by March 17, 2008, Nasdaq
staff will provide written notification that the Company’s securities will be
delisted, at which time the Company may appeal the Nasdaq staff’s determination
to delist its securities to a Nasdaq Listing Qualifications Panel.
On
February 1, 2008, OccuLogix received a letter from Nasdaq indicating that, for
the previous 30 consecutive trading days, the Company’s common stock did not
maintain a minimum market value of publicly held shares of $5,000,000 as
required for continued inclusion by Marketplace Rule 4450(a)(2), or the MVPHS
Rule. Therefore, in accordance with Marketplace Rule 4450(e)(1), the Company was
provided 90 calendar days, or until May 1, 2008, to regain compliance. The
Nasdaq letter stated that, if at any time before May 1, 2008, the minimum market
value of publicly held shares of the Company’s common stock is $5,000,000 or
greater for a minimum of ten consecutive trading days, Nasdaq staff will provide
written notification that the Company complies with the MVPHS Rule. The Nasdaq
letter also stated that, if the Company does not regain compliance with the
MVPHS Rule by May 1, 2008, Nasdaq staff will provide written notification that
the Company’s securities will be delisted, at which time the Company may appeal
the Nasdaq staff’s determination to delist its securities to a Nasdaq Listing
Qualifications Panel.
The
Company will not have become compliant with the Minimum Bid Price Rule by March
17, 2008. Although we intend to appeal any determination by Nasdaq staff to
delist our common stock to a Nasdaq Listing Qualifications Panel, we may not be
successful in our appeal, in which case our common stock may be transferred to
The Nasdaq Capital Market or be delisted altogether. Should either occur,
existing stockholders will suffer decreased liquidity.
These
Nasdaq notices have no effect on the listing of the Company's common stock on
the Toronto Stock Exchange.
Recent
Developments
On
January 9, 2008, we announced the departure, or pending departure, of seven
members of our executive team and, commencing on February 1, 2008, a 50%
reduction in the salary of each of Elias Vamvakas, our Chairman and Chief
Executive Officer, and Tom Reeves, our President and Chief Operating Officer. By
January 31, 2008, a total of 12 non-executive employees of the Company left the
Company’s employment.
On
February 19, 2008, we announced that the Company secured a bridge loan in an
aggregate principal amount of $3,000,000, less transaction costs of
approximately $200,000, from a number of private parties. The loan bears
interest at a rate of 12% per annum and has a 180-day term, which may be
extended to 270 days under certain circumstances. The repayment of the loan is
secured by a pledge by the Company of its shares of the capital stock of
OcuSense. Under the terms of the loan agreement, the Company has two pre-payment
options available to it, should it decide to not wait until the maturity date to
repay the loan. Under the first pre-payment option, the Company may repay the
loan in full by paying the lenders, in cash, the amount of outstanding principal
and accrued interest and issuing to the lenders five-year warrants in an
aggregate amount equal to approximately 19.9% of the issued and outstanding
shares of the Company’s common stock (but not to exceed 20% of the issued and
outstanding shares of the Company’s common stock). The warrants would be
exercisable into shares of the Company’s common stock at an exercise price of
$0.10 per share and would not become exercisable until the 180
th
day
following their issuance. Under the second pre-payment option, provided that the
Company has closed a private placement of shares of its common stock for
aggregate gross proceeds of at least $4,000,000, the Company may repay the loan
in full by issuing to the lenders shares of its common stock, in an aggregate
amount equal to the amount of outstanding principal and accrued interest, at a
15% discount to the price paid by the private placement investors. Any exercise
by the Company of the second pre-payment option would be subject to stockholder
and regulatory approval.
Currently,
we anticipate that the net proceeds of the loan, together with the Company’s
other cash and cash equivalents, will be sufficient to sustain the Company’s
operations only until approximately the end of April 2008 (assuming that the
outstanding obligation of OccuLogix to pay $2,000,000 to OcuSense becomes due
and payable prior to the end of April 2008).
RESULTS
OF OPERATIONS
Correction
of prior years’ comparative amounts
In
accordance with the Securities and Exchange Commission (the “SEC”) Staff
Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements”, the following discussion on the Company’s results of operations
have been corrected to reflect the Company’s accounting for stock options
granted during fiscal 2005 to certain consultants that were subject to
performance conditions. The vesting of these options was contingent
upon the attainment of FDA approval of the RHEO™ System. These stock
options were accounted for in accordance with SFAS No. 123 and subsequently in
accordance with SFAS No. 123(R) upon the Company’s adoption of SFAS No. 123(R)
on January 1, 2006. The total fair value of these options was estimated at the
date of grant and was being amortized, over the Company’s estimate of the
expected vesting period, as stock-based compensation expense in the Company
consolidated statements of operations. In preparing the financial
statements for the year ended December 31, 2007, the Company noted that these
options should have been accounted for in accordance with EITF 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services, (“EITF 96-18”) which requires
that if, on the measurement date of the award, the quantity or any of the terms
of the equity instruments are dependent on the achievement of performance
conditions which result in a range of fair values, the lowest aggregate amount
should be used.
Based on
the provisions of EITF 96-18, the Company concluded that no stock-based
compensation expense should have been recorded for these options. Since the
effect of the error on the individual prior periods’ consolidated financial
statements was immaterial, the Company has adjusted the comparative consolidated
financial statements of prior years to reflect the correction of this error
without undertaking a restatement of the prior periods’ consolidated financial
statements. The following financial statement line items for fiscal 2006 and
2005 were affected by the correction of the error.
|
|
Previously
reported
|
|
|
Corrected
amount
|
|
|
Effect
of error
|
|
|
|
|
$’000
|
|
|
|
$’000
|
|
|
|
$’000
|
|
Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
354,320
|
|
|
|
354,191
|
|
|
|
(129
|
)
|
Accumulated
deficit
|
|
|
(293,151
|
)
|
|
|
(293,022
|
)
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
336,978
|
|
|
|
336,836
|
|
|
|
(142
|
)
|
Accumulated
deficit
|
|
|
(210,979
|
)
|
|
|
(210,837
|
)
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
(i)
|
|
|
8,452
|
|
|
|
8,407
|
|
|
|
45
|
|
Clinical
and regulatory
(i)
|
|
|
4,957
|
|
|
|
4,922
|
|
|
|
35
|
|
Sales
and marketing
(i)
|
|
|
1,639
|
|
|
|
1,625
|
|
|
|
14
|
|
Loss
from continuing operations
|
|
|
(80,736
|
)
|
|
|
(80,642
|
)
|
|
|
94
|
|
Cumulative
effect of a change in accounting principle
|
|
|
107
|
|
|
|
—
|
|
|
|
(107
|
)
|
Net
loss for the year
|
|
|
(82,171
|
)
|
|
|
(82,184
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
8,729
|
|
|
|
8,670
|
|
|
|
59
|
|
Clinical
and regulatory expenses
|
|
|
5,251
|
|
|
|
5,168
|
|
|
|
83
|
|
Loss
from continuing operations
|
|
|
(162,972
|
)
|
|
|
(162,830
|
)
|
|
|
142
|
|
Net
loss for the year
|
|
|
(162,972
|
)
|
|
|
(162,830
|
)
|
|
|
142
|
|
|
|
Previously
reported
|
|
|
Corrected
amount
|
|
|
Effect
of error
|
|
|
|
|
$’000
|
|
|
|
$’000
|
|
|
|
$’000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to cash used in operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
(i)
|
|
|
2,221
|
|
|
|
2,127
|
|
|
|
94
|
|
Cumulative
effect of a change in accounting principle
|
|
|
(107
|
)
|
|
|
—
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to cash used in operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
367
|
|
|
|
225
|
|
|
|
142
|
|
(i)
|
The
comparative figures for the year ended December 31, 2006 have been
reclassified to reflect the effect of discontinued
operations.
|
Continuing
Operations
Revenues,
Cost of Goods Sold and Gross Margin
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
Change
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to related parties
|
|
$
|
—
|
|
|
|
N/M
|
*
|
|
$
|
—
|
|
|
|
N/M
|
*
|
|
$
|
81
|
|
Sales
to unrelated parties
|
|
|
92
|
|
|
|
(47
|
)%
|
|
|
174
|
|
|
|
(90
|
)%
|
|
|
1,759
|
|
Total
revenues
|
|
$
|
92
|
|
|
|
(47
|
)%
|
|
$
|
174
|
|
|
|
(91
|
)%
|
|
$
|
1,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold to related parties
|
|
$
|
—
|
|
|
|
N/M
|
*
|
|
$
|
—
|
|
|
|
N/M
|
*
|
|
$
|
43
|
|
Cost
of goods sold to unrelated parties
|
|
|
2,298
|
|
|
|
(33
|
)%
|
|
|
3,429
|
|
|
|
5
|
%
|
|
|
3,251
|
|
Royalty
costs
|
|
|
100
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
100
|
|
Total
cost of goods sold
|
|
$
|
2,398
|
|
|
|
(32
|
)%
|
|
$
|
3,529
|
|
|
|
4
|
%
|
|
$
|
3,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
loss
|
|
|
(2,306
|
)
|
|
|
31
|
%
|
|
|
(3,355
|
)
|
|
|
(116
|
)%
|
|
|
(1,554
|
)
|
Percentage
of total revenue
|
|
|
(2,507
|
)%
|
|
(579)
pts
|
|
|
|
(1,928
|
)%
|
|
(1,844)
pts
|
|
|
|
(84
|
)%
|
*N/M
– Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Revenue
consists of revenue generated from the sale of components of the RHEO™ System
which consists of the OctoNova pump and the disposable treatment sets, which
include two disposable filters and applicable tubing.
During
the year ended December 31, 2007, we sold a total of 816 treatment sets, at a
price of $200 per treatment set, to Veris. The sale of these treatment sets was
not recognized as revenue during the year based on Veris’ payment history with
the Company and the 180-day payment terms agreed by Veris and us in March 2007.
In October 2007, we met with the management of Veris and based on discussions
with Veris, we believe that Veris will not be able to meet its financial
obligations to the Company. Therefore, during the year ended December 31, 2007,
the Company recorded an allowance for doubtful accounts against the total amount
due from Veris for the purchase of the treatment sets.
Revenues
for the year ended December 31, 2007 is made up of revenue from the sale of
a total of 600 treatment sets at a negotiated price of $150 per treatment set to
Macumed AG, a company based in Germany. Revenues for the year ended December 31,
2006 include the sale of 859 treatment sets to Veris at a negotiated price of
$200 per treatment set as payment was received by the Company in advance of
shipment of the treatment sets.
During
fiscal 2006, as compared with fiscal 2005, revenues decreased significantly
primarily due to reduced sales of components of the RHEO™ System to Veris as a
result of our February 3, 2006 announcement that MIRA-1 did not meet its primary
efficacy endpoint. In addition, included in revenues in fiscal 2005 are sales
made to RHEO Clinic Inc., a subsidiary of TLC Vision Corporation (“TLC Vision”)
and a related party, for which we reported revenues of $81,593 in the period.
RHEO Clinic Inc. has since ceased the treatment of commercial patients and is
therefore no longer a source of revenue for us.
On
November 1, 2007, we announced an indefinite suspension of the RHEO™ System
clinical development program for Dry AMD and are in the process of winding down
the RHEO-AMD study. Accordingly, we do not expect to be able to continue to
generate revenue from the sale of the components of the RHEO™ System in the
future.
Cost
of Sales
Cost of
sales includes costs of goods sold and royalty costs. Our cost of goods sold
consists primarily of costs for the manufacture of the RHEO™ System, including
the costs we incur for the purchase of component parts from our suppliers,
applicable freight and shipping costs, fees related to warehousing, logistics
inventory management and recurring regulatory costs associated with conducting
business and ISO certification.
During
fiscal 2006, we sold a number of treatment sets to Veris at a price, net of
negotiated discounts, which was lower than our cost. As Veris was then our sole
customer for the RHEO™ System treatment sets, the price at which we sold the
treatment sets to Veris represented our inventory’s then current net realizable
value, and therefore, we have written down the value of the treatment sets to
reflect this net realizable value. Included in cost of sales for the year ended
December 31, 2006, is $1,625,000 which reflects the write-down of the treatment
sets to its net realizable value. In addition, we evaluated our ending
inventories as at December 31, 2006 on the basis that Veris may not be able to
increase its commercial activities in Canada in line with our initial
expectations. Accordingly, we set up an additional provision for obsolescence of
$1,679,124 during the year ended December 31, 2006 for treatment sets that will
unlikely be utilized prior to their expiration dates (2005 - $1,990,830). As at
December 31, 2006, the value of our commercial inventory of treatment sets was
nil. On November 1, 2007, we announced an indefinite suspension of the RHEO™
System clinical development program for Dry AMD, and we are engaged in the
process of winding down the RHEO-AMD study. Accordingly, we have written
down the value of our commercial inventory of OctoNova pumps to nil as of
December 31, 2007 since the Company may not be able to sell or utilize these
pumps before their technologies become outdated. Included in cost of sales for
the year ended December 31, 2007, is a charge of $2,190,666 which reflects the
write-down of the value of these pumps to nil as of December 31,
2007.
Cost of
sales for the year ended December 31, 2007 includes royalty fees payable to Dr.
Brunner and Mr. Stock and a charge of $2,190,666 which reflects the write-down
of the value of our commercial inventory of pumps to nil as of December 31,
2007. Included in cost of sales for the year ended December 31, 2006 are royalty
fees payable to Dr. Brunner and Mr. Stock and a total charge of $3,304,124 which
reflect the write-down of our commercial inventory of treatment sets to nil as
at December 31, 2006.
During
the year ended December 31, 2006, as compared with the corresponding period in
fiscal 2005, cost of sales increased due primarily to the charge of $1,625,000
which reflects the write-down of our inventory of treatment sets to its net
realizable value. There was no comparative expense in fiscal 2005. Cost of sales
for the years ended December 31, 2006 and 2005 includes a provision for
obsolescence of $1,679,124 and 1,990,830, respectively, for treatment sets that
will unlikely be utilized prior to their expiration dates.
Gross
Margin
During
fiscal 2007 as compared with fiscal 2006, our retina gross margin decreased 579
percentage points due to reduced sales in fiscal 2007.
During
fiscal 2006 as compared with fiscal 2005, our retina gross margin decreased
1,844 percentage points due to reduced sales in fiscal 2006 and increased cost
of sales due to the inventory write-down and the provision for obsolescence
recorded in the period.
Operating
Expenses
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
Change
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
7,374
|
|
|
|
(12
|
)%
|
|
$
|
8,407
|
|
|
|
(3
|
)%
|
|
$
|
8,670
|
|
Clinical
and regulatory
|
|
|
8,676
|
|
|
|
76
|
%
|
|
|
4,922
|
|
|
|
(5
|
)%
|
|
|
5,168
|
|
Sales
and marketing
|
|
|
1,413
|
|
|
|
(13
|
)%
|
|
|
1,625
|
|
|
|
(25
|
)%
|
|
|
2,165
|
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
(100
|
)%
|
|
|
65,946
|
|
|
|
(55
|
)%
|
|
|
147,452
|
|
Impairment
of intangible asset
|
|
|
20,923
|
|
|
|
N/M
|
*
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Restructuring
charges
|
|
|
1,313
|
|
|
|
60
|
%
|
|
|
820
|
|
|
|
N/M
|
*
|
|
|
—
|
|
Total
operating expenses
|
|
$
|
39,699
|
|
|
|
(51
|
)%
|
|
$
|
81,720
|
|
|
|
(50
|
)%
|
|
$
|
163,455
|
|
*N/M
– Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
General
and administrative expenses decreased by $1,033,775 during the year ended
December 31, 2007, as compared with the corresponding period of fiscal 2006 due
to a decrease of $1,352,416 in stock-based compensation expense which reflects
the reversal of the stock-based compensation expense recorded in prior periods
associated with performance-based options granted to certain employees,
directors and consultants of the Company. The vesting of these options was
contingent upon meeting company-wide goals which include the attainment of FDA
approval of the RHEO™ System and the achievement of a minimum amount of sales
over a specified period. In light of the indefinite suspension of the RHEO™
System clinical development program and the sale of SOLX, management concluded
that these goals were no longer achievable and accordingly has reversed the
option expense recorded in prior periods associated with these performance-based
options. Professional fees also decreased by $352,634 during the year ended
December 31, 2007 as compared with the corresponding period of fiscal 2006.
These decreases were partially offset by the increase in employee and related
travel costs of $383,859 due to the additional cost of OcuSense employees during
the period as well as the increase in amortization expense of $90,482 associated
with the intangible asset acquired upon the acquisition of 50.1% of the capital
stock, on a fully diluted basis, of OcuSense on November 30, 2006. General and
administrative expenses for the year ended December 31, 2007 also include a
charge of $190,873 which reflects the reduction to the carrying value of certain
of the Company’s patents and trademarks related to the RHEO™ System as a result
of our indefinite suspension of the RHEO™ System clinical development program
for Dry AMD. There was no comparative charge during the year ended December 31,
2006.
General
and administrative expenses decreased by $262,893 during the year ended December
31, 2006, as compared with the corresponding period of fiscal 2005. This
decrease is due to the decrease in employee and related travel costs of $537,274
due in part to the grant of options to an employee in lieu of salary.
Professional fees and fees associated with compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 also decreased by $917,318 while directors’ fees
decreased by $50,207 due to the grant of options to directors in lieu of their
annual fees payable for board and committee memberships. These decreases in cost
were partially offset by an increase of $1,262,292 in stock-based compensation
expense associated with the adoption of SFAS No. 123R on January 1, 2006 which
requires us to recognize a non-cash expense related to the fair value of our
stock-based compensation awards.
We are
continuing to focus our efforts on achieving additional operating efficiencies
by reviewing and improving upon our existing business processes and cost
structure.
Clinical
and Regulatory Expenses
Clinical
and regulatory expenses increased by $3,753,781 during the year ended December
31, 2007, as compared with the corresponding prior year period, due to the
increase in OcuSense product development and regulatory costs of $2,564,703.
OcuSense employee and related travel costs, professional fees and options
expense also increased by $494,458, $328,713 and $112,360, respectively, during
the year ended December 31, 2007 as compared with the corresponding period in
fiscal 2006. We acquired 50.1% of the capital stock, on a fully diluted basis,
of OcuSense on November 30, 2006. Therefore, clinical and regulatory expenses
for the year ended December 31, 2006 include OcuSense’s cost for the month of
December 2006. Clinical trial expenses associated with the RHEO-AMD trial also
increased by $1,101,074. The RHEO-AMD trial was abandoned on November 1, 2007.
Accordingly, we have recorded a write-down to the value of our inventory of
treatment sets used for the trial and also written down the carrying value of
certain of our medical equipment used in the trial. Clinical and regulatory
expenses for the year ended December 31, 2007 therefore include a charge of
$942,309 which reflects the write-down of our inventory and certain of our
medical equipment as of December 31, 2007. Also included in clinical trial
expenses for the year ended December 31, 2006 are advance payments totaling
$243,644 made to various clinical trial sites for the provision of clinical
trial services in connection with our RHEO-AMD trial which we have abandoned.
This unrecoverable amount has been fully expensed in the year ended December 31,
2007. There was no comparative expense during the year ended December 31, 2006.
These increases in cost during the year ended December 31, 2007 were offset in
part by the decrease in costs associated with the MIRA-1 trial, the LEARN, or
Long-term Efficacy in AMD from Rheopheresis in North America, trials and other
related clinical trials of $2,200,131 since the Company completed the
analysis of the MIRA-1 data during the first half of fiscal 2006 and the
treatment phase of the LEARN trials was completed in December 2006.
During
the year ended December 31, 2006, clinical and regulatory expenses decreased by
$245,778, as compared with the corresponding period in fiscal 2005, as a result
of decreased professional fees associated with the MIRA-1 clinical trial of
$233,920.
Our goal
is to complete product development of OcuSense’s TearLab™ test for DED.
Following the completion of product development, OcuSense will have to conduct
clinical trials in order to seek a 510(k) clearance and a CLIA waiver from the
FDA for the TearLab™ test for DED.
Sales
and Marketing Expenses
Sales and
marketing expenses decreased by $211,729 during the year ended December 31,
2007, as compared with the prior period in fiscal 2006, due to the decrease
in the RHEO™ System marketing expenses of $128,420. Stock-based compensation
expense also decreased by $331,038 which reflects the reversal of the
stock-based compensation expense recorded in prior periods associated with
performance-based options granted to certain employees, directors and
consultants of the Company. The vesting of these options was contingent upon
meeting company-wide goals which include the attainment of FDA approval of the
RHEO™ System and the achievement of a minimum amount of sales over a specified
period. In light of the indefinite suspension of the RHEO™ System clinical
development program and the sale of SOLX, management concluded that these goals
were no longer achievable and accordingly has reversed the option expense
recorded in prior periods associated with these performance-based options. These
decreases in cost were offset in part by the increase in OcuSense employee and
related travel costs of $146,504 and professional fees of $61,559. During 2007,
OcuSense hired a new employee and retained the use of some outside consultants
to begin establishing sales and marketing efforts to increase awareness of the
TearLab™ test for DED, and upon receipt of FDA approval, to promote the use of
the TearLab™ test for DED in the United States.
Sales and
marketing expenses decreased by $540,149 during the year ended December 31,
2006, as compared with the prior period in fiscal 2005, due to reduced
employee and travel costs during the period of $422,423 and a decrease in
marketing expenses of $344,067 due to reduced marketing efforts in the year
following the announcement of MIRA-1 results. Bad debt expense also decreased
during the year ended December 31, 2006 by $510,913 as the Company only
recognized revenue on sale of treatment sets sold to its then sole customer,
Veris, on receipt of payment. These decreases in costs were offset by increased
stock-based compensation expense of $524,003 associated with the adoption of
SFAS No. 123R beginning January 1, 2006 and increased fees and expenses of the
Company’s Scientific Advisory Board members of $210,456.
The
cornerstone of our sales and marketing strategy to date has been to increase
awareness of our product among eye care professionals and, in particular, the
key opinion leaders in the eye care professions. OcuSense will continue to
develop and execute our conference and podium strategy to ensure visibility and
evidence-based positioning of the TearLab™ test for DED among eye care
professionals.
Impairment
of Goodwill
The
decrease in our stock price subsequent to the February 3, 2006 announcement of
the MIRA-1 trial's failure to meet its primary efficacy endpoint, the June 12,
2006 announcement of the outcome of our meeting with the FDA and the June 30,
2006 announcement of the termination of negotiations with Sowood were identified
as indicators of impairment which led to an analysis of our intangible assets
and goodwill which, in turn, resulted in the reporting of an impairment charge
of $65,946,686 and $147,451,758 during the years ended December 31, 2006
and 2005, respectively. The impairment of goodwill charge represents the
write-down of the value of goodwill acquired on the purchase of TLC Vision's 50%
interest in OccuLogix, L.P. on December 8, 2004 to nil as at December 31,
2006.
Impairment
of Intangible Assets
Prior to
the termination of the Distribution Agreement on February 25, 2008, the
Company’s intangible assets consisted of the value of that distribution
agreement with Asahi Medical and the distribution agreement the Company has
with Diamed and MeSys, the designer and the manufacturer, respectively, of the
OctoNova pumps. The Rheofilter filter, the Plasmaflo filter and the OctoNova
pump are components of the RHEO™ System. On November 1, 2007, the Company
announced an indefinite suspension of the RHEO™ System clinical development
program for Dry AMD and is in the process of winding down the RHEO-AMD
study as there is no reasonable prospect that the RHEO™ System clinical
development program will be relaunched in the foreseeable future. In
accordance with SFAS No. 144, the Company concluded that its indefinite
suspension of the RHEO™ System clinical development program for Dry AMD was
a significant event which may affect the carrying value of its distribution
agreements. Accordingly, management was required to re-assess whether
the carrying value of the Company’s distribution agreements was recoverable
as of December 31, 2007. Based on management’s estimates of undiscounted cash
flows associated with the distribution agreements, the Company concluded that
the carrying value of the distribution agreements was not recoverable as of
December 31, 2007. Accordingly, the Company recorded an impairment charge of
$20,923,028 during the year ended December 31, 2007 to record the distribution
agreements at their fair value as of December 31, 2007. There was no comparable
expense during the years ended December 31, 2006 and 2005.
Restructuring
Charges
In
accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or
Disposal Activities” (“SFAS No. 146”), we recognized a total of $1,312,721 and
$819,642 in restructuring charges during the years ended December 31, 2007 and
2006, respectively. With the suspension of the Company’s RHEO™ System clinical
development program, and the consequent winding-down of the RHEO-AMD study, and
the Company’s disposition of SOLX during the year ended December 31, 2007, the
Company has reduced its workforce considerably. During 2006, the Company
implemented a number of structural and management changes designed both to
support the continued development of the RHEO™ System and to execute the
Company’s accelerated diversification strategy within ophthalmology. The
restructuring charges of $1,312,721 and $819,642, recorded in the years ended
December 31, 2007 and 2006, respectively, consist solely of severance and
benefit costs related to the termination of certain of the Company’s employees
at the Company’s Palm Harbor and Mississauga offices. The severance and
benefit costs recorded during the year ended December 31, 2007 were yet to be
paid by December 31, 2007. There was no comparable expense in the year ended
December 31, 2005.
Other
Income, Net
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
Change
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
610
|
|
|
|
(55
|
)%
|
|
$
|
1,370
|
|
|
|
(14
|
)%
|
|
$
|
1,593
|
|
Changes
in fair value of warrant obligation
|
|
|
1,882
|
|
|
|
N/M
|
*
|
|
|
—
|
|
|
|
N/M
|
*
|
|
|
—
|
|
Impairment
of investments
|
|
|
(1,036
|
)
|
|
|
N/M
|
*
|
|
|
—
|
|
|
|
N/M
|
*
|
|
|
—
|
|
Interest
expense
|
|
|
(17
|
)
|
|
|
(13
|
)%
|
|
|
(15
|
)
|
|
|
N/M
|
*
|
|
|
—
|
|
Other
income (expense)
|
|
|
18
|
|
|
|
(42
|
)%
|
|
|
31
|
|
|
|
154
|
%
|
|
|
(57
|
)
|
Minority
interest
|
|
|
2,183
|
|
|
|
1,282
|
%
|
|
|
158
|
|
|
|
N/M
|
*
|
|
|
—
|
|
|
|
$
|
3,640
|
|
|
|
136
|
%
|
|
$
|
1,544
|
|
|
|
1
|
%
|
|
$
|
1,536
|
|
*
N/M – Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
Interest
income consists of interest income earned in the current period and the
corresponding prior periods as a result of the Company’s cash and short-term
investment position following the raising of capital in the Company’s initial
public offering in December 2004 and in the private placement of the Shares and
Warrants in February 2007.
The
continued decrease in interest income during years ended December 31, 2007 and
2006, when compared to the corresponding period in fiscal 2005, is due to the
utilization of the funds raised in order to finance infrastructure costs, to
accumulate inventory and to fund costs of the MIRA-1 and RHEO-AMD trials
and other clinical trials and, more recently, to acquire SOLX and OcuSense in
line with our diversification strategy.
Changes
in Fair Value of Warrant Obligation
On
February 6, 2007, pursuant to the Securities Purchase Agreement between the
Company and certain institutional investors, the Company issued the Warrants to
these investors. The Warrants are five-year warrants exercisable into an
aggregate of 2,670,933 shares of the Company’s common stock. On February 6,
2007, the Company also issued the Cowen Warrant to Cowen and Company, LLC in
part payment of the placement fee payable to Cowen and Company, LLC for the
services it had rendered as the placement agent in connection with the private
placement of the Shares and the Warrants. The Cowen Warrant is a five-year
warrant exercisable into an aggregate of 93,483 shares of the Company’s common
stock. The per share exercise price of the Warrants is $2.20, subject to
adjustment, and the Warrants became exercisable on August 6, 2007. All of the
terms and conditions of the Cowen Warrant (other than the number of shares of
the Company's common stock into which it is exercisable) are identical to those
of the Warrants. The Company accounts for the Warrants and the Cowen Warrant in
accordance with the provisions of SFAS No. 133 along with related interpretation
EITF 00-19. Based on the provisions of EITF 00-19, the Company determined that
the Warrants and the Cowen Warrant do not meet the criteria for classification
as equity. Accordingly, the Company has classified the Warrants and the Cowen
Warrant as a current liability as at December 31, 2007. The estimated fair value
was determined using the Black-Scholes option-pricing model. In addition, SFAS
No. 133 requires the Company to record the outstanding derivatives at fair value
at the end of each reporting period resulting in an adjustment to the recorded
liability of the derivative, with any gain or loss recorded in earnings of the
applicable reporting period. The Company therefore estimated the fair value of
the Warrants and the Cowen Warrant as at December 31, 2007 and determined the
aggregate fair value to be a nominal amount, a decrease of approximately
$2,052,578 over the initial measurement of the aggregate fair value of the
Warrants and the Cowen Warrant on the date of issuance.
Changes
in fair value of warrant obligation for the year ended December 31, 2007
includes a gain of $2,052,578 which reflect the decrease in the fair value of
the Warrants and the Cowen Warrant at December 31, 2007 over their fair value on
the date of issuance. Transaction costs associated with the issuance of the
Warrants of $170,081 have also been recorded as a warrant expense in the
Company’s consolidated statement of operations for the year ended December 31,
2007. There was no comparable net gain recorded in the years ended December 31,
2006 and 2005.
Impairment
of investments
As at
December 31, 2007, we had investments in the aggregate principal amount of
$1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Based on discussions with the Company’s advisors and the
current lack of liquidity for asset-backed securities of this type, we concluded
that the carrying value of these investments was higher than its fair value as
of December 31, 2007. Accordingly, these auction rate securities have been
recorded at their estimated fair value of $863,750. We consider this to be an
other-than-temporary reduction in the value of these auction rate
securities. Accordingly, the impairment associated with these auction rate
securities of $1,036,250 has been included as an impairment of investments in
our consolidated statement of operations for the year ended December 31,
2007.
Impairment
of investments for the year ended December 31, 2007 reflect the decrease in the
fair value of the Company’s investments in asset-backed auction rate securities
as at December 31, 2007. There was no comparable expense recorded in the years
ended December 31, 2006 and 2005.
Interest
Expense
On
November 30, 2006, we announced that Elias Vamvakas, our Chairman and Chief
Executive Officer, had agreed to provide us with a standby commitment to
purchase Convertible Debentures of the Company for a Total Commitment Amount of
$8,000,000. Pursuant to the Summary of Terms and Conditions, during
the 12-month commitment term commencing on November 30, 2006, upon no less than
45 days’ written notice by the Company to Mr. Vamvakas, Mr. Vamvakas was
obligated to purchase Convertible Debentures in the aggregate principal amount
specified in such written notice. A commitment fee of 200 basis points was
payable by the Company on the undrawn portion of the total $8,000,000 commitment
amount. Any Convertible Debentures purchased by Mr. Vamvakas would have carried
an interest rate of 10% per annum and would have been convertible, at Mr.
Vamvakas’ option, into shares of the Company’s common stock at a conversion
price of $2.70 per share. The Summary of Terms and Conditions of the standby
commitment further provided that if the Company closed a financing with a third
party, whether by way of debt, equity or otherwise and there are no Convertible
Debentures outstanding, then, the Total Commitment Amount was to be reduced
automatically upon the closing of the financing by the lesser of: (i) the Total
Commitment Amount; and (ii) the net proceeds of the financing. On February 6,
2007, the Company raised gross proceeds in the amount of $10,016,000 in a
private placement of shares of its common stock and warrants. The Total
Commitment Amount was therefore reduced to zero, thus effectively terminating
Mr. Vamvakas’ standby commitment. No portion of the standby commitment was ever
drawn down by the Company, and the Company paid Mr. Vamvakas a total of $29,808
in commitment fees in February 2007.
Interest
expense for the years ended December 31, 2007 and 2006 consists primarily of the
commitment fee due to Mr. Vamvakas on the undrawn portion of the Total
Commitment Amount during the periods. There was no comparable expense during the
year ended December 31, 2005.
Other
Income (Expense)
Other
income for the years ended December 31, 2007 and 2006 consists primarily of
foreign exchange gain of $22,889 and $37,229, respectively, due to exchange rate
fluctuations on the Company’s foreign currency transactions. This gain was
offset by miscellaneous tax expense of $4,879 and $6,120 during the years ended
December 31, 2007 and 2006, respectively. Other expense was $57,025 for the year
ended December 31, 2005 and consists of a provision for subscription receivable
of $34,927 and miscellaneous tax expense of $23,021.
Minority
Interest
Minority
interest is from our acquisition of 50.1% of the capital stock of OcuSense, on a
fully diluted basis, on November 30, 2006. The results of OcuSense’s operations
have been included in our consolidated financial statements since that date.
Income from minority interest of $2,182,843 and $157,624 for the years ended
December 31, 2007 and 2006, respectively, relate to the loss reported by
OcuSense in which the Company has a shared interest with minority
partners.
Recovery
of Income Taxes
For the
years ended December 31,
(in
thousands)
|
|
|
2007
|
|
|
|
Change
|
|
|
|
2006
|
|
|
|
Change
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery
of income taxes
|
$
|
|
5,655
|
|
|
|
96
|
%
|
|
$
|
2,888
|
|
|
|
349
|
%
|
|
$
|
643
|
|
Recovery
of Income Taxes
Recovery
of income taxes increased by $2,766,378 during the year ended December 31, 2007,
as compared with the prior period in 2006. The increase is due to the
elimination of the deferred tax liability of $7,995,790 associated with the
Company’s distribution intangible which was fully impaired as at December 31,
2007. In addition, we recorded a deferred tax recovery in the amount of
$2,244,990 associated with the recognition of the deferred tax asset from the
availability of net operating losses in the United States of OcuSense during the
2007 fiscal year which may be utilized to reduce taxes in future years. These
increases in recovery of income taxes were offset in part by a valuation
allowance increase of $4,809,456 associated with the Company’s Retina division.
A deferred tax asset was recognized in prior years as the asset was believed to
be more likely than not to be realized based on existing taxable temporary
differences.
Recovery
of income taxes increased by $2,245,961 during the year ended December 31,
2006, as compared with the prior period in 2005 due primarily to the recognition
of deferred tax asset from the availability of fiscal 2006 net operating losses
in the United States which may be utilized to reduce taxes in future years.
There was no comparable benefit recorded during the year ended December 31,
2005.
To date,
the Company has recognized income tax benefits in the aggregate amount of $2.3
million associated with the recognition of the deferred tax asset from the
availability of net operating losses in the United States which may be utilized
to reduce taxes in future years. The benefits associated with the balance of the
net operating losses are subject to a full valuation allowance since it is not
more likely than not that these losses can be utilized in future
years.
Recovery
of income taxes for the years ended December 31, 2007 and 2006 also includes the
amortization of the deferred tax liability of $223,544 and $15,684,
respectively, which was recorded based on the difference between the fair value
of intangible asset acquired upon the acquisition of OcuSense on November 30,
2006 and its tax bases. The increase in the amount recorded during the year
ended December 31, 2007 as compared with the corresponding period in fiscal 2006
is due to the additional deferred tax liability recorded by the Company upon the
payment of $2,000,000 to OcuSense in June 2007 upon the attainment by OcuSense
of one of the two pre-determined milestones. In addition, the acquisition of
50.1% of the capital stock of OcuSense, on a fully diluted basis, was completed
by the Company on November 30, 2006. Therefore, recovery of income taxes for the
year ended December 31, 2006 only included one month’s amortization of the
deferred tax liability recorded upon the acquisition of OcuSense, The deferred
tax liability totaling $2,547,499 is being amortized over an average period of
10 years, the estimated useful life of the intangible asset. There was no
comparable income tax benefit recorded during the year ended December 31,
2005.
Discontinued
Operations
On
December 19, 2007, the Company sold to Solx Acquisition, and Solx Acquisition
purchased from the Company, all of the issued and outstanding shares of the
capital stock of SOLX, which had been the glaucoma subsidiary of the Company
prior to the completion of this transaction. The consideration for the purchase
and sale of all of the issued and outstanding shares of the capital stock of
SOLX consisted of: (i) on the closing date of the sale, the
assumption by Solx Acquisition of all of the liabilities of the Company related
to SOLX’s business, incurred on or after December 1, 2007, and the Company’s
obligation to make a $5,000,000 payment to the former stockholders of SOLX due
on September 1, 2008 in satisfaction of the outstanding balance of the purchase
price of SOLX; (ii) on or prior to February 15, 2008, the payment by Solx
Acquisition of all of the expenses that the Company had paid to the closing
date, as they related to SOLX’s business during the period commencing on
December 1, 2007; (iii) during the period commencing on the closing date and
ending on the date on which SOLX achieves a positive cash flow, the payment by
Solx Acquisition of a royalty equal to 3% of the worldwide net sales of the SOLX
790 Laser and the SOLX Gold Shunt, including next-generation or future models or
versions of these products; and (iv) following the date on which SOLX achieves a
positive cash flow, the payment by Solx Acquisition of a royalty equal to 5% of
the worldwide net sales of these products. In order to secure the obligation of
Solx Acquisition to make these royalty payments, SOLX granted to the Company a
subordinated security interest in certain of its intellectual property. No value
was assigned to the royalty payments as the determination of worldwide net sales
of SOLX’s products is subject to significant uncertainty.
The
Company’s results of operations related to discontinued operations for the years
ended December 31, 2007 and 2006 are as follows:
|
|
December
31,
|
|
|
|
|
2007
$
|
|
|
|
2006
$
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
244,150
|
|
|
|
31,625
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
119,147
|
|
|
|
11,053
|
|
Royalty
costs
|
|
|
26,277
|
|
|
|
8,332
|
|
Total
cost of goods sold
|
|
|
145,424
|
|
|
|
19,385
|
|
Gross
profit
|
|
|
98,726
|
|
|
|
12,240
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
3,630,943
|
|
|
|
1,378,536
|
|
Clinical
and regulatory
|
|
|
2,828,686
|
|
|
|
754,624
|
|
Sales
and marketing
|
|
|
818,301
|
|
|
|
330,210
|
|
Impairment
of goodwill
|
|
|
14,446,977
|
|
|
|
—
|
|
Impairment
of intangible assets
|
|
|
22,286,383
|
|
|
|
—
|
|
|
|
|
44,011,290
|
|
|
|
2,463,370
|
|
|
|
|
(43,912,564
|
)
|
|
|
(2,451,130
|
)
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
486
|
|
|
|
—
|
|
Accretion
expense
|
|
|
(857,400
|
)
|
|
|
(273,192
|
)
|
Other
|
|
|
(9,302
|
)
|
|
|
(67
|
)
|
|
|
|
(866,216
|
)
|
|
|
(273,259
|
)
|
Loss
from discontinued operations before income taxes
|
|
|
(44,778,780
|
)
|
|
|
(2,724,389
|
)
|
Recovery
of income taxes
|
|
|
9,349,882
|
|
|
|
1,182,005
|
|
Loss
from discontinued operations
|
|
|
(35,428,898
|
)
|
|
|
(1,542,384
|
)
|
Revenues,
Cost of Goods Sold and Gross Margin of Discontinued Operations
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
244
|
|
|
|
663
|
%
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
$
|
119
|
|
|
|
982
|
%
|
|
$
|
11
|
|
Royalty
costs
|
|
|
26
|
|
|
|
225
|
%
|
|
|
8
|
|
Total
cost of sales
|
|
$
|
145
|
|
|
|
663
|
%
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
99
|
|
|
|
662
|
%
|
|
|
13
|
|
Percentage
of revenue
|
|
|
41
|
%
|
|
|
—
|
|
|
|
41
|
%
|
Revenues
Revenue
consists of revenue generated from the sale of components of the SOLX Glaucoma
System.
The
Company completed the acquisition of SOLX on September 1, 2006. On December 20,
2007, we announced the sale of SOLX to Solx Acquisition. The results of SOLX’s
operations have therefore been included in our consolidated financial statements
from September 1, 2006 to December 19, 2007, the closing date of the sale of
SOLX.
Revenue
therefore includes the sale of SOLX Gold Shunts from September 1, 2006 to
December 19, 2007. There was no comparative revenue during the year ended
December 31, 2005.
Cost
of Sales
Cost of
sales includes costs of goods sold and royalty costs. Our cost of goods sold
consists primarily of costs for the manufacture of the SOLX Glaucoma System,
including the costs we incur for the purchase of component parts from our
suppliers, applicable freight and shipping costs, fees related to warehousing,
logistics inventory management and recurring regulatory costs associated with
conducting business and ISO certification.
Cost of
sales includes the cost of the components of the SOLX Glaucoma System sold
during the years ended December 31, 2007 and 2006.
Gross
Margin
Gross
margin on the sale of SOLX Gold Shunts was 41% during each of the years ended
December 31, 2007 and 2006.
Operating
Expenses of Discontinued Operations
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
3,631
|
|
|
|
163
|
%
|
|
$
|
1,378
|
|
Clinical
and regulatory
|
|
|
2,829
|
|
|
|
275
|
%
|
|
|
755
|
|
Sales
and marketing
|
|
|
818
|
|
|
|
148
|
%
|
|
|
330
|
|
Impairment
of goodwill
|
|
|
14,447
|
|
|
|
N/M
|
*
|
|
|
—
|
|
Impairment
of intangible assets
|
|
|
22,286
|
|
|
|
N/M
|
*
|
|
|
—
|
|
Total
operating expenses
|
|
$
|
44,011
|
|
|
|
1,687
|
%
|
|
$
|
2,463
|
|
*N/M
– Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
General
and administrative expenses increased by $2,252,407 during the year ended
December 31, 2007, as compared with the corresponding period of fiscal 2006, due
to an increase of $1,738,334 in the amortization of the intangible assets
acquired during fiscal 2006 upon the acquisition of SOLX on September 1, 2006.
SOLX employee and related travel costs and administrative expenses also
increased by $311,886 and $183,575, respectively, during the year ended December
31, 2007 as compared with the corresponding period in fiscal 2006. We acquired
SOLX on September 1, 2006. Therefore, general and administrative expenses for
the year ended December 31, 2006 include SOLX’s cost for four months to December
2006.
Clinical
and Regulatory Expenses
SOLX’s
clinical and regulatory expenses increased by $2,074,062 during the year ended
December 31, 2007 as compared with the comparative period in 2006. We acquired
SOLX on September 1, 2006. Therefore, clinical and regulatory expenses for the
year ended December 31, 2006 include SOLX’s cost for the four months ended
December 31 2006.
Sales
and Marketing Expenses
Sales and
marketing expenses increased by $488,091 due to the increase in SOLX’s sales and
marketing expenses of $315,581 and increased employee and related travel
costs and administrative expenses of $107,935 and $28,686,
respectively.
Impairment
of Goodwill
On
September 1, 2006, the Company acquired SOLX by way of a merger for a total
purchase price of $29,068,443. Of this amount, $14,446,977 was allocated to
goodwill. On December 19, 2007, the Company sold all of the issued and
outstanding shares of the capital stock of SOLX to Solx Acquisition. The sale
transaction established fair values for the Company’s recorded goodwill and
certain of the Company’s intangible assets. Accordingly, the Company performed
an impairment test of its recorded goodwill to re-assess whether its recorded
goodwill was impaired as at December 1, 2007. Based on the goodwill impairment
analysis performed, the Company concluded that a goodwill impairment charge of
$14,446,977 should be recorded during the year ended December 31, 2007 to write
down the value of its recorded goodwill to its fair value of nil as at December
31, 2007.
Impairment
of Intangible Assets
The SOLX
sale transaction established fair values for the Company’s recorded goodwill and
the Company’s shunt and laser technology and regulatory and other intangible
assets acquired upon the acquisition of SOLX on September 1, 2006. Accordingly,
management was required to re-assess whether the carrying value of the Company’s
shunt and laser technology and regulatory and other intangible assets was
recoverable as of December 1, 2007. Based on management’s estimates of
undiscounted cash flows associated with these intangible assets, the Company
concluded that the carrying value of these intangible assets was not recoverable
as of December 1, 2007. Accordingly, the Company recorded an impairment charge
of $22,286,383 during the year ended December 31, 2007 to record the shunt and
laser technology and regulatory and other intangible assets at their fair value
as of December 31, 2007.
Other
Expense of Discontinued Operations
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
expense
|
|
$
|
(857
|
)
|
|
|
(214
|
)%
|
|
$
|
(273
|
)
|
Other
expense
|
|
|
(9
|
)
|
|
|
N/M
|
*
|
|
|
—
|
|
|
|
$
|
(866
|
)
|
|
|
(217
|
)%
|
|
$
|
(273
|
)
|
*
N/M – Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion Expense
In
connection with the acquisition of SOLX on September 1, 2006, we remained
indebted to the former stockholders of SOLX in an aggregate amount of up to
$13,000,000 for the outstanding portion of the purchase price of SOLX.
$5,000,000 of this amount was payable in cash on the second anniversary of the
September 1, 2006 closing. The $5,000,000 was recorded as a long-term
liability at its present value, discounted at the incremental borrowing rate of
the Company as at August 1, 2006. The difference between the discounted value
and the $5,000,000 payable was being amortized using the effective yield method
over the two-year period with the monthly expense being charged as an interest
expense in the Company’s consolidated statement of operations. Accretion expense
for the year ended December 31, 2007 and 2006 consists primarily of the
accretion expense for the years ended December 2007 and 2006.
Recovery
of Income Taxes of Discontinued Operations
For the
years ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Recovery
of income taxes
|
|
$
|
9,350
|
|
|
|
691
|
%
|
|
$
|
1,182
|
|
Recovery
of Income Taxes
Recovery
of income taxes increased by $8,167,877 during the year ended December 31, 2007,
as compared with the prior period in 2006. The increase is primarily due to the
elimination of the deferred tax liability of $11,861,145 associated with the
intangible assets acquired upon the acquisition of SOLX on September 1, 2006 as
these intangible assets were impaired as at December 31, 2007. This increase in
recovery of income taxes were offset in part by a valuation allowance increase
of $2,511,263 associated with the Company’s Glaucoma division. A deferred tax
asset was recognized in prior years as the asset was believed to be more likely
than not to be realized based on existing taxable temporary
differences.
The
recovery of income taxes was $1,182,450 during the year ended December 31, 2006
primarily due to the recognition of the deferred tax asset of $773,395 from the
availability of fiscal 2006 net operating losses in the United States which may
be utilized to reduce taxes in future years. Also impacting the recovery of
income taxes was the amortization of the deferred tax liability of $409,055
which was recorded based on the difference between the fair value of intangible
assets acquired and its tax bases.
LIQUIDITY
AND CAPITAL RESOURCES
As at
December 31,
(in
thousands)
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,236
|
|
|
$
|
5,741
|
|
|
$
|
(3,505
|
)
|
Short-term
investments
|
|
|
—
|
|
|
|
9,785
|
|
|
|
(9,785
|
)
|
Total
cash and cash equivalents and short-term investments
|
|
$
|
2,236
|
|
|
$
|
15,526
|
|
|
$
|
(13,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
of total assets
|
|
|
23
|
%
|
|
|
17
|
%
|
|
6
pts
|
|
Working
capital (deficiency)
|
|
$
|
(997
|
)
|
|
$
|
13,539
|
|
|
$
|
(30,876
|
)
|
In
December 2004, the Company raised $67,200,000 of gross cash proceeds (less
issuance costs of $7,858,789) in an initial public offering of shares of its
common stock. Immediately prior to the offering, the primary source of the
Company’s liquidity was cash raised through the issuance of
debentures.
On
February 6, 2007, the Company raised gross proceeds in the amount of $10,016,000
(less issuance costs of approximately $750,000) in a private placement of shares
of its common stock and warrants.
On
February 19, 2008, we announced that the Company secured a bridge loan in an
aggregate principal amount of $3,000,000 (less transaction costs of
approximately $200,000) from a number of private parties. The loan bears
interest at a rate of 12% per annum and has a 180-day term, which may be
extended to 270 days under certain circumstances. The repayment of the loan is
secured by a pledge by the Company of its shares of the capital stock of
OcuSense.
To date,
cash has been primarily utilized to finance increased infrastructure costs, to
accumulate inventory and to fund costs of the MIRA-1, LEARN and RHEO-AMD trials
and other clinical trials and to acquire SOLX and OcuSense in line with our
diversification strategy. With the suspension of the Company’s RHEO™ System
clinical trial development program, and the consequent winding-down of the
RHEO-AMD study, and the Company’s disposition of SOLX, we expect that, in the
future, we will use our cash resources to complete the product development of
OcuSense’s TearLab™ test for DED and conduct the clinical trials that will be
required for the TearLab™ test for DED. In addition, we remain indebted to
OcuSense in an aggregate amount of up to $2,000,000 for the outstanding portion
of the purchase price of the capital stock of OcuSense that we acquired on
November 30, 2006. We currently expect this amount to become due and payable
during the first half of 2008. Furthermore, we are legally committed to make an
additional equity investment of $3,000,000 upon receipt, if any, from the FDA of
a 510(k) clearance for the TearLab™ test for DED and another additional equity
investment of $3,000,000 upon receipt, if any, from the FDA of a CLIA waiver for
the TearLab™ test for DED.
Currently,
we anticipate that the net proceeds of the loan, together with the Company’s
other cash and cash-equivalents, will be sufficient to sustain the Company’s
operations only until approximately the end of April 2008 (assuming that the
outstanding obligation of OccuLogix to pay $2,000,000 to OcuSense becomes due
and payable prior to the end of April 2008).
As at
December 31, 2007, we had investments in the aggregate principal amount of
$1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. Contractual maturities for these auction rate securities range
from 33 to 39 years, with an average interest reset date of approximately 46
days. Historically, the carrying value of auction rate securities approximated
their fair value due to the frequent resetting of interest rates. However, as a
result of market conditions associated with the liquidity issues experienced in
the global credit and capital markets, all of these investments have recently
failed to settle on their respective settlement dates and have been reset to be
settled at a future date with an average maturity of 46 days.
Due to
the current lack of liquidity for asset-backed securities of this type, we
concluded that the carrying value of these investments was higher than its fair
value as of December 31, 2007. Accordingly, these auction rate securities have
been recorded at their estimated fair value of $863,750, which represents a
decline of $1,036,250 in the carrying value of these auction rate securities. We
estimated the fair value of these auction rate securities based on the
following: (i) the underlying structure of each security; (ii) the present value
of future principal and interest payments discounted at rates considered to
reflect current market conditions; (iii) consideration of the probabilities of
default, auction failure, or repurchase at par for each period; and (iv)
estimates of the recovery rates in the event of default for each
security. This estimated fair value could change significantly based
on future market conditions.
We determined the
reduction in the value of these auction rate securities to be an
other-than-temporary reduction in value. Accordingly, the impairment
associated with these auction rate securities of $1,036,250 has been included as
an impairment of investments in our consolidated statement of operations for the
year ended December 31, 2007. Our conclusion for the other-than-temporary
impairment is based on the Company’s current liquidity position. Although we
continue to receive payment of interest earned on these securities, we do not
know at the present time when we will be able to convert these investments into
cash. Accordingly, management has classified these investments as a
non-current asset on its consolidated balance sheet as of December 31, 2007.
Management will continue to closely monitor these investments for future
indications of further impairment. If the current market conditions deteriorate
further, or the anticipated recovery in market values does not occur, we may be
required to record additional impairment charges in fiscal 2008.
The
illiquidity of these investments may have an adverse impact on the length of
time during which we currently expect to be able to sustain our operations in
the absence of an additional capital raise by the Company as we do not have the
ability to hold these auction rate securities until the market recovers nor can
we hold these securities until their contractual maturity dates.
Years
ended December 31,
(in
thousands)
|
|
2007
|
|
|
Change
|
|
|
2006
|
|
|
Change
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in operating activities
|
|
$
|
(17,217
|
)
|
|
$
|
(2,669
|
)
|
|
$
|
(14,548
|
)
|
|
$
|
4,162
|
|
|
$
|
(18,710
|
)
|
Cash
provided by investing activities
|
|
|
4,510
|
|
|
|
(5,908
|
)
|
|
|
10,418
|
|
|
|
(33
|
)
|
|
|
10,451
|
|
Cash
provided by financing activities
|
|
|
9,202
|
|
|
|
8,931
|
|
|
|
271
|
|
|
|
(57
|
)
|
|
|
328
|
|
Net
(decrease) increase in cash and cash equivalents during the
year
|
|
$
|
(3,505
|
)
|
|
$
|
354
|
|
|
$
|
(3,859
|
)
|
|
$
|
4,072
|
|
|
$
|
(7,931
|
)
|
Cash
Used in Operating Activities
Net cash
used to fund our operating activities during the year ended December 31, 2007
was $17,217,438. Net loss during the year was $68,139,314. The
non-cash charges which comprise a portion of the net loss during that period
consisted primarily of the intangible assets and goodwill impairment of
$57,656,388 and the amortization of intangible assets, fixed assets, patents and
trademarks and accretion expense of $6,475,869 netted by applicable deferred
income taxes of $15,004,750 and minority interest of $2,182,843. Additional
non-cash charges consist of $480,971 in stock-based compensation charges and
impairment of investments of $1,036,250 netted by the change in the fair value
of warrant obligation of $1,882,497.
The net
change in non-cash working capital balances related to operations for the
years ended December 31, 2007, 2006 and 2005 consists of the
following:
|
|
Years
ended December 31,
|
|
|
|
|
2007
$
|
|
|
|
2006
$
|
|
|
|
2005
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
to related party
|
|
|
—
|
|
|
|
(5,065
|
)
|
|
|
13,291
|
|
Amounts
receivable
|
|
|
(58,782
|
)
|
|
|
390,634
|
|
|
|
(82,810
|
)
|
Inventory
|
|
|
2,756,759
|
|
|
|
2,250,554
|
|
|
|
(3,431,743
|
)
|
Prepaid
expenses
|
|
|
37,951
|
|
|
|
247,361
|
|
|
|
(322,455
|
)
|
Accounts
payable
|
|
|
797,415
|
|
|
|
(1,225,575
|
)
|
|
|
301,457
|
|
Accrued
liabilities
|
|
|
911,987
|
|
|
|
(1,155,335
|
)
|
|
|
(563,925
|
)
|
Deferred
revenue and rent inducement
|
|
|
—
|
|
|
|
—
|
|
|
|
(485,047
|
)
|
Due
to stockholders
|
|
|
(109,842
|
)
|
|
|
(5,827
|
)
|
|
|
(358,523
|
)
|
Other
current assets
|
|
|
7,000
|
|
|
|
12,781
|
|
|
|
4,105
|
|
|
|
|
4,342,488
|
|
|
|
509,528
|
|
|
|
(4,925,650
|
)
|
·
|
Amounts
receivable increased due primarily to the expected repayment by Solx
Acquisition, on or prior to February 15, 2008, in accordance with the
stock purchase agreement between the Company and Solx Acquisition, of all
the expenses relating to the SOLX business that the Company had
paid.
|
·
|
Decrease
in inventory balance reflects the write-down of inventory and the
provision for obsolescence for inventory the Company is not expected to be
able to sell prior to their expiration
dates.
|
·
|
Decrease
in prepaid expenses is primarily due to the expensing of advance payments
made to various organizations involved in the RHEO-AMD trial due to our
suspension of the trial, offset in part by prepaid insurance
premiums.
|
·
|
Accounts
payable and accrued liabilities increased and reflect amounts owed for
costs associated with the Company’s
activities.
|
·
|
The
decrease in amounts due to stockholders is due to payments made to TLC
Vision during the year ended December 31, 2007 for its payment of benefits
of certain employees of the Company and for computer and administrative
support.
|
Cash
Provided by Investing Activities
Net cash
provided by investing activities for the year ended December 31, 2007 is
$4,510,838 and consists of the net sale of short-term investments of
$7,885,000 offset in part by the payment of $3,000,000 to the former
stockholders of SOLX in connection with the payment of the purchase price, cash
in the amount of $267,934 used to acquire fixed assets and cash in the amount of
$106,228 used to protect and maintain patents and trademarks.
Net cash
provided by investing activities for the year ended December 31, 2006 was
$10,418,156 and resulted from cash generated from the sale of short-term
investments of $21,841,860. Cash used in investing activities during the period
consists of $255,886 used to acquire fixed assets and $105,217 used to protect
and maintain patents and trademarks. Additional cash used in investing
activities includes cash of $7,906,968 paid by the Company, including costs of
acquisition, to acquire SOLX net of cash acquired from SOLX of $34,719. In
addition, the Company advanced a total of $2,434,537 to SOLX to support its
operations prior to the acquisition. The Company also invested $2,076,312 to
acquire 50.1% of the capital stock of OcuSense, on a fully diluted basis,
including acquisition costs of $76,312. Cash acquired upon the acquisition of
OcuSense was $1,320,497. The $2,076,312 invested by the Company in OcuSense has
been utilized to fund the operations of OcuSense.
Cash
Provided by Financing Activities
Net cash
provided by financing activities for the year ended December 31, 2007 was
$9,201,735 and is made up of gross proceeds in the amount of $10,016,000 raised
in the February 2007 private placement of the Shares and the Warrants, less
issuance costs of $871,215 which includes the fair value of the Cowen Warrant of
$97,222 issued in part payment of the placement fee owed to Cowen and Company,
LLC. Cash provided by financing activities also includes cash received in the
amount of $2,228 from the exercise of options to purchase shares of common stock
of the Company, offset by additional share issuance costs of $42,500 in respect
of the shares issued to the former stockholders of SOLX in part payment of the
purchase price of SOLX.
Net cash
provided by financing activities for the year ended December 31, 2006 was
$270,935 and reflects cash received from the exercise of options to purchase
shares of common stock of the Company.
Borrowings
On
November 30, 2006, we announced that Elias Vamvakas, our Chairman and Chief
Executive Officer, had agreed to provide us with a standby commitment to
purchase Convertible Debentures of the Company for a Total Commitment Amount of
$8,000,000. Pursuant to the Summary of Terms and Conditions, during
the 12-month commitment term commencing on November 30, 2006, upon no less than
45 days’ written notice by the Company to Mr. Vamvakas, Mr. Vamvakas
was obligated to purchase Convertible Debentures in the aggregate principal
amount specified in such written notice. A commitment fee of 200 basis points
was payable by the Company on the undrawn portion of the total $8,000,000
commitment amount. Any Convertible Debentures purchased by Mr. Vamvakas
would have carried an interest rate of 10% per annum and would have been
convertible, at Mr. Vamvakas’ option, into shares of the Company’s common
stock at a conversion price of $2.70 per share. The Summary of Terms and
Conditions of the standby commitment further provided that if the Company closed
a financing with a third party, whether by way of debt, equity or otherwise and
there are no Convertible Debentures outstanding, then, the Total Commitment
Amount was to be reduced automatically upon the closing of the financing by the
lesser of: (i) the Total Commitment Amount; and (ii) the net proceeds of the
financing. On February 6, 2007, the Company raised gross proceeds in the amount
of $10,016,000 in a private placement of shares of its common stock and
warrants. The Total Commitment Amount was therefore reduced to zero, thus
effectively terminating Mr. Vamvakas’ standby commitment. No portion of the
standby commitment was ever drawn down by the Company, and the Company paid
Mr. Vamvakas a total of $29,808 in commitment fees in February
2007.
Contractual
Obligations and Contingencies
The
following table summarizes our contractual commitments as of December 31, 2007
and the effect those commitments are expected to have on liquidity and cash flow
in future periods.
|
|
Payments
Due by Period
|
|
Contractual
Commitments
|
|
Total
|
|
|
Less
than
1
year
|
|
|
1
to 3 years
|
|
|
More
than
3
years
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
445,202
|
|
|
|
197,374
|
|
|
|
247,828
|
|
|
|
—
|
|
Royalty
payments
|
|
|
1,517,000
|
|
|
|
135,000
|
|
|
|
405,000
|
|
|
|
977,000
|
|
Consulting
and non-competition agreements
|
|
|
206,286
|
|
|
|
153,286
|
|
|
|
56,000
|
|
|
|
|
|
On
November 30, 2006, pursuant to the Series A Preferred Stock Purchase Agreement
between us and OcuSense, we purchased 1,744,223 shares of OcuSense’s Series A
Preferred Stock representing 50.1% of OcuSense’s capital stock on a fully
diluted basis for an aggregate purchase price of up to $8,000,000. On the
closing of the purchase which took place on November 30, 2006, we paid
$2,000,000 of the purchase price. We paid another $2,000,000 installment of the
purchase price on January 3, 2007. The Company agreed to make additional
payments totaling $4,000,000 upon the attainment of two pre-defined milestones
by OcuSense prior to May 1, 2009. In June 2007, we paid OcuSense a total of
$2,000,000 upon the attainment of the first of the two pre-defined milestones.
We will pay the last $2,000,000 installment of the purchase price upon the
attainment by OcuSense of the second of such milestones, provided that the
milestone is achieved prior to May 1, 2009. The Series A Preferred Stock
Purchase Agreement also makes provision for an ability on our part to increase
our ownership interest in OcuSense for nominal consideration if OcuSense fails
to meet certain milestones by specified dates. In addition, pursuant to the
Series A Preferred Stock Purchase Agreement, we have agreed to purchase
$3,000,000 of shares of OcuSense’s Series B Preferred Stock, which shall
constitute 10% of OcuSense’s capital stock on a fully diluted basis at the time
of purchase, upon OcuSense’s receipt from the FDA of 510(k) clearance for the
DED Test and to purchase another $3,000,000 of shares of OcuSense’s Series B
Preferred Stock, which shall constitute an additional 10% of OcuSense’s capital
stock on a fully diluted basis at the time of purchase, upon OcuSense’s receipt
from the FDA of CLIA waiver for the DED Test.
Pursuant
to the terms of our distribution agreement with MeSys GmbH, or MeSys, dated
January 1, 2002, we undertook a minimum purchase commitment of 25 OctoNova pumps
per year beginning after FDA approval of the RHEO™ System, representing an
annual commitment after FDA approval of €405,000, or approximately $534,900. The
marketing and distributorship agreement with Diamed provides for a minimum
purchase of 1,000 OctoNova pumps during the period from the date of the
agreement until the end of the five-year period following receipt of FDA
approval, representing an aggregate commitment of €16,219,000, or approximately
$23,871,935, based on exchange rates as of December 31, 2007.
Off-Balance-Sheet
Arrangements
As of
December 31, 2007, we did not have any significant off-balance-sheet
arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation
S-K.
Financial
Condition
Management
believes that the existing cash and cash equivalents and short-term investments,
together with the net proceeds of the bridge loan, will be sufficient to fund
the Company’s anticipated level of operations and other demands and commitments
until approximately the end of April 2008 (assuming that the outstanding
obligation of OccuLogix to pay $2,000,000 to OcuSense becomes due and payable
prior to the end of April 2008).
As at
December 31, 2007, we had investments in the aggregate principal amount of
$1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Based on discussions with the Company’s advisors and the
current lack of liquidity for asset-backed securities of this type, we concluded
that the carrying value of these investments was higher than its fair value as
of December 31, 2007. Accordingly, these auction rate securities have been
recorded at their estimated fair value of $863,750. We consider this to be an
other-than-temporary reduction in the value, accordingly, the impairment
associated with these auction rate securities of $1,036,250 has been included as
an impairment of investments in our consolidated statement of operations for the
year ended December 31, 2007. Although we continue to receive payment of
interest earned on these securities, we do not know at the present time when it
will be able to convert these investments into cash. Accordingly,
management has classified these investments as a non-current asset on its
consolidated balance sheet as of December 31, 2007. Management will continue to
closely monitor these investments for future indications of further impairment.
The illiquidity of these investments may have an adverse impact on the length of
time during which we currently expect to be able to sustain its operations in
the absence of an additional capital raise by the Company.
Our
forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-looking statement and involves
risks and uncertainties. Actual results could vary as a result of a number of
factors. We have based this estimate on assumptions that may prove to be wrong,
and we could utilize our available capital resources sooner than we currently
expect. Our future funding requirements will depend on many factors, including
but not limited to:
|
·
|
the
cost and results of development of OcuSense’s TearLab™ test for
DED;
|
|
·
|
the
cost and results, and the rate of progress, of the clinical trials of the
TearLab™ test for DED that will be required to support OcuSense’s
application to obtain 510(k) clearance and a CLIA waiver from the FDA to
market and sell the TearLab™ test for DED in the United
States;
|
|
·
|
OcuSense’s
ability to obtain 510(k) approval and a CLIA waiver from the FDA for the
TearLab™ test for DED and the timing of such approval, if
any;
|
|
·
|
whether
government and third-party payors agree to reimburse treatments using the
TearLab™ test for DED;
|
|
·
|
the
costs and timing of building the infrastructure to market and sell the
TearLab™ test for DED;
|
|
·
|
the
costs of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;
and
|
|
·
|
the
effect of competing technological and market
developments.
|
With the
suspension of the Company’s RHEO™ System clinical development program, and the
consequent winding-down of the RHEO-AMD study, and the Company’s disposition of
SOLX, the Company no longer has any operating business. Its major asset is its
50.1% ownership stake, on a fully diluted basis, in OcuSense. Accordingly,
unless we acquire other businesses (which, in light of the Company’s financial
condition, is unlikely to occur), our ability to generate any revenues will be
dependent almost entirely upon the success of OcuSense.
We cannot
begin commercialization of the TearLab™ test for DED in the United States until
we receive FDA approval. At this time, we do not know when we can expect to
begin to generate revenues from the TearLab™ test for DED in the United
States.
We will
need additional capital in the future, and our prospects for obtaining it are
uncertain. On October 9, 2007, we announced that the Board had authorized
management and the Company’s advisors to explore the full range of strategic
alternatives available to enhance shareholder value, including, but not limited
to, the raising of capital through the sale of securities, one or more strategic
alliances and the combination, sale or merger of all or part of the Company. For
some time prior to the October 9, 2007 announcement, the Company had been
seeking to raise additional capital, with the objective of securing funding
sufficient to sustain its operations as it had been clear that, unless we were
able to raise additional capital, the Company would not have had sufficient cash
to support its operations beyond early 2008. Although the Company secured a
bridge loan in an aggregate principal amount of $3,000,000 from a number of
private parties on February 19, 2008, management believes that these net
proceeds, together with the Company’s existing cash and cash-equivalents, will
be sufficient to cover its operating activities and other demands only until
approximately the end of April 2008 (assuming that the outstanding obligation of
OccuLogix to pay $2,000,000 to OcuSense becomes due and payable prior to the end
of April 2008). Additional capital may not be available on terms favorable to
us, or at all. In addition, future financings could result in significant
dilution of existing stockholders. However, unless we succeed in raising
additional capital, we will be unable to continue our operations. See “Risk
Factors—Risks Relating to Our Business—Our financial condition and history of
losses have caused our auditors to express doubt as to whether we will be able
to continue as a going concern.”
Critical
Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations is
based upon our audited consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of assets, liabilities,
sales and expenses, and related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates, including those related to our
intangible assets, uncollectible receivables, inventories, goodwill and
stock-based compensation. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Because this can vary in each situation, actual results may
differ from these estimates under different assumptions or
conditions.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our audited consolidated
financial statements.
Revenue
Recognition
The
Company recognized revenue from the sale of the RHEO™ System, prior to the
Company’s announcement of the indefinite suspension of its RHEO™ System clinical
development program, which is comprised of OctoNova pumps and the related
disposable treatment sets and, prior to the Company’s disposition of SOLX on
December 19, 2007, from the sale of the components of the SOLX Glaucoma System
which includes the SOLX 790 Titanium Sapphire Laser (“SOLX 790 Laser”) and the
SOLX Gold Shunt. The Company received a signed binding purchase order from its
customers. The pricing was a negotiated amount between the Company and its
customers. The Company sold the components of the SOLX Glaucoma System directly
to physicians and also through distributors. Revenue has been reported net of
distributors’ commissions.
The
Company had the obligation to train its customers and to calibrate the OctoNova
pumps delivered to them. Only upon the completion of these services did the
Company recognize revenue for the pumps. The Company was also responsible for
providing a one-year warranty on the OctoNova pumps, and the estimated cost of
providing this service was accrued at the time revenue is recognized. The
treatment sets and the components of the SOLX Glaucoma System did not require
any additional servicing and revenue was recognized upon passage of title.
However, the Company’s revenue recognition policy requires an assessment as to
whether collectibility is reasonably assured, which requires the Company to
evaluate the creditworthiness of its customers. The result of the assessment
could materially impact the timing of revenue recognition.
Bad
Debt Reserves
The
Company evaluates the collectibility of its accounts receivable based on a
combination of factors. In cases where management is aware of circumstances that
may impair a specific customer’s ability to meet its financial obligations to
the Company, a specific allowance against amounts due to the Company is
recorded, which reduces the net recognized receivable to the amount management
reasonably believes will be collected. For all other customers, the Company
recognizes allowances for doubtful accounts based on the length of time the
receivables are past due, the current business environment and historical
experience. As at December 31, 2007 and 2006, the Company had bad debt reserves
of $172,992 and nil, respectively. The Company expensed amounts related to bad
debt reserves of nil, nil and $518,852 during the years ended December 31, 2007,
2006 and 2005, respectively, and set up a provision for $172,992, nil and
$530,445 representing invoices for products shipped, plus related taxes, to a
customer during the years ended December 31, 2007, 2006 and 2005, respectively,
for which revenue was not recognized due to the likelihood that the customer
would not be able to pay for the amounts invoiced.
Inventory
Valuation
Inventory
is recorded at the lower of cost and net realizable value and consists of
finished goods. Cost is accounted for on a first-in, first-out basis. Deferred
cost of sales (included in finished goods) consists of products shipped but not
recognized as revenue because they did not meet the revenue recognition
criteria.
The
Company evaluates its ending inventory for estimated excess quantities and
obsolescence, based on expected future sales levels and projections of future
demand, with the excess inventory provided for. In addition, the Company
assesses the impact of changing technology and market conditions. In
addition, the Company assesses whether recent transactions provide indicators as
to whether the net realizable value of its inventory is below its recorded cost.
In April 2006, the Company sold a number of treatment sets to Veris Health
Sciences Inc. (“Veris”) at a price lower than the Company’s
cost. Accordingly, the Company wrote down the value of its treatment
sets to reflect this current net realizable value during the year ended December
31, 2006. In light of the Company’s current financial position, on November 1,
2007, the Company announced an indefinite suspension of the RHEO™ System
clinical development program for Dry AMD. That decision was made
following a comprehensive review of the respective costs and development
timelines associated with the products in the Company’s portfolio and, in
particular, the fact that, if the Company is unable to raise additional capital,
it will not have sufficient cash to support its operations beyond early 2008.
Accordingly, the Company has written down the value of its treatment sets and
OctoNova pumps, the components of the RHEO™ System, to nil as of December 31,
2007 since the Company is not expected to be able to sell or utilize these
treatment sets and OctoNova pumps prior to their expiration dates, in the case
of the treatment sets, or before the technologies become outdated.
As at
December 31, 2007 and 2006, the Company had inventory reserves of $7,295,545 and
$5,101,394, respectively. During the years ended December 31, 2007, 2006 and
2005, the Company recognized a provision related to inventory of $2,790,209,
$3,304,124 and $1,990,830, respectively, based on the above
analysis.
Impairment
of long-lived
assets
We review
our fixed assets and intangible assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset might not be
recoverable. When such an event occurs, management estimates the future
undiscounted cash flows expected to result from the use of the asset and its
eventual disposition. In the event the undiscounted cash flows are less than the
carrying amount of the asset, a further analysis is required to estimate the
fair value of the asset using the discounted cash flow method and then an
impairment loss equal to the excess of the carrying amount over the fair value
is charged to operations.
Our
intangible assets consist of the value of the exclusive distribution agreements
we have with Asahi Medical and MeSys and other acquisition-related intangibles
arising from our acquisition of SOLX and OcuSense during fiscal 2006 prior to
the sale of SOLX on December 19, 2007. The distribution agreements and other
acquisition-related intangible assets are amortized using the straight-line
method over an estimated useful life of 15 and 10 years,
respectively.
On
November 1, 2007, we announced an indefinite suspension of the RHEO™ System
clinical development program for Dry AMD and are in the process of winding down
the RHEO-AMD study as there is no reasonable prospect that the RHEO™ System
clinical development program will be relaunched in the foreseeable
future. In accordance with SFAS No. 144, we concluded that its
indefinite suspension of the RHEO™ System clinical development program for Dry
AMD was a significant event which may affect the carrying value of our
distribution agreements. Accordingly, management was required to re-assess
whether the carrying value of the Company’s distribution agreements was
recoverable as of December 31, 2007. Based on management’s estimates of
undiscounted cash flows associated with the distribution agreements, we
concluded that the carrying value of the distribution agreements was not
recoverable as of December 31, 2007. Accordingly, we recorded an impairment
charge of $20,923,028 during the year ended December 31, 2007 to record the
distribution agreements at their fair value as of December 31,
2007.
On
December 19, 2007, we sold to Solx Acquisition, all of the issued and
outstanding shares of the capital stock of SOLX. The sale transaction
established fair values for the Company’s recorded goodwill and the Company’s
shunt and laser technology and regulatory and other intangible assets acquired
upon the acquisition of SOLX on September 1, 2006. Accordingly, management was
required to re-assess whether the carrying value of the Company’s shunt and
laser technology and regulatory and other intangible assets was recoverable as
of December 1, 2007. Based on management’s estimates of undiscounted cash flows
associated with these intangible assets, we concluded that the carrying value of
these intangible assets was not recoverable as of December 1, 2007. Accordingly,
we recorded an impairment charge of $22,286,383 during the year ended December
31, 2007 to record the shunt and laser technology and regulatory and other
intangible assets at their fair value as of December 31, 2007.
The
Company determined that, as at December 31, 2007, there have been no significant
events which may affect the carrying value of its TearLab™ technology. However,
the Company’s prior history of losses and losses incurred during the current
fiscal year reflects a potential indication of impairment, thus requiring
management to assess whether the OcuSense’s TearLab™ technology was impaired as
of December 31, 2007. Based on management’s estimates of forecasted undiscounted
cash flows as of December 31, 2007, the Company concluded that there is no
indication of an impairment of the OcuSense’s TearLab™ technology. Therefore, no
impairment charge was recorded during the year ended December 31,
2007.
Impairment
of Goodwill
Effective
January 1, 2002, goodwill is no longer amortized and is subject to an annual
impairment test. Goodwill impairment is evaluated between annual tests upon the
occurrence of certain events or circumstances. Goodwill impairment is assessed
based on a comparison of the fair value of the reporting unit to the underlying
carrying value of the reporting unit’s net assets, including goodwill. When the
carrying amount of the reporting unit exceeds its fair value, the fair value of
the reporting unit’s goodwill is compared with its carrying amount to measure
the amount of impairment loss, if any.
Prior to
the acquisition of SOLX and OcuSense during the second half of fiscal 2006, the
Company was a single reporting unit. Therefore, management determined the fair
value of the Company’s goodwill using the Company’s market capitalization as
opposed to the fair value of its assets and liabilities. As a result of the
announcement on February 3, 2006, the per share price of our common stock as
traded on NASDAQ decreased from $12.75 on February 2, 2006 to close at
$4.10 on February 3, 2006. The 10-day average price of the stock immediately
following the announcement was $3.65 and reflected a decrease in our market
capitalization from $536.6 million on February 2, 2006 to $153.6 million based
on the 10-day average share price subsequent to the announcement. On June 12,
2006, we announced that the FDA will require us to perform an additional study
of the RHEO™ System. In addition, on June 30, 2006, we announced that we had
terminated negotiations with Sowood in connection with a proposed private
purchase of approximately $30,000,000 of zero-coupon convertible notes of the
Company. The per share price of our common stock decreased subsequent to the
June 12, 2006 announcement and again after the June 30, 2006 announcement. Based
on the result of the preliminary analysis of the data from MIRA-1 and the events
that occurred during the second quarter of fiscal 2006, we concluded that there
were sufficient indicators of impairment leading to an analysis of our
intangible assets and goodwill and resulting in our reporting an impairment
charge to goodwill of $65,945,686 and $147,451,758 during the years ended
December 31, 2006 and 2005, respectively.
Subsequent
to the acquisition of SOLX and OcuSense, the Company determined the fair value
of its acquired goodwill based on a comparison of the fair value of the
reporting unit to the underlying carrying value of the reporting unit’s net
assets, including goodwill.
On
December 19, 2007, the Company sold to Solx Acquisition, all of the issued and
outstanding shares of the capital stock of SOLX, which had been the glaucoma
subsidiary of the Company prior to the completion of this sale. The sale
transaction established fair values for the Company’s recorded goodwill and
certain of the Company’s intangible assets. Accordingly, the Company performed
an impairment test of its recorded goodwill to re-assess whether its recorded
goodwill was impaired as at December 1, 2007. Based on the goodwill impairment
analysis performed, the Company concluded that a goodwill impairment charge of
$14,446,977 should be recorded during the year ended December 31, 2007 to write
down the value of its recorded goodwill to its fair value of nil as at December
31, 2007.
Stock-based
Compensation
We
account for stock-based compensation in accordance with the provisions of SFAS
123R. Under the fair value recognition provision of SFAS 123R, stock-based
compensation cost is estimated at the grant date based on the fair value of the
award and is recognized as an expense ratably over the requisite service period
of the award. We have selected the Black-Scholes option-pricing model as our
method of determining the fair value for all our awards and will recognize
compensation cost on a straight-line basis over the awards’ vesting
periods.
Impairment
of Investments
As at
December 31, 2007, we had investments in the aggregate principal amount of
$1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Due to the current lack of liquidity for asset-backed
securities of this type, the Company has concluded that the carrying value of
these investments was higher than its fair value as of December 31, 2007.
Accordingly, these auction rate securities have been recorded at their estimated
fair value of $863,750. We consider this to be an other-than-temporary reduction
in the value. Accordingly, the loss associated with these auction rate
securities of $1,036,250 has been included as an impairment of investments in
the Company’s consolidated statement of operations for the year ended December
31, 2007. Although we continue to receive payment of interest earned on these
securities, we do not know at the present time when we will be able to convert
these investments into cash. Accordingly, management has classified
these investments as a non-current asset on its consolidated balance sheet as of
December 31, 2007. We will continue to closely monitor these investments for
future indications of further impairment. The illiquidity of these investments
may have an adverse impact on the length of time during which we currently
expect to be able to sustain our operations in the absence of an additional
capital raise by the Company.
Fair
Value of Warrants
On
February 6, 2007, pursuant to the Securities Purchase Agreement between the
Company and certain institutional investors, the Company issued the Warrants to
these investors. The Warrants are five-year warrants exercisable into an
aggregate of 2,670,933 shares of the Company’s common stock. On February 6,
2007, the Company also issued the Cowen Warrant to Cowen and Company, LLC in
part payment of the placement fee payable to Cowen and Company, LLC for the
services it had rendered as the placement agent in connection with the private
placement of the Shares and the Warrants. The Cowen Warrant is a five-year
warrant exercisable into an aggregate of 93,483 shares of the Company’s common
stock. The per share exercise price of the Warrants is $2.20, subject to
adjustment, and the Warrants became exercisable on August 6, 2007. All of the
terms and conditions of the Cowen Warrant (other than the number of shares of
the Company's common stock into which it is exercisable) are identical to those
of the Warrants. The Company accounts for the Warrants and the Cowen Warrant in
accordance with the provisions of SFAS No. 133 along with related interpretation
EITF 00-19. Based on the provisions of EITF 00-19, the Company determined that
the Warrants and the Cowen Warrant do not meet the criteria for classification
as equity. Accordingly, the Company has classified the Warrants and the Cowen
Warrant as a current liability as at December 31, 2007. The estimated fair value
was determined using the Black-Scholes option-pricing model. In addition, SFAS
No. 133 requires the Company to record the outstanding derivatives at fair value
at the end of each reporting period resulting in an adjustment to the recorded
liability of the derivative, with any gain or loss recorded in earnings of the
applicable reporting period. The Company therefore estimated the fair value of
the Warrants and the Cowen Warrant as at December 31, 2007 and determined the
aggregate fair value to be a nominal amount, a decrease of approximately
$2,052,578 over the initial measurement of the aggregate fair value of the
Warrants and the Cowen Warrant on the date of issuance.
Effective
Corporate Tax Rate
Income
Taxes
As of
December 31, 2007, we had net operating loss carry forwards for federal income
taxes of $75 million. Our utilization of the net operating loss and tax credit
carry forwards may be subject to annual limitations pursuant to Section 382 of
the Internal Revenue Code, and similar state provisions, as a result of changes
in our ownership structure. The annual limitations may result in the expiration
of net operating losses and credits prior to utilization.
At
December 31, 2007, we had recorded a deferred tax liability due to the
difference between the fair value of our intangible assets and their tax bases.
We also recorded a deferred tax asset, netted off against the deferred tax
liability, from the availability of 2007 net operating losses in the United
States which may be utilized to reduce taxes in future years. In addition, we
also had additional deferred tax asset representing the benefit of net operating
loss carry forwards and certain stock issuance costs capitalized for tax
purposes. We did not record a benefit for this deferred tax asset because
realization of the benefit was uncertain, and, accordingly, a valuation
allowance is provided to offset the deferred tax asset.
The
Company and its subsidiaries have current and prior year losses available to
reduce taxable income and taxes payable in future years which, if not utilized,
will expire as follows:
|
|
|
$
|
|
|
|
|
|
|
2012
|
|
|
3,455,029
|
|
2018
|
|
|
4,500,401
|
|
2019
|
|
|
1,893,700
|
|
2020
|
|
|
4,488,361
|
|
2021
|
|
|
3,356,992
|
|
2022
|
|
|
2,497,602
|
|
2023
|
|
|
1,901,399
|
|
2024
|
|
|
6,494,479
|
|
2025
|
|
|
12,985,677
|
|
2026
|
|
|
12,339,131
|
|
2027
|
|
|
21,451,150
|
|
Recent
Accounting Pronouncements
The
adoption of
Staff
Accounting Bulletin
No. 1
10
, “
Share-based
payments
”
during fiscal
2007 did not have a material impact on our results of operations and financial
position.
In
September 2006, FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS
No. 157”). SFAS No. 157 defines fair value, establishes a framework and gives
guidance regarding the methods used for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning on or after November 15,
2007 and for interim periods within those fiscal years.
On
February 12, 2008, FASB issued FASB Staff Position No. 157-2, “Effective Date of
FASB Statement No 157” (FSP No. 157”). FSP No. 157-2 amends SFAS No. 157 to
delay the effective date of SFAS No. 157 for non-financial assets and
non-financial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually)
for fiscal years beginning after November 15, 2008.
On
February 14, 2008, FASB issued FSP No. 157-1, “Application of FASB Statement No.
157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13” (“FSP No. 157-1”). FSP No. 157-1 amends SFAS No.
157 to exclude SFAS No. 13, “Accounting for Leases” (“SFAS No. 13”), and other
accounting pronouncements that address fair value measurements for purposes of
lease classification or measurement under SFAS No. 13.
We are
currently evaluating the impact that the adoption of SFAS No. 157, FSP No. 157-2
and FSP No. 157-1 will have on our results of operations and financial
position.
In
February 2007, FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115” (“SFAS No. 159”). SFAS No. 159 expands the use of fair value
accounting but does not affect existing standards which require assets or
liabilities to be carried at fair value. Under SFAS No. 159, a company may elect
to use fair value to measure accounts and loans receivable, available-for-sale
and held-to-maturity securities, equity method investments, accounts payable,
guarantees and issued debt. Other eligible items include firm commitments for
financial instruments that otherwise would not be recognized at inception and
non-cash warranty obligations where a warrantor is permitted to pay a third
party to provide the warranty goods or services. If the use of fair value is
elected, any upfront costs and fees related to the item must be recognized in
earnings and cannot be deferred (e.g., debt issue costs). The fair value
election is irrevocable and generally made on an instrument-by-instrument basis,
even if a company has similar instruments that it elects not to measure based on
fair value. At the adoption date, unrealized gains and losses on existing items
for which fair value has been elected are reported as a cumulative adjustment to
beginning retained earnings. Subsequent to the adoption of SFAS No. 159, changes
in fair value are recognized in earnings. SFAS No. 159 is effective for fiscal
years beginning on or after November 15, 2007 and is required to be adopted by
the Company in the first quarter of fiscal 2008. The adoption of SFAS No. 159
will not have a material impact on our results of operations and financial
position.
In June
2007, FASB’s Emerging Issues Task Force (“EITF”) issued EITF Issue No. 06-11,
“Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”
(“EITF No. 06-11”). EITF No. 06-11 requires that the tax benefits related to
dividend equivalents paid on restricted stock units, which are expected to vest,
be recorded as an increase to additional paid-in capital. EITF No. 06-11 is
effective prospectively to the income tax benefits on dividends declared in
fiscal years beginning on or after December 15, 2007. We are currently
evaluating the impact the adoption of EITF No. 06-11 will have on our results of
operations and financial position.
In
December 2007, FASB issued Statement No. 141R (revised 2007), “Business
Combinations (a revision of Statement No. 141)” (“SFAS No. 141R”). SFAS No. 141R
applies to all transactions or other events in which an entity obtains control
of one or more businesses, including those business combinations achieved
without the transfer of consideration. SFAS No. 141R retains the fundamental
requirements in Statement No. 141 that the acquisition method of accounting be
used for all business combinations. SFAS No. 141R expands the scope to include
all business combinations and requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree at their fair values as of the acquisition date. In addition, SFAS No.
141R changes the way entities account for business combinations achieved in
stages by requiring the identifiable assets and liabilities to be measured at
their full fair values. Also, contractual contingencies and contingent
consideration shall be measured at fair value at the acquisition date. SFAS No.
141R is effective on a prospective basis to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. We are currently evaluating the
impact, if any, that the adoption of SFAS No. 141R will have on our results of
operations and financial position.
In
December 2007, FASB issued Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 amends ARB No. 51 to establish accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 clarifies that a non-controlling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial statements.
Additionally, SFAS No. 160 requires that consolidated net income include the
amounts attributable to both the parent and the non-controlling interest. SFAS
No. 160 is effective for interim periods beginning on or after December 15,
2008. We are currently evaluating the impact, if any, that the adoption of SFAS
No. 160 will have on our results of operations and financial
position.
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Quantitative
and Qualitative Disclosure of Market Risk
Currency
Fluctuations and Exchange Risk
All of
our sales are in U.S. dollars or are linked to the U.S. dollar, while a portion
of our expenses are in Canadian dollars and Euros. We cannot predict any future
trends in the exchange rate of the Canadian dollar or Euro against the U.S.
dollar. Any strengthening of the Canadian dollar or Euro in relation to the U.S.
dollar would increase the U.S. dollar cost of our operations, and affect our
U.S. dollar measured results of operations. We do not engage in any hedging or
other transactions intended to manage these risks. In the future, we may
undertake hedging or other similar transactions or invest in market risk
sensitive instruments if we determine that is advisable to offset these
risks.
Interest
Rate Risk
The
primary objective of our investment activity is to preserve principal while
maximizing interest income we receive from our investments, without increasing
risk. We believe this will minimize our market risk.
As at
December 31, 2007, we had investments in the aggregate principal amount of
$1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Due to the current lack of liquidity for asset-backed
securities of this type, the Company has concluded that the carrying value of
these investments was higher than its fair value as of December 31, 2007.
Accordingly, these auction rate securities have been recorded at their estimated
fair value of $863,750. We consider this to be an other-than-temporary reduction
in the value. Accordingly, the loss associated with these auction rate
securities of $1,036,250 has been included as an impairment of investments in
the Company’s consolidated statement of operations for the year ended December
31, 2007. Although we continue to receive payment of interest earned on these
securities, we do not know at the present time when we will be able to convert
these investments into cash. Accordingly, management has classified
these investments as a non-current asset on its consolidated balance sheet as of
December 31, 2007. We will continue to closely monitor these investments for
future indications of further impairment. The illiquidity of these investments
may have an adverse impact on the length of time during which we currently
expect to be able to sustain our operations in the absence of an additional
capital raise by the Company.
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
Consolidated
Financial Statements
December
31, 2007 and 2006
PUBLIC
ACCOUNTING FIRM
To the
Board of Directors and Shareholders of
OccuLogix, Inc.
We have
audited the accompanying consolidated balance sheets of
OccuLogix, Inc.
(the
“Company”) as of December 31, 2007 and 2006 and the related consolidated
statements of operations, changes in stockholders’ equity and cash flows for
each of the three years in the period ended December 31, 2007. Our
audits also included the financial statement schedule listed in the index at
Item 15(a). These financial statements and schedule are the responsibility of
the Company’s management. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company as of
December 31, 2007 and 2006 and the consolidated result of its operations and its
cash flows for each of the three years in the period ended December 31, 2007 in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
The
accompanying consolidated financial statements have been prepared assuming that
OccuLogix, Inc.
will
continue as a going concern. As more fully described in Note 1, the
Company has incurred recurring operating losses and has a working capital
deficiency. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard
to these matters also are described in Note 1. The financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
As
discussed in Note 3 to these consolidated financial statements, the Company
changed its accounting policy in regards to the accounting for income taxes for
the year ended December 31, 2007. Additionally, as discussed in Note 16(e), the
Company changed its accounting policy in regards to the accounting for
stock-based compensation during the year ended December 31, 2006.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of
OccuLogix, Inc.’s
internal
control over financial reporting as of December 31, 2007, based on criteria
established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission, and our report dated
March 14, 2008 expressed an unqualified opinion thereon.
Toronto,
Canada,
|
Chartered
Accountants
|
March
14, 2008.
|
Licensed
Public Accountants
|
OccuLogix,
Inc.
(expressed
in U.S. dollars)
(Going
Concern Uncertainty – See Note 1)
|
|
As
of December 31,
|
|
|
|
|
|
|
|
2006
(restated
– note 10)
$
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
2,235,832
|
|
|
|
5,705,235
|
|
Short-term
investments
|
|
|
—
|
|
|
|
9,785,000
|
|
Amounts
receivable, net of bad debt reserves of $172,992 in 2007 and nil in 2006
(note
12(e))
|
|
|
374,815
|
|
|
|
165,409
|
|
Inventory,
net of provision for inventory obsolescence of $7,295,545 in
2007 and $5,101,394 in 2006
|
|
|
—
|
|
|
|
2,344,638
|
|
Prepaid
expenses
|
|
|
481,121
|
|
|
|
548,883
|
|
Other
current assets
|
|
|
10,442
|
|
|
|
10,442
|
|
Current
assets relating to discontinued operations
(note
10)
|
|
|
—
|
|
|
|
618,154
|
|
Total
current assets
|
|
|
3,102,210
|
|
|
|
19,177,761
|
|
Fixed
assets, net
(note
6)
|
|
|
122,286
|
|
|
|
574,310
|
|
Patents
and trademarks, net
(note
7)
|
|
|
139,437
|
|
|
|
234,841
|
|
Investments
(note
1)
|
|
|
863,750
|
|
|
|
—
|
|
Intangible
assets, net
(note
8)
|
|
|
5,770,677
|
|
|
|
26,876,732
|
|
Goodwill
(note
5)
|
|
|
—
|
|
|
|
—
|
|
Other
assets relating to discontinued operations
(note
10)
|
|
|
—
|
|
|
|
43,540,051
|
|
|
|
|
9,998,360
|
|
|
|
90,403,695
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts
payable
(note
12)
|
|
|
1,192,807
|
|
|
|
162,705
|
|
Accrued
liabilities
(notes 12
and 14)
|
|
|
2,873,451
|
|
|
|
1,837,158
|
|
Due
to stockholders
(note
11)
|
|
|
32,814
|
|
|
|
152,406
|
|
Current
portion of other long-term liability
(note
4)
|
|
|
—
|
|
|
|
3,000,000
|
|
Current
liabilities relating to discontinued operations
(note
10)
|
|
|
—
|
|
|
|
486,466
|
|
Total
current liabilities
|
|
|
4,099,072
|
|
|
|
5,638,735
|
|
Deferred
tax liability, net
(note
13)
|
|
|
—
|
|
|
|
7,851,667
|
|
Other
long-term liability
(note
4)
|
|
|
—
|
|
|
|
3,420,609
|
|
Other
liabilities relating to discontinued operations
(note
10)
|
|
|
—
|
|
|
|
11,087,750
|
|
Total
liabilities
|
|
|
4,099,072
|
|
|
|
27,998,761
|
|
Commitments
and contingencies
(note
15)
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
—
|
|
|
|
1,184,844
|
|
Stockholders’
equity
|
|
|
|
|
|
|
|
|
Capital
stock
(note
16)
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
57,306
|
|
|
|
50,627
|
|
Par
value of $0.001 per share;
|
|
|
|
|
|
|
|
|
Authorized:
75,000,000; Issued and outstanding:
|
|
|
|
|
|
|
|
|
December
31, 2007 – 57,306,145; December 31, 2006 – 50,626,562
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
362,402,899
|
|
|
|
354,191,066
|
|
Accumulated
deficit
|
|
|
(356,560,917
|
)
|
|
|
(293,021,603
|
)
|
Total
stockholders’ equity
|
|
|
5,899,288
|
|
|
|
61,220,090
|
|
|
|
|
9,998,360
|
|
|
|
90,403,695
|
|
See
accompanying notes
OccuLogix,
Inc.
(expressed
in U.S. dollars except number of shares)
|
|
Years
ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(restated
– note 10)
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to related parties
(note
12)
|
|
|
—
|
|
|
|
—
|
|
|
|
81,593
|
|
Sales
to unrelated parties
|
|
|
91,500
|
|
|
|
174,259
|
|
|
|
1,758,696
|
|
Total
revenue
|
|
|
91,500
|
|
|
|
174,259
|
|
|
|
1,840,289
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold to related parties
(note
12)
|
|
|
—
|
|
|
|
—
|
|
|
|
43,236
|
|
Cost
of goods sold to unrelated parties
|
|
|
2,298,103
|
|
|
|
3,428,951
|
|
|
|
3,250,866
|
|
Royalty
costs
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
Total
cost of goods sold
|
|
|
2,398,103
|
|
|
|
3,528,951
|
|
|
|
3,394,102
|
|
|
|
|
(2,306,603
|
)
|
|
|
(3,354,692
|
)
|
|
|
(1,553,813
|
)
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
(notes 11, 12 and
16)
|
|
|
7,373,726
|
|
|
|
8,407,501
|
|
|
|
8,670,394
|
|
Clinical
and regulatory
(notes 12
and 16)
|
|
|
8,675,552
|
|
|
|
4,921,771
|
|
|
|
5,167,549
|
|
Sales
and marketing
(notes 12
and 16)
|
|
|
1,413,459
|
|
|
|
1,625,188
|
|
|
|
2,165,337
|
|
Impairment
of goodwill
(note
5)
|
|
|
—
|
|
|
|
65,945,686
|
|
|
|
147,451,758
|
|
Impairment
of intangible asset
(note
8)
|
|
|
20,923,028
|
|
|
|
—
|
|
|
|
—
|
|
Restructuring
charges
(note
9)
|
|
|
1,312,721
|
|
|
|
819,642
|
|
|
|
—
|
|
|
|
|
39,698,486
|
|
|
|
81,719,788
|
|
|
|
163,455,038
|
|
Loss
from continuing operations
|
|
|
42,005,089
|
|
|
|
(85,074,480
|
)
|
|
|
(165,008,851
|
)
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
609,933
|
|
|
|
1,370,208
|
|
|
|
1,593,366
|
|
Changes
in fair value of warrant obligation
|
|
|
1,882,497
|
|
|
|
—
|
|
|
|
—
|
|
Impairment
of investments
(note
1)
|
|
|
(1,036,250
|
)
|
|
|
—
|
|
|
|
—
|
|
Interest
expense
|
|
|
(17,228
|
)
|
|
|
(14,896
|
)
|
|
|
—
|
|
Other
|
|
|
18,010
|
|
|
|
30,935
|
|
|
|
(57,025
|
)
|
Minority
interest
|
|
|
2,182,843
|
|
|
|
157,624
|
|
|
|
—
|
|
|
|
|
3,639,805
|
|
|
|
1,543,871
|
|
|
|
1,536,341
|
|
Loss
from continuing operations before income taxes
|
|
|
(38,365,284
|
)
|
|
|
(83,530,609
|
)
|
|
|
(163,472,510
|
)
|
Recovery
of income taxes
(note
13)
|
|
|
5,654,868
|
|
|
|
2,888,490
|
|
|
|
642,529
|
|
Loss
from continuing operations
|
|
|
(32,710,416
|
)
|
|
|
(80,642,119
|
)
|
|
|
(162,829,981
|
)
|
Loss
from discontinued operations
(note
10)
|
|
|
(35,428,898
|
)
|
|
|
(1,542,384
|
)
|
|
|
—
|
|
Net
loss for the year
|
|
|
(68,139,314
|
)
|
|
|
(82,184,503
|
)
|
|
|
(162,829,981
|
)
|
Weighted
average number of shares outstanding – basic and diluted
|
|
|
56,628,186
|
|
|
|
44,979,692
|
|
|
|
41,931,240
|
|
Loss
from continuing operations per share – basic and diluted
|
|
$
|
(0.58
|
)
|
|
$
|
(1.79
|
)
|
|
$
|
(3.88
|
)
|
Loss
from discontinued operations per share – basic and diluted
|
|
|
(0.62
|
)
|
|
|
(0.04
|
)
|
|
|
—
|
|
Net
loss per share – basic and diluted
|
|
$
|
(1.20
|
)
|
|
$
|
(1.83
|
)
|
|
$
|
(3.88
|
)
|
See
accompanying notes
OccuLogix,
Inc.
(expressed
in U.S. dollars)
|
|
Voting
common
stock
at
par value
|
|
|
Additional
paid-in
capital
|
|
|
Accumulated
deficit
|
|
|
Accumulated
other comprehensive loss
|
|
|
Stockholders’
equity
|
|
|
|
shares
issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
#
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
41,806,768
|
|
|
|
41,807
|
|
|
|
336,063,557
|
|
|
|
(48,007,119
|
)
|
|
|
—
|
|
|
|
288,098,245
|
|
Stock-based
compensation
(note
16(e))
|
|
|
—
|
|
|
|
—
|
|
|
|
224,776
|
|
|
|
—
|
|
|
|
—
|
|
|
|
224,776
|
|
Stock
issued on exercise of options
(note
16(e))
|
|
|
279,085
|
|
|
|
279
|
|
|
|
230,956
|
|
|
|
—
|
|
|
|
—
|
|
|
|
231,235
|
|
Subscription
receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
221,661
|
|
|
|
—
|
|
|
|
—
|
|
|
|
221,661
|
|
Contribution
of inventory from related party
(note
12)
|
|
|
—
|
|
|
|
—
|
|
|
|
167,730
|
|
|
|
—
|
|
|
|
—
|
|
|
|
167,730
|
|
Contribution
of inventory from unrelated party
|
|
|
—
|
|
|
|
—
|
|
|
|
15,652
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,652
|
|
Fractional
payout of converted shares due to preferred stockholders
|
|
|
—
|
|
|
|
—
|
|
|
|
(45
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(45
|
)
|
Additional
share issue costs related to initial public offering
(note
16(d))
|
|
|
—
|
|
|
|
—
|
|
|
|
(88,714
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(88,714
|
)
|
Net
loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(162,829,981
|
)
|
|
|
—
|
|
|
|
(162,829,981
|
)
|
Balance,
December 31, 2005
|
|
|
42,085,853
|
|
|
|
42,086
|
|
|
|
336,835,573
|
|
|
|
(210,837,100
|
)
|
|
|
—
|
|
|
|
126,040,559
|
|
Stock-based
compensation
(note
16(e))
|
|
|
—
|
|
|
|
—
|
|
|
|
2,111,481
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,111,481
|
|
Stock
issued on exercise of options
(note
16(e))
|
|
|
140,726
|
|
|
|
141
|
|
|
|
270,794
|
|
|
|
—
|
|
|
|
—
|
|
|
|
270,935
|
|
Free
inventory returned to related party
(note
12)
|
|
|
—
|
|
|
|
—
|
|
|
|
(60,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(60,000
|
)
|
Contribution
of inventory from unrelated party
|
|
|
—
|
|
|
|
—
|
|
|
|
11,994
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,994
|
|
Shares
issued on acquisition of Solx, Inc.
(notes 4 and
16(d))
|
|
|
8,399,983
|
|
|
|
8,400
|
|
|
|
15,027,570
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,035,970
|
|
Shares
issue costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,908
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,908
|
)
|
Change
in OcuSense, Inc.’s stockholders’ equity, stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
15,562
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,562
|
|
Net
loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(82,184,503
|
)
|
|
|
—
|
|
|
|
(82,184,503
|
)
|
Balance,
December 31, 2006
|
|
|
50,626,562
|
|
|
|
50,627
|
|
|
|
354,191,066
|
|
|
|
(293,021,603
|
)
|
|
|
—
|
|
|
|
61,220,090
|
|
OccuLogix,
Inc.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY continued
(expressed
in U.S. dollars)
|
|
Voting
common
stock
at
par value
|
|
|
Additional
paid-in
capital
|
|
|
Accumulated
deficit
|
|
|
Accumulated
other comprehensive loss
|
|
|
Stockholders’
equity
|
|
|
|
shares
issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
#
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Balance,
December 31, 2006 (balance forward)
|
|
|
50,626,562
|
|
|
|
50,627
|
|
|
|
354,191,066
|
|
|
|
(293,021,603
|
)
|
|
|
—
|
|
|
|
61,220,090
|
|
Net
loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(68,139,314
|
)
|
|
|
—
|
|
|
|
(68,139,314
|
)
|
Unrealized
loss on investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,036,250
|
)
|
|
|
(1,036,250
|
)
|
Impairment
of investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,036,250
|
|
|
|
1,036,250
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,139,314
|
)
|
Cumulative
effect of adoption of FIN 48
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,600,000
|
|
|
|
—
|
|
|
|
4,600,000
|
|
Stock-based
compensation
(note
16(e))
|
|
|
—
|
|
|
|
—
|
|
|
|
325,666
|
|
|
|
—
|
|
|
|
—
|
|
|
|
325,666
|
|
Stock
issued on exercise of options
(note
16(e))
|
|
|
2,250
|
|
|
|
2
|
|
|
|
2,226
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,228
|
|
Contribution
of inventory from related party
(note
12)
|
|
|
—
|
|
|
|
—
|
|
|
|
384,660
|
|
|
|
—
|
|
|
|
—
|
|
|
|
384,660
|
|
Contribution
of inventory from unrelated party
|
|
|
—
|
|
|
|
—
|
|
|
|
33,643
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,643
|
|
Shares
issued on private placement of common stock
(note
16(d))
|
|
|
6,677,333
|
|
|
|
6,677
|
|
|
|
8,053,967
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,060,644
|
|
Shares
issue costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(743,634
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(743,634
|
)
|
Change
in OcuSense, Inc.’s stockholders’ equity, stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
155,305
|
|
|
|
—
|
|
|
|
—
|
|
|
|
155,305
|
|
Balance,
December 31, 2007
|
|
|
57,306,145
|
|
|
|
57,306
|
|
|
|
362,402,899
|
|
|
|
(356,560,917
|
)
|
|
|
—
|
|
|
|
5,899,288
|
|
See
accompanying notes
OccuLogix,
Inc.
(expressed
in U.S. dollars)
|
|
Years
ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
|
|
(68,139,314
|
)
|
|
|
(82,184,503
|
)
|
|
|
(162,829,981
|
)
|
Adjustments
to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
(note
16(e))
|
|
|
480,971
|
|
|
|
2,127,043
|
|
|
|
224,776
|
|
Amortization
of fixed assets
|
|
|
844,948
|
|
|
|
213,488
|
|
|
|
99,301
|
|
Amortization
of patents and trademarks
|
|
|
195,494
|
|
|
|
5,608
|
|
|
|
5,712
|
|
Amortization
of intangible assets
|
|
|
4,578,027
|
|
|
|
2,749,212
|
|
|
|
1,716,667
|
|
Impairment
of goodwill
(note
5)
|
|
|
14,446,977
|
|
|
|
65,945,686
|
|
|
|
147,451,758
|
|
Impairment
of intangible assets
(note
8)
|
|
|
43,209,411
|
|
|
|
—
|
|
|
|
—
|
|
Accretion
expense
(note
4)
|
|
|
857,400
|
|
|
|
273,195
|
|
|
|
—
|
|
Amortization
of premiums/discounts on short-term investments
|
|
|
—
|
|
|
|
35,985
|
|
|
|
147,337
|
|
Subscription
receivable – provision for doubtful amount
|
|
|
—
|
|
|
|
—
|
|
|
|
34,927
|
|
Change
in fair value of warrant obligation
(note
16(f))
|
|
|
(1,882,497
|
)
|
|
|
—
|
|
|
|
—
|
|
Impairment
of investments
|
|
|
1,036,250
|
|
|
|
—
|
|
|
|
—
|
|
Deferred
income taxes
(note
13)
|
|
|
(15,004,750
|
)
|
|
|
(4,065,962
|
)
|
|
|
(635,167
|
)
|
Minority
interest
|
|
|
(2,182,843
|
)
|
|
|
(157,624
|
)
|
|
|
—
|
|
Net
change in non-cash working capital balances related to operations
(note
17)
|
|
|
4,342,488
|
|
|
|
509,528
|
|
|
|
(4,925,650
|
)
|
Cash
used in operating activities
|
|
|
(17,217,438
|
)
|
|
|
(14,548,344
|
)
|
|
|
(18,710,320
|
)
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of short-term investments
|
|
|
7,885,000
|
|
|
|
21,841,860
|
|
|
|
10,689,818
|
|
Additions
to fixed assets
|
|
|
(267,934
|
)
|
|
|
(255,886
|
)
|
|
|
(202,273
|
)
|
Additions
to patents and trademarks
|
|
|
(106,228
|
)
|
|
|
(105,217
|
)
|
|
|
(36,290
|
)
|
Acquisition
costs
(note
4)
|
|
|
—
|
|
|
|
(949,499
|
)
|
|
|
—
|
|
Advance
to Solx, Inc., pre-acquisition
|
|
|
—
|
|
|
|
(2,434,537
|
)
|
|
|
—
|
|
Payments
for acquisitions, net of cash acquired
(note
4)
|
|
|
(3,000,000
|
)
|
|
|
(7,678,565
|
)
|
|
|
—
|
|
Cash
provided by investing activities
|
|
|
4,510,838
|
|
|
|
10,418,156
|
|
|
|
10,451,255
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of common stock options
(note
16(e))
|
|
|
2,228
|
|
|
|
270,935
|
|
|
|
231,235
|
|
Proceeds
from exercise of Series A convertible preferred stock warrants
(note
16(f))
|
|
|
—
|
|
|
|
—
|
|
|
|
186,734
|
|
Fractional
payout of converted shares due to preferred stockholders
|
|
|
—
|
|
|
|
—
|
|
|
|
(792
|
)
|
Share
issuance costs
|
|
|
(816,493
|
)
|
|
|
—
|
|
|
|
(88,714
|
)
|
Proceeds
from issuance of common stock
(note
16(d))
|
|
|
10,016,000
|
|
|
|
—
|
|
|
|
—
|
|
Cash
provided by financing activities
|
|
|
9,201,735
|
|
|
|
270,935
|
|
|
|
328,463
|
|
Net
decrease in cash and cash equivalents during the year
|
|
|
(3,504,865
|
)
|
|
|
(3,859,253
|
)
|
|
|
(7,930,602
|
)
|
Cash
and cash equivalents, beginning of year
|
|
|
5,740,697
|
|
|
|
9,599,950
|
|
|
|
17,530,552
|
|
Cash
and cash equivalents, end of year
|
|
|
2,235,832
|
|
|
|
5,740,697
|
(i)
|
|
|
9,599,950
|
|
See
accompanying notes
(i)
|
As
at December 31, 2006, cash and cash equivalents of $5,740,697 include cash
and cash equivalents of discontinued operations of
$35,462.
|
(expressed
in U.S. dollars except as otherwise noted)
1. NATURE
OF OPERATIONS AND GOING CONCERN UNCERTAINTY
OccuLogix,
Inc. (the “Company”) is an ophthalmic therapeutic company founded to
commercialize innovative treatments for age-related eye diseases. Until
recently, the Company operated two business divisions, being Retina and
Glaucoma. Until recently, the Company’s Retina division was in the business of
developing and commercializing a treatment for dry age-related macular
degeneration, or Dry AMD. The Company’s product for Dry AMD, the RHEO™ System,
contains a pump that circulates blood through two filters and is used to perform
the Rheopheresis™ procedure, which is referred to under the Company’s trade name
RHEO™ Therapy. The Rheopheresis™ procedure is a blood filtration procedure that
selectively removes molecules from plasma, which is designed to treat Dry AMD,
the most common form of the disease.
The
Company conducted a clinical trial, called MIRA-1, or Multicenter Investigation
of Rheopheresis for AMD, which, if successful, was expected to support its
application with the U.S. Food and Drug Administration (the “FDA”) to obtain
approval to market the RHEO™ System in the United States. On February 3, 2006,
the Company announced that, based on a preliminary analysis of the data from
MIRA-1, MIRA-1 did not meet its primary efficacy endpoint as it did not
demonstrate a statistically significant difference in the mean change of Best
Spectacle-Corrected Visual Acuity applying the Early Treatment Diabetic
Retinopathy Scale, or ETDRS BCVA, between the treated and placebo groups in
MIRA-1 at 12 months post-baseline. As expected, the treated group demonstrated a
positive result. An anomalous response of the control group is the principal
reason why the primary efficacy endpoint was not met.
On June
8, 2006, the Company met with the FDA to discuss the results of MIRA-1 and the
impact the results will have on its application to market the RHEO™ System in
the United States. In light of MIRA-1’s failure to meet its primary
efficacy endpoint, the FDA advised that it will require an additional study of
the RHEO™ System to be performed. On January 29, 2007, the Company announced
that it had obtained Investigational Device Exemption clearance from the FDA to
commence the new pivotal clinical trial of the RHEO™ System called RHEO-AMD, or
Safety and Effectiveness in a Multi-Center, Randomized, Sham-Controlled
Investigation for Dry Non-exudative Age-Related Macular Degeneration (AMD) using
Rheopheresis.
However,
on November 1, 2007, the Company announced the indefinite suspension of its
RHEO™ System clinical development program. This decision was made following a
comprehensive review of the respective costs and development timelines
associated with the products in the Company’s portfolio and in light of the
Company’s financial position. The Company is in the process of winding down the
RHEO-AMD study as there is no reasonable prospect that the RHEO™ System clinical
development program will be relaunched in the foreseeable future. Subsequent to
the Company’s fiscal 2007 year-end, as of February 25, 2008, the Company has
terminated its relationship with Asahi Kasei Kuraray Medical Co., Ltd. (formerly
Asahi Kasei Medical Co., Ltd.), or Asahi Medical. Asahi Medical manufactures,
and supplied the Company with the Rheofilter filter and the Plasmaflo filter,
both of which are key components of the RHEO™ System. The Company is also
engaged in discussions with Diamed Medizintechnik GmbH, or Diamed, and MeSys
GmbH, or MeSys, regarding the termination of its relationship with each of
them. Diamed is the designer, and MeSys is the manufacturer, of the
OctoNova pump, another key component of the RHEO™ System.
In
anticipation of the delay in the commercialization of the RHEO™ System in the
United States as a result of the MIRA-1 study’s failure to meet its primary
efficacy endpoint and the FDA’s requirement of the Company to conduct an
additional study of the RHEO™ System, the Company accelerated its
diversification plans and, on September 1, 2006, acquired Solx, Inc., or SOLX, a
Boston University Photonics Center-incubated company that has developed a system
for the treatment of glaucoma, called the SOLX Glaucoma System. The SOLX
Glaucoma System developed by SOLX includes the SOLX 790 Laser and the SOLX Gold
Shunt which can be used separately or together to provide physicians with
multiple options to manage intraocular pressure or IOP
(note 4)
. Upon the
acquisition of SOLX, SOLX became the Glaucoma division of the
Company.
On
December 20, 2007, the Company announced the sale of all of the issued and
outstanding capital stock of SOLX to Solx Acquisition, Inc., or Solx
Acquisition, a company wholly owned by Doug P. Adams, the founder of SOLX and
who, until the closing of the sale, had been serving as an executive officer of
the Company in the capacity of President & Founder, Glaucoma Division. The
consideration for the purchase and sale of all of the issued and outstanding
shares of the capital stock of SOLX consisted of: (i) on December 19,
2007, the closing date of the sale, the assumption by Solx Acquisition of all of
the liabilities of the Company, as they related to SOLX’s business, incurred on
or after December 1, 2007, and the Company’s obligation to make a $5,000,000
payment to the former stockholders of SOLX due on September 1, 2008 in
satisfaction of the outstanding balance of the purchase price of SOLX; (ii) on
or prior to February 15, 2008, the payment by Solx Acquisition of all of the
expenses that the Company had paid to the closing date, as they related to
SOLX’s business during the period commencing on December 1, 2007; (iii) during
the period commencing on the closing date and ending on the date on which SOLX
achieves a positive cash flow, the payment by Solx Acquisition of a royalty
equal to 3% of the worldwide net sales of the SOLX 790 Laser and the SOLX Gold
Shunt, including next-generation or future models or versions of these products;
and (iv) following the date on which SOLX achieves a positive cash flow, the
payment by Solx Acquisition of a royalty equal to 5% of the worldwide net sales
of these products. In order to secure the obligation of Solx Acquisition to make
these royalty payments, SOLX granted to the Company a subordinated security
interest in certain of its intellectual property. In connection with the sale of
SOLX, those employees of the Company, whose roles and responsibilities related
mainly to SOLX’s business, ceased to be employees of the Company and became
employees of Solx Acquisition or SOLX.
As part
of its accelerated diversification plans, on November 30, 2006, the Company
acquired 50.1% of the capital stock, on a fully diluted basis, of OcuSense,
Inc., or OcuSense, a San Diego-based company that is in the process of
developing technologies that will enable eye care practitioners to test, at the
point-of-care, for highly sensitive and specific biomarkers using nanoliters of
tear film
(note
4)
.
With the
suspension of the Company’s RHEO™ System clinical development program, and the
consequent winding-down of the RHEO-AMD study, and the Company’s disposition of
SOLX, the Company no longer has any operating business. Its major asset is its
50.1% ownership stake, on a fully diluted basis, in OcuSense.
Going
concern uncertainty
The
consolidated financial statements have been prepared on the basis that the
Company will continue as a going concern. However, the Company has sustained
substantial losses of $68,139,314, $82,184,503 and $162,829,981 for the years
ended December 31, 2007, 2006 and 2005, respectively. The Company’s working
capital deficiency at December 31, 2007 is $996,862, which represents a
$14,535,888 reduction of its working capital of $13,539,026 at December 31,
2006. As a result of the Company’s history of losses and financial condition,
there is substantial doubt about the ability of the Company to continue as a
going concern.
On
February 19, 2008, the Company announced that it has secured a bridge loan in an
aggregate principal amount of $3,000,000 (less transaction costs of
approximately $200,000) from a number of private parties. The loan bears
interest at a rate of 12% per annum and has a 180-day term, which may be
extended to 270 days under certain circumstances. The Company has pledged its
shares of the capital stock of OcuSense as collateral for the loan.
Management
believes that these proceeds, together with the Company’s existing cash, will be
sufficient to cover its operating activities and other demands only until
approximately the end of April 2008 (assuming that the outstanding obligation of
OccuLogix to pay $2,000,000 to OcuSense becomes due and payable prior to the end
of April 2008)
(note
4)
. The Company currently is not generating cash from
operations, and most of its cash has been, and is being, utilized to fund its
operations and to fund deferred acquisition payments. The Company’s operating
expenses have consisted mostly of expenses relating to the furtherance of its
clinical trial activities, the commercialization of the SOLX Glaucoma System in
Europe and the completion of the product development of the TearLab™ test for
dry eye disease, or DED. Unless the Company raises additional
capital, it will not have sufficient cash to support its operations beyond
approximately the end of April 2008.
On
October 9, 2007, the Company announced that its Board of Directors, or the
Board, had authorized management and the Company’s advisors to explore the full
range of strategic alternatives available to enhance shareholder value. These
alternatives may include, but are not limited to, the raising of capital through
the sale of securities, one or more strategic alliances and the combination,
sale or merger of all or part of OccuLogix. In making the announcement, the
Company stated that there can be no assurance that the exploration of strategic
alternatives will result in a transaction. To date, the Company has not
disclosed, nor does it intend to disclose, developments with respect to its
exploration of strategic alternatives unless and until the Board, has approved a
specific transaction.
For some
time prior to the October 9, 2007 announcement, the Company had been seeking to
raise additional capital, with the objective of securing funding sufficient to
sustain its operations as it had been clear that, unless the Company was able to
raise additional capital, the Company would not have had sufficient cash to
support its operations beyond early 2008. The Board’s decisions to suspend the
Company’s RHEO™ System clinical development program and to dispose of SOLX were
made and implemented in order to conserve as much cash as possible while the
Company continued its capital-raising efforts.
On
January 9, 2008, the Company announced the departure, or pending departure, of
seven members of its executive team and, commencing on February 1, 2008, a 50%
reduction in the salary of each of Elias Vamvakas, its Chairman and Chief
Executive Officer, and Tom Reeves, its President and Chief Operating Officer. By
January 31, 2008, a total of 12 non-executive employees of the Company left the
Company’s employment.
As at
December 31, 2007, the Company had investments in the aggregate principal amount
of $1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Due to the current lack of liquidity for asset-backed
securities of this type, the Company has concluded that the carrying value of
these investments was higher than its fair value as of December 31, 2007.
Accordingly, these auction rate securities have been recorded at their estimated
fair value of $863,750. The Company considers this to be an other-than-temporary
reduction in the value. Accordingly, the loss associated with these auction rate
securities of $1,036,250 has been included as an impairment of investments in
the Company’s consolidated statement of operations for the year ended December
31, 2007. Although the Company continues to receive payment of interest earned
on these securities, the Company does not know at the present time when it will
be able to convert these investments into cash. Accordingly,
management has classified these investments as a non-current asset on its
consolidated balance sheet as of December 31, 2007. Management will continue to
closely monitor these investments for future indications of further impairment.
The illiquidity of these investments may have an adverse impact on the length of
time during which the Company currently expects to be able to sustain its
operations in the absence of an additional capital raise by the
Company.
The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary if the Company were not
able to continue in existence as a going concern.
2.
CORRECTION OF PRIOR YEARS’ COMPARATIVE FINANICAL STATEMENTS
In
accordance with the U.S. Securities and Exchange Commission (the “SEC”) Staff
Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements”, the Company’s comparative consolidated financial statements have
been corrected to reflect the Company’s accounting for stock options granted
during fiscal 2005 to certain consultants that were subject to performance
conditions. The vesting of these options was contingent upon the
attainment of FDA approval of the RHEO™ System. These stock options
were accounted for in accordance with Statement of Financial Accounting Standard
(“SFAS”) No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and
subsequently in accordance with SFAS No. 123(R) (revised 2004), “Stock-Based
Compensation” (“SFAS No. 123R”) upon the Company’s adoption of SFAS No. 123(R)
on January 1, 2006. The total fair value of these options was estimated at the
date of grant and was being amortized, over the Company’s estimate of the
expected vesting period, as stock-based compensation expense in the Company’s
consolidated statements of operations. In preparing the consolidated
financial statements for the year ended December 31, 2007, the Company noted
that these options should have been accounted for in accordance with Emerging
Issues Task Force (“EITF”) 96-18, Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services, (“EITF 96-18”) which requires that if, on the measurement
date of the award, the quantity or any of the terms of the equity instruments
are dependent on the achievement of performance conditions which result in a
range of fair values, the lowest aggregate amount should be used.
Based on
the provisions of EITF 96-18, the Company concluded that no stock-based
compensation expense should have been recorded for these options. Since the
effect of the error on the individual prior periods’ consolidated financial
statements was immaterial, the Company has adjusted the comparative consolidated
financial statements of prior years to reflect the correction of this error
without undertaking a restatement of the prior periods’ consolidated financial
statements. The following financial statement line items for fiscal 2006 and
2005 were affected by the correction of the error.
|
|
Previously
reported
|
|
|
Corrected
amount
|
|
|
Effect
of error
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
354,320,116
|
|
|
|
354,191,066
|
|
|
|
(129,050
|
)
|
Accumulated
deficit
|
|
|
(293,150,653
|
)
|
|
|
(293,021,603
|
)
|
|
|
129,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
336,977,578
|
|
|
|
336,835,573
|
|
|
|
(142,005
|
)
|
Accumulated
deficit
|
|
|
(210,979,105
|
)
|
|
|
(210,837,100
|
)
|
|
|
142,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
(i)
|
|
|
8,452,915
|
|
|
|
8,407,501
|
|
|
|
45,414
|
|
Clinical
and regulatory
(i)
|
|
|
4,956,207
|
|
|
|
4,921,771
|
|
|
|
34,436
|
|
Sales
and marketing
(i)
|
|
|
1,639,428
|
|
|
|
1,625,188
|
|
|
|
14,240
|
|
Loss
from continuing operations
|
|
|
(80,736,209
|
)
|
|
|
(80,642,119
|
)
|
|
|
94,090
|
|
Cumulative
effect of a change in accounting principle
|
|
|
107,045
|
|
|
|
—
|
|
|
|
(107,045
|
)
|
Net
loss for the year
|
|
|
(82,171,548
|
)
|
|
|
(82,184,503
|
)
|
|
|
(12,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
8,729,456
|
|
|
|
8,670,394
|
|
|
|
59,062
|
|
Clinical
and regulatory expenses
|
|
|
5,250,492
|
|
|
|
5,167,549
|
|
|
|
82,943
|
|
Loss
from continuing operations
|
|
|
(162,971,986
|
)
|
|
|
(162,829,981
|
)
|
|
|
|
|
Net
loss for the year
|
|
|
(162,971,986
|
)
|
|
|
(162,829,981
|
)
|
|
|
142,005
|
|
|
|
Previously
reported
|
|
|
Corrected
amount
|
|
|
Effect
of error
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to cash used in operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
(i)
|
|
|
2,221,133
|
|
|
|
2,127,043
|
|
|
|
94,090
|
|
Cumulative
effect of a change in accounting principle
|
|
|
(107,045
|
)
|
|
|
—
|
|
|
|
(107,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to cash used in operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
366,781
|
|
|
|
224,776
|
|
|
|
142,005
|
|
(i)
|
The
comparative figures for the year ended December 31, 2006 have been
reclassified to reflect the effect of discontinued
operations.
|
The
cumulative effect of the correction for the years ended December 31, 2006 and
2005 on basic and diluted net loss per share was nil.
3.
SIGNIFICANT ACCOUNTING POLICIES
The
consolidated financial statements have been prepared by management in conformity
with accounting principles generally accepted in the United States (“U.S.
GAAP”).
The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany transactions and balances have been
eliminated on consolidation.
The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting periods. Some of the Company’s more
significant estimates include those related to uncollectible receivables,
stock-based compensation, investments and its intangible assets. Actual results
could differ from those estimates.
Revenue
recognition
Prior to
the Company’s announcement of the indefinite suspension of its RHEO™ System
clinical development program, the Company recognized revenue from the sale of
the RHEO™ System, which is comprised of OctoNova pumps and the related
disposable treatment sets, and, prior to the Company’s disposition of SOLX on
December 19, 2007, the Company recognized revenue from the sale of the
components of the SOLX Glaucoma System which includes the SOLX 790 Titanium
Sapphire Laser (“SOLX 790 Laser”) and the SOLX Gold Shunt. The Company received
a signed binding purchase order from its customers. The pricing was a negotiated
amount between the Company and its customers. The Company sold the components of
the SOLX Glaucoma System directly to physicians and also through distributors.
Revenue has been reported net of distributors’ commissions.
The
Company had the obligation to train its customers and to calibrate the OctoNova
pumps delivered to them. Only upon the completion of these services did the
Company recognize revenue for the pumps. The Company was also responsible for
providing a one-year warranty on the OctoNova pumps, and the estimated cost of
providing this service was accrued at the time revenue was recognized. The
treatment sets and the components of the SOLX Glaucoma System did not require
any additional servicing and revenue was recognized upon passage of title.
However, the Company’s revenue recognition policy requires an assessment as to
whether collectibility is reasonably assured, which requires the Company to
evaluate the creditworthiness of its customers. The result of the assessment
could materially impact the timing of revenue recognition.
Cost
of goods sold
Cost of
sales includes costs of goods sold and royalty costs. The Company’s cost of
goods sold consists primarily of costs for the manufacture of the RHEO™ System,
prior to the Company’s announcement of the indefinite suspension of its RHEO™
System clinical development program,
and, the SOLX Glaucoma
System, prior to the Company’s disposition of SOLX on December 19, 2007.
Cost of sales also includes the costs the Company incurs for the purchase of
component parts from its suppliers, applicable freight and shipping costs, fees
related to warehousing, logistics inventory management and recurring regulatory
costs associated with conducting business and ISO certification. In addition to
these direct costs, included in the cost of goods sold are licensing costs
associated with distributing the RHEO™ System in Canada and minimum royalty
payments due to Mr. Hans Stock and Dr. Richard Brunner that are only recoverable
based on sufficient volume
(notes 11 and
12)
.
Cash
and cash equivalents
Cash and
cash equivalents comprise cash on hand and highly liquid short-term investments
with original maturities of 90 days or less at the date of
purchase.
Investments
consist of investments in auction rate securities. These investments are
classified as available-for-sale securities and are recorded at fair value with
unrealized gains or losses reported in accumulated other comprehensive income
unless the fair value is determined to be less than the carrying value and that
this reduction in value is other than temporary. In such
circumstances, the reduction in the carrying value is included in the
determination of net loss. All of the auction rate securities have contractual
maturities of more than three years.
Bad
debt reserves
The
Company evaluates the collectibility of its accounts receivable based on a
combination of factors. In cases where management is aware of circumstances that
may impair a specific customer’s ability to meet its financial obligations to
the Company, a specific allowance against amounts due to the Company is
recorded, which reduces the net recognized receivable to the amount management
reasonably believes will be collected. For all other customers, the Company
recognizes allowances for doubtful accounts based on the length of time the
receivables are past due, the current business environment and historical
experience. As at December 31, 2007 and 2006, the Company had bad debt reserves
of $172,992 and nil, respectively. The Company expensed amounts related to bad
debt reserves of nil, nil and $518,852 during the years ended December 31, 2007,
2006 and 2005, respectively, and set up a provision for $172,992, nil and
$530,445 representing invoices for products shipped, plus related taxes, to a
customer during the years ended December 31, 2007, 2006 and 2005, respectively,
for which revenue was not recognized due to the likelihood that the customer
would not be able to pay for the amounts invoiced.
Inventory
is recorded at the lower of cost and net realizable value and consists of
finished goods. Cost is accounted for on a first-in, first-out basis. Deferred
cost of sales (included in finished goods) consists of products shipped but not
recognized as revenue because they did not meet the revenue recognition
criteria.
The
Company evaluates its ending inventory for estimated excess quantities and
obsolescence, based on expected future sales levels and projections of future
demand, with the excess inventory provided for. In addition, the Company
assesses the impact of changing technology and market conditions. In
addition, the Company assesses whether recent transactions provide indicators as
to whether the net realizable value of its inventory is below its recorded
cost.
In
April 2006, the Company sold a number of treatment sets to Veris Health Sciences
Inc. (“Veris”) at a price lower than the Company’s cost. Accordingly,
the Company wrote down the value of its treatment sets to reflect this current
net realizable value during the year ended December 31, 2006. In light of the
Company’s current financial position, on November 1, 2007, the Company announced
an indefinite suspension of the RHEO™ System clinical development program for
Dry AMD. That decision was made following a comprehensive review of
the respective costs and development timelines associated with the products in
the Company’s portfolio and, in particular, the fact that, if the Company had
been unable to raise additional capital, it would not have had sufficient cash
to support its operations beyond early 2008. Accordingly, the Company has
written down the value of its treatment sets and OctoNova pumps, the components
of the RHEO™ System, to nil as of December 31, 2007 since the Company is not
expected to be able to sell or utilize these treatment sets and OctoNova pumps
prior to their expiration dates, in the case of the treatment sets, or before
the technologies become outdated.
As at
December 31, 2007 and 2006, the Company had inventory reserves of $7,295,545 and
$5,101,394, respectively. During the years ended December 31, 2007, 2006 and
2005, the Company recognized a provision related to inventory of $2,790,209,
$3,304,124 and $1,990,830, respectively, based on the above
analysis.
Fair
value of financial instruments
Fair
value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties. The
estimated fair values of cash and cash equivalents, amounts receivable, accounts
payable, accrued liabilities and amounts due from and to stockholders
approximate their carrying values due to the short-term maturities of these
instruments.
Fixed
assets are recorded at cost less accumulated amortization. Amortization is
calculated using the straight-line method, commencing when the assets become
available for productive use, based on the following estimated useful
lives:
Furniture
and office equipment
|
2 –
7 years
|
Computer
equipment and software
|
3
years
|
Leasehold
improvements
|
Shorter
of useful life or initial term of the lease
|
Medical
equipment
|
1 –
5 years
|
Impairment
of long-lived assets
The
Company reviews its fixed assets and intangible assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
might not be recoverable. When such an event occurs, management estimates the
future undiscounted cash flows expected to result from the use of the asset and
its eventual disposition. In the event the undiscounted cash flows are less than
the carrying amount of the asset, an impairment loss equal to the excess of the
carrying amount over the fair value is charged to operations.
The
Company’s intangible assets as at December 31, 2007 are comprised of the value
of the exclusive distribution agreements the Company had with Asahi Medical,
Diamed and MeSys and the value of the TearLab™ technology acquired upon the
acquisition of 50.1% of the capital stock of OcuSense on a fully diluted basis.
The Company’s intangible assets are being amortized using the straight-line
method over an estimated useful life of 10 years.
Patents
and trademarks
Patents
and trademarks are recorded at historical cost and are amortized using the
straight-line method over their estimated useful lives, not to exceed 15
years.
Goodwill
Goodwill
is not amortized and instead is subject to an annual impairment test. The
Company’s annual impairment test is conducted effective October 1 and is
evaluated between annual tests upon the occurrence of certain events or
circumstances. Goodwill impairment is assessed based on a comparison of the fair
value of the reporting unit to the underlying carrying value of the reporting
unit’s net assets, including goodwill. When the carrying amount of the reporting
unit exceeds its fair value, the fair value of the reporting unit’s goodwill is
compared with its carrying amount to measure the amount of impairment loss, if
any.
Foreign
currency translation
The
Company’s functional and reporting currency is the U.S. dollar. The assets and
liabilities of the Company’s Canadian operations are maintained in U.S. dollars.
Monetary assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at exchange rates in effect at the consolidated balance sheet
dates, and non-monetary assets and liabilities are translated at exchange rates
in effect on the date of the transaction. Revenue and expenses are translated
into U.S. dollars at average exchange rates prevailing during the year.
Resulting exchange gains and losses are included in net loss for the year and
are not material in any of the years presented.
Clinical
and regulatory costs
Clinical
and regulatory costs attributable to the performance of contract services are
recognized as the services are performed. Non-refundable, up-front fees paid in
connection with these contracted services are deferred and recognized as an
expense on a straight-line basis over the estimated term of the related
contract.
On
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN No. 48”). FIN
No. 48 addresses the determination of whether tax benefits claimed or expected
to be claimed on a tax return should be recorded in the financial
statements. Under FIN No. 48, the Company may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits
recognized in the consolidated financial statements from such a position should
be measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement. FIN No. 48 also provides guidance on
derecognition, classification, interest and penalties on income taxes and
accounting in interim periods and requires increased disclosure.
As a
result of the implementation of the provisions of FIN No. 48, the Company
recognized a reduction to the January 1, 2007 deferred tax liability balance in
the amount of $4.6 million with a corresponding reduction to accumulated
deficit.
As of
January 1, 2007, the Company had unrecognized tax benefits of $24.8 million
which, if recognized, would favorably affect the Company’s effective tax
rate.
When
applicable, the Company recognizes accrued interest and penalties related to
unrecognized tax benefits as other expense in its consolidated statements of
operations, which is consistent with the recognition of these items in prior
reporting periods. As of January 1, 2007, the Company did not have any liability
for the payment of interest and penalties.
The
Company does not expect a significant change in the amount of its unrecognized
tax benefits within the next 12 months. Therefore, it is not expected that the
change in the Company’s unrecognized tax benefits will have a significant impact
on the results of operations or financial position of the Company.
However,
a portion of the Company’s net operating losses may be subject to annual
limitations as a result of the Company’s initial public offering and prior
changes of control. Accordingly, until a formal analysis of the effect of the
changes of control is performed, a portion of the income tax benefits recognized
to date may be affected.
All
federal income tax returns for the Company and its subsidiaries remain open
since their respective dates of incorporation due to the existence of net
operating losses. The Company and its subsidiaries have not been, nor
are they currently, under examination by the Internal Revenue Service or the
Canada Revenue Agency.
State and
provincial income tax returns are generally subject to examination for a period
of between three and five years after their filing. However, due to
the existence of net operating losses, all state income tax returns of the
Company and its subsidiaries since their respective dates of incorporation are
subject to re-assessment. The state impact of any federal changes
remains subject to examination by various states for a period of up to one year
after formal notification to the states. The Company and its
subsidiaries have not been, nor are they currently, under examination by any
state tax authority.
The
Company accounts for stock-based compensation expense for its employees in
accordance with the provisions of SFAS No. 123R. Under the fair value
recognition provision of SFAS No. 123R, stock-based compensation cost is
estimated at the grant date based on the fair value of the award and is
recognized as an expense ratably over the requisite service period of the award.
The Company has selected the Black-Scholes option-pricing model as its method of
determining the fair value for all its awards and will recognize compensation
cost on a straight-line basis over the awards’ vesting periods (
note
16(e))
.
The
Company follows SFAS No. 128, “Earnings Per Share” (“SFAS No. 128”). In
accordance with SFAS No. 128, companies that are publicly held or have complex
capital structures are required to present basic and diluted earnings per share
(“EPS”) on the face of the statement of income. Basic EPS excludes dilution and
is computed by dividing net loss available to common stockholders by the
weighted average number of shares of common stock outstanding for the year.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted and the
resulting additional shares are dilutive because their inclusion decreases the
amount of EPS.
The
following are potentially dilutive securities which have not been used in the
calculation of diluted loss per share as they are anti-dilutive:
|
|
Years
ended December 31,
|
|
|
|
|
2007
#
|
|
|
|
2006
#
|
|
|
|
2005
#
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
4,787,387
|
|
|
|
4,237,221
|
|
|
|
4,107,614
|
|
Warrants
|
|
|
2,764,416
|
|
|
|
—
|
|
|
|
—
|
|
Comprehensive
income
The
Company follows SFAS No. 130, “Reporting Comprehensive Income” (“SFAS No. 130”).
SFAS No. 130 establishes standards for reporting and the presentation of
comprehensive income and its components in a full set of financial statements.
SFAS No. 130 requires only additional disclosures in the financial statements
and does not affect the Company’s financial position or results of
operations.
Comparative
figures
Certain
of the comparative figures have been reclassified to conform to the current
year’s method of presentation and to reflect the effect of discontinued
operations.
Recent
accounting pronouncements
The
adoption of
SAB
No. 1
10
, “
Share-based
payments
”
,
during fiscal
2007 did not have a material impact on the Company’s results of operations and
financial position:
In
September 2006, FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS
No. 157”). SFAS No. 157 defines fair value, establishes a framework and gives
guidance regarding the methods used for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning on or after November 15,
2007 and for interim periods within those fiscal years.
On
February 12, 2008, FASB issued FASB Staff Position No. 157-2, “Effective Date of
FASB Statement No 157” (FSP No. 157”). FSP No. 157-2 amends SFAS No. 157 to
delay the effective date of SFAS No. 157 for non-financial assets and
non-financial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually)
for fiscal years beginning after November 15, 2008.
On
February 14, 2008, FASB issued FSP No. 157-1, “Application of FASB Statement No.
157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13” (“FSP No. 157-1”). FSP No. 157-1 amends SFAS No.
157 to exclude SFAS No. 13, “Accounting for Leases” (“SFAS No. 13”), and other
accounting pronouncements that address fair value measurements for purposes of
lease classification or measurement under SFAS No. 13.
The
Company is currently evaluating the impact that the adoption of SFAS No. 157,
FSP No. 157-2 and FSP No. 157-1 will have on its results of operations and
financial position.
In
February 2007, FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115” (“SFAS No. 159”). SFAS No. 159 expands the use of fair value
accounting but does not affect existing standards which require assets or
liabilities to be carried at fair value. Under SFAS No. 159, a company may elect
to use fair value to measure accounts and loans receivable, available-for-sale
and held-to-maturity securities, equity method investments, accounts payable,
guarantees and issued debt. Other eligible items include firm commitments for
financial instruments that otherwise would not be recognized at inception and
non-cash warranty obligations where a warrantor is permitted to pay a third
party to provide the warranty goods or services. If the use of fair value is
elected, any upfront costs and fees related to the item must be recognized in
earnings and cannot be deferred (e.g., debt issue costs). The fair value
election is irrevocable and generally made on an instrument-by-instrument basis,
even if a company has similar instruments that it elects not to measure based on
fair value. At the adoption date, unrealized gains and losses on existing items
for which fair value has been elected are reported as a cumulative adjustment to
beginning retained earnings. Subsequent to the adoption of SFAS No. 159, changes
in fair value are recognized in earnings. SFAS No. 159 is effective for fiscal
years beginning on or after November 15, 2007 and is required to be adopted by
the Company in the first quarter of fiscal 2008. The adoption of SFAS No. 159
will not have a material impact on the Company’s results of operations and
financial position.
In June
2007, FASB’s EITF issued EITF Issue No. 06-11, “Accounting for Income Tax
Benefits of Dividends on Share-Based Payment Awards” (“EITF No. 06-11”). EITF
No. 06-11 requires that the tax benefits related to dividend equivalents paid on
restricted stock units, which are expected to vest, be recorded as an increase
to additional paid-in capital. EITF No. 06-11 is effective prospectively to the
income tax benefits on dividends declared in fiscal years beginning on or after
December 15, 2007. The Company is currently evaluating the impact the adoption
of EITF No. 06-11 will have on its results of operations and financial
position.
In
December 2007, FASB issued Statement No. 141R (revised 2007), “Business
Combinations (a revision of Statement No. 141)” (“SFAS No. 141R”). SFAS No. 141R
applies to all transactions or other events in which an entity obtains control
of one or more businesses, including those business combinations achieved
without the transfer of consideration. SFAS No. 141R retains the fundamental
requirements in Statement No. 141 that the acquisition method of accounting be
used for all business combinations. SFAS No. 141R expands the scope to include
all business combinations and requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree at their fair values as of the acquisition date. In addition, SFAS No.
141R changes the way entities account for business combinations achieved in
stages by requiring the identifiable assets and liabilities to be measured at
their full fair values. Also, contractual contingencies and contingent
consideration shall be measured at fair value at the acquisition date. SFAS No.
141R is effective on a prospective basis to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company is currently
evaluating the impact, if any, that the adoption of SFAS No. 141R will have on
its results of operations and financial position.
In
December 2007, FASB issued Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 amends ARB No. 51 to establish accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 clarifies that a non-controlling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial statements.
Additionally, SFAS No. 160 requires that consolidated net income include the
amounts attributable to both the parent and the non-controlling interest. SFAS
No. 160 is effective for interim periods beginning on or after December 15,
2008. The Company is currently evaluating the impact, if any, that the adoption
of SFAS No. 160 will have on its results of operations and financial
position.
4.
ACQUISITIONS
During
the fiscal year ended December 31, 2006, the Company completed two acquisitions.
The results of each purchase acquisition are included in the Company’s
consolidated statements of operations from the date of each acquisition. There
were no acquisitions made during fiscal 2007.
The
Company’s acquisitions during fiscal 2006 are described below.
Solx,
Inc.
On
September 1, 2006, the Company acquired SOLX, a privately held company that
has developed a system for the treatment of glaucoma. The SOLX Glaucoma
System developed by SOLX includes the SOLX 790 Laser and the SOLX Gold Shunt
which can be used separately or together to provide physicians with multiple
options to manage intraocular pressure. The acquisition of SOLX represented an
expansion of the Company’s ophthalmic product portfolio beyond the RHEO™
procedure for Dry AMD. The results of SOLX’s operations have been included in
the Company’s consolidated financial statements since September 1,
2006.
The
Company acquired SOLX by way of a merger, in connection with which the Company
issued an aggregate of 8,399,983 shares of its common stock and paid $7,000,000
in cash to the stockholders of SOLX. The Company made an additional payment of
$3,000,000 in cash on the first anniversary of the September 1, 2006 closing and
was expected to make an additional payment of $5,000,000 in cash to the former
stockholders of SOLX on the second anniversary of the September 1, 2006
closing. In addition, if SOLX received final FDA approval for the
marketing and sale of the SOLX Gold Shunt on or prior to December 31, 2007, the
Company was expected to make an additional $5,000,000 in cash to the former
stockholders of SOLX. The stock consideration was valued based on a per share
price of $1.79, being the weighted-average closing sale price of the Company’s
common stock as traded on the NASDAQ Global Market (“NASDAQ”) over the two-day
trading period before and after August 1, 2006, being the date the terms of the
acquisition of SOLX were agreed to and announced. The Company
recorded the cash payment paid on the first anniversary of the closing date as a
current liability as of December 31, 2006. The $5,000,000 due on the second
anniversary of the closing date was recorded as a long-term liability at its
present value, discounted at the incremental borrowing rate of the Company as at
August 1, 2006. The difference between the discounted value and the $5,000,000
payable was being amortized using the effective yield method over the two-year
period with the monthly expense being charged as an interest expense in the
Company’s consolidated statements of operations. In accordance with SFAS No.
141, “Business Combinations”, the contingent payment of $5,000,000 was not
included in the determination of the purchase price or recorded as a liability
as the receipt of FDA approval for the marketing and sale of the SOLX Gold Shunt
on or prior to December 31, 2007 was subject to many variables, the outcome of
which was not determinable beyond reasonable doubt.
The total
purchase price of $29,068,443, which included acquisition-related transaction
costs of $851,279, was allocated as follows:
|
|
$
|
|
|
|
|
|
Net
tangible assets
|
|
|
(2,908,384
|
)
|
Deferred
tax liability
|
|
|
(12,270,150
|
)
|
Intangible
assets:
|
|
|
|
|
Shunt
and laser technology
|
|
|
27,000,000
|
|
Regulatory
and other
|
|
|
2,800,000
|
|
|
|
|
14,621,466
|
|
Goodwill
|
|
|
14,446,977
|
|
|
|
|
29,068,443
|
|
Acquisition-related
transaction costs included investment banking, legal and accounting fees and
other third-party costs directly related to the acquisition.
In
estimating the fair value of the intangible assets acquired, the Company
considered a number of factors, including the valuation performed by an
independent third-party valuator that used the income approach to value SOLX’s
shunt and laser technology (consisting of the SOLX Gold Shunt and the SOLX 790
Laser) and the cost approach to value the regulatory and other intangible assets
acquired
(note
8)
.
On
December 19, 2007, the Company sold all of the issued and outstanding capital
stock of SOLX to Solx Acquisition. The consideration for the purchase and sale
of all of the issued and outstanding shares of the capital stock of SOLX
consisted of: (i) on the closing date of the sale, the assumption by
Solx Acquisition of all of the liabilities of the Company related to SOLX’s
business, incurred on or after December 1, 2007, and the Company’s obligation to
make a $5,000,000 payment to the former stockholders of SOLX due on September 1,
2008 in satisfaction of the outstanding balance of the purchase price of SOLX;
(ii) on or prior to February 15, 2008, the payment by Solx Acquisition of all of
the expenses that the Company had paid to the closing date, as they related to
SOLX’s business during the period commencing on December 1, 2007; (iii) during
the period commencing on the closing date and ending on the date on which SOLX
achieves a positive cash flow, the payment by Solx Acquisition of a royalty
equal to 3% of the worldwide net sales of the SOLX 790 Laser and the SOLX Gold
Shunt, including next-generation or future models or versions of these products;
and (iv) following the date on which SOLX achieves a positive cash flow, the
payment by Solx Acquisition of a royalty equal to 5% of the worldwide net sales
of these products. In order to secure the obligation of Solx Acquisition to make
these royalty payments, SOLX granted to the Company a subordinated security
interest in certain of its intellectual property. The results of operations of
SOLX from September 1, 2006, the date the Company acquired SOLX, to December 19,
2007, the closing date of the sale, have been included in discontinued
operations in the Company’s consolidated statements of operations
(note 10)
.
OcuSense,
Inc.
On
November 30, 2006, the Company acquired 50.1% of the capital stock of OcuSense,
measured on a fully diluted basis. OcuSense’s first product, which is currently
under development, is a hand-held tear film test for the measurement of
osmolarity, a quantitative and highly specific biomarker that has shown to
correlate with dry eye disease, or DED. The test is known as the TearLab™ test
for DED. The results of OcuSense’s operations have been included in the
Company’s consolidated financial statements since November 30,
2006.
Pursuant
to the terms of the Series A Preferred Stock Purchase Agreement (the “Series A
Preferred Stock Purchase Agreement”), dated as of November 30, 2006, between
OcuSense and the Company, the Company purchased 1,754,589 shares of OcuSense’s
Series A Preferred Stock, par value of $0.001 per share, representing 50.1% of
OcuSense’s capital stock on a fully diluted basis for an aggregate purchase
price of up to $8,000,000 (the “Purchase Price”). On the closing of the purchase
which took place on November 30, 2006, the Company paid $2,000,000 of the
Purchase Price. The Company paid another $2,000,000 installment of the Purchase
Price on January 3, 2007. In June 2007, the Company paid the third $2,000,000
installment of the Purchase Price upon the attainment by OcuSense of the first
of two pre-defined milestones. The Company is expected to pay the last
$2,000,000 installment of the Purchase Price upon the attainment by OcuSense of
the second of such milestones, provided that the milestone is achieved prior to
May 1, 2009. The contingent payments totaling $4,000,000, $2,000,000 of which
has been paid during fiscal 2007, were not included in the determination of the
Purchase Price or recorded as a liability as at December 31, 2006 as the
attainment by OcuSense of the two pre-determined milestones prior to May 1, 2009
was subject to many variables, the outcome of which is not determinable beyond
reasonable doubt. Upon the payment of the first contingent amount in June 2007,
the carrying value of the TearLab™ technology acquired upon the acquisition of
OcuSense was increased by $1,663,333, which reflects the minority interest
portion of the $2,000,000 paid to OcuSense in the amount of $998,000 and the
additional deferred tax liability of $665,333 recorded based on the difference
between the increase in the carrying value of the TearLab™ technology and its
tax basis
(note
8)
.
The
Series A Preferred Stock Purchase Agreement also makes provision for an ability
on the part of the Company to increase its ownership interest in OcuSense for
nominal consideration if OcuSense fails to meet certain other milestones by
specified dates. In addition, pursuant to the Series A Preferred Stock Purchase
Agreement, the Company has agreed to purchase $3,000,000 of shares of OcuSense’s
Series B Preferred Stock, which shall constitute 10% of OcuSense’s capital stock
on a fully diluted basis at the time of purchase, upon OcuSense’s receipt from
the FDA of 510(k) clearance for the TearLab™ test for DED and to purchase
another $3,000,000 of shares of OcuSense’s Series B Preferred Stock, which shall
constitute an additional 10% of OcuSense’s capital stock on a fully diluted
basis at the time of purchase, upon OcuSense’s receipt from the FDA of Clinical
Laboratory Improvement Amendments, or CLIA, waiver for the TearLab™ test for
DED.
The
adjusted purchase price of $5,169,098 includes acquisition-related transaction
costs of $171,098. Acquisition-related transaction costs include legal fees and
other third-party costs directly related to the acquisition.
The
adjusted purchase price of $5,169,098 (2006 - $4,171,098) has been allocated as
follows:
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Net
tangible assets
|
|
|
1,347,848
|
|
|
|
1,347,848
|
|
Deferred
tax liability
|
|
|
(2,547,499
|
)
|
|
|
(1,882,166
|
)
|
Intangible
asset
|
|
|
6,368,749
|
|
|
|
4,705,416
|
|
|
|
|
5,169,098
|
|
|
|
4,171,098
|
|
In
estimating the fair value of the intangible assets acquired, the Company
considered a number of factors, including the valuation performed by an
independent third-party valuator that used the income approach to value
OcuSense’s TearLab™ technology
(note 8)
.
If the
Company’s acquisition of 50.1% of the capital stock of OcuSense, measured on a
fully diluted basis, had been completed on January 1, 2005, the effect on the
pro forma statements of operations would have been to increase net loss by
$1,320,036 and $378,224 for the years ended December 31, 2006 and 2005,
respectively. Net loss per share would have increased by $0.03 and $0.01 for the
years ended December 31, 2006 and 2005, respectively. There is no pro forma
effect on the Company’s revenue for each of the years ended December 31, 2006
and 2005.
The
unaudited pro forma information is presented for information purposes only and
may not be indicative of the results of operations if the acquisition had
occurred on January 1, 2005, nor is it necessarily indicative of future results
of operations.
5.
GOODWILL
The
Company follows the provisions of SFAS No. 142, “Goodwill and Other Intangible
Assets” (“SFAS No. 142”), which requires that goodwill not be amortized but
instead be tested for impairment at least annually and more frequently if
circumstances indicate possible impairment.
The
Company’s goodwill amount by reporting unit is as follows:
|
|
Retina
|
|
|
Glaucoma
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
65,945,686
|
|
|
|
—
|
|
|
|
65,945,686
|
|
Acquired
during the period
|
|
|
—
|
|
|
|
14,446,977
|
|
|
|
14,446,977
|
|
Impairment
loss recognized
|
|
|
(65,945,686
|
)
|
|
|
—
|
|
|
|
(65,945,686
|
)
|
Balance,
December 31, 2006
|
|
|
—
|
|
|
|
14,446,977
|
|
|
|
14,446,977
|
|
Impairment
loss recognized
|
|
|
—
|
|
|
|
(14,446,977
|
)
|
|
|
(14,446,977
|
)
|
Balance,
December 31, 2007
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
The
Company performs its annual goodwill impairment analysis on its acquired
goodwill on October 1 of each year and evaluates the carrying value of its
goodwill between annual tests upon the occurrence of certain events and
circumstances.
Retina
The
Company conducted a pivotal clinical trial, called MIRA-1, which, if successful,
was expected to support its application to the FDA to obtain approval to market
the RHEO™ System in the United States. On February 3, 2006, the Company
announced that, based on a preliminary analysis of the data from MIRA-1, MIRA-1
did not meet its primary efficacy endpoint as it did not demonstrate a
statistically significant difference in the mean change of ETDRS BCVA between
the treated and placebo groups in MIRA-1 at 12 months post-baseline. As a result
of the announcement on February 3, 2006, the per share price of the
Company’s common stock as traded on NASDAQ decreased from $12.75 on
February 2, 2006 to close at $4.10 on February 3, 2006. The 10-day average price
of the stock immediately following the announcement was $3.65 and reflected a
decrease in the Company’s market capitalization from $536.6 million on February
2, 2006 to $153.6 million based on the 10-day average share price subsequent to
the announcement. Based on this, the Company concluded that there were
sufficient indicators to require management to re-assess whether the Company’s
recorded goodwill was impaired as of December 31, 2005. Prior to the
acquisition of SOLX and OcuSense during the second half of fiscal 2006, the
Company was a single reporting unit. Therefore, management determined the fair
value of the Company's goodwill using the Company’s market capitalization as
opposed to the fair value of its assets and liabilities. The Company recorded a
goodwill impairment charge of $147,451,758 during the year ended December 31,
2005 as a result of a goodwill impairment re-assessment performed subsequent to
the February 3, 2006 announcement.
On June
12, 2006, the Company announced that it met with the FDA to discuss the results
of MIRA-1 and confirmed that the FDA will require the Company to perform an
additional study of the RHEO™ System to obtain approval to market the RHEO™
System in the United States. In addition, on June 30, 2006, the
Company announced that it had terminated negotiations with Sowood Capital
Management LP in connection with a proposed private purchase of approximately
$30,000,000 of zero-coupon convertible notes of the Company. In accordance with
SFAS No. 142, the Company concluded that, based on the price of the Company’s
common stock subsequent to the June 12, 2006 announcement and again after the
June 30, 2006 announcement, there were sufficient indicators to require
management to re-assess whether the Company’s recorded goodwill was impaired as
at June 30, 2006. Based on the goodwill impairment analysis performed, the
Company concluded that a further goodwill impairment charge of $65,945,686
should be recorded during the second quarter of 2006.
Glaucoma
On
September 1, 2006, the Company acquired SOLX by way of a merger for a total
purchase price of $29,068,443. Of this amount, $14,446,977 has been allocated to
goodwill. On December 19, 2007, the Company sold to Solx Acquisition, and Solx
Acquisition purchased from the Company, all of the issued and outstanding shares
of the capital stock of SOLX, which had been the Glaucoma division of the
Company prior to the completion of the transactions provided for in the stock
purchase agreement. The sale transaction established fair values for the
Company’s recorded goodwill and certain of the Company’s intangible assets.
Accordingly, the Company performed an impairment test of its recorded goodwill
to re-assess whether its recorded goodwill was impaired as at December 1, 2007.
Based on the goodwill impairment analysis performed, the Company concluded that
a goodwill impairment charge of $14,446,977 should be recorded during the year
ended December 31, 2007 to write down the value of its recorded goodwill to its
fair value of nil
(note
10)
.
6.
FIXED ASSETS
|
|
2007
|
|
|
2006
|
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture
and office equipment
|
|
|
101,903
|
|
|
|
50,854
|
|
|
|
119,776
|
|
|
|
49,566
|
|
Computer
equipment and software
|
|
|
197,317
|
|
|
|
155,928
|
|
|
|
268,955
|
|
|
|
145,001
|
|
Leasehold
improvements
|
|
|
6,335
|
|
|
|
704
|
|
|
|
—
|
|
|
|
—
|
|
Medical
equipment
|
|
|
1,163,135
|
|
|
|
1,138,918
|
|
|
|
1,805,228
|
|
|
|
1,138,675
|
|
|
|
|
1,468,690
|
|
|
|
1,346,404
|
|
|
|
2,193,959
|
|
|
|
1,333,242
|
|
Less
accumulated amortization
|
|
|
1,346,404
|
|
|
|
|
|
|
|
1,333,242
|
|
|
|
|
|
|
|
|
122,286
|
|
|
|
|
|
|
|
860,717
|
|
|
|
|
|
Amortization
expense was $844,948, $213,488 and $99,301 during the years ended December 31,
2007, 2006 and 2005, respectively, of which $231,542, $74,610 and nil is
included as amortization expense of discontinued operations for the years ended
December 31, 2007, 2006 and 2005, respectively
(note 10)
.
On
November 1, 2007, the Company announced an indefinite suspension of the RHEO™
System clinical development program for Dry AMD and is in the process of winding
down the RHEO-AMD study as there is no reasonable prospect that the RHEO™ System
clinical development program will be relaunched in the foreseeable future. In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (“SFAS No. 144”), the Company determined that the carrying
value of certain of the Company’s medical equipment was not recoverable as of
December 31, 2007. Accordingly, during the year ended December 31, 2007, the
Company recorded a reduction to the carrying value of certain of its medical
equipment of $431,683 which reflects a write-down of the value of this medical
equipment to nil as of December 31, 2007. The assets written down were being
used in the clinical trials of the RHEO™ System. The Company did not write down
the carrying value of any of its fixed assets during the years ended December
31, 2006 and 2005.
7.
PATENTS AND TRADEMARKS
|
|
2007
|
|
|
2006
|
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
|
236,854
|
|
|
|
113,013
|
|
|
|
139,461
|
|
|
|
14,909
|
|
Trademarks
|
|
|
120,211
|
|
|
|
104,615
|
|
|
|
117,513
|
|
|
|
7,224
|
|
|
|
|
357,065
|
|
|
|
217,628
|
|
|
|
256,974
|
|
|
|
22,133
|
|
Less
accumulated amortization
|
|
|
217,628
|
|
|
|
|
|
|
|
22,133
|
|
|
|
|
|
|
|
|
139,437
|
|
|
|
|
|
|
|
234,841
|
|
|
|
|
|
Amortization
expense was $195,494, $5,608 and $5,712 during the years ended December 31,
2007, 2006 and 2005, respectively.
Based on
the November 1, 2007 announcement and in accordance with SFAS No. 144, the
Company determined that the carrying value of certain of the Company’s patents
and trademarks was not recoverable as of December 31, 2007. Accordingly, during
the year ended December 31, 2007, the Company recorded a $190,873 reduction to
the carrying value of its patents and trademarks related to the RHEO™ System
which reflects a write-down of these patents and trademarks to a value of nil as
of December 31, 2007. The Company did not write down the carrying value of any
of its patents and trademarks during the years ended December 31, 2006 and
2005.
The
Company’s recorded patents and trademarks as of December 31, 2007 relate to the
cost of pending applications for patents and trademarks for the TearLab™
technology. These patents and trademarks will be amortized, using the
straight-line method, over an estimated useful life of 10 years from the date of
approval of the patents and trademarks.
Estimated
amortization expense for patents and trademarks for each of the next five years
is as follows:
|
|
Patents
$
|
|
|
Trademarks
$
|
|
|
Total
$
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
12,384
|
|
|
|
1,560
|
|
|
|
13,944
|
|
2009
|
|
|
12,384
|
|
|
|
1,560
|
|
|
|
13,944
|
|
2010
|
|
|
12,384
|
|
|
|
1,560
|
|
|
|
13,944
|
|
2011
|
|
|
12,384
|
|
|
|
1,560
|
|
|
|
13,944
|
|
2012
|
|
|
12,384
|
|
|
|
1,560
|
|
|
|
13,944
|
|
|
|
|
61,920
|
|
|
|
7,800
|
|
|
|
69,720
|
|
8.
INTANGIBLE ASSETS
The
Company’s intangible assets consist of the value of the exclusive distribution
agreements that the Company has with its major suppliers and other
acquisition-related intangibles. The Company has no indefinite-lived intangible
assets. The distribution agreements were being amortized using the
straight-line method over an estimated useful life of 15 years while the other
acquisition-related intangible assets are amortized using the straight-line
method over an estimated useful life of 10 years, respectively. Amortization
expense for the years ended December 31, 2007, 2006 and 2005 was $4,578,027,
$2,749,212 and $1,716,667, respectively, of which $2,731,667, $993,333 and nil
is included as amortization expense of discontinued operations for the years
ended December 31, 2007, 2006 and 2005, respectively
(note 10)
.
Intangible
assets subject to amortization consist of the following:
|
|
2007
|
|
|
2006
|
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
agreements
|
|
|
—
|
|
|
|
—
|
|
|
|
25,750,000
|
|
|
|
3,539,472
|
|
Shunt
and laser technology
|
|
|
—
|
|
|
|
—
|
|
|
|
27,000,000
|
|
|
|
900,000
|
|
Regulatory
and other
|
|
|
—
|
|
|
|
—
|
|
|
|
2,800,000
|
|
|
|
93,333
|
|
TearLab™
technology
|
|
|
6,368,749
|
|
|
|
598,072
|
|
|
|
4,705,416
|
|
|
|
39,212
|
|
|
|
|
6,368,749
|
|
|
|
598,072
|
|
|
|
60,255,416
|
|
|
|
4,572,017
|
|
Estimated
amortization expense for the intangible assets for each of the fiscal years
ending December 31 is as follows:
|
|
$
|
|
|
|
|
|
2008
|
|
|
647,179
|
|
2009
|
|
|
647,179
|
|
2010
|
|
|
647,179
|
|
2011
|
|
|
647,179
|
|
2012
and thereafter
|
|
|
3,181,961
|
|
|
|
|
5,770,677
|
|
The
Company’s intangible assets consist of the value of the exclusive distribution
agreements the Company has with Asahi Medical, the manufacturer of the
Rheofilter filters and the Plasmaflo filters, and Diamed and MeSys, the designer
and the manufacturer, respectively, of the OctoNova pumps. The Rheofilter
filter, the Plasmaflo filter and the OctoNova pump are components of the RHEO™
System, the Company’s product for the treatment of Dry AMD. On November 1,
2007, the Company announced an indefinite suspension of the RHEO™ System
clinical development program for Dry AMD and is in the process of winding
down the RHEO-AMD study as there is no reasonable prospect that the RHEO™ System
clinical development program will be relaunched in the foreseeable
future. In accordance with SFAS No. 144, the Company concluded that
its indefinite suspension of the RHEO™ System clinical development
program for Dry AMD was a significant event which may affect the carrying value
of its distribution agreements. Accordingly, management was required to
re-assess whether the carrying value of the Company’s distribution
agreements was recoverable as of December 31, 2007. Based on management’s
estimates of undiscounted cash flows associated with the distribution
agreements, the Company concluded that the carrying value of the distribution
agreements was not recoverable as of December 31, 2007. Accordingly, the Company
recorded an impairment charge of $20,923,028 during the year ended December 31,
2007 to record the distribution agreements at their fair value as of December
31, 2007.
On
December 19, 2007, the Company sold to Solx Acquisition all of the issued and
outstanding shares of the capital stock of SOLX, which had been the Glaucoma
division of the Company prior to the completion of the transactions provided for
in the stock purchase agreement. The sale transaction established fair values
for the Company’s recorded goodwill and the Company’s shunt and laser technology
and regulatory and other intangible assets acquired upon the acquisition of SOLX
on September 1, 2006. Accordingly, management was required to re-assess
whether the carrying value of the Company’s shunt and laser technology
and regulatory and other intangible assets was recoverable as of December 1,
2007. Based on management’s estimates of undiscounted cash flows associated with
these intangible assets, the Company concluded that the carrying value of these
intangible assets was not recoverable as of December 1, 2007. Accordingly, the
Company recorded an impairment charge of $22,286,383 during the year ended
December 31, 2007 to record the shunt and laser technology and regulatory and
other intangible assets at their fair value as of December 31, 2007
(note 10)
.
The
Company determined that, as of December 31, 2007, there have been no
significant events which may affect the carrying value of its TearLab™
technology. However, the Company’s prior history of losses and losses incurred
during the current fiscal year reflects a potential indication of impairment,
thus requiring management to assess whether the Company’s TearLab™ technology
was impaired as of December 31, 2007. Based on management’s estimates of
forecasted undiscounted cash flows as of December 31, 2007, the Company
concluded that there is no indication of an impairment of the Company’s TearLab™
technology. Therefore, no impairment charge was recorded during the year ended
December 31, 2007.
9.
RESTRUCTURING CHARGES
In March
2006, the Company implemented a number of structural and management changes
designed to then support both the continued development of its RHEO™ System and
to execute its accelerated diversification strategy within ophthalmology. In
accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or
Disposal Activities” (“SFAS No. 146”), the Company recognized a total of
$819,642 in restructuring charges during the year ended December 31, 2006.
The
restructuring charges of $819,642 recorded during the year ended December 31,
2006 consist solely of severance and benefit costs related to the termination of
a total of 12 employees at both the Company’s Mississauga, Ontario and Palm
Harbor, Florida offices. All severance and benefit costs were fully paid as at
December 31, 2006.
On
January 9, 2008, the Company announced the termination of employment of certain
members of its executive team in light of the Company's current financial
situation and in connection with the indefinite suspension of its RHEO™ System
clinical development program and the sale of SOLX. In accordance with SFAS No.
146, the Company recognized a total of $1,312,721 in restructuring charges
during the year ended December 31, 2007. The total restructuring charges of
$1,312,721 recorded in the year ended December 31, 2007 consist solely of
severance and benefit costs related to the termination of a total of eight
employees at both the Company’s Mississauga, Ontario and Palm Harbor, Florida
offices. All severance and benefit costs are yet to be paid as at December 31,
2007.
10.
DISCONTINUED OPERATIONS
On
December 19,
2007
, the
Company sold to Solx Acquisition, and Solx Acquisition purchased from the
Company,
all of the issued and outstanding shares of the capital stock of
SOLX, which had been the Glaucoma division of the Company prior to the
completion of this transaction. The consideration for the purchase and sale of
all of the issued and outstanding shares of the capital stock of SOLX consisted
of: (i) on the closing date of the sale, the assumption by Solx
Acquisition of all of the liabilities of the Company related to SOLX’s business,
incurred on or after December 1, 2007, and the Company’s obligation to make a
$5,000,000 payment to the former stockholders of SOLX due on September 1, 2008
in satisfaction of the outstanding balance of the purchase price of SOLX; (ii)
on or prior to February 15, 2008, the payment by Solx Acquisition of all of the
expenses that the Company had paid to the closing date, as they related to
SOLX’s business during the period commencing on December 1, 2007; (iii) during
the period commencing on the closing date and ending on the date on which SOLX
achieves a positive cash flow, the payment by Solx Acquisition of a royalty
equal to 3% of the worldwide net sales of the SOLX 790 Laser and the SOLX Gold
Shunt, including next-generation or future models or versions of these products;
and (iv) following the date on which SOLX achieves a positive cash flow, the
payment by Solx Acquisition of a royalty equal to 5% of the worldwide net sales
of these products. In order to secure the obligation of Solx Acquisition to make
these royalty payments, SOLX granted to the Company a subordinated security
interest in certain of its intellectual property. No value was assigned to the
royalty payments as the determination of worldwide net sales of SOLX’s products
is subject to significant uncertainty.
The sale
transaction described above established fair values for certain of the Company’s
acquisition-related intangible assets and goodwill. Accordingly, the Company
performed an impairment test of these assets at December 1, 2007. Based on this
analysis, during the year ended December 31, 2007, the Company recognized a
non-cash goodwill impairment charge of $14,446,977 and an impairment charge of
$22,286,383 to record its acquisition-related intangible assets at their fair
value as of December 31, 2007
(notes 5 and 8)
.
The
Company’s results of operations related to discontinued operations for the years
ended December 31, 2007 and 2006 are as follows:
|
|
December
31,
|
|
|
|
2007
$
|
|
|
2006
$
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
244,150
|
|
|
|
31,625
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
119,147
|
|
|
|
11,053
|
|
Royalty
costs
|
|
|
26,277
|
|
|
|
8,332
|
|
Total
cost of goods sold
|
|
|
145,424
|
|
|
|
19,385
|
|
|
|
|
98,726
|
|
|
|
12,240
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
General
and administrative
(notes 11, 12 and
16)
|
|
|
3,630,943
|
|
|
|
1,378,536
|
|
Clinical
and regulatory
(notes 12
and 16)
|
|
|
2,828,686
|
|
|
|
754,624
|
|
Sales
and marketing
(notes 12
and 16)
|
|
|
818,301
|
|
|
|
330,210
|
|
Impairment
of goodwill
(note
5)
|
|
|
14,446,977
|
|
|
|
—
|
|
Impairment
of intangible assets
(note
8)
|
|
|
22,286,383
|
|
|
|
—
|
|
|
|
|
44,011,290
|
|
|
|
2,463,370
|
|
|
|
|
(43,912,564
|
)
|
|
|
(2,451,130
|
)
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
486
|
|
|
|
—
|
|
Interest
and accretion expense
|
|
|
(857,400
|
)
|
|
|
(273,192
|
)
|
Other
|
|
|
(9,302
|
)
|
|
|
(67
|
)
|
|
|
|
(866,216
|
)
|
|
|
(273,259
|
)
|
Loss
from discontinued operations before income taxes
|
|
|
(44,778,780
|
)
|
|
|
(2,724,389
|
)
|
Recovery
of income taxes
(note
13)
|
|
|
9,349,882
|
|
|
|
1,182,005
|
|
Loss
from discontinued operations
|
|
|
(35,428,898
|
)
|
|
|
(1,542,384
|
)
|
The
Company’s assets and liabilities related to discontinued operations at December
31, 2006 are shown below. The Company did not have any assets and liabilities
related to discontinued operations at December 31, 2007.
|
|
December
31, 2006
$
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash
and cash equivalents
|
|
|
35,462
|
|
Amounts
receivable
|
|
|
800
|
|
Inventory
|
|
|
371,099
|
|
Prepaid
expenses
|
|
|
131,593
|
|
Other
current assets
|
|
|
79,200
|
|
Total
current assets
|
|
|
618,154
|
|
Fixed
assets, net
(note
6)
|
|
|
286,407
|
|
Intangible
assets, net
(note
8)
|
|
|
28,806,667
|
|
Goodwill
(note
5)
|
|
|
14,446,977
|
|
|
|
|
44,158,205
|
|
|
|
|
|
|
LIABILITES
|
|
|
|
|
Current
|
|
|
|
|
Accounts
payable
|
|
|
232,687
|
|
Accrued
liabilities
(notes 12
and 14)
|
|
|
253,779
|
|
Total
current liabilities
|
|
|
486,466
|
|
Deferred
tax liability
(note
13)
|
|
|
11,087,750
|
|
|
|
|
11,574,216
|
|
11.
DUE TO STOCKHOLDERS
|
|
December
31,
|
|
|
|
|
2007
$
|
|
|
|
2006
$
|
|
|
|
|
|
|
|
|
|
|
Due
(from)/to
|
|
|
|
|
|
|
|
|
TLC
Vision Corporation
(note
12)
|
|
|
(2,708
|
)
|
|
|
91,884
|
|
Other
stockholders
(note
12)
|
|
|
35,522
|
|
|
|
60,522
|
|
|
|
|
32,814
|
|
|
|
152,406
|
|
The
balance due from and owing to TLC Vision Corporation (“TLC Vision”) is related
to computer and administrative support provided by TLC Vision, net of payments
made by the Company to TLC Vision. All amounts have been expensed during the
years ended December 31, 2007 and 2006, respectively, and included in general
and administrative expenses. The balance due to other stockholders includes
outstanding royalty fees payable to Mr. Hans Stock.
12.
RELATED PARTY TRANSACTIONS
The
following are the Company’s related party transactions in addition to those
disclosed in notes 10, 11 and 15.
One of
the Company’s primary customers had been RHEO Clinic Inc., a subsidiary of TLC
Vision. RHEO Clinic Inc. used the RHEO™ System to treat patients for which it
charged its customers (the patients) a per-treatment fee. During the third
quarter of 2005, RHEO Clinic Inc. determined that it would no longer treat
patients and subsequently sold certain of its assets to the Company at a
purchase price of C$61,812, including all applicable taxes. In connection with
that sale, the Company agreed to share equally in losses incurred by RHEO Clinic
Inc., to a maximum of C$28,952, for assets that RHEO Clinic Inc. was not able to
dispose of as of the agreed date, being December 31, 2005. On May 1, 2006, the
Company paid RHEO Clinic Inc. C$31,859 which included the amount owing for
losses incurred for the assets that RHEO Clinic Inc. was not able to dispose of
as of the agreed date.
(b)
|
TLC
Vision and Diamed
|
On June
25, 2003, the Company entered into agreements with TLC Vision and Diamed to
issue grid debentures in the maximum aggregate principal amount of $12,000,000
in connection with the funding of the Company’s MIRA-1 and related clinical
trials. $7,000,000 of the aggregate principal amount was convertible into shares
of the Company’s common stock at a price of $0.98502 per share, and $5,000,000
of the aggregate principal amount was non-convertible.
The
$5,000,000 portion of the $12,000,000 commitment which was not convertible into
the Company’s common stock was not advanced and the commitment was terminated
prior to the completion of the Company’s initial public offering of shares of
its common stock. During the years ended December 31, 2004 and 2003, the Company
issued grid debentures in an aggregate principal amount of $4,350,000 and
$2,650,000 to TLC Vision and Diamed, respectively, under the convertible portion
of the grid debentures. On December 8, 2004, as part of the corporate
reorganization relating to the Company’s initial public offering, the Company
issued 7,106,454 shares of its common stock to TLC Vision and Diamed, upon
conversion of $7,000,000 of aggregate principal amount of convertible debentures
at a conversion price of $0.98502 per share. Collectively, at December 31, 2007,
the two companies have a combined 35.6% equity interest in the Company on a
fully diluted basis.
The
Company entered into a distributorship agreement (the “Distribution Agreement”),
effective October 20, 2006, with Asahi Medical. The Distribution Agreement
replaced the 2001 distributorship agreement between Asahi Medical and the
Company, as supplemented and amended by the 2003, 2004 and 2005 Memoranda.
Pursuant to the Distribution Agreement, the Company had distributorship rights
to Asahi Medical's Plasmaflo filter and Asahi Medical's second generation
polysulfone Rheofilter filter on an exclusive basis in the United States, Mexico
and certain Caribbean countries (collectively, “Territory 1-a”), on an exclusive
basis in Canada, on an exclusive basis in Colombia, Venezuela, New Zealand,
Australia (collectively, “Territory 2”) and on a non-exclusive basis in
Italy.
On
January 28, 2008, the Company disclosed that it was engaged in discussions with
Asahi Medical to terminate the Distribution Agreement. The Company and Asahi
Medical have entered into a termination agreement to terminate substantially all
of their obligations under the Distribution Agreement on and as of February 25,
2008 (the “Termination Agreement”). Pursuant to the Termination
Agreement, the Company and Asahi Medical have agreed to a mutual release of
claims relating to the Distribution Agreement, other than any claims relating to
certain provisions of the Distribution Agreement which survived its
termination.
The
Company received free inventory from Asahi Medical for purposes of the RHEO-AMD
trial, the LEARN, or Long-term Efficacy in AMD from Rheopheresis in North
America, trials and related clinical studies. The Company has accounted for this
inventory at a value equivalent to the cost the Company has paid for the same
filters purchased from Asahi Medical for purposes of commercial sales to the
Company’s customers. The value of the free inventory received from Asahi Medical
was $384,660 and nil for the years ended December 31, 2007 and 2006,
respectively.
(d)
|
Mr. Hans Stock
(note
11)
|
On
February 21, 2002, the Company entered into an agreement with Mr. Stock as
a result of his assistance in procuring a distributorship agreement for the
filter products used in the RHEO™ System from Asahi Medical. Mr. Stock
agreed to further assist the Company in procuring new product lines from Asahi
Medical for marketing and distribution by the Company. The agreement will remain
effective for a term consistent with the term of the distributorship agreement
with Asahi Medical, and Mr. Stock will receive a 5% royalty payment on the
purchase of the filters from Asahi Medical. During each of the years ended
December 31, 2007 and 2006, the Company did not pay any amount
to Mr. Stock as royalty fees. Included in due to stockholders at
December 31, 2007 and 2006 is $48,022 and $48,022, respectively, due to
Mr. Stock.
On June
25, 2002, the Company entered into a consulting agreement with Mr. Stock
for the purpose of procuring a patent license for the extracorporeal
applications in ophthalmic diseases for that period of time in which the patent
was effective. Mr. Stock was entitled to 1.0% of total net revenue from the
Company’s commercial sales of products sold in reliance and dependence upon the
validity of the patent’s claims and rights in the United States. The Company
agreed to make advance consulting payments to Mr. Stock of $50,000
annually, payable on a quarterly basis, to be credited against any and all
future consulting payments payable in accordance with this agreement. Due to the
uncertainty of future royalty payment requirements, all required payments to
date have been expensed.
On August
6, 2004, the Company entered into a patent license and royalty agreement with
Mr. Stock to obtain an exclusive license to U.S. Patent No. 6,245,038. The
Company is required to make royalty payments totaling 1.5% of product sales to
Mr. Stock, subject to minimum advance royalty payments of $12,500 per
quarter. The advance payments are credited against future royalty payments to be
made in accordance with the agreement. This agreement replaces the June 25, 2002
consulting agreement with Mr. Stock which provided for a royalty payment of
1% of product sales. During each of the years ended December 31, 2007 and 2006,
the Company paid $50,000 to Mr. Stock as royalty fees. Included in due to
stockholders at December 31, 2007 and 2006 is $12,500 and $12,500, respectively,
due to Mr. Stock.
On June
25, 2003, the Company entered into a reimbursement agreement with Apheresis
Technologies, Inc. (“ATI”) pursuant to which employees of ATI, including Mr.
John Cornish, one of the Company’s stockholders and its former Vice President,
Operations, provided services to the Company and ATI is reimbursed for the
applicable percentage of time the employees spend working for the Company.
Effective April 1, 2005, the Company terminated its reimbursement agreement with
ATI, as a result of which termination the Company no longer compensated ATI
in respect of any salary paid to, or benefits provided to, Mr. Cornish by
ATI. Until April 1, 2005, Mr. Cornish did not have an employment contract
with the Company and received no direct compensation from the Company. On April
1, 2005, Mr. Cornish entered into an employment agreement with the Company
under which he received an annual base salary of $106,450, representing
compensation to him for devoting 80% of his time to the business and affairs of
the Company. Effective June 1, 2005, the Company amended its employment
agreement with Mr. Cornish such that he began to receive an annual base
salary of $116,723, representing compensation to him for devoting 85% of his
time to the business and affairs of the Company. Effective April 13, 2006, the
Company further amended its employment agreement with Mr. Cornish such that
his annual base salary was decreased to $68,660 in consideration of his devoting
50% of his time to the business and affairs of the Company. In light of the
Company's current financial situation, and in connection with the indefinite
suspension of its RHEO™ System clinical development program and the sale of
SOLX, the Company terminated the employment of Mr. Cornish effective
January 4, 2008.
During
the year ended December 31, 2007, ATI made available to the Company, upon
request, the services of certain of ATI’s employees and consultants on a per
diem basis. During the year ended December 31, 2007, the Company paid
ATI $98,769 under this arrangement (2006 – nil). Included in accounts payable
and accrued liabilities at December 31, 2007 and 2006 is $20,004 and $9,629,
respectively, due to ATI.
Effective
January 1, 2004, the Company entered into a rental agreement with Cornish
Properties Corporation, a company owned and managed by Mr. Cornish,
pursuant to which the Company leases space from Cornish Properties Corporation
at $2,745 per month. The original term of the lease extended to December 31,
2005. On November 8, 2005, as provided for in the rental agreement, the Company
extended the term of the rental agreement with Cornish Properties Corporation
for another year, ending December 31, 2006. On December 19, 2006, the
Company extended the term of the rental agreement with Cornish Properties
Corporation for another year, ending December 31, 2007, at a lease payment of
$2,168 per month. During the years ended December 31, 2007 and 2006, the Company
paid Cornish Properties Corporation an amount of $26,016 and $32,940,
respectively, as rent.
On
November 30, 2006, the Company announced that Mr. Elias Vamvakas, the Chairman,
Chief Executive Officer and Secretary of the Company, had agreed to provide the
Company with a standby commitment to purchase convertible debentures of the
Company (“Convertible Debentures”) in an aggregate maximum amount of $8,000,000
(the “Total Commitment Amount”). Pursuant to the Summary of Terms and
Conditions, executed and delivered as of November 30, 2006 by the Company and
Mr. Vamvakas, during the 12-month commitment term commencing on November 30,
2006, upon no less than 45 days’ written notice by the Company to Mr. Vamvakas,
Mr. Vamvakas was obligated to purchase Convertible Debentures in the aggregate
principal amount specified in such written notice. A commitment fee of 200 basis
points was payable by the Company on the undrawn portion of the Total Commitment
Amount. Any Convertible Debentures purchased by Mr. Vamvakas would have
carried an interest rate of 10% per annum and would have been convertible, at
Mr. Vamvakas’ option, into shares of the Company’s common stock at a
conversion price of $2.70 per share. The Summary of Terms and Conditions further
provided that if the Company closes a financing with a third party, whether by
way of debt, equity or otherwise and there are no Convertible Debentures
outstanding, then the Total Commitment Amount was to be reduced automatically
upon the closing of the financing by the lesser of: (i) the Total Commitment
Amount; and (ii) the net proceeds of the financing. On February 6, 2007, the
Company raised gross proceeds in the amount of $10,016,000 in a private
placement of shares of its common stock and warrants. The Total Commitment
Amount was therefore reduced to zero, thus effectively terminating
Mr. Vamvakas’ standby commitment. No portion of the standby commitment was
ever drawn down by the Company, and the Company paid Mr. Vamvakas a total
of $29,808 in commitment fees in February 2007.
The
Company entered into a consultancy and non-competition agreement on July 1, 2003
with the Center for Clinical Research (“CCR”), then a significant shareholder of
the Company, which requires the Company to pay a fee of $5,000 per month. For
the year ended December 31, 2003, CCR agreed to forego the payment of $75,250
due to it in exchange for options to purchase 20,926 shares of the Company’s
common stock at an exercise price of $0.13 per share. In addition, CCR agreed to
the repayment of the balance of $150,500 due to it at a rate of $7,500 per month
beginning in July 2003. On August 22, 2005, the Company amended the consultancy
and non-competition agreement with CCR such that the fee payable to it was
increased from $5,000 to $15,000 per month effective January 1, 2005. The
monthly fee is fixed regardless of actual time incurred by CCR in performance of
the services rendered to the Company. The agreement allows either party to
convert the payment arrangement to a fee of $2,500 daily. In the event of such
conversion, CCR shall provide services on a daily basis as required by the
Company and will invoice the Company for the total number of days that services
were provided in that month. The amended consultancy and non-competition
agreement provides for the payment of a one-time bonus of $200,000 upon receipt
by the Company of FDA approval of the RHEO™ System and the grant of 60,000
options to CCR at an exercise price of $7.15 per share. The stockholders of the
Company approved the adjustment of the exercise price of these options to $2.05
per share on June 23, 2006. These options were scheduled to vest as to 100% when
and if the Company receives FDA approval of the RHEO™ System on or before
November 30, 2006, as to 80% when and if the Company receives FDA approval after
November 30, 2006 but on or before January 31, 2007 and as to 60% when and if
the Company receives FDA approval after January 31, 2007. In August 2006, by
letter agreement between the Company and CCR, it was agreed that the monthly fee
of $15,000 would be suspended at the end of August 2006 until CCR’s services are
required by the Company in the future. This resulted in a consulting expense,
included within clinical and regulatory expense for the years ended December 31,
2007 and 2006, of $10,000 and $125,000, respectively.
On
September 29, 2004, the Company signed a product purchase agreement with Veris
for its purchase from the Company of 8,004 treatment sets over the period from
October 2004 to December 2005, a transaction valued at $6,003,000, after
introductory rebates. However, due to delays in opening its planned number of
clinics throughout Canada, Veris no longer required the contracted-for number of
treatment sets in the period. The Company agreed to the original pricing for the
reduced number of treatment sets required in the period.
Dr. Jeffrey Machat, who is an investor in, and one of the directors
of, Veris, was a co-founder and former director of TLC Vision. In December 2005,
by letter agreement, the Company agreed to the volume and other terms for the
purchase and sale of treatment sets and pumps for the period ending February 28,
2006. As of December 31, 2005, the Company had received a total of $1,779,566
from Veris. Included in amounts receivable, net at December 31, 2005, was
$1,049,297 due from Veris for the purchase of additional pumps and treatment
sets. Veris agreed to the payment of interest at the rate of 8% per annum on all
amounts outstanding for more than 45 days up to March 31, 2006, the expected
date of final payment. In January 2006, the Company received from Veris an
interest payment of $4,495 on amounts outstanding for more than 45 days to
December 31, 2005. On February 3, 2006, the Company announced that the MIRA-1
clinical trial had not met its primary efficacy endpoint and that it would be
more likely than not that the Company will be required to conduct a follow-up
clinical trial of the RHEO™ System in order to support its Pre-Market Approval
application to the FDA. Because of this delay in being able to pursue
commercialization of the RHEO™ System in the United States and the resulting
market reaction to this news and based on discussions with Veris, the Company
believed that Veris would not be able to meet its financial obligations to the
Company. Therefore, during the year ended December 31, 2005, the Company
recorded an allowance for doubtful accounts of $1,049,297 against the amount due
from Veris and did not accrue additional interest on the amount outstanding
during the year ended December 31, 2006.
In April
2006, the Company agreed to sell a total of 1,000 treatment sets, with a
negotiated discount, to Veris at a price of $200 per treatment set, which is
lower than the Company’s cost. It was also agreed that payment for the treatment
sets must be received by the Company in advance of shipment. In July
2006, Veris negotiated new payment terms with the Company, and it was agreed
that payment for treatment sets shipped subsequent to June 2006 must be received
within 60 days of shipment. The Company also agreed that all sales of treatment
sets made to Veris to the end of 2006 will remain at the discounted price of
$200 per treatment set. During the year ended December 31, 2006, the Company
received a total of $171,800 from Veris for the purchase of 1,207 treatment
sets. The sale of the treatment sets was included in revenue for the year ended
December 31, 2006 as all the treatment sets had been delivered to Veris. In
November 2006, the Company sold 348 treatment sets to Veris for $73,776,
including applicable taxes, payment for which was not received by the Company
within the agreed 60-day credit period. The sale of these treatment sets was not
recognized as revenue during the year ended December 31, 2006 as the Company
believed that Veris would not be able to meet its financial obligations to the
Company. In January 2007, the Company met with the management of Veris and
agreed to forgive the outstanding amount receivable of $73,776 for the purchase
of 348 treatment sets delivered to Veris in November 2006. This amount was
therefore not included in amounts receivable, net as of December 31, 2006. In
addition, the Company recorded an inventory loss of $60,987 in the year ended
December 31, 2006 for the sale of these 348 treatment sets since these treatment
sets had been delivered to Veris already.
In June
2006, Veris returned four pumps which had been sold to it in December 2005. In
fiscal 2005, the Company had recorded an inventory loss associated with all
sales made to Veris in December 2005 and did not recognize revenue due to the
Company’s anticipation that Veris may not return the products shipped to it and
would not be able to pay for the amounts invoiced. Accordingly, during fiscal
2006, amounts receivable, net and the allowance for doubtful accounts recorded
against the amount due from Veris have been reduced by the invoiced amount for
the four pumps of $143,520. In addition, the cost of the four pumps returned by
Veris, valued at $85,058, was used to reduce the cost of goods sold in the
period.
On
November 6, 2006, the Company amended its product purchase agreement with Veris
and agreed to forgive the outstanding amount receivable of $904,101 from Veris
which had been owing for the purchase of treatment sets and pumps and for
related services delivered or provided to Veris during the period from September
14, 2005 to December 31, 2005. In consideration of the forgiveness of this debt,
Veris agreed that the Company did not owe Veris any amounts whatsoever in
connection with (i) the use by the Company of the leasehold premises located at
5280 Solar Drive in Mississauga, Ontario or (ii) legal fees and expenses
incurred by Veris prior to February 14, 2006 with respect to certain of Veris’
trademarks that had been assigned to the Company, and licensed back to Veris, on
February 14, 2006.
In March
2007, Veris negotiated new payment terms with the Company, and it was agreed
that payment for treatment sets shipped subsequent to March 2007 must be
received within 180 days of shipment. During the year ended December 31, 2007,
the Company sold a total of 816 treatment sets to Veris, for a total amount of
$172,992, plus applicable taxes. The sale of these treatment sets was not
recognized as revenue during the year ended December 31, 2007 based on Veris’
payment history with the Company and the new 180-day payment terms agreed by
Veris and the Company. In October 2007, the Company met with the management of
Veris and, based on discussions with Veris, the Company believes that Veris will
not be able to meet its financial obligations to the Company. Therefore, during
the year ended December 31, 2007, the Company recorded an allowance for doubtful
accounts of $172,992 against the total amount due from Veris for the purchase of
these treatment sets.
The
Company also entered into a clinical trial agreement on November 22, 2005 with
Veris which required Veris to provide certain clinical trial services to the
Company. The agreement provided for an advance payment of C$195,000 to Veris
which represents 30% of the total value of the contract. The Company paid Veris
C$195,000 on November 22, 2005 as provided for in the clinical trial agreement.
This amount has been expensed during the year ended December 31, 2005 as the
Company has suspended the clinical trial in question.
During
the fourth quarter of 2004, the Company began a business relationship with
Innovasium Inc. Innovasium Inc. designed and built some of the Company’s
websites and also created some of the sales and marketing materials to reflect
the look of the Company’s websites. Daniel Hageman, who is the President
and one of the owners of Innovasium Inc., is the spouse of a former officer of
the Company. During the years ended December 31, 2007 and 2006, the Company paid
Innovasium Inc. C$74,932 and C$44,219, respectively. Included in accounts
payable and accrued liabilities at December 31, 2007 and 2006 is nil and
nil, respectively, due to Innovasium Inc. These amounts are expensed in the
period incurred and paid when due.
13.
INCOME TAXES
Significant
components of the Company’s deferred tax assets and liabilities are as
follows:
|
|
December
31,
|
|
|
|
|
2007
$
|
|
|
|
2006
$
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets
|
|
|
|
|
|
|
|
|
Intangibles
|
|
|
144,644
|
|
|
|
1,547,214
|
|
Fixed
assets
|
|
|
50,902
|
|
|
|
3,457
|
|
Stock
options
|
|
|
4,998,697
|
|
|
|
4,845,559
|
|
Accruals
and other
|
|
|
2,935,841
|
|
|
|
2,244,941
|
|
Research
tax credit
|
|
|
12,801,402
|
|
|
|
215,719
|
|
Net
operating loss carryforwards
|
|
|
27,292,240
|
|
|
|
23,355,282
|
|
|
|
|
48,223,726
|
|
|
|
32,212,172
|
|
Valuation
allowance
|
|
|
(45,915,455
|
)
|
|
|
(29,428,172
|
)
|
Deferred
tax asset of continuing operations
|
|
|
2,308,271
|
|
|
|
2,010,605
|
|
Deferred
tax asset of discontinued operations
|
|
|
—
|
|
|
|
773,395
|
|
|
|
|
2,308,271
|
|
|
|
2,784,000
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liability
|
|
|
|
|
|
|
|
|
Intangible
assets (other than goodwill)
|
|
|
(2,308,271
|
)
|
|
|
(21,723,417
|
)
|
Deferred
tax liability of continuing operations
|
|
|
(2,308,271
|
)
|
|
|
(9,862,272
|
)
|
Deferred
tax liability of discontinued operations
|
|
|
—
|
|
|
|
(11,861,145
|
)
|
|
|
|
(2,308,271
|
)
|
|
|
(21,723,417
|
)
|
|
|
|
|
|
|
|
|
|
Deferred
tax liability of continuing operations, net
|
|
|
—
|
|
|
|
(7,851,667
|
)
|
Deferred
tax liability of discontinued operations, net
|
|
|
—
|
|
|
|
(11,087,750
|
)
|
The
following is a reconciliation of the recovery of income taxes between those that
are expected, based on substantively enacted tax rates and laws, to those
currently reported:
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
restated
– notes 2 and 10
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before income taxes
|
|
|
(38,365,284
|
)
|
|
|
(83,530,609
|
)
|
|
|
(163,472,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
recovery of income taxes
|
|
|
(13,927,612
|
)
|
|
|
(30,255,276
|
)
|
|
|
(60,486,249
|
)
|
Non-controlling
interest
|
|
|
(873,137
|
)
|
|
|
(63,050
|
)
|
|
|
—
|
|
Goodwill
impairment
|
|
|
(14,165,305
|
)
|
|
|
23,740,447
|
|
|
|
54,557,150
|
|
Stock-based
compensation
|
|
|
(677,699
|
)
|
|
|
55,117
|
|
|
|
38,628
|
|
Rate
change
|
|
|
—
|
|
|
|
322,321
|
|
|
|
12,923
|
|
Tax
free income
|
|
|
—
|
|
|
|
(864
|
)
|
|
|
(46,979
|
)
|
Return
to provision
|
|
|
(35,270
|
)
|
|
|
(180,455
|
)
|
|
|
1,252,842
|
|
Non-deductible
expenses
|
|
|
252,519
|
|
|
|
89,360
|
|
|
|
19,656
|
|
Change
in valuation allowance
|
|
|
22,771,636
|
|
|
|
3,404,355
|
|
|
|
4,009,500
|
|
Recovery
of income taxes from continued operations
|
|
|
(5,654,868
|
)
|
|
|
(2,888,490
|
)
|
|
|
(642,529
|
)
|
Recovery
of income taxes from discontinued operations
|
|
|
(9,349,882
|
)
|
|
|
(1,182,005
|
)
|
|
|
—
|
|
Total
recovery of income taxes
|
|
|
15,004,750
|
|
|
|
(4,070,495
|
)
|
|
|
(642,529
|
)
|
The
Company and its subsidiaries have current and prior year losses available to
reduce taxable income and taxes payable in future years, and, if these losses
are not utilized, they will expire as follows:
|
|
|
$
|
|
|
|
|
|
|
2012
|
|
|
3,455,029
|
|
2018
|
|
|
4,500,401
|
|
2019
|
|
|
1,893,700
|
|
2020
|
|
|
4,488,361
|
|
2021
|
|
|
3,356,992
|
|
2022
|
|
|
2,497,602
|
|
2023
|
|
|
1,901,399
|
|
2024
|
|
|
6,494,479
|
|
2025
|
|
|
12,985,677
|
|
2026
|
|
|
12,339,131
|
|
2027
|
|
|
21,451,150
|
|
14.
ACCRUED LIABILITIES
|
|
December
31,
|
|
|
|
2007
$
|
|
|
2006
$
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
Due
to professionals
|
|
|
475,044
|
|
|
|
688,619
|
|
Due
to clinical trial sites
|
|
|
136,681
|
|
|
|
110,798
|
|
Due
to clinical trial specialists
|
|
|
116,359
|
|
|
|
113,142
|
|
Product
development costs
|
|
|
277,521
|
|
|
|
124,312
|
|
Due
to employees and directors
|
|
|
66,804
|
|
|
|
418,682
|
|
Sales
tax and capital tax payable
|
|
|
26,820
|
|
|
|
12,394
|
|
Corporate
compliance
|
|
|
246,675
|
|
|
|
227,475
|
|
Interest
payable
|
|
|
—
|
|
|
|
10,758
|
|
Severances
|
|
|
1,312,721
|
|
|
|
—
|
|
Miscellaneous
|
|
|
214,826
|
|
|
|
130,978
|
|
|
|
|
2,873,451
|
|
|
|
1,837,158
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
|
|
|
|
|
|
Due
to professionals
|
|
|
—
|
|
|
|
20,428
|
|
Due
to clinical trial sites
|
|
|
—
|
|
|
|
84,276
|
|
Due
to clinical trial specialists
|
|
|
—
|
|
|
|
93,500
|
|
Due
to employees and directors
|
|
|
—
|
|
|
|
45,464
|
|
Miscellaneous
|
|
|
—
|
|
|
|
10,111
|
|
|
|
|
—
|
|
|
|
253,779
|
|
15.
COMMITMENTS AND CONTINGENCIES
The
Company has commitments relating to operating leases for rental of office space
and equipment from unrelated parties. The total future minimum obligation under
the various leases is $197,374 for 2008. Rent paid under these leases was
$90,465, $80,329 and $60,207 for the years ended December 31, 2007, 2006 and
2005, respectively. All Canadian dollar amounts have been converted at the
year-end exchange rate.
In May
and June 2002, the Company entered into two separate agreements with Dr. Richard
Brunner and Mr. Stock, respectively, to obtain the exclusive license to U.S.
Patent No. 6,245,038. The Company is required to make royalty payments totaling
1.5% of product sales. The Company is required to make minimum advance quarterly
royalty payments of $25,000 and amounts credited against future royalty payments
to be made in accordance with the agreements. These agreements may be terminated
by the Company upon the first to occur of:
(a)
|
all
patents of the patent rights expiring, which is June
2017;
|
(b)
|
all
patent claims of the patent rights being invalidated;
or
|
(c)
|
the
introduction of a similar competing technology deployed in the United
States which could not be deterred by enforcement of the
patent.
|
On August
6, 2004, the Company entered into a patent license and royalty agreement with
Mr. Stock to obtain an exclusive license to U.S. Patent No. 6,245,038. The
Company is required to make royalty payments totaling 1.5% of product sales to
Mr. Stock, subject to minimum advance royalty payments of $12,500 per quarter.
The advance payments are credited against future royalty payments to be made in
accordance with the agreement. This agreement replaces the June 2002 consulting
agreement with Mr. Stock, which provided for a royalty payment of 1% of product
sales. This agreement effectively increases the total royalty payments required
to be made in respect of U.S. Patent No. 6,245,038 to 2% of product sales
(note 12).
Future
minimum royalty payments under the agreements as at December 31, 2007 are
approximately as follows:
|
|
$
|
|
|
|
|
|
2008
|
|
|
100,000
|
|
2009
|
|
|
100,000
|
|
2010
|
|
|
100,000
|
|
2011
|
|
|
100,000
|
|
2012
and thereafter
|
|
|
550,000
|
|
|
|
|
950,000
|
|
In
addition, the Company entered into a consultancy and non-competition agreement
on July 1, 2003 with CCR
(note
12)
, which requires the Company to pay a fee of $5,000 per month. On
August 22, 2005, the Company amended the consultancy and non-competition
agreement with CCR such that the fee payable was increased from $5,000 to
$15,000 per month effective January 1, 2005. The monthly fee is fixed regardless
of actual time incurred by CCR in performance of the services rendered to the
Company. The agreement allows either party to convert the payment arrangement to
a fee of $2,500 daily. In the event of such conversion, CCR shall provide
services on a daily basis as required by the Company and will invoice the
Company for the total number of days that services were provided in that month.
The amended consultancy and non-competition agreement provides for the payment
of a one-time bonus of $200,000 upon receipt by the Company of FDA approval of
the RHEO™ System and the grant of 60,000 options to CCR at an exercise price of
$7.15 per share. The stockholders of the Company approved the adjustment of the
exercise price of these options to $2.05 per share on June 23, 2006
(
n
ote
16(e)
)
. These options were
scheduled to vest as to 100% when and if the Company receives FDA approval of
the RHEO™ System on or before November 30, 2006, as to 80% when and if the
Company receives FDA approval after November 30, 2006 but on or before January
31, 2007 and as to 60% when and if the Company receives FDA approval after
January 31, 2007. In August 2006, by letter agreement between the Company and
CCR, it was agreed that the monthly fee of $15,000 would be suspended at the end
of August 2006 until CCR’s services will be required by the Company in the
future. The future minimum obligation under the consultancy and non-competition
agreement for 2008 is therefore nil.
The
Company entered into consulting agreements with individual members of its
Scientific Advisory Board (“SAB”). The SAB was established in fiscal 2005 to
advise the Company on its continuing research and development activities. In
light of the Company’s financial position, on November 1, 2007, the Company
announced an indefinite suspension of the RHEO™ System clinical development
program for Dry AMD. That decision was made following a comprehensive
review of the respective costs and development timelines associated with the
products in the Company’s portfolio and, in particular, the fact that, if the
Company were unable to raise additional capital, it would not have had
sufficient cash to support its operations beyond early 2008. Accordingly, the
Company terminated its agreements with the individual members of the SAB
effective November 1, 2007. The future minimum obligation under the various
consulting agreements is therefore nil. Consulting fees paid amounted to
$218,929, $244,165 and nil for the years ended December 31, 2007, 2006 and
2005.
On
November 30, 2006, pursuant to the Series A Preferred Stock Purchase Agreement
between the Company and OcuSense, the Company purchased 1,744,223 shares of
OcuSense’s Series A Preferred Stock representing 50.1% of OcuSense’s capital
stock on a fully diluted basis for an aggregate purchase price of up to
$8,000,000 (the “Purchase Price”). On the closing of the purchase which took
place on November 30, 2006, the Company paid $2,000,000 of the Purchase Price.
The Company paid another $2,000,000 installment of the Purchase Price on January
3, 2007. In June 2007, the Company paid the third $2,000,000 installment of the
Purchase Price upon the attainment by OcuSense of the first of two pre-defined
milestones. The Company is expected to pay the last $2,000,000 installment of
the Purchase Price upon the attainment by OcuSense of the second of such
milestones, provided that the milestone is achieved prior to May 1, 2009. The
Series A Preferred Stock Purchase Agreement also makes provision for an ability
on the part of the Company to increase its ownership interest in OcuSense for
nominal consideration if OcuSense fails to meet certain milestones by specified
dates. In addition, pursuant to the Series A Preferred Stock Purchase Agreement,
the Company has agreed to purchase $3,000,000 of shares of OcuSense’s Series B
Preferred Stock, which shall constitute 10% of OcuSense’s capital stock on a
fully diluted basis at the time of purchase, upon OcuSense’s receipt from the
FDA of 510(k) clearance for the TearLab™ test for DED and to purchase another
$3,000,000 of shares of OcuSense’s Series B Preferred Stock, which shall
constitute an additional 10% of OcuSense’s capital stock on a fully diluted
basis at the time of purchase, upon OcuSense’s receipt from the FDA of CLIA
waiver for the TearLab™ test for DED
(note 4)
.
On April
4, 2007, the Company entered into an independent contractor services agreement
with Carol Jones for the purpose of providing consulting services for the
Company’s clinical trial activities. The agreement requires the Company to pay a
minimum fee of $1,750 per month during the period from April 4, 2007 to April 4,
2008. Future minimim obligation under the independent contractor services
agreement is $24,500 for 2008.
On
January 25, 2007, OcuSense entered into a consulting agreement with Dr. Michael
Lemp which requires the Company to pay a consulting fee of $8,333 per month.
Future minimim obligation under the consulting agreement is $100,000 for
2008.
On
February 1, 2007, OcuSense entered into a consulting agreement with Nancy Cahill
which requires the Company to pay a consulting fee of $1,000 per month. Future
minimim obligation under the consulting agreement is $12,000 for
2008.
On
September 17, 2007, OcuSense signed a letter of agreement with KAM
Communications for the purpose of providing marketing support for the future
launch of the TearLab™ test for DED which requires the Company to pay a monthly
fee of $2,398. Future minimum obligation under the agreement is $16,786 for
2008.
Contingencies
During
the ordinary course of business activities, the Company may be contingently
liable for litigation and a party to claims. Management believes that adequate
provisions have been made in the accounts where required. Although it is not
possible to estimate the extent of potential costs and losses, if any,
management believes that the ultimate resolution of any such contingencies will
not have a material adverse effect on the financial position and results of
operations of the Company.
Pursuant
to the terms of the distribution agreement with MeSys, dated January 1, 2002,
the Company undertook a commitment to purchase a minimum of 25 OctoNova pumps
yearly, beginning after receipt of FDA approval of the RHEO™ System,
representing an annual commitment of approximately $534,900. The marketing and
distributorship agreement with Diamed provides for a minimum purchase of 1,000
OctoNova pumps during the period from the date of the agreement until the end of
the five-year period following receipt of FDA approval, representing an
aggregate commitment of €16,219,000, or approximately $23,871,935, based on
exchange rates as of December 31, 2007. The Company is currently engaged in
discussions with Diamed and MeSys regarding the termination of its relationship
with each of them. Diamed is the designer, and MeSys is the
manufacturer, of the OctoNova pump, one of the key components of the RHEO™
System.
16.
CAPITAL STOCK
(a)
|
Authorized
share capital
|
The total
number of authorized shares of common stock of the Company is 75,000,000. Each
share of common stock has a par value of $0.001 per share. The total number of
authorized shares of preferred stock of the Company is 10,000,000. Each share of
preferred stock has a par value of $0.001 per share.
|
(i)
|
On
July 18, 2002, the Company’s former parent company, OccuLogix Corp. (“Old
OccuLogix”), merged with the Company, which was then a wholly-owned
subsidiary of Old OccuLogix, to form OccuLogix, Inc. Pursuant to the
merger, the Company effected a one-for-four stock split of its common and
convertible preferred stock pursuant to which each share of Old OccuLogix
common stock outstanding immediately prior to the merger was converted
into one-fourth of one fully paid and non-assessable share of the
Company’s common stock. Each outstanding share of Old OccuLogix Series A
preferred stock was converted into one-fourth of one fully paid and
non-assessable share of the Company’s Series A convertible preferred
stock.
|
At the
effective time of the merger, each outstanding warrant and option to purchase
common stock of Old OccuLogix was assumed by the Company and converted into a
warrant or option to purchase common stock of the Company, with appropriate
adjustments to the exercise price and number of shares for which such warrants
or options were exercisable.
|
(ii)
|
On
December 8, 2004, the Company consummated certain reorganization
transactions, which are collectively referred to as the “Reorganization”
and which consisted of the
following:
|
|
·
|
4,622,605
shares of common stock issued upon the automatic conversion of all
outstanding shares of Series A and Series B convertible preferred
stock;
|
|
·
|
7,106,454
shares of common stock issued to TLC Vision and Diamed upon conversion of
$7,000,000 aggregate principal amount of convertible grid debentures held
by them, the conversion price was $0.98502 per share;
and
|
|
·
|
19,070,234
shares of common stock issued to TLC Vision in connection with the
purchase by the Company of TLC Vision’s 50% interest in OccuLogix L.P.
(the “Partnership”), this amount included 1,281,858 shares of common stock
which were issued upon the exchange of shares of OccuLogix ExchangeCo ULC,
one of the Company’s Canadian subsidiaries, issued for tax purposes to TLC
Vision in connection with the Company’s purchase of TLC Vision’s interest
in the Partnership.
|
Following
the Reorganization, the Partnership’s U.S. business was carried on, and will
continue to be carried on, by OccuLogix LLC, a Delaware limited liability
company that is the Company’s wholly-owned, indirect subsidiary. The Partnership
carried on the Canadian business until December 31, 2005.
The
Company had licensed to the Partnership all of the distribution and marketing
rights for the RHEO
™
System for
ophthalmic indications to which it is entitled. Prior to the Reorganization, the
Company’s only profit stream came from its share of the Partnership’s earnings.
The Company’s acquisition of TLC Vision’s 50% ownership interest in the
Partnership, achieved through the Reorganization, moved the earnings potential
for sales of the RHEO
™
System to the
Company.
|
(iii)
|
On
December 31, 2005, the Partnership transferred all of its assets and
liabilities, and assigned its right to develop and sell the RHEO™ System,
to OccuLogix Canada Corp., a wholly-owned subsidiary of the Company.
Following the transfer, the Partnership’s Canadian business will be
carried on by OccuLogix Canada Corp. The Partnership and its general
partner have subsequently been wound
up.
|
(c)
|
Convertible
preferred stock
|
Convertible
preferred stockholders were entitled to one vote per share, on an “as-converted
to common stock” basis. Each share of Series A and Series B Convertible
Preferred Stock was entitled to receive a non-cumulative dividend of $0.411216
and $0.34698, respectively, prior to the payment of any dividend on common
stock. Each share of Series A and Series B Convertible Preferred Stock was
entitled to a liquidation preference of $4.836 and $3.5183, respectively, plus
any declared but unpaid dividend before any payment could be made to holders of
common stock.
After
giving effect to the anti-dilution adjustment resulting from the issuance of the
June 25, 2003 related party secured grid debentures
(note 12)
, each share of
Series A and Series B Convertible Preferred Stock was convertible into 1.678323
and 1.643683 shares of common stock, respectively, at the option of the holder.
Each share of Series A and Series B Convertible Preferred Stock would
automatically convert into shares of common stock at the conversion rate
previously described if the Company obtained a firm underwriting commitment for
an initial public offering. The conversion rate would be adjusted for stock
dividends, stock splits and other dilutive events. Shares of Series A and Series
B Convertible Preferred Stock would automatically convert in the event of sale
of all or substantially all of the assets or capital stock of the
Company.
In
December 2004, 5,600,000 shares of common stock of the Company at $12.00 per
share were issued in connection with the initial public offering for gross cash
proceeds of $67,200,000 (less issuance costs of $7,858,789).
On
September 1, 2006, the Company issued 8,399,983 shares of its common stock to
the former stockholders of SOLX in connection with the acquisition of SOLX. The
stock consideration was valued based on a per share price of $1.79, being the
weighted-average closing sale price of the Company’s common stock as traded on
NASDAQ over the two-day trading period before and after August 1, 2006, being
the date the terms of the acquisition of SOLX were agreed to and announced
(note 4)
.
On
February 1, 2007, the Company entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement”) with certain institutional investors, pursuant
to which the Company agreed to issue to those investors an aggregate of
6,677,333 shares of the Company’s common stock (the “Shares”) and five-year
warrants exercisable into an aggregate of 2,670,933 shares of the Company’s
common stock (the “Warrants”). The per share purchase price of the
Shares was $1.50, and the per share exercise price of the Warrants is $2.20,
subject to adjustment. The Warrants became exercisable on August 6,
2007. Pursuant to the Securities Purchase Agreement, on February 6, 2007, the
Company issued the Shares and the Warrants. The gross proceeds of the sale of
the Shares and the Warrants totaled $10,016,000 (less transaction costs of
$871,215). On February 6, 2007, the Company also issued to Cowen and Company,
LLC a five-year warrant exercisable into an aggregate of 93,483 shares of the
Company’s common stock (the “Cowen Warrant”) in part payment of the placement
fee payable to Cowen and Company, LLC for the services it had rendered as the
placement agent in connection with the sale of the Shares and the Warrants. All
of the terms and conditions of the Cowen Warrant (other than the number of
shares of the Company's common stock into which the Cowen Warrant is
exercisable) are identical to those of the Warrants. The estimated grant date
fair value of the Cowen Warrant of $97,222 is included in the transaction costs
of $871,215
(note
16(f)).
As at
December 31, 2007, the number of shares of common stock of the Company reserved
for issuance upon the exercise of stock options is as follows:
Expiry
date
|
|
Range
of exercise prices
$
|
|
|
|
#
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2.05
|
|
|
|
25,000
|
|
2009
|
|
|
2.00
– 2.05
|
|
|
|
167,625
|
|
2010
|
|
|
2.00
– 2.05
|
|
|
|
119,375
|
|
2012
|
|
|
0.80
– 2.00
|
|
|
|
96,090
|
|
2013
|
|
|
0.99
– 1.30
|
|
|
|
1,079,798
|
|
2014
|
|
|
2.05
|
|
|
|
675,000
|
|
2015
|
|
|
2.05
|
|
|
|
949,500
|
|
2016
|
|
|
1.77
– 2.14
|
|
|
|
728,749
|
|
2017
|
|
|
1.11
– 1.82
|
|
|
|
946,250
|
|
|
|
|
|
|
|
|
4,787,387
|
|
The
Company has a stock option plan, the 2002 Stock Option Plan (the “Stock Option
Plan”), which was most recently amended in June 2007 in order to, among other
things, increase the share reserve under the Stock Option Plan by 2,000,000.
Under the Stock Option Plan, up to 6,456,000 options are available for grant to
employees, directors and consultants. Options granted under the Stock Option
Plan may be either incentive stock options or non-statutory stock options. Under
the terms of the Stock Option Plan, the exercise price per share for an
incentive stock option shall not be less than the fair market value of a share
of stock on the effective date of grant and the exercise price per share for
non-statutory stock options shall not be less than 85% of the fair market value
of a share of stock on the date of grant. No option granted to a holder of more
than 10% of the Company’s common stock shall have an exercise price per share
less than 110% of the fair market value of a share of stock on the effective
date of grant.
Options
granted may be time-based or performance-based options. The vesting
of performance-based options is contingent upon meeting company-wide goals,
including obtaining FDA approval of the RHEO™ System and the achievement of a
minimum amount of sales over a specified period. Generally, options expire 10
years after the date of grant. No incentive stock options granted to a 10% owner
optionee shall be exercisable after the expiration of five years after the
effective date of grant of such option, no option granted to a prospective
employee, prospective consultant or prospective director may become exercisable
prior to the date on which such person commences service, and with the exception
of an option granted to an officer, director or consultant, no option shall
become exercisable at a rate less than 20% per annum over a period of five years
from the effective date of grant of such option unless otherwise approved by the
board of directors of the Company (the “Board of Directors”).
The
Company has also issued options outside of the Stock Option Plan. These options
were issued before the establishment of the Stock Option Plan, when the
authorized limit of the Stock Option Plan was exceeded or as permitted under
stock exchange rules when the Company was recruiting executives. In addition,
options issued to companies for the purpose of settling amounts owing were
issued outside of the Stock Option Plan, as the Stock Option Plan prohibited the
granting of options to companies. The issuance of such options was approved by
the Board of Directors and granted on terms and conditions similar to those
options issued under the Stock Option Plan.
On
January 1, 2006, the Company adopted the provisions of SFAS No. 123R,
“Share-Based Payments”, requiring the recognition of expense related to the fair
value of its stock-based compensation awards. The Company elected to use the
modified prospective transition method as permitted by SFAS No. 123R and
therefore has not restated its financial results for prior periods. Under this
transition method, stock-based compensation expense for each of the years
ended December 31, 2007 and 2006 includes compensation expense for all
stock-based compensation awards granted prior to, but not yet vested as of
January 1, 2006 based on the grant date fair value estimated in accordance with
the original provisions of SFAS No. 123. Stock-based compensation expense for
all stock-based compensation awards granted subsequent to January 1, 2006 was
based on the grant date fair value estimated in accordance with the provisions
of SFAS No. 123R. The Company recognizes compensation expense for stock option
awards on a straight-line basis over the requisite service period of the
award.
The
following table sets forth the total stock-based compensation expense resulting
from stock options included in the Company’s consolidated statements of
operations:
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
(i)
|
|
|
2005
(ii)
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
65,660
|
|
|
|
1,396,609
|
|
|
|
170,576
|
|
Clinical
and regulatory
|
|
|
216,246
|
|
|
|
203,131
|
|
|
|
53,700
|
|
Sales
and marketing
|
|
|
199,065
|
|
|
|
527,303
|
|
|
|
500
|
|
Stock-based
compensation expense before income taxes
(iii)(iv)
|
|
|
480,971
|
|
|
|
2,127,043
|
|
|
|
224,776
|
|
(i)
|
At
the annual meeting of stockholders of the Company held on June 23, 2006,
the stockholders of the Company approved the re-pricing of all then
out-of-the-money stock options of the Company. Consequently,
the exercise price of all outstanding stock options of the Company that,
on June 23, 2006, was greater than $2.05, being the weighted average
trading price of the Company’s common stock on NASDAQ during the
five-trading day period immediately preceding June 23, 2006, was adjusted
downward to $2.05. 2,585,000 of the Company’s outstanding stock
options with a weighted average exercise price of $8.42 were affected by
the re-pricing. SFAS No. 123R requires the re-pricing of equity awards to
be treated as a modification of the original award and provides that such
a modification is an exchange of the original award for a new
award. SFAS No. 123R considers the modification to be the
repurchase of the old award for a new award of equal or greater value,
incurring additional compensation cost for any incremental
value. This incremental difference in value is measured as the
excess, if any, of the fair value of the modified award determined in
accordance with the provisions of SFAS No. 123R over the fair value of the
original award immediately before its terms are modified, measured based
on the share price and other pertinent factors at that
date. SFAS No. 123R provides that this incremental fair value,
plus the remaining unrecognized compensation cost from the original
measurement of the fair value of the old option, must be recognized over
the remaining vesting period. Of the 2,585,000 options affected by the
re-pricing, 1,401,073 were vested as at December 31,
2006. Therefore, additional compensation cost of $423,338 for
the 1,401,073 stock options that were vested has been recognized and is
included in the stock-based compensation expense for the year ended
December 31, 2006.
|
In
accordance with SFAS No. 123R, the Company also recorded compensation expense of
$3,363 in the year ended December 31, 2006 as the Board of Directors approved
accelerating the vesting of 1,250 unvested stock options granted to a terminated
employee on April 28, 2006. SFAS No. 123R treats such a modification
as a cancellation of the original unvested award and the grant of a new fully
vested award as of that date.
(ii)
|
Stock-based
compensation expense for the year ended December 31, 2005 relates
primarily to compensation expense associated with non-employee stock
options. The fair value of these options was determined using the
Black-Scholes option-pricing model and was recorded in the Company’s
consolidated statements of operations in accordance with the provisions of
SFAS No. 123.
|
On
December 11, 2005, the Board of Directors approved accelerating the vesting of
unvested stock options granted prior to December 31, 2004 to employees, officers
and directors. As a result of the vesting acceleration, options to purchase
438,561 shares of the Company’s common stock became exercisable immediately,
including 308,611 held by executive officers, 48,958 held by non-employee
directors and 80,992 held by other employees. These accelerated stock options
represent approximately 30% of the total employee stock options of the Company
that would not have been vested as at December 31, 2005. The weighted average
exercise price of the options that were accelerated was $11.78. The purpose of
the acceleration was to enable the Company to avoid recognizing compensation
expense associated with these options of $1,532,203 and $1,466,253 during the
years ended December 31, 2006 and 2007, respectively, in its consolidated
statements of operations as a result of the adoption of SFAS No. 123R on January
1, 2006. In accordance with APB No. 25, the Company recorded a compensation
expense of $53,295 for the year ended December 31, 2005 as 9,033 of the total
options, of which the vesting was accelerated, were “in-the-money” as at the
date of the accelerated vesting. With respect to SFAS No. 123, the Company
recognized, for purposes of pro forma disclosures, the incremental increase in
fair value and the remaining balance of unrecognized compensation cost for the
affected options at the time of acceleration.
In
accordance with APB No. 25, the Company also recorded a compensation expense of
$4,431 for the year ended December 31, 2005 as certain performance-based options
granted to an employee and two directors were “in-the-money” as at December 31,
2005.
(iii)
|
The
tax benefit associated with the Company’s stock-based compensation expense
for the years ended December 31, 2007, 2006 and 2005 is $964,644, $781,527
and nil,
respectively. This
amount has not been recognized in the Company's consolidated financial
statements for the years ended December 31, 2007 and 2006 as there is a
low probability that the Company will realize this
benefit.
|
(iv)
|
Of
the total stock-based compensation expense of $480,971, $2,127,043 and
$224,776 included in the Company’s consolidated statements of operations
for the years ended December 31, 2007, 2006 and 2005, respectively,
$72,800, $36,287 and nil is included as stock-based compensation expense
of discontinued operations for the years ended December 31, 2007, 2006 and
2005, respectively.
|
Net cash
proceeds from the exercise of common stock options were $2,228, $270,935 and
$231,235 for the years ended December 31, 2007, 2006 and 2005, respectively. No
income tax benefit was realized from stock option exercises during the years
ended December 31, 2007, 2006 and 2005. In accordance with SFAS No. 123R, the
Company presents excess tax benefits from the exercise of stock options, if any,
as financing cash flows rather than operating cash flows.
Prior to
the adoption of SFAS No. 123R, the Company applied the provisions of SFAS No.
123, which allowed companies either to expense the estimated fair value of
employee stock options or to follow the intrinsic value method as set forth in
APB No. 25 but required companies to disclose the pro forma effects on net loss
as if the fair value of the options had been expensed. The Company elected to
apply APB No. 25 in accounting for employee stock options. Therefore, as
required by SFAS No. 123, prior to the adoption of SFAS No. 123R, the Company
provided pro forma net loss and pro forma net loss per share disclosures for
stock-based awards as if the fair value of the options had been
expensed.
The
following table illustrates the pro forma net loss and net loss per share of
common stock as if the fair value method had been applied to all awards during
the year ended December 31, 2005:
|
|
|
$
|
|
|
|
|
|
|
Net
loss, as reported
|
|
|
(162,829,981
|
)
|
Adjustment
for APB No. 25
|
|
|
57,726
|
|
Adjustment
for SFAS No. 123
|
|
|
(6,664,395
|
)
|
Pro
forma net loss
|
|
|
(169,436,650
|
)
|
Pro
forma net loss per share - basic and diluted
|
|
|
(4.04
|
)
|
The
weighted average fair value of stock options granted during the years ended
December 31, 2007, 2006 and 2005 was $0.90, $1.77 and $3.54, respectively. The
estimated fair value was determined using the Black-Scholes option-pricing model
with the following weighted-average assumptions:
|
Years
ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
Volatility
|
|
0.765
|
|
|
0.901
|
|
|
0.728
|
|
Expected
life of options
|
|
5.85
years
|
|
|
5.56
years
|
|
|
2.33
years
|
|
Risk-free
interest rate
|
|
4.87%
|
|
|
4.83%
|
|
|
3.87%
|
|
Dividend
yield
|
|
0%
|
|
|
0%
|
|
|
0%
|
|
The
Company’s computation of expected volatility for the years ended December 31,
2007, 2006 and 2005 is based on a comparable company’s historical stock prices
as the Company did not have sufficient historical data. The Company’s
computation of expected life has been estimated using the “short-cut approach”
as provided in SAB No. 110 as options granted by the Company meet the criteria
of “plain vanilla” options as defined in SAB No. 110. Under this approach,
estimated life is calculated to be the mid-point between the vesting date and
the end of the contractual period. The risk-free interest rate for an award is
based on the U.S. Treasury yield curve with a term equal to the expected life of
the award on the date of grant.
A summary
of the options issued during the year ended December 31, 2007 and the total
number of options outstanding as of that date and changes since December 31,
2004 are set forth below:
|
|
Number
of Options Outstanding
|
|
|
Weighted Average
Exercise Price
$
|
|
|
Weighted Average
Remaining Contractual Life (years)
|
|
|
Aggregate
Intrinsic Value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2004
|
|
|
2,749,199
|
|
|
|
4.64
|
|
|
|
8.31
|
|
|
|
—
|
|
Granted
|
|
|
1,823,750
|
|
|
|
8.10
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(279,085
|
)
|
|
|
0.83
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(186,250
|
)
|
|
|
9.99
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2005
|
|
|
4,107,614
|
|
|
|
1.75
|
|
|
|
8.20
|
|
|
|
—
|
|
Granted
|
|
|
890,000
|
|
|
|
1.99
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(140,726
|
)
|
|
|
1.93
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(619,667
|
)
|
|
|
2.05
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2006
(i)
|
|
|
4,237,221
|
|
|
|
1.75
|
|
|
|
7.61
|
|
|
|
—
|
|
Granted
|
|
|
1,077,500
|
|
|
|
1.31
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2,250
|
)
|
|
|
0.99
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(525,084
|
)
|
|
|
1.83
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2007
|
|
|
4,787,387
|
|
|
|
1.64
|
|
|
|
7.41
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
or expected to vest, December 31, 2007
|
|
|
3,203,728
|
|
|
|
1.61
|
|
|
|
6.48
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2007
|
|
|
3,006,637
|
|
|
|
1.61
|
|
|
|
6.32
|
|
|
|
—
|
|
(i)
|
At
the annual meeting of stockholders of the Company held on June 23, 2006,
the stockholders of the Company approved the re-pricing of all then
out-of-the-money stock options of the Company. Consequently,
the exercise price of all outstanding stock options of the Company that,
on June 23, 2006, was greater than $2.05, being the weighted average
trading price of the Company’s common stock on NASDAQ during the
five-trading day period immediately preceding June 23, 2006, was adjusted
downward to $2.05.
|
The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (i.e., the difference between the Company’s closing stock price
on the last trading day of fiscal 2007 of $0.08 and the exercise price,
multiplied by the number of shares that would have been received by the option
holders if the options had been exercised on December 31, 2007). This amount is
nil for all the years presented as the exercise price of all options outstanding
as at December 31, 2007, 2006, 2005 and 2004 is higher than $0.08, the Company’s
closing stock price on the last trading day of fiscal 2007.
As at
December 31, 2007, $3,870,931 of total unrecognized compensation cost related to
stock options is expected to be recognized over a weighted-average period of
1.85 years.
On
February 6, 2007, pursuant to the Securities Purchase Agreement between the
Company and certain institutional investors
(note
16
(d))
, the Company issued the
Warrants to these investors. The Warrants are five-year warrants exercisable
into an aggregate of 2,670,933 shares of the Company’s common stock. On February
6, 2007, the Company also issued the Cowen Warrant to Cowen and Company, LLC in
part payment of the placement fee payable to Cowen and Company, LLC for the
services it had rendered as the placement agent in connection with the private
placement of the Shares and the Warrants pursuant to the Securities Purchase
Agreement. The Cowen Warrant is a five-year warrant exercisable into an
aggregate of 93,483 shares of the Company’s common stock. The per share exercise
price of the Warrants is $2.20, subject to adjustment, and the Warrants became
exercisable on August 6, 2007. All of the terms and conditions of the Cowen
Warrant (other than the number of shares of the Company's common stock into
which it is exercisable) are identical to those of the Warrants.
The
Company accounts for the Warrants and the Cowen Warrant in accordance with the
provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (“SFAS No. 133”), along with related interpretation EITF No. 00-19,
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” (“EITF No. 00-19”). SFAS No. 133 requires
every derivative instrument within its scope (including certain derivative
instruments embedded in other contracts) to be recorded on the balance sheet as
either an asset or liability measured at its fair value, with changes in the
derivative’s fair value recognized currently in earnings unless specific hedge
accounting criteria are met. Based on the provisions of EITF No. 00-19, the
Company determined that the Warrants and the Cowen Warrant do not meet the
criteria for classification as equity. Accordingly, the Company has classified
the Warrants and the Cowen Warrant as a current liability at December 31,
2007.
The
estimated fair value of the Warrants and the Cowen Warrant was determined using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
|
|
|
Expected
life of Warrants
|
|
|
|
|
|
|
|
|
The
Company initially allocated the total proceeds received, pursuant to the
Securities Purchase Agreement, to the Shares and the Warrants based on their
relative fair values. This resulted in an allocation of $2,052,578 to obligation
under warrants which includes the fair value of the Cowen Warrant of
$97,222.
In
addition, SFAS No. 133 requires the Company to record the outstanding
derivatives at fair value at the end of each reporting period, resulting in an
adjustment to the recorded liability of the derivative, with any gain or loss
recorded in earnings of the applicable reporting period. The Company therefore
estimated the fair value of the Warrants and the Cowen Warrant as at December
31, 2007 and determined the aggregate fair value to be a nominal amount, a
decrease of approximately $2,052,578 over the initial measurement of the
aggregate fair value of the Warrants and the Cowen Warrant on the date of
issuance. Accordingly, the Company recognized a gain of $2,052,578 in its
consolidated statement of operations for the year ended December 31,
2007 which reflects the decrease in the Company’s obligation to its warrant
holders to its nominal amount at December 31, 2007.
Transaction
costs associated with the issuance of the Warrants of $170,081 has been recorded
as a warrant expense in the Company’s consolidated statement of operations for
the year ended December 31, 2007.
A summary
of the Warrants issued during the year ended December 31, 2007 and the total
number of warrants outstanding as of that date are set forth below:
|
|
Number
of Warrants Outstanding
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2006
|
|
|
—
|
|
|
|
—
|
|
|
|
|
2,764,416
|
|
|
|
2.20
|
|
Outstanding,
December 31, 2007
|
|
|
2,764,416
|
|
|
|
2.20
|
|
17.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The net
change in non-cash working capital balances related to operations consists of
the following:
|
|
Years
ended
December
31,
|
|
|
|
2007
$
|
|
|
2006
$
|
|
|
2005
$
|
|
|
|
|
|
|
|
|
|
|
|
Due
to related party
|
|
|
—
|
|
|
|
(5,065
|
)
|
|
|
13,291
|
|
Amounts
receivable
|
|
|
(58,782
|
)
|
|
|
390,634
|
|
|
|
(82,810
|
)
|
Inventory
|
|
|
2,756,759
|
|
|
|
2,250,554
|
|
|
|
(3,431,743
|
)
|
Prepaid
expenses
|
|
|
37,951
|
|
|
|
247,361
|
|
|
|
(322,455
|
)
|
Accounts
payable
|
|
|
797,415
|
|
|
|
(1,225,575
|
)
|
|
|
301,457
|
|
Accrued
liabilities
|
|
|
911,987
|
|
|
|
(1,155,335
|
)
|
|
|
(563,925
|
)
|
Deferred
revenue and rent inducement
|
|
|
—
|
|
|
|
—
|
|
|
|
(485,047
|
)
|
Due
to stockholders
|
|
|
(109,842
|
)
|
|
|
(5,827
|
)
|
|
|
(358,523
|
)
|
Other
current assets
|
|
|
7,000
|
|
|
|
12,781
|
|
|
|
4,105
|
|
|
|
|
4,342,488
|
|
|
|
509,528
|
|
|
|
(4,925,650
|
)
|
The
following table lists those items that have been excluded from the consolidated
statements of cash flows as they relate to non-cash transactions and additional
cash flow information:
|
|
Years
ended December 31,
|
|
|
|
2007
$
|
|
|
2006
$
|
|
|
2005
$
|
|
|
|
|
|
|
|
|
|
|
|
Free
inventory
|
|
|
418,303
|
|
|
|
(48,006
|
)
|
|
|
183,382
|
|
Warrant
issued in part payment of placement fee
|
|
|
97,222
|
|
|
|
―
|
|
|
|
—
|
|
Common
stock issued on acquisition
|
|
|
—
|
|
|
|
15,035,969
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
|
11,180
|
|
|
|
―
|
|
|
|
—
|
|
Income
taxes recovered (paid), net
|
|
|
—
|
|
|
|
4,533
|
|
|
|
(8,138
|
)
|
18.
FINANCIAL INSTRUMENTS
The
Company’s activities which result in exposure to fluctuations in foreign
currency exchange rates consist of the purchase of equipment from suppliers
billing in foreign currencies. The Company does not use derivative financial
instruments to reduce its currency risk.
The
Company’s financial instruments that are exposed to concentration of credit risk
consist primarily of cash and cash equivalents and amounts receivable. The
Company maintains its accounts for cash with large low credit risk financial
institutions in the United States and Canada in order to reduce its
exposure.
During
fiscal 2007, the Company derived all of its revenue from the sale of the
components of the RHEO™ System and the SOLX Glaucoma System prior to the sale of
all of the issued and outstanding shares of SOLX on December 19, 2007. During
the year ended December 31, 2007, the Company sold components of the RHEO™
System to one of its customers, Veris. As previously discussed in note 12, the
Company fully provided for the balance due from Veris. Accordingly, no trade
receivables due from Veris have been recognized as at December 31,
2007.
Fair
value of financial instruments
Fair
value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties. The
estimated fair values of cash and cash equivalents, amounts receivable, accounts
payable, accrued liabilities and amounts due from and to stockholders
approximate their carrying values due to the short-term maturities of these
instruments.
As at
December 31, 2007, the Company had investments in the aggregate principal amount
of $1,900,000 which consist of investments in four separate asset-backed auction
rate securities yielding an average return of 5.865% per
annum. However, as a result of market conditions, all of these
investments have recently failed to settle on their respective settlement dates
and have been reset to be settled at a future date with an average maturity of
46 days. Due to the current lack of liquidity for asset-backed
securities of this type, the Company has concluded that the carrying value of
these investments was higher than its fair value as of December 31, 2007.
Accordingly, these auction rate securities have been recorded at their estimated
fair value of $863,750. The Company considers this to be an other-than-temporary
reduction in the value. Accordingly, the loss associated with these auction rate
securities of $1,036,250 has been included as an impairment of investments in
the Company’s consolidated statement of operations for the year ended December
31, 2007. Although the Company continues to receive payment of interest earned
on these securities, the Company does not know at the present time when it will
be able to convert these investments into cash. Accordingly,
management has classified these investments as a non-current asset on its
consolidated balance sheet as of December 31, 2007. Management will continue to
closely monitor these investments for future indications of further impairment.
The illiquidity of these investments may have an adverse impact on the length of
time during which the Company currently expects to be able to sustain its
operations in the absence of an additional capital raise by the
Company.
19.
SEGMENTED INFORMATION
As a
result of the acquisition of SOLX and OcuSense during 2006
(
note
4
)
,
the Company had three
reportable segments: retina, glaucoma and point-of-care. The retina segment was
in the business of commercializing the RHEO™ System which was used to perform
the Rheopheresis™ procedure, a procedure that selectively removes molecules from
plasma, which is designed to treat Dry AMD. The Company began limited
commercialization of the RHEO™ System in Canada in 2003 and provided support to
its sole customer in Canada, Veris, in its commercial activities in Canada. The
Company obtained investigational device exemption clearance from the FDA to
commence RHEO-AMD, its clinical study of the RHEO™ System. On November 1, 2007,
the Company announced an indefinite suspension of the RHEO™ System clinical
development program for Dry AMD. That decision was made
following a comprehensive review of the respective costs and development
timelines associated with the products in the Company’s portfolio and, in
particular, the fact that, if the Company is unable to raise additional capital,
it will not have sufficient cash to support its operations beyond approximately
the end of April 2008 (assuming that the outstanding obligation of OccuLogix to
pay $2,000,000 to OcuSense becomes due and payable prior to the end of April
2008)
(note
4)
.
The
glaucoma segment of the Company was in the business of providing treatment for
glaucoma with the use of the components of the SOLX Glaucoma System which are
used to provide physicians with multiple options to manage intraocular pressure.
The Company was seeking to obtain 510(k) approval to market the components of
the SOLX Glaucoma System in the United States. The Company acquired the glaucoma
segment in the acquisition of SOLX on September 1, 2006; therefore, no amounts
are shown for the segment in periods prior to September 1, 2006. On December 19,
2007, the Company sold all of the issued and outstanding shares of the capital
stock of SOLX, which had been the glaucoma segment of the Company prior to the
completion of this sale. All revenue and expenses related to the Company’s
glaucoma segment, prior to the December 19, 2007 closing date, has therefore
been included in discontinued operations on its consolidated statements of
operations for the years ended December 31, 2007 and 2006.
The
point-of-care segment is made up of the TearLab™ business which is currently
developing technologies that enable eye care practitioners to test, at the
point-of-care, for highly sensitive and specific biomarkers in tears using
nanoliters of tear film. The Company acquired the TearLab™ business in the
acquisition of 50.1% of the capital stock of OcuSense, on a fully diluted basis,
on November 30, 2006; therefore, no amounts are shown in periods prior to
November 30, 2006. During the year ended December 31, 2006, the TearLab™
business did not meet the quantitative criteria to be disclosed separately as a
reportable segment and was included as other.
The
accounting policies of the segments are the same as those described in
significant accounting policies
(note 3)
. Intersegment sales
and transfers are minimal and are accounted for at current market prices, as if
the sales or transfers were to third parties.
The
Company’s reportable units are strategic business units that offer different
products and services. They are managed separately, because each business unit
requires different technology and marketing strategies. The Company’s business
units are acquired or developed as a unit, and in the case of SOLX and OcuSense,
their respective management was retained at the time of
acquisition.
The
Company’s business units are as follows:
|
|
Retina
|
|
|
Glaucoma
|
|
|
Point-of-care
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Year
ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
91,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
91,500
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
2,398,103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,398,103
|
|
Operating
|
|
|
10,230,299
|
|
|
|
—
|
|
|
|
4,577,178
|
|
|
|
14,807,477
|
|
Depreciation
and amortization
|
|
|
2,065,088
|
|
|
|
—
|
|
|
|
590,172
|
|
|
|
2,655,260
|
|
Impairment
of intangible asset
|
|
|
20,923,028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,923,028
|
|
Restructuring
charges
|
|
|
1,312,721
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,312,721
|
|
Loss
from continuing operations
|
|
|
(36,837,739
|
)
|
|
|
—
|
|
|
|
(5,167,350
|
)
|
|
|
(42,005,089
|
)
|
Interest
income
|
|
|
551,948
|
|
|
|
—
|
|
|
|
57,985
|
|
|
|
609,933
|
|
Interest
expense
|
|
|
(16,444
|
)
|
|
|
—
|
|
|
|
(784
|
)
|
|
|
(17,228
|
)
|
Changes
in fair value of warrant obligation
|
|
|
1,882,497
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,882,497
|
|
Loss
on short-term investment
|
|
|
(1,036,250
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,036,250
|
)
|
Other
income (expense), net
|
|
|
(6,547
|
)
|
|
|
—
|
|
|
|
24,557
|
|
|
|
18,010
|
|
Minority
interest
|
|
|
—
|
|
|
|
—
|
|
|
|
2,182,843
|
|
|
|
2,182,843
|
|
Recovery
of income taxes
|
|
|
3,186,334
|
|
|
|
—
|
|
|
|
2,468,534
|
|
|
|
5,654,868
|
|
Loss
from continuing operations
|
|
|
(32,276,201
|
)
|
|
|
—
|
|
|
|
(434,215
|
)
|
|
|
(32,710,416
|
)
|
Loss
from discontinued operations
|
|
|
—
|
|
|
|
(35,428,898
|
)
|
|
|
—
|
|
|
|
(35,428,898
|
)
|
Net
loss
|
|
|
(32,276,201
|
)
|
|
|
(35,428,898
|
)
|
|
|
(434,215
|
)
|
|
|
(68,139,314
|
)
|
Total
assets
|
|
|
3,672,542
|
|
|
|
—
|
|
|
|
6,325,818
|
|
|
|
9,998,360
|
|
|
|
Retina
|
|
|
Glaucoma
|
|
|
Point-of-care
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Year
ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
174,259
|
|
|
|
—
|
|
|
|
—
|
|
|
|
174,259
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
3,528,951
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,528,951
|
|
Operating
|
|
|
12,741,701
|
|
|
|
—
|
|
|
|
312,394
|
|
|
|
13,054,095
|
|
Depreciation
and amortization
|
|
|
1,860,849
|
|
|
|
—
|
|
|
|
39,516
|
|
|
|
1,900,365
|
|
Impairment
of goodwill
|
|
|
65,945,686
|
|
|
|
—
|
|
|
|
—
|
|
|
|
65,945,686
|
|
Restructuring
charges
|
|
|
819,642
|
|
|
|
—
|
|
|
|
—
|
|
|
|
819,642
|
|
Loss
from continuing operations
|
|
|
(84,722,570
|
)
|
|
|
—
|
|
|
|
(351,910
|
)
|
|
|
(85,074,480
|
)
|
Interest
income
|
|
|
1,370,208
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,370,208
|
|
Interest
expense
|
|
|
(13,592
|
)
|
|
|
|
|
|
|
(1,304
|
)
|
|
|
(14,896
|
)
|
Other
income (expense), net
|
|
|
31,108
|
|
|
|
—
|
|
|
|
(173
|
)
|
|
|
30,935
|
|
Minority
interest
|
|
|
—
|
|
|
|
|
|
|
|
157,624
|
|
|
|
157,624
|
|
Recovery
of income taxes
|
|
|
2,814,058
|
|
|
|
—
|
|
|
|
74,432
|
|
|
|
2,888,490
|
|
Loss
from continuing operations
|
|
|
(80,520,788
|
)
|
|
|
—
|
|
|
|
(121,331
|
)
|
|
|
(80,642,119
|
)
|
Loss
from discontinued operations
|
|
|
—
|
|
|
|
(1,542,384
|
)
|
|
|
—
|
|
|
|
(1,542,384
|
)
|
Net
loss for the year
|
|
|
(80,520,788
|
)
|
|
|
(1,542,384
|
)
|
|
|
(121,331
|
)
|
|
|
(82,184,503
|
)
|
Total
assets
|
|
|
38,762,773
|
|
|
|
44,158,205
|
|
|
|
7,482,717
|
|
|
|
90,403,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
1,840,289
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,840,289
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
3,394,102
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,394,102
|
|
Operating
|
|
|
14,181,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,181,600
|
|
Depreciation
and amortization
|
|
|
1,821,680
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,821,680
|
|
Impairment
of goodwill
|
|
|
147,451,758
|
|
|
|
—
|
|
|
|
—
|
|
|
|
147,451,758
|
|
Loss
from continuing operations
|
|
|
(165,008,851
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(165,008,851
|
)
|
Interest
income
|
|
|
1,593,366
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,593,366
|
|
Other
expense, net
|
|
|
(57,025
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,025
|
)
|
Recovery
of income taxes
|
|
|
642,529
|
|
|
|
—
|
|
|
|
—
|
|
|
|
642,529
|
|
Net
loss for the year
|
|
|
(162,829,981
|
)
|
|
|
|
|
|
|
|
|
|
|
(162,829,981
|
)
|
Total
assets
|
|
|
137,806,058
|
|
|
|
—
|
|
|
|
—
|
|
|
|
137,806,058
|
|
The
Company’s geographic segments are as follows:
|
|
United
States
|
|
|
Canada
|
|
|
Europe
|
|
|
Israel
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Year
ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets and intangible assets
|
|
|
5,972,098
|
|
|
|
60,302
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,032,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets and intangible assets
|
|
|
70,932,850
|
|
|
|
186,987
|
|
|
|
63,484
|
|
|
|
42,613
|
|
|
|
71,225,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets and intangible assets
|
|
|
90,340,988
|
|
|
|
137,686
|
|
|
|
—
|
|
|
|
—
|
|
|
|
90,478,674
|
|
20.
SUBSEQUENT EVENT
(i)
|
On
February 19, 2008, the Company announced that it had secured a bridge loan
in an aggregate principal amount of $3,000,000 (less transaction costs of
approximately $200,000) from a number of private parties. The loan bears
interest at a rate of 12% per annum and has a 180-day term, which may be
extended to 270 days under certain circumstances. The Company has pledged
its shares of the capital stock of OcuSense as collateral for the
loan.
|
Under the
terms of the loan agreement, the Company has two pre-payment options available
to it, should it decide to not wait until the maturity date to repay the loan.
Under the first pre-payment option, the Company may repay the loan in full by
paying the lenders, in cash, the amount of outstanding principal and accrued
interest and issuing to the lenders five-year warrants in an aggregate amount
equal to approximately 19.9% of the issued and outstanding shares of the
Company’s common stock (but not to exceed 20% of the issued and outstanding
shares of the Company’s common stock). The warrants would be exercisable into
shares of the Company’s common stock at an exercise price of $0.10 per share and
would not become exercisable until the 180th day following their issuance. Under
the second pre-payment option, provided that the Company has closed a private
placement of shares of its common stock for aggregate gross proceeds of at least
$4,000,000, the Company may repay the loan in full by issuing to the lenders
shares of its common stock, in an aggregate amount equal to the amount of
outstanding principal and accrued interest, at a 15% discount to the price paid
by the private placement investors. Any exercise by the Company of the second
pre-payment option would be subject to stockholder and regulatory
approval.
(ii)
|
On
September 18, 2007, OccuLogix received a letter from The Nasdaq Stock
Market, or Nasdaq, indicating that, for the previous 30 consecutive
business days, the bid price of the Company’s common stock closed below
the minimum $1.00 per share requirement for continued inclusion under
Marketplace Rule 4450(e)(5), or the Minimum Bid Price Rule. Therefore, in
accordance with Marketplace Rule 4450(e)(2), the Company was provided 180
calendar days, or until March 17, 2008, to regain compliance. The Nasdaq
letter stated that, if, at any time before March 17, 2008, the bid price
of the Company’s common stock closes at $1.00 per share or more for a
minimum of 10 consecutive business days, Nasdaq staff will provide written
notification that it has achieved compliance with the Minimum Bid Price
Rule. The Nasdaq letter also stated that, if the Company does not regain
compliance with the Minimum Bid Price Rule by March 17, 2008, Nasdaq staff
will provide written notification that the Company’s securities will be
delisted, at which time the Company may appeal the Nasdaq staff’s
determination to delist its securities to a Nasdaq Listing Qualifications
Panel.
|
On February 1, 2008, the Company received a
letter from The Nasdaq Stock Market, or Nasdaq, indicating that, for the
previous 30 consecutive trading days, the Company’s common stock did not
maintain a minimum market value of publicly held shares of $5,000,000 as
required for continued inclusion by Marketplace Rule 4450(a)(2), or the MVPHS
Rule. Therefore, in accordance with Marketplace Rule 4450(e)(1), the Company was
provided 90 calendar days, or until May 1, 2008, to regain compliance. The
Nasdaq letter stated that, if at any time before May 1, 2008, the minimum market
value of publicly held shares of the Company’s common stock is $5,000,000 or
greater for a minimum of 10 consecutive trading days, Nasdaq staff will provide
written notification that the Company complies with the MVPHS Rule. The Nasdaq
letter also stated that, if the Company does not regain compliance with the
MVPHS Rule by May 1, 2008, Nasdaq staff will provide written notification that
the Company’s securities will be delisted, at which time the Company may appeal
the Nasdaq staff’s determination to delist its securities to a Nasdaq Listing
Qualifications Panel.
The
Company will not have become compliant with the Minimum Bid Price Rule by March
17, 2008. Although the Company intends to appeal any determination by Nasdaq
staff to delist its common stock to a Nasdaq Listing Qualifications Panel, the
Company may not be successful in its appeal, in which case its common stock may
be transferred to The Nasdaq Capital Market or be delisted altogether. Should
either occur, existing stockholders will suffer decreased
liquidity.
These
Nasdaq notices have no effect on the listing of the Company's common stock on
the Toronto Stock Exchange.
21.
QUARTERLY FINANCIAL DATA (UNAUDITED)
The
following tables contain selected unaudited consolidated statement of operations
data for each quarter of fiscal 2007 and 2006:
|
|
Fiscal
2007 Quarter Ended
|
|
|
|
March
31
|
|
|
June
30
|
|
|
September
30
|
|
|
December
31
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
90,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,500
|
|
Gross
profit (loss)
|
|
|
57,900
|
|
|
|
(33,297
|
)
|
|
|
(2,287,411
|
)
|
|
|
(43,795
|
)
|
(Loss)
from continuing operations
|
|
|
(3,169,254
|
)
|
|
|
(1,497,312
|
)
|
|
|
(18,577,182
|
)
|
|
|
(9,466,668
|
)
|
(Loss)
from discontinued operations
|
|
|
(1,103,490
|
)
|
|
|
(1,081,559
|
)
|
|
|
(1,082,842
|
)
|
|
|
(32,161,007
|
)
|
Net
(loss)
|
|
|
(4,272,744
|
)
|
|
|
(2,578,871
|
)
|
|
|
(19,660,024
|
)
|
|
|
(41,627,675
|
)
|
Weighted
average number of shares outstanding – basic and diluted
|
|
|
54,558,769
|
|
|
|
57,304,020
|
|
|
|
57,306,145
|
|
|
|
57,306,145
|
|
Net
(loss) from continuing operations per share – basic and
diluted
|
|
|
(0.06
|
)
|
|
|
(0.03
|
)
|
|
|
(0.32
|
)
|
|
|
(0.17
|
)
|
Net
(loss) from discontinued operations per share – basic and
diluted
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.56
|
)
|
Net
(loss) per share – basic and diluted
|
|
|
(0.08
|
)
|
|
|
(0.05
|
)
|
|
|
(0.34
|
)
|
|
|
(0.73
|
)
|
|
|
Fiscal
2006 Quarter Ended
|
|
|
|
March
31
|
|
|
June
30
|
|
|
September
30
|
|
|
December
31
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
—
|
|
|
|
82,715
|
|
|
|
53,144
|
|
|
|
38,400
|
|
Gross
profit (loss)
|
|
|
(1,650,000
|
)
|
|
|
78,398
|
|
|
|
(52,214
|
)
|
|
|
(1,730,876
|
)
|
(Loss)
from continuing operations
|
|
|
(5,806,868
|
)
|
|
|
(69,971,237
|
)
|
|
|
(3,033,234
|
)
|
|
|
(1,830,780
|
)
|
(Loss)
from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
(531,771
|
)
|
|
|
(1,010,613
|
)
|
Net
(loss)
|
|
|
(5,806,868
|
)
|
|
|
(69,971,237
|
)
|
|
|
(3,565,005
|
)
|
|
|
(2,841,393
|
)
|
Weighted
average number of shares outstanding – basic and diluted
|
|
|
42,166,561
|
|
|
|
42,186,579
|
|
|
|
44,911,018
|
|
|
|
50,622,496
|
|
Net
(loss) from continuing operations per share – basic and
diluted
|
|
|
(0.14
|
)
|
|
|
(1.66
|
)
|
|
|
(0.07
|
)
|
|
|
(0.04
|
)
|
Net
(loss) from discontinued operations per share – basic and
diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
Net
(loss) per share – basic and diluted
|
|
|
(0.14
|
)
|
|
|
(1.66
|
)
|
|
|
(0.08
|
)
|
|
|
(0.06
|
)
|
(i)
|
Loss
from continuing operations for the three months ended March 31, 2007
includes a charge for the change in the fair value of the Company’s
obligation under warrants and warrant expense of
$723,980.
|
(ii)
|
Loss
from continuing operations for the three months ended June 30, September
30 and December 31, 2007 includes income recognized from the change in the
fair value of the Company’s obligation under warrants of $1,500,710,
$856,969 and $248,797,
respectively.
|
(iii)
|
Loss
from continuing operations for the three months ended December 31, 2007
includes a charge for the loss on short-term investments of
$1,036,250.
|
(iv)
|
Loss
from continuing operations for the three months ended September 30, 2007,
December 31, 2006 and March 31, 2006 includes the expense of amounts
related to inventory reserves of $2,782,494, $1,679,124 and $1,625,000,
respectively.
|
(v)
|
Loss
from continuing operations for the three months ended June 30, 2006
includes a goodwill impairment charge of
$65,945,686.
|
(vi)
|
Loss
from discontinued operations for the three months ended December 31, 2007
includes a goodwill impairment charge of
$14,446,977.
|
(vii)
|
Loss
from continuing operations for the three months ended September 30, 2007
includes the charge for the impairment of intangible assets of
$20,923,028.
|
(viii)
|
Loss
from discontinued operations for the three months ended December 31, 2007
includes the charge for the impairment of intangible assets of
$22,286,383.
|
(ix)
|
Net
loss per share – basic and diluted are computed independently for the
quarters presented. Therefore, the sum of the quarterly per share
information may not be equal to the annual per share
information.
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
|
Not
applicable.
ITEM
9A.
|
CONTROLS
AND PROCEDURES.
|
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company’s reports under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and that such information
is accumulated and communicated to the Company’s management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. The Company’s disclosure
controls and procedures are designed to provide reasonable assurance of
achieving their desired objectives, and the Company’s Chief Executive Officer
and Chief Financial Officer have concluded that the Company’s disclosure
controls and procedures are effective to provide that reasonable
assurance.
As of the
end of the period covered by the report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management,
including the Company’s Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act).
Based on that evaluation, the Company’s Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective to
ensure that information required to be disclosed in the reports the Company
files and submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms.
There
have been no significant changes in the Company’s internal control over
financial reporting that occurred during the year ended December 31, 2007, that
have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management
of the Company is responsible for establishing and maintaining effective
internal control over financial reporting as defined in Rule 13a-15(f) under the
Exchange Act. The Company’s internal control over financial reporting is
designed to provide reasonable assurance to the Company’s management and Board
of Directors regarding the preparation and fair presentation of published
financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2007. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in
Internal Control
–
Integrated Framework.
Based
on our assessment, we believe that, as of December 31, 2007, the Company’s
internal control over financial reporting is effective based on those
criteria.
Management’s
assessment of the effectiveness of internal control over financial reporting as
of December 31, 2007, has been audited by Ernst & Young LLP, an independent
registered public accounting firm who also audited the Company’s consolidated
financial statements. Ernst & Young’s attestation report on management’s
assessment of the Company’s internal control over financial reporting is
included elsewhere herein.
REPORT
OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
The Board
of Directors and Shareholders of
OccuLogix, Inc.
We have
audited OccuLogix, Inc.’s internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). OccuLogix, Inc.’s management is
responsible for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s annual report on internal
control over financial reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion,
OccuLogix, Inc.
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2007, based on the COSO criteria.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of
OccuLogix, Inc.
as of December
31, 2007 and 2006, and the related consolidated statements of operations,
changes in stockholders’ equity and cash flows for each of the three years ended
December 31, 2007 and our report dated 14, 2008 expressed an unqualified opinion
thereon in the period.
Toronto,
Canada,
|
Chartered
Accountants
|
March
14, 2008.
|
Licensed
Public Accountants
|
ITEM
9B.
|
OTHER
INFORMATION.
|
ITEM
10.
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
|
The
information required with respect to directors is incorporated herein by
reference to the information contained in the General Proxy Information for our
2008 Annual Meeting of Stockholders (the “Proxy Statement”). The information
with respect to our audit committee financial expert is incorporated herein by
reference to the information contained in the sections captioned “Appointment of
Auditors” and “Audit Committee Report” of the Proxy Statement.
Information
about our Code of Ethics appears under the heading “Code of Business Conduct and
Ethics” in the Proxy Statement. That portion of the Proxy Statement is
incorporated by reference into this report.
Information
about compliance with Section 16(a) of the Exchange Act appears under the
heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy
Statement. That portion of the Proxy Statement is incorporated by reference into
this report.
ITEM
11.
|
EXECUTIVE
COMPENSATION.
|
Information
about compensation of our named executive officers appears under the headings
“Executive Officers” and “Information on Executive Compensation” in the Proxy
Statement. Information about compensation of our directors appears under the
heading “Compensation of Directors” in the Proxy Statement. These portions of
the Proxy Statement are incorporated by reference into this report.
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
|
Information
about security ownership of certain beneficial owners and management and
information regarding securities authorized for issuance under equity
compensation plans appears under the headings “Information on Executive
Compensation”, “Employee Benefit Plans” and “Principal Stockholders” in the
Proxy Statement. These portions of the Proxy Statement are incorporated by
reference to this report.
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS.
|
Information
about certain relationships and related transactions appears under the heading
“Certain Relationships and Related Party Transactions” in the Proxy Statement.
That portion of the Proxy Statement is incorporated by reference into this
report.
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
|
Information
about the principal accountant fees and services as well as related pre-approval
policies and procedures appears under the headings “Appointment of Auditors” and
“Audit Committee Report” in the Proxy Statement. These portions of the Proxy
Statement are incorporated by reference into this report.
PART
IV
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.
|
(a)
|
The
following documents are filed as part of the
report:
|
|
(1)
|
Financial
Statements included in PART II of this
report:
|
Included
in PART II of this report:
|
Page
|
|
|
|
65
|
|
|
|
66
|
|
|
|
67
|
|
|
|
68
|
|
|
|
70
|
|
|
|
71
|
|
(2)
|
Financial
Statement Schedules:
|
Schedule
II – Valuation and Qualifying Accounts and Reserves
Except as
noted above, all financial statement schedules for which provisions have been
made in the applicable accounting regulations of the Commission have been
omitted because they are inapplicable, not required by the instructions or
because the required information is either incorporated herein by reference or
included in the financial statements or notes thereto included in this
report.
The
exhibits required to be filed as part of this Annual Report on Form 10-K are
listed in the attached Index to Exhibits. Items 10.4, 10.5, 10.8 to 10.14
inclusive, 10.18, 10.24, 10.40, 10.44 to 10.49 inclusive and 10.52 to 10.57
inclusive in the attached Index to Exhibits are management contracts or
compensatory plans or arrangements.
The
exhibits required to be filed as part of this Annual Report on Form 10-K are
listed in the attached Index to Exhibits.
* * *
Copies of
the exhibits filed with this Annual Report on Form 10-K or incorporated by
reference herein do not accompany copies hereof for distribution to stockholders
of the Registrant. The Registrant will furnish a copy of any of such exhibits to
any stockholder requesting the same for a nominal charge to cover duplicating
costs.
POWER OF
ATTORNEY
The
registrant and each person whose signature appears below hereby appoint Elias
Vamvakas and William G. Dumencu as attorney-in-fact with full power of
substitution, severally, to execute in the name and on behalf of the registrant
and each such person, individually and in each capacity stated below, one or
more amendments to this Annual Report on Form 10-K, which amendments may make
such changes in this Annual Report as the attorney-in-fact acting in the
premises deems appropriate and to file any such amendments to this Annual Report
on Form 10-K with the Securities and Exchange Commission.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated:
March 17, 2008
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
/s/
Elias Vamvakas
|
|
|
|
|
|
Elias Vamvakas
|
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: March
17, 2008
|
|
By:
|
/s/
Elias Vamvakas
|
|
|
|
|
|
|
|
Elias Vamvakas
|
|
|
|
Chief
Executive Officer and
|
|
|
|
Chairman
of Board of Directors
|
|
|
|
|
|
|
|
|
Dated:
March 17, 2008
|
|
By:
|
/s/
William G. Dumencu
|
|
|
|
|
|
|
|
William G. Dumencu
|
|
|
|
Chief
Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
Dated: March
17, 2008
|
|
By:
|
/s/
Jay T. Holmes
|
|
|
|
|
|
|
|
Jay T. Holmes
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
Dated:
March 17, 2008
|
|
By:
|
/s/
Thomas N. Davidson
|
|
|
|
|
|
|
|
Thomas N. Davidson
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
Dated: March
17, 2008
|
|
By:
|
/s/
Richard L. Lindstrom
|
|
|
|
|
|
|
|
Richard
L. Lindstrom, M.D.
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
Dated: March
17, 2008
|
|
By:
|
/s/
Georges Noël
|
|
|
|
|
|
|
|
Georges Noël
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
Dated: March
17, 2008
|
|
By:
|
/s/
Adrienne L. Graves
|
|
|
|
|
|
|
|
Adrienne
L. Graves
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
Dated: March
17, 2008
|
|
By:
|
/s/
Gilbert S. Omenn
|
|
|
|
|
|
|
|
Gilbert S. Omenn
|
|
|
|
Director
|
SCHEDULE
II
VALUATION
AND QUALIFYING ACCOUNTS AND RESERVES
|
|
Balance
at beginning of period
|
|
|
Charged
to costs and expenses
|
|
|
Charged
to other accounts
|
|
|
Deductions
|
|
|
Balance
at end of period
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad
debt reserves
|
|
|
—
|
|
|
|
518,852
|
|
|
|
—
|
|
|
|
—
|
|
|
|
518,852
|
|
Inventory
reserves
|
|
|
—
|
|
|
|
1,990,830
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,990,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad
debt reserves
|
|
|
518,852
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(518,852
|
)
1
|
|
|
—
|
|
Inventory
reserves
|
|
|
1,990,830
|
|
|
|
3,304,124
|
|
|
|
—
|
|
|
|
(193,560
|
)
2
|
|
|
5,101,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad
debt reserves
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Inventory
reserves
|
|
|
5,101,394
|
|
|
|
2,790,209
|
|
|
|
—
|
|
|
|
(596,058
|
)
2
|
|
|
7,295,545
|
|
1.
|
During
fiscal 2006, OccuLogix, Inc. (“the Company”) agreed to forgive the amount
receivable from Veris Health Services Inc. (“Veris”) which had been owing
for products and related services delivered or provided to Veris during
the period from September 14, 2005 to December 31,
2005.
|
2.
|
During
fiscal 2007 and 2006, the Company utilized inventory that had previously
been provided for.
|
2.1
|
Form
of Plan of Reorganization (incorporated by reference to Exhibit 2.1 to the
Registrant’s Registration Statement on Form S-1/A No. 4, filed with the
Commission on December 6, 2004 (file no. 333-118024)).
|
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant as currently
in effect (incorporated by reference to Exhibit 10.4 to the Registrant’s
Registration Statement on Form S-1/A No. 3, filed with the Commission on
November 16, 2004 (file no. 333-118024)).
|
|
|
3.2
|
Amended
and Restated By-Laws of the Registrant as currently in effect
(incorporated by reference to Exhibit 10.4 to the Registrant’s
Registration Statement on Form S-1/A No. 3, filed with the Commission on
November 16, 2004 (file no. 333-118024)).
|
|
|
10.1
|
Amended
and Restated Marketing and Distribution Agreement dated October 25, 2004
between Diamed Medizintechnik GmbH and the Registrant (incorporated by
reference to Exhibit 10.6 to the Registrant’s Registration Statement on
Form S-1/A No. 1, filed with the Commission on October 7, 2004 (file no.
333-118024)).
|
|
|
10.2
|
Amended
and Restated Patent License and Royalty Agreement dated October 25, 2004
between the Registrant and Dr. Richard Brunner (incorporated by reference
to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1/A
No. 1, filed with the Commission on October 7, 2004 (file no.
333-118024)).
|
|
|
10.3
|
Amended
and Restated Patent License and Royalty Agreement dated October 25, 2004
between the Registrant and Hans Stock (incorporated by reference to
Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1/A No.
1, filed with the Commission on October 7, 2004 (file no.
333-118024)).
|
|
|
10.4
|
Employment
Agreement between the Registrant and Elias Vamvakas dated September 1,
2004 (incorporated by reference to Exhibit 10.13 to the Registrant’s
Registration Statement on Form S-1/A No. 1, filed with the Commission on
October 7, 2004 (file no. 333-118024)).
|
|
|
10.5
|
Employment
Agreement between the Registrant and Thomas P. Reeves dated August 1, 2004
(incorporated by reference to Exhibit 10.14 to the Registrant’s
Registration Statement on Form S-1/A No. 1, filed with the Commission on
October 7, 2004 (file no. 333-118024)).
|
|
|
10.6
|
Rental
Agreement between the Registrant and Cornish Properties Corporation dated
January 1, 2004 (incorporated by reference to Exhibit 10.27 to the
Registrant’s Registration Statement on Form S-1/A No. 4, filed with the
Commission on December 6, 2004 (file no. 333-118024)).
|
|
|
10.7
|
Agreement
between the Registrant and Rheogenx Biosciences Corporation dated March
28, 2005 (incorporated by reference to Exhibit 10.2 to the Registrant’s
Quarterly Report on Form 10-Q, filed with the Commission on May 6, 2005
(file no. 000-51030)).
|
|
|
10.8
|
Amending
Agreement between the Registrant and Thomas P. Reeves, dated as of July 1,
2005, amending the Employment Agreement between the Registrant and Thomas
P. Reeves dated August 2004 (incorporated by reference to Exhibit 10.4 to
the Registrant’s Quarterly Report on Form 10-Q, filed with the Commission
on August 8, 2005 (file no. 000-51030)).
|
|
|
10.9
|
Option
Agreement between Steve Parks and the Registrant dated as of October 4,
2005 (incorporated by reference to Exhibit 10.4 to the Registrant’s
Quarterly Report on Form 10-Q, filed with the Commission on November 10,
2005 (file no. 000-51030)).
|
|
|
10.10
|
Release
Agreement between John Caloz and the Registrant, dated as of April 13,
2006, terminating the Employment Agreement between the Registrant and John
Caloz dated May 18, 2006 (incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q, filed with the Commission on
May 10, 2006 (file no. 000-51030)).
|
10.11
|
Release
Agreement between Irving Siegel and the Registrant, dated as of April 13,
2006, terminating the Employment Agreement between the Registrant and
Irving Siegel dated as of August 3, 2003, as amended by the Amending
Agreement between the Registrant and Irving Siegel dated as of September
1, 2005 (incorporated by reference to Exhibit 10.3 to the Registrant’s
Quarterly Report on Form 10-Q, filed with the Commission on May 10, 2006
(file no. 000-51030)).
|
|
|
10.12
|
Termination
Agreement among the Registrant, AMD Medical Services Inc., Irving Siegel,
OccuLogix Canada Corp., Rheo Clinic Inc. and TLC Vision Corporation, dated
as of April 13, 2006, terminating, among other things, the Consulting
Agreement among the Registrant, AMD Medical Services Inc. and Irving
Siegel dated September 1, 2005 (incorporated by reference to Exhibit 10.4
to the Registrant’s Quarterly Report on Form 10-Q, filed with the
Commission on May 10, 2006 (file no. 000-51030)).
|
|
|
10.13
|
Amending
Agreement between the Registrant and Nozhat Choudry, dated as of April 1,
2006, amending the Employment Agreement between the Registrant and Nozhat
Choudry dated as of February 10, 2006 (incorporated by reference to
Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed with
the Commission on May 10, 2006 (file no. 000-51030)).
|
|
|
10.14
|
Amending
Agreement between the Registrant and John Cornish, dated as of April 13,
2006, amending the Employment Agreement between the Registrant and John
Cornish dated as of April 1, 2005, as amended by the Amending Agreement
between the Registrant and John Cornish dated as of June 1, 2005
(incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly
Report on Form 10-Q, filed with the Commission on May 10, 2006 (file no.
000-51030)).
|
|
|
10.15
|
Convertible
Unsecured Promissory Note of Solx, Inc., dated April 1, 2006, in the
principal amount of $2,000,000 (incorporated by reference to Exhibit 10.8
to the Registrant’s Quarterly Report on Form 10-Q/A, filed with the
Commission on May 25, 2006 (file no. 000-51030)).
|
|
|
10.16
|
Agreement
and Plan of Merger, dated as of August 1, 2006, by and among the
Registrant, OccuLogix Mergeco, Inc., Solx, Inc. and Doug P. Adams, John
Sullivan and Peter M. Adams, acting, in each case, in his capacity as a
member of the Stockholder Representative Committee referred to therein
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed with the Commission on August 9, 2006 (file no.
000-51030)).
|
|
|
10.17
|
Convertible
Unsecured Promissory Note of Solx, Inc., dated August 1, 2006, in the
principal amount of $240,000 (incorporated by reference to Exhibit 10.2 to
the Registrant’s Quarterly Report on Form 10-Q, filed with the Commission
on August 9, 2006 (file no. 000-51030)).
|
|
|
10.18
|
Employment
Agreement between the Registrant and Doug P. Adams dated as of September
1, 2006 (incorporated by reference to Exhibit 10.41 to the Registrant’s
Annual Report on Form 10-K/A, filed with the Commission on March 29, 2007
(file no. 000-51030)).
|
|
|
10.19
|
Registration
Rights Agreement, dated as of September 1, 2006, among the Registrant,
Doug P. Adams, John Sullivan and Peter M. Adams, acting, in each case, in
his capacity as a member of the Stockholder Representative Committee
referred to in the Agreement and Plan of Merger, dated as of August 1,
2006, by and among the Registrant, OccuLogix Mergeco, Inc., Solx, Inc. and
Doug P. Adams, John Sullivan and Peter M. Adams, acting, in each case, in
his capacity as a member of the Stockholder Representative Committee
referred to therein (incorporated by reference to Exhibit 10.42 to the
Registrant’s Annual Report on Form 10-K/A, filed with the Commission on
March 29, 2007 (file no. 000-51030)).
|
|
|
10.20
|
2006
Distributorship Agreement between Asahi Kasei Medical Co., Ltd. and the
Registrant dated October 20, 2006 (incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the
Commission on November 9, 2006 (file no.
000-51030)).
|
10.21
|
Summary
of Terms and Conditions between the Registrant and Elias Vamvakas dated
November 30, 2006 (incorporated by reference to Exhibit 10.44 to the
Registrant’s Annual Report on Form 10-K/A, filed with the Commission on
March 29, 2007 (file no. 000-51030)).
|
|
|
10.22
|
Series
A Stock Purchase Agreement by and among OcuSense, Inc. and the Registrant
dated as of November 30, 2006 (incorporated by reference to Exhibit 10.45
to the Registrant’s Annual Report on Form 10-K/A, filed with the
Commission on March 29, 2007 (file no. 000-51030)). (Exhibits
have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be
provided to the Securities and Exchange Commission upon
request.)
|
|
|
10.23
|
Securities
Purchase Agreement, dated as of February 1, 2007, by and among the
Registrant and the investors listed on the Schedule of Investors attached
thereto as Exhibit A (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K, filed with the Commission on
February 6, 2007 (file no. 000-51030)).
|
|
|
10.24
|
Employment
Agreement between the Registrant and Suh Kim dated as of March 12, 2007
(incorporated by reference to Exhibit 10.47 to the Registrant’s Annual
Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file
no. 000-51030)).
|
|
|
10.25
|
License
Agreement between OcuSense, Inc. and The Regents of the University of
California dated March 12, 2003 (incorporated by reference to Exhibit
10.48 to the Registrant’s Annual Report on Form 10-K/A, filed with the
Commission on March 29, 2007 (file no. 000-51030)). (Portions
of this exhibit have been omitted pursuant to a request for confidential
treatment.)
|
|
|
10.26
|
Amendment
No. 1, dated June 9, 2003, to the License Agreement between OcuSense, Inc.
and The Regents of the University of California dated March 12, 2003
(incorporated by reference to Exhibit 10.49 to the Registrant’s Annual
Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file
no. 000-51030)).
|
|
|
10.27
|
Amendment
No. 2, dated September 5, 2005, to the License Agreement between OcuSense,
Inc. and The Regents of the University of California dated March 12, 2003
(incorporated by reference to Exhibit 10.50 to the Registrant’s Annual
Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file
no. 000-51030)). (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment.)
|
|
|
10.28
|
Amendment
No. 3, dated July 7, 2006, to the License Agreement between OcuSense, Inc.
and The Regents of the University of California dated March 12, 2003
(incorporated by reference to Exhibit 10.51 to the Registrant’s Annual
Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file
no. 000-51030)).
|
|
|
10.29
|
Amendment
No. 4, dated October 9, 2006, to the License Agreement between OcuSense,
Inc. and The Regents of the University of California dated March 12, 2003
(incorporated by reference to Exhibit 10.52 to the Registrant’s Annual
Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file
no. 000-51030)).
|
|
|
|
Terms
of Business, dated February 5, 2007, between Invetech Pty Ltd and
OcuSense, Inc.
|
|
|
|
Amendment
No. 5, dated June 29, 2007, to the License Agreement between OcuSense,
Inc. and The Regents of the University of California dated March 12, 2003.
(Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.)
|
|
|
|
Lease,
dated October 17, 2005, between Penyork Properties III Inc. and the
Registrant.
|
|
|
|
Lease
Amending Agreement, dated as of March 9, 2007, between the Registrant and
2600 Skymark Investments Inc., amending the Lease between Penyork
Properties III Inc. and the Registrant dated October 17,
2005.
|
|
2002
Stock Option Plan, as amended and restated on June 29,
2007.
|
|
|
|
Manufacturing
and Development Agreement, dated October 25, 2007, between MiniFAB (Aust)
Pty Ltd and OcuSense, Inc. (Portions of this exhibit have been
omitted pursuant to a request for confidential
treatment.)
|
|
|
10.36
|
First
Amendment to Series A Preferred Stock Purchase Agreement, dated October
29, 2007, between OcuSense, Inc. and the Registrant (incorporated by
reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form
10-Q, filed with the Commission on November 9, 2007 (file no.
000-51030)).
|
|
|
|
Research
Agreement, dated as of December 13, 2007, between
*
and OcuSense, Inc.
(Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.)
|
|
|
|
Stock
Purchase Agreement, dated as of December 19, 2007, between the Registrant
and Solx Acquisition, Inc. (Exhibits have been omitted pursuant
to Item 601(b)(2) of Regulation S-K and will be provided to the Commission
upon request.)
|
|
|
|
Amending
Agreement, dated as of December 19, 2007, by and among the Registrant,
Solx, Inc. and Peter M. Adams, acting for and on behalf of the Stockholder
Representative Committee, amending the Agreement and Plan of Merger, dated
as of August 1, 2006, by and among the Registrant, OccuLogix Mergeco,
Inc., Solx, Inc. and Doug P. Adams, John Sullivan and Peter M. Adams,
acting in each case, in his capacity as a member of the Stockholder
Representative Committee referred to therein.
|
|
|
|
Termination
Agreement, dated as of December 19, 2007, between Doug P. Adams and the
Registrant, terminating the Employment Agreement between the Registrant
and Doug P. Adams dated as of September 1, 2006.
|
|
|
|
Limited
Guaranty, dated as of December 19, 2007, by Doug P. Adams for the benefit
of the Registrant.
|
|
|
|
Security
Agreement, dated as of December 19, 2007, by Solx, Inc. in favor of the
Registrant.
|
|
|
|
Letter
Agreement, dated December 20, 2007, between the Registrant and Solx
Acquisition, Inc.
|
|
|
|
Termination
Agreement, dated as of January 4, 2008, between John Cornish and the
Registrant, terminating the Employment Agreement between the Registrant
and John Cornish dated as of April 1, 2005, as amended.
|
|
|
|
Termination
Agreement, dated as of January 4, 2008, between Julie Fotheringham and the
Registrant, terminating the Employment Agreement between the Registrant
and Julie Fotheringham dated September 1, 2004.
|
|
|
|
Termination
Agreement, dated as of January 4, 2008, between Stephen Parks and the
Registrant, terminating the Employment Agreement between Stephen Parks and
the Registrant dated as of October 4, 2005.
|
|
|
|
Termination
Agreement, dated as of January 8, 2008, between David C. Eldridge and the
Registrant, terminating the Employment Agreement between the Registrant
and Dr. David Eldridge dated November 9, 2004.
|
|
|
|
Termination
Agreement, dated as of January 31, 2008, between Nozhat Choudry and the
Registrant, terminating the Employment Agreement between Nozhat Choudry
and the Registrant, as amended.
|
|
Termination
Agreement, dated as of January 31, 2008, between Stephen Kilmer and the
Registrant, terminating the Employment Agreement between the Registrant
and Stephen Kilmer dated July 30, 2004.
|
|
|
|
Loan
Agreement, dated as of February 19, 2008, by and among the Registrant, the
Lenders named therein and Marchant Securities Inc.
|
|
|
|
Share
Pledge Agreement, dated as of February 19, 2008, by the Registrant in
favor of Marchant Securities Inc., as collateral agent.
|
|
|
|
Employment
Agreement, dated as of February 25, 2008, between the Registrant and
William G. Dumencu.
|
|
|
10.53
|
Termination
Agreement, dated as of February 25, 2008, between Asahi Kasei Kuraray
Medical Co., Ltd and the Registrant
|
|
|
|
Amending
Agreement, dated as of March 3, 2008, between Nozhat Choudry and the
Registrant, amending the Termination Agreement between Nozhat Choudry and
the Registrant dated as of January 31, 2008.
|
|
|
|
Amending
Agreement, dated as of March 3, 2008, between John Cornish and the
Registrant, amending the Termination Agreement between John Cornish and
the Registrant dated as of January 4, 2008.
|
|
|
|
Amending
Agreement, dated as of March 3, 2008, between David C. Eldridge and the
Registrant, amending the Termination Agreement between David C. Eldridge
and the Registrant dated as of January 8, 2008.
|
|
|
|
Amending
Agreement, dated as of March 3, 2008, between Julie Fotheringham and the
Registrant, amending the Termination Agreement between Julie Fotheringham
and the Registrant dated as of January 4, 2008.
|
|
|
|
Amending
Agreement, dated as of March 3, 2008, between Stephen Parks and the
Registrant, amending the Termination Agreement between Stephen Parks and
the Registrant dated as of January 4, 2008.
|
|
|
14.1
|
Code
of Conduct of the Registrant (incorporated by reference to Exhibit 14.1 to
the Registrant’s Quarterly Report on Form 10-Q, filed with the Commission
on November 10, 2005 (file no. 000-51030)).
|
|
|
14.2
|
Complaint
and Reporting Procedures of the Registrant (incorporated by reference to
Exhibit 14.2 to the Registrant’s Quarterly Report on Form 10-Q, filed with
the Commission on August 8, 2005 (file no. 000-51030)).
|
|
|
21.1
|
Subsidiaries
of Registrant (incorporated by reference to Exhibit 21.1 to the
Registrant’s Registration Statement on Form S-1/A No. 1, filed with the
Commission on October 7, 2004 (file no. 333-118024)).
|
|
|
|
Consent
of Ernst & Young LLP.
|
|
|
24.1
|
Power
of Attorney (included on signature page).
|
|
|
|
CEO’s
Certification required by Rule 13A-14(a) of the Securities Exchange Act of
1934.
|
|
|
|
CFO’s
Certification required by Rule 13A-14(a) of the Securities Exchange Act of
1934.
|
|
|
|
CEO’s
Certification of periodic financial reports pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
|
|
|
|
CFO’s
Certification of periodic financial reports pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section
1350.
|
Exhibit 10.30
TERMS
OF BUSINESS
In these
Terms of Business unless the context requires a different meaning, the following
terms have the meanings indicated:
'
Agreement
' means the agreement
that arises between Invetech and the Client consisting of the Proposal and these
Terms of Business;
'
Assignment
' means the
assignment to be carried out by Invetech as specified in the Proposal (as varied
or extended in any way by agreement in writing from time to time in accordance
with clause 15.2);
'
Client
' means the client
identified in the Proposal;
'
Invetech
' means Invetech Pty
Ltd (ABN 45 004 301 839) and its successors and assigns;
'
Product
' means any article,
item, product, equipment, process, data, report or other deliverable developed
for the Client by Invetech under the Agreement;
'
Project IP
' is as defined in
clause 8.2; and
'
Proposal
' means the written
proposal accompanied by these Terms of Business.
2.1
|
As
specified in the Proposal Invoicing Schedule, part of the fee will be
invoiced to and payable by the Client upon receipt of the Client’s
acceptance of the Proposal and authorisation to proceed with the
Assignment. Further invoices will then be issued as shown in
the Proposal Invoicing Schedule, for payment by the Client of fees and
expenses incurred.
|
2.2
|
The
initial invoice in respect of the advance, must be paid by the Client
prior to the start of work on the Assignment. The Client must
pay all subsequent invoices within 30 days after the invoice
date. If the Client fails to pay an invoice when it is due,
Invetech may charge interest at a rate equivalent to one percent (1%) per
month, or the maximum rate permitted by law, whichever is less. Each
invoice shall be sufficient evidence of the details therein including the
amount owed to Invetech.
|
The
Client will reimburse Invetech for reasonable out-of-pocket expenses incurred in
connection with the performance of the Assignment in respect of materials, the
services of third parties, the use of third parties’ equipment and other
expenses.
Subject to clauses 4.4 and
4.5 of these Terms of Business, the amount payable by the Client will be at cost
plus a mark-up as shown in the Proposal.
4.
|
GOODS
AND SERVICES TAX
|
Words or
expressions used in this clause 4 which are defined in the
A New Tax System (Goods and Services
Tax) Act 1999
(Cth) or, if not so defined, then which are defined in the
Trade Practices Act
1974
(Cth), have the same meaning in this clause.
4.2
|
GST
inclusive amounts
|
For the
purposes of these Terms of Business where the expression 'GST inclusive' is used
in relation to an amount payable or other consideration to be provided for a
supply under these Terms of Business, the amount or consideration will not be
increased on account of any GST payable on that supply.
4.3
|
Consideration
is GST exclusive
|
Any
consideration to be paid or provided to Invetech for a supply made by Invetech
under or in connection with these Terms of Business unless specifically
described in these Terms of Business as 'GST inclusive', does not include
an amount on account of GST
.
4.4
|
Gross
up of consideration
|
Despite
any other provision in these Terms of Business, if Invetech makes a supply under
or in connection with these Terms of Business on which GST is imposed (not being
a supply the consideration for which is specifically described in these Terms of
Business as 'GST inclusive'):
|
(a)
|
the
consideration payable or to be provided for that supply under these Terms
of Business but for the application of this clause ('GST exclusive
consideration') is increased by, and the Client must also pay to Invetech
an amount equal to the GST payable by Invetech on that supply;
and
|
|
(b)
|
the
amount by which the GST exclusive consideration is increased must be paid
to Invetech by the Client without set off, deduction or requirement for
demand, at the same time as the GST exclusive consideration is payable or
to be provided.
|
4.5
|
Reimbursements
(net down)
|
If a
payment to a party under these Terms of Business is a reimbursement or
indemnification, calculated by reference to a loss, cost or expense incurred by
that party, then the payment will be reduced by the amount of any input tax
credit to which that party is entitled for that loss, cost or expense and for
which credit that party actually receives the benefit.
4.6
|
Client
Warranty and Indemnity
|
The
Client warrants that where GST is imposed on a supply made by Invetech under or
in connection with these Terms of Business and the consideration for that supply
was not increased under clause 4.4 as the parties mistakenly regarded the supply
as GST-free, the Client will indemnify Invetech for and in respect of the GST
(including any interest or penalty) imposed on that supply.
5.1
|
The
Client shall furnish to Invetech all such information including data and
drawings relating to the
Assignment
as are described in the Proposal
promptly after the effective date of this
Agreement. Thereafter, the Client shall furnish to Invetech
upon request all such additional information as is reasonably required by
Invetech to enable Invetech to provide its services in relation to the
Assignment.
|
5.2
|
The
Client acknowledges Invetech shall not be responsible for delays in the
Assignment caused by Client’s failure to comply with clause
5.1.
|
5.3
|
The
Client acknowledges that if the Client fails to comply with its
obligations under this clause that failure may cause or contribute to an
increase in any estimated fee advised by Invetech to the Client, Invetech
incurring additional costs, charges and expenses and delays in Invetech
carrying out the Assignment.
|
6.
|
CLIENT
INFORMATION CONFIDENTIALITY
|
Invetech
and Client have entered into that certain "Mutual Non-Disclosure Agreement"
effective as of June 10, 2005 (the "NDA") and agree that the terms and
conditions of the NDA shall apply with respect to Confidential Information (as
defined in the NDA) disclosed to Invetech in connection with this Agreement
(whether disclosed directly by Client or indirectly by The TCI Card Supplier or
other third party on behalf of Client); provided, however, the parties agree
that (i) the definition of the "Project" as set forth in the NDA shall be
amended to include the performance of the services and activities contemplated
in this Agreement, (ii) "Confidential Information" under the NDA shall also
include research data and results generated by Invetech hereunder that relate to
Client's technology or to the development of the Product or prototypes thereof,
and (iii) the term of the obligations set forth therein shall continue for a
period of five (5) years following the expiration or termination of this
Agreement. Except as expressly modified in this Terms of Business ,
the NDA shall continue in full force and effect in accordance with its
terms.
For
clarification but without limitation, Invetech and Client
|
(i)
|
shall
each be entitled to disclose in publicity materials the other party's
identity; and
|
|
(ii)
|
shall
each be entitled to disclose a general description of the nature of the
Assignment, provided that such description of the Assignment has first
been reviewed and approved,
such approval to
not be unreasonably withheld, in writing by the other
party.
|
7.
|
INFORMATION
AND INVETECH STATEMENTS
|
7.1
|
All
information contained, and all surveys, forecasts and recommendations made
in the Proposal and any other report or letter to the Client, are supplied
and have been prepared by Invetech in good faith upon the basis of
information, statements, assumptions and representations provided or made
to Invetech by or on behalf of the Client or otherwise available to
Invetech. Invetech honestly believes (but has made no inquiry
nor undertaken any due diligence) that all information supplied or to be
supplied by Invetech in relation to the Assignment will be of commercial
value to the Client but Invetech does not warrant or represent that any of
it is accurate, fully comprehensive in its field or suitable to the
Client’s purposes; nor does Invetech warrant or represent that surveys or
forecasts made by Invetech in relation to the Assignment are accurate or
will be realised, since the accuracy of surveys and the achievement of
results forecast must depend upon matters outside Invetech’s
control.
|
7.2
|
For
the avoidance of doubt, no statement of fact made by Invetech whether in
the Proposal or in any report or letter to the Client or whether made
orally, is to be construed as a representation, undertaking or
warranty.
|
8.
|
INTELLECTUAL
PROPERTY RIGHTS
|
8.1
|
The
Client shall retain ownership of any pre-existing intellectual property
rights in materials and information provided by the Client to Invetech for
use by Invetech for the purposes of undertaking the Assignment. Invetech
shall retain ownership of any pre-existing intellectual property rights in
materials, information, tools and methodologies provided by Invetech for
the purposes of undertaking the Assignment (and any improvements to them,
except to the extent that those improvements comprise
patented or
unpatented intellectual property owned or controlled by the Client or that
have application in the field of measuring osmolarity or osmolality of
human tear fluid) and Invetech hereby grants the Client a worldwide,
non-exclusive, royalty-free licence (with the right to grant and authorize
sublicenses) to make, have made, use, offer for sale, sell and otherwise
exploit products and services embodying any such pre-existing Invetech
intellectual property (and any such improvements therein) as may be
embodied in the Product.
|
8.2
|
Subject
to clause 8.1, with effect from completion of the Assignment and provided
that the Client has paid to Invetech all outstanding fees and charges due
to Invetech, Invetech assigns to the Client all right, title and interest
in and to any trade dress, trademarks and design registrations or design
patents, and any inventions, whether patentable or not, and any other
discoveries, trade secrets or know-how
which:
|
|
(a)
|
are
embodied in the Product; and
|
|
(b)
|
were
made, developed, conceived or first reduced to practice by or for Invetech
as a direct result of Invetech undertaking the
Assignment
|
along
with all patents, copyrights, and any other intellectual property rights
therein, including the right to apply for and maintain the rights described in
this Section 8.2 in all countries worldwide
(such rights comprising the
‘
Project IP
’
) and Invetech will (at the
Client's request and cost) do those things that may be reasonably necessary to
effect the registration of such intellectual property. Client must
provide to Invetech full details (including copies of all relevant
documentation) of any application for registration (whether as a registered
patent, a registered design or otherwise) of the Project IP or any part of
it.
8.3
|
Patents
and the registration of designs may each confer on the holder thereof
substantial protection, including rights to damages in the case of
subsequent infringement by others whether intentional or
not. Invetech will, if and only if requested to do so in
writing by the Client and at the Client's expense, arrange to carry out
searches in relation to the Assignment in order to identify potential
infringements of prior patents or design registrations. Where
no such request is made and agreed in writing by Invetech, the Client is
deemed to have assumed responsibility for these matters, and the Client
indemnifies Invetech against any claims of (i) infringement of any
intellectual property rights brought against Invetech as a result of the
provision of Invetech’s services in relation to the Assignment, and (ii)
misappropriation or misuse of copyrights or trade secrets of a third party
caused by the disclosure of any materials or information to Invetech by
the Client, in each case unless such claims are covered by the indemnity
in clause 8.4.
|
8.4
|
Invetech
agrees that it shall not knowingly design, develop or manufacture the
Product in a manner such that the sale or intended use thereof would
infringe the intellectual property of any third party. Client
shall indemnify Invetech against all losses, claims, proceedings, damages,
costs and expenses in respect of or arising directly or indirectly from
any breach by the Client of any of its obligations in the preceding
sentence.
|
9.
|
PRODUCT
LIABILITY AND CLIENT INDEMNITY
|
|
9.1
|
(a)
Subject
only to any liability of Invetech under clause 10, the Client shall
indemnify, keep indemnified and save harmless Invetech from and against
all losses, claims, proceedings, damages, costs and expenses in respect of
or arising directly or indirectly
from:
|
|
(i)
|
the
Product or its use or operation by Client or any Client Related
Person;
|
|
(ii)
|
the
use by Client or any Client Related Person of any system, design, process
or procedure recommended, developed or devised by Invetech for or on
behalf of the Client;
|
|
(iii)
|
the
use by Client or any Client Related Person of any information, survey,
forecast or recommendation arising out of the
Assignment;
|
and
|
(iv)
|
any
breach by the Client of any of its obligations under the
Agreement.
|
where
'Client Related Person'
means any person who directly or indirectly accesses, acquires or possesses by,
from or through the Client any Product, system, design, process, procedure,
information, survey, forecast, recommendation or advice related to, or arising
out of, this Assignment.
|
(b)
|
Invetech
shall indemnify, keep indemnified and save harmless the Client from and
against all losses, claims, proceedings, damages, costs and expenses in
respect of or arising directly or indirectly from the use by Invetech or
any Invetech Related Person of any system, design, process or procedure
recommended, developed or devised by Invetech for or on behalf of the
Client in connection with the Assignment and used in any way by Invetech
other than for the benefit of the
Client.
|
9.2
|
The
Client shall at its own cost and expense procure that the Product complies
in all respects with the provisions of all legislation, Acts, regulations,
rules and by-laws for the time being in force and all orders or directions
which may be made or given by any statutory or any other competent
authority in respect of or affecting the Product in any jurisdiction in
which it may be manufactured, used or
sold.
|
9.3
|
The
Client acknowledges that Invetech is not responsible to obtain any
independent verification of any information whether provided by or on
behalf of the Client or obtained from any other source whatsoever, nor to
obtain any searches of any matters of public record unless it is
specifically required to do so in the Proposal. The Client
agrees that prior to implementing any recommendations or results of the
provision of Invetech’s services or using any Product, the Client will
itself verify the suitability and safety for implementation or use of
those recommendations, results or
Product/s.
|
10.1
|
Section
68A of the Trade Practices Act, 1974 ('the Act') has the effect of
enabling those who have contracted to supply services to limit their
liability in certain circumstances for breach of conditions and warranties
implied by the Act.
|
Subject
to the qualifications in Section 68A of the Act, Invetech’s liability for any
breach of a condition or warranty implied by Division 2 of Part V of the Act
(other than a condition or warranty implied by Section 69 of the Act) in the
case of services or goods provided in the course of performing the Assignment
shall be limited to Invetech at its discretion either:
|
(a)
|
in
the case of services; supplying the services again or paying the cost of
having the services supplied again;
or
|
|
(b)
|
in
the case of goods; replacing the goods, supplying equivalent goods, paying
the cost of replacing the goods or paying the cost of acquiring equivalent
goods.
|
10.2
|
To
the extent permitted by law, Invetech's total aggregate liability under or
in any way related to the Agreement (including, without limitation,
liability for any negligence or carelessness of Invetech or any of its
employees, servants or agents or which arises directly or indirectly from
the use of the Product or any information, survey, forecast or
recommendation arising out of the Assignment or from services or goods
supplied by Invetech for or on behalf of the Client or from any advice
given to the Client by Invetech or termination of the Agreement, however
arising), is limited to the aggregate sum total of fees paid to Invetech
by the Client under the Proposal.
|
10.3
|
To
the extent permitted by law, Invetech excludes its liability for all
indirect and consequential damages however arising (including, without
limitation, in the circumstances set out in clause 10.2). For
the purposes of this clause, '
consequential
damage
' shall include,
but not be limited to loss of profit or goodwill or similar financial
loss, any payment made or due to any third party and any loss or damage
caused by delay in the supply of services or goods in relation to the
Assignment.
|
10.4
|
Except
as required by statute (including the Act), all implied conditions and
warranties in respect of the Product or any services or goods supplied by
Invetech as part of the Assignment are hereby
excluded.
|
10.5
|
Without
restricting the ambit of this clause, any liability Invetech may have for
any costs, expenses, damages or loss directly or indirectly arising from
the Client's reliance on surveys, advice, forecasts or any other
information supplied by Invetech under the Proposal is excluded to the
full extent permitted by law.
|
It is a
condition of Invetech’s agreement with the Client to provide Invetech’s services
in relation to the Assignment that neither the Client nor any firm or company
associated with or related to the Client will, for a period of two (2) years
after execution of this Agreement, solicit or offer to employ any member of
Invetech’s professional staff. The Client's liability to Invetech for any breach
of this provision will equate to a year's gross salary for the individual
concerned, this amount being a genuine pre-estimate of Invetech's loss in this
event. Notwithstanding the foregoing that it shall not be a violation
of this clause 11 for Client or any such related firm to (i) make any general
public solicitation for employment for any position, or (ii) hire a member of
Invetech’s professional staff who either responds to such a general solicitation
for employment or otherwise contacts Client or such related firm on his or her
own initiative and without solicitation by Client or any such related firm in
contravention of the above provisions.
Invetech
shall be entitled to use in publicity material, including without limitation
electronically stored and transmitted material, images of the Product and
references to the Assignment and to Invetech's role in it, provided that the use
of such images and references do not breach Invetech's obligations under clause
6 or disclose confidential information generated in the course of the Assignment
that is not otherwise in the public domain.
13.1
|
Unless
otherwise provided in the Proposal, the Agreement or the Assignment and
Invetech’s further services in relation to the Agreement or the Assignment
may be terminated either by Invetech or the Client giving four week’s
prior notice in writing to the
other.
|
13.2
|
If
the Client becomes insolvent, goes into liquidation, receivership,
voluntary or other administration or some similar legal process, fails to
make a payment to Invetech when due or is otherwise in breach of any of
these Terms of Business or the Agreement in a material way then at any
time thereafter (unless Invetech expressly waives that failure, breach or
circumstance in writing) Invetech may by written notice to the Client
immediately terminate the Agreement or the Assignment and Invetech’s
further services in relation to the
Assignment.
|
13.3
|
If
the Agreement or the Assignment is terminated either under this clause or
otherwise, the Client must immediately pay all moneys due or payable in
relation to work done by Invetech under the Proposal to that date and,
where termination is not due in any way to default by Invetech, the Client
must also pay or reimburse to Invetech all costs, expenses and charges
paid or incurred by Invetech that would otherwise be payable pursuant to
clause 3, including any arising out of the cancellation, provided however
that the amount due under this clause shall not exceed the next payment
due as defined in the proposal payment
schedule.
|
13.4
|
Clauses
2, 3, 4, 6, 7, 8, 9, 10, 12, 14, 16 and 22 will survive any termination of
the Agreement or the Assignment.
|
If for
any reason any provision of these Terms of Business would render the Agreement
ineffective, void, voidable, illegal or unenforceable, that provision or the
relevant part thereof shall, without in any way affecting the validity of the
remainder of the Agreement, be severable and the Agreement shall be read and
construed and take effect for all purposes as if that provision or part were not
contained herein.
15.
|
ENTIRE
AGREEMENT AND VARIATIONS
|
15.1
|
These
Terms of Business and the Proposal constitute the entire Agreement between
Invetech and the Client.
|
15.2
|
Any
variation of the Proposal, these Terms of Business or the Agreement will
only be effective if it is in writing signed by Invetech and the
Client.
|
All
disputes concerning these Terms of Business or the Assignment, which cannot be
resolved by negotiation between Invetech and the Client, must be referred to an
independent expert agreed upon by the Client and Invetech before any other
proceedings are commenced. Failing agreement on the choice of expert
within 14 days of the dispute arising, the dispute is to be referred to an
independent expert nominated by the Victorian Chapter Chairman for the time
being of the Institute of Arbitrators and Mediators, Australia in Melbourne, The
independent expert shall be regarded as an expert and not as an arbitrator and
accordingly no legislation relating to arbitration shall
apply. Unless otherwise agreed in writing by the parties, the
location for any meetings or proceedings in connection with such independent
expert shall be in Melbourne, Australia if referred by OcuSense, and in Los
Angeles California if referred by Invetech. The terms of the
appointment will require the independent expert to use his or her best
endeavours to certify in writing to the Client and Invetech the determination
that has been made within 30 days of the appointment. Any costs
associated with any such referral and determination will be paid by Invetech and
the Client in equal shares unless the expert makes a written determination that
one party has been vexatious or frivolous in which case that party shall pay all
of those costs.
Any
person who purports to enter into the Agreement constituted by the Proposal and
these Terms of Business on behalf of the Client hereby warrants that for all
purposes of the Agreement he or she is the duly authorised agent of the Client
and if such person is not the duly authorised agent of the Client then in
consideration of Invetech entering into the Agreement he or she shall be deemed
to be the Client and be bound by all the terms, covenants and conditions of the
Agreement.
The
Agreement is subject to the laws of Victoria and the Commonwealth of Australia
and the Client submits to the jurisdiction of the Courts of Victoria and the
Commonwealth of Australia.
Invetech
will carry out the Assignment for the Client only and prior to completion or
termination of the Assignment the Client may not assign any of its rights
arising under the Agreement to any other entity without Invetech’s prior written
consent. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the successors or permitted assigns of the
parties.
A notice
to be given by either Invetech or the Client to the other must be in writing and
delivered by hand or by post (postage prepaid) or sent by facsimile (with
receipt confirmed) to that party’s address or facsimile number as shown in the
Proposal. Each party may change its address for purposes of receiving
notice hereunder upon written notice to the other party.
Invetech’s
obligations in relation to the Assignment will be suspended during the time that
Invetech is prevented from fully complying with its obligations by causes beyond
its reasonable control.
22.1
|
The
Proposal is only capable of acceptance and implementation on the basis of
these Terms of Business and, if the Client purports to accept by some
other means incorporating different or additional terms, then those
different or additional terms will not apply and any work undertaken by
Invetech under or in connection with the Assignment shall be on the basis
of the conditions contained in the Proposal and these Terms of
Business.
|
22.2
|
If
there is any conflict between these Terms of Business and any conditions
contained in the Proposal, these Terms of Business will override those
conditions to the extent of the inconsistency unless an inconsistent
condition in the Proposal expressly states that it takes precedence over
or operates notwithstanding these Terms of
Business.
|
Page 5
Exhibit
10.31
***Sections
4 and 5 of this Amendment have been omitted pursuant to a request for
confidential treatment and have been filed separately with the U.S. Securities
and Exchange Commission.
Amendment
#5
to
License
Agreement 2003-03-0433
This
amendment #5 (“Amendment #5”) is made by and between OcuSense, Inc., a Delaware
corporation, having an address at 12707 High Bluff Drive, Suite 200, San Diego,
California 92130 (“LICENSEE”) and The Regents of The University of California, a
California corporation having its statewide administrative offices at 1111
Franklin Street, Oakland, California 94607-5200 (“UNIVERSITY”), represented by
its San Diego campus having an address at University of California, San Diego,
Technology Transfer & Intellectual Property Services, Mail-code 0910, 9500
Gilman Drive, La Jolla, California 92093-0910 (“UCSD”).
This
Amendment #5 is effective on June 29, 2007 (“Amendment #5 Effective
Date”).
RECITALS
WHEREAS,
LICENSEE and
UNIVERSITY previously entered into License Agreement #5003-03-0433 (“License”)
as of March 12, 2003 (as amended 6/9/03, 9/5/05, 7/7/06 and 10/9/06) for the
commercial development of UCSD invention disclosure SD2002-180 titled, “Volume
Independent Tear Film Osmometer” (“Invention”);
WHEREAS,
in its efforts to
develop market opportunities for the Invention, LICENSEE has requested certain
revisions and/or clarifications to the License so as to facilitate LICENSEE’s
establishment of meaningful distribution channels and strategic partnerships,
furthering the likelihood of realizing broad commercial markets for
Invention;
WHEREAS,
UNIVERSITY is
desirous that LICENSEE achieve the broadest possible commercial success with
Invention and therefore UNIVERSITY is amenable to clarifying the terms of
LICENSEE’s agreement via the following amendments to License.
Therefore,
it is hereby agreed that in consideration of a one-time license amendment fee of
seven thousand five hundred dollars (US$7,500.00) payable upon execution of this
Amendment #5:
|
1.
|
A
new Paragraph 1.2(m) is added to the License to
read:
|
“use and
products for the measurement and/or analysis of biomarkers or other analytes in
tears; for the diagnosis and/or management of diseases, but excluding the fields
described in any of Paragraphs 1.2(a) through 1.2(l).”
|
2.
|
Paragraph
1.5 of the License is amended in its entirety to read as
follows:
|
“”
Patent Rights
” shall include
all of the patent rights listed in the table below, and: (i) any conversions or
utility patent applications claiming priority thereto; (ii) any continuing
applications or utility patent applications with respect thereto, including
reissues, extensions, substitutions, continuations, divisions, and
continuation-in-part applications to the extent the claims in such
continuation-in-part applications are supported in the specification; (iii) any
corresponding foreign applications or patents; (iv) and all patents filed by
UNIVERSITY having claims which are supported by specifications of any of the
foregoing.”
UCSD
Case #
|
Application
#
|
Patent
#
|
Inventor(s)
|
Assignee
|
Parent
|
2002-180-1
|
60/311,198
|
NA
|
Sullivan
|
UC
|
NA
|
2002-180-2
|
60/401,432
|
NA
|
Sullivan
|
UC
|
NA
|
2002-180-3
|
10/400,617
|
7,017,394
|
Sullivan
|
UC
|
conversion
dash 1 and 2
|
2002-180-4
|
10/722,084
|
7,051,569
|
Sullivan
/
Donsky
|
Joint
UC/Ocusense
|
CIP
of dash 3
|
2002-180-5
|
10/810,780
|
7,111,502
|
Sullivan
/
Donsky
|
UC
|
CIP
of dash 3
|
2002-180-6
|
11/358,986
|
abandoned
|
Sullivan
|
UC
|
CIP
of dash 3
|
2002-180-7
(2006-296)
|
60/912,129
|
NA
|
Sullivan
|
UC
|
CIP
of dash 6
|
2002-180-7
(2006-296)
|
11/735,935
|
|
Sullivan
|
UC
|
CIP
of dash 8
|
2002-180-8
|
11/327,884
|
7,204,122
|
Sullivan
/
Donsky
|
Joint
UC/Ocusense
|
div
of dash 4
|
2007-211-1
|
60/869,543
|
|
Sullivan
/
Donsky
|
Joint
UC/Ocusense
|
CIP
of dash 3
|
|
3.
|
A
new Paragraph 2.2(e) is added to the License to read as
follows:
|
“For so
long as LICENSEE is licensed by UNIVERSITY under Section 2.1 above, if LICENSEE
grants a license to a third party under its own interest in any of the Patent
Rights licensed hereunder that are jointly owned by the parties, LICENSEE shall
also concurrently grant a sublicense under this Paragraph 2.2 under UNIVERSITY’s
interest in such jointly-owned Patent Rights.”
***Sections
4 and 5 in their entirety have been omitted pursuant to a request for
confidential treatment and have been filed separately with the U.S. Securities
and Exchange Commission.
6. A
new Paragraph 7.7 is added to the License to read as follows:
“Notwithstanding
Paragraph 7.1 above, this Agreement will terminate upon written notice given by
UNIVERSITY in its sole discretion, upon the filing of a claim in a court or
government agency seeking a determination that any portion of UNIVERSITY’s
Patent Rights is valid or unenforceable where the filing is by the LICENSEE, a
third party on behalf of the LICENSEE, or a third party at the written urging of
the LICENSEE; provided, however, that if any third party files such a claim on
behalf of LICENSEE (not at the written urging of LICENSEE) and LICENSEE
cooperates reasonably, as requested by the UNIVERSITY, to oppose such claim,
then such filing by the third party shall not be grounds for termination; and
further provided, however, that the right of termination set forth in this
Paragraph 7.7 shall not apply with respect to (i) interference proceedings with
respect to Patent Rights and patents or patent applications of LICENSEE or its
Affiliates, (ii) any good faith correspondence between LICENSEE and the United
States Patent and Trademark Office in the course of LICENSEE’s prosecution of
its interest in the Patent Rights or its prosecution of Patent Rights
for which UNIVERSITY has granted LICENSEE prosecution rights and/or (ii)
disputes regarding inventorship. For clarity, the parties acknowledge
that the filing of a claim or counterclaim by a third party in response to a
suit or threatened suit for enforcement of the Patent Rights shall not be
grounds for termination under this Paragraph 7.7.”
IN WITNESS WHEREOF
, both
UNIVERSITY and LICENSEE have executed this Amendment #5, in duplicate originals,
by their respective and duly authorized officers on the day and year
written.
OCUSENSE
INC.
|
|
THE
REGENTS OF THE
|
|
|
|
|
UNIVERSITY
OF CALIFORNIA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
|
“Eric
Donsky”
|
|
By
|
”Jane
Moores”
|
|
(signature)
|
|
(signature)
|
|
|
|
|
|
|
|
Name:
|
Eric
Donsky
|
|
Name:
|
Jane
Moores, Ph.D.
|
|
Title:
|
CEO
|
|
Title:
|
Interim
Director
|
|
|
|
|
|
Technology
Transfer & Intellectual
|
|
|
|
|
|
Property
Services
|
|
|
|
|
|
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Date 7/9/07
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Date 7/2/07
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3
Exhibit
10.32
MULTI
TENANT OFFICE
STANDARD
BUILDING LEASE
PENYORK
PROPERTIES III INC.
- and
-
OCCULOGIX,
INC.
___________________
LEASE
___________________
Project:
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2600
Skymark Avenue, Mississauga,
Ontario
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Premises:
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Suites
103 and 201, Building 9
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TABLE OF
CONTENTS
Section
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4.4
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Acceptance
of Premises
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4.5
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Licence
to Use Common Facilities
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4.7
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Fixturing
of Premises
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5.4
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Deemed
Rent and Allocation
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5.5
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Monthly
Payments of Additional Rent
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6.1
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Taxes
Payable by Tenant
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6.2
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Determination
of Tenant’s Taxes
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6.3
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Business
Taxes and Sales Taxes
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6.4
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Tax
Bills and Assessment Notices
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6.5
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Contest
of Realty Taxes
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7.1
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Operation
of Project by Landlord
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7.2
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Tenant’s
Payment of Operating Costs
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7.3
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Adjustments
to Operating Costs
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9.
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SERVICES
AND UTILITIES
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9.2
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Heating
and Air Conditioning
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9.3
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Non-Liability
of Landlord
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9.4
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Landlord’s
Suspension of Utilities
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10. MAINTENANCE,
REPAIRS AND ALTERATIONS
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10.1
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Maintenance
and Repairs of Premises
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10.2
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Approval
of Repairs and Alterations
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10.3
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Repair
According to Landlord’s Notice
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10.5
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Ownership
of Leasehold Improvements
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11.1
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Vacating
of Possession
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11.2
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Removal
of Trade Fixtures
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11.3
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Removal
of Leasehold Improvements
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11.4
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Overholding
by Tenant
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12.
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DAMAGE
AND DESTRUCTION
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12.1
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Insured
Damage to Premises
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12.2
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Uninsured
Damage and Last Two Years
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12.4
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Restoration
of Premises or Project
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12.5
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Determination
of Matters
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13.
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INSURANCE
AND INDEMNITY
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13.1
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Landlord’s
Insurance
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13.2
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Tenant’s
Effect On Other Insurance
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13.4
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Landlord’s
Right to Place Tenant’s Insurance
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13.5
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Landlord’s
Non-Liability
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13.6
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Indemnity
of Landlord
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13.7
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Landlord’s
Employees and Agents
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14.
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ASSIGNMENT,
SUBLETTING AND CHANGE OF CONTROL
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14.6
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No
Advertising of Premises
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14.9
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Assignment
by Landlord
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15.
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STATUS
AND SUBORDINATION OF LEASE
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15.3
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Tenant’s
Failure to Comply
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16.1
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Default
and Remedies
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16.3
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Bankruptcy
and Insolvency
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16.4
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Distress
and Tenant’s Property
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16.5
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Intentionally
Deleted
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16.8
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Impossibility
of Performance
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17. CONTROL
OF PROJECT
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17.2
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Alterations
of the Project
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17.3
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Use
of Common Facilities
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17.4
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Rules
and Regulations
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18.6
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Section
Numbers and Headings
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18.10
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Demolition or
Substantial Alterations
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Schedules
"A"
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LEGAL
DESCRIPTION OF PROJECT
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"B"
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OUTLINE
PLAN OF PREMISES
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"C"
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SECURITY
AGREEMENT - intentionally deleted
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"E"
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EXCLUSIVE
USES OF OTHER TENANTS
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"F"
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RENT
DEPOSIT AGREEMENT
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"G"
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ENVIRONMENTAL
QUESTIONNAIRE
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THIS LEASE
is dated October
17, 2005 and is made,
BETWEEN:
PENYORK
PROPERTIES III INC.
(hereinafter
called “
Landlord
”)
OF
THE FIRST PART
-and-
OCCULOGIX,
INC.
(hereinafter
called “
Tenant
”)
OF
THE SECOND PART
1.
LEASE
SUMMARY
The
following is a summary of some of the basic terms of this Lease, which are
elaborated upon in the balance of this Lease. This Section 1 is for convenience
and if a conflict occurs between the provisions of this Section 1 and any other
provisions of this Lease, the latter shall govern.
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(a)
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Premises:
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being
comprised of:
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(i)
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Suite 103
(“Suite 103
Premises”) being a portion of the
first (1
st
) floor of
Building 9,
as shown
outlined on the floor plan annexed hereto as Schedule “B-1”;
and
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(ii)
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Suite 201
(“Suite 201
Premises”), being a portion of the
second (2
nd
)
floor of Building 9
, as
shown outlined on the floor plan annexed hereto as Schedule
“B”,
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(collectively,
the “Premises”), of the project municipally known as
2600 Skymark Avenue, Mississauga,
Ontario.
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(b)
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Term:
One (1) year and Six (6)
months;
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(c)
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Commencement
Date:
February 1,
2006;
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(d)
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Expiry
Date:
July 31,
2007
;
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(e)
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Basic
Rent:
Subject
to adjustment in accordance with Section 5.2 and, further, subject to
Section 3 of Schedule “D”:
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RENTAL
PERIOD
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RATE
PER SQ.FT. PER ANNUM OF RENTABLE AREA
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February
1, 2006 to July 31, 2007
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$10.00
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(f)
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Rentable
Area of Premises:
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(i)
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Suite 103
Premises
containing approximately
1,363
square feet;
and
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(ii)
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Suite 201
Premises
containing approximately
5,237
square
feet;
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(collectively
approximately
6,600
square feet) (subject to determination in accordance with Section
2.24);
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(g)
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Rent
Deposit:
Twenty Four
Thousand Six Hundred and Thirty-Four Dollars and Sixty Two Cents
($24,634.62)
, to
be held by the Landlord in accordance with the provisions of the Rent
Deposit Agreement;
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(h)
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Use
of Premises: General business offices for an
ophthalmic therapeutic
company
, to the extent permitted by all Laws and to the extent in
keeping with the standards of a first-class office building, under the
name Occulogix, Inc. and by no other name whatsoever without the
Landlord’s prior written consent;
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(i)
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Address for Service of
Notice on Tenant:
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at the
Premises
Address for Service of
Notice on Landlord:
PenYork
Properties III Inc.
c/o
Bentall Investment Management
55
University Avenue, Suite 300
Toronto,
Ontario
M5 V
2H7
Attention:
Investment Manager
With a
copy to the Landlord at:
PenYork
Properties III Inc.
c/o
Bentall Real Estate Services L.P.
10
Carlson Court, Suite 500
Etobicoke,
Ontario
M9W
6L2
Attention: Vice-President,
Operations
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(j)
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Special
Provisions: See Schedule “D
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Where
used in this Lease, the following words or phrases shall have the meanings set
forth in the balance of this Article.
2.1 “Additional
Rent” shall have the meaning given to it in Section 5.3.
2.2 “Architect”
means an architect, engineer, surveyor or other qualified person appointed by
the Landlord from time to time.
2.3 “Basic
Rent” shall have the meaning given to it in Section 5.2.
2.4 “Building”
means the building in which the Premises are located.
2.5 “Business
Hours” means normal business hours for the Project as determined by Landlord
from time to time and which, unless otherwise determined by Landlord, shall be
from 8:00 a.m. to 6:00 p.m., Monday through Friday, excluding holidays, and
subject to applicable Laws.
2.6 “Commencement
Date” shall have the meaning given to it in subsection 1(c).
2.7 “Common
Facilities” means: (a) the Project, excluding only Leasable Areas, Storage
Areas, and premises at or below grade whether leased or not, used for sports,
fitness or other recreational purposes, and including, without limitation: (i)
all areas, facilities, systems, improvements, furniture, fixtures and equipment
in or on the Project; (ii) the lands forming part of the Project; and (iii)
parking areas and facilities, if any, and other service areas and facilities, if
any; and (b) all lands, areas, facilities, systems, improvements, furniture,
fixtures and equipment serving or benefiting the Project, whether or not located
within the Project, to the extent that the same are designated or intended by
Landlord to be part of the Common Facilities from time to time.
2.8 “Environmental
Legislation” means all statutes, laws, ordinances, codes, rules, regulations,
orders, notices and directives, now or at any time hereafter in effect, made or
issued by any municipal, provincial or federal government, or by any department,
agency, board or office thereof, or by any board of fire insurance underwriters
or any other agency or source whatsoever, regulating, relating to or imposing
liability or standards of conduct concerning any matter which may be relevant to
the use or occupancy of the Project or any part thereof or the conduct of any
business or activity in, on, under or about the Project or any part thereof, or
any material, substance or thing which may at any time be in, on, under or about
the Project or any part thereof or emanate therefrom.
2.9 “Expiry
Date” shall have the meaning given to it in subsection 1(d).
2.10
“
Fiscal Year”
means the period used by Landlord for fiscal purposes in respect of the Project.
Unless otherwise determined by Landlord by written notice to Tenant at any time
or times, each Fiscal Year shall be a calendar year. In the event of a change in
the Fiscal Year, or with respect to a partial Fiscal Year at the beginning or
end of the Term, all appropriate adjustments resulting from a Fiscal Year being
shorter or longer than twelve (12) months shall be made.
2.11
“Hazardous Materials” means any substance or thing or mixture of them which
alone, or in combination, or in concentrations, are flammable, corrosive,
reactive or toxic or which might cause adverse effects or be deemed detrimental
to living things or to the environment (including, but not limited to, any
pollutant, contaminant, toxic or hazardous substance, such as by way of example,
urea formaldehyde, asbestos, polychlorinated biphenyl, pesticides, mold, mildew,
mycotoxins or microbial growths or any other substance the removal, manufacture,
preparation, generation, use, maintenance, storage, transfer, handling or
ownership of which is subject to applicable Laws.
2.12
“Landlord’s Work” - intentionally deleted.
2.13
“Laws” means all statutes, regulations, by-laws, orders, rules, requirements and
directions of all governmental authorities having jurisdiction.
2.14
“Lease” means this Lease including all of the schedules attached
hereto.
2.15
“Lease Year” means each consecutive period of three hundred sixty-five (365)
days (or three hundred sixty-six (366) days in the case of a Lease Year which
includes the month of February in a leap year), except that the first Lease Year
shall commence on the Commencement Date and end on the day before the
anniversary of the first day of the first full month of the Term; each
successive Lease Year shall commence on the anniversary of the first day of the
first full month of the Term.
2.16
“Leasable Areas” means all areas and spaces of the Project to the extent
designated or intended from time to time by Landlord to be leased to tenants,
whether leased or not, but excluding any parking areas and facilities, Storage
Areas, and premises at or below grade.
2.17
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(a)
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“Operating
Costs” means the aggregate of all expenses and costs of every kind for
each fiscal period designated by Landlord, as determined in accordance
with reasonable principles and without duplication, incurred by or on
behalf of Landlord with respect to the operation, maintenance, repair,
replacement and management of the Project, including structural repairs
and replacements, and all insurance relating to the Project, provided that
if the Project is less than one hundred (100%) percent completed or
occupied during the whole of any fiscal period, Operating Costs shall be
adjusted to mean the amount obtained by adding to the actual Operating
Costs during such fiscal period such additional costs as would have been
incurred, as determined by Landlord acting reasonably, if the Project had
been one hundred (100%) percent completed and occupied. For clarification,
Landlord shall be entitled to adjust upward only those amounts which may
vary depending on occupancy and in no event shall this provision entitle
Landlord to recover more costs than Landlord actually incurs in respect of
any adjusted item or require Tenant to pay in respect of such adjusted
item more than Tenant would have had to pay had the Project been one
hundred (100%) percent completed and occupied. Without in any way limiting
the generality of the foregoing, Operating Costs shall include all costs
in respect of the following:
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(i)
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all
remuneration, including wages and fringe benefits, of employees directly
engaged in the operation, maintenance, repair, replacement and management
of the Project;
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(ii)
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heating,
ventilating, air conditioning and humidity control of the Project and fire
sprinkler maintenance and monitoring, if any, of the
Project;
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(iii)
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cleaning,
janitorial services, window cleaning and waste
removal;
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(iv)
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operation,
maintenance, repair and replacements of elevators and escalators, if
any;
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(v)
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all
utilities supplied to the Project including, without limitation, water,
gas, electricity and sewer charges, excluding those charged directly to
tenants of the Project;
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(vi)
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landscaping
and maintenance of all outside areas, including snow and ice clearing and
removal and salting of driveways and parking areas and of sidewalks
adjacent to the Project;
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(vii)
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depreciation
or amortization, over a reasonable period of time in accordance with
reasonable principles, of the costs, including capital costs, of all
improvements, furnishings, fixtures, equipment, machinery, systems and
facilities constructed or installed in or used in connection with the
Project and interest on the undepreciated cost of all items in respect of
which depreciation or amortization is included herein at two (2%) percent
in excess of the prime rate of interest charged by Landlord’s bank at
Toronto as of the first day of each Fiscal
Year;
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(viii)
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all
insurance which Landlord obtains and the cost of any deductible amounts
payable by Landlord in respect of any insured risk or
claim;
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(ix)
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policing,
supervision, security and traffic
control;
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(x)
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the
cost of repairs and replacements to, and maintenance of, the Project
including structural maintenance, repairs, improvements and replacements
(with replacements of a capital nature being treated in accordance with
the provisions hereof applicable to capital costs), and the cost of all
supplies, machinery, equipment, facilities, systems and property installed
therein or used in connection therewith, and all repairs and replacements
to and maintenance thereof;
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(xi)
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all
costs in the nature of Operating Costs in respect of areas, services and
facilities outside the Project, such as sidewalks and boulevards, off-site
utilities and other service connections, and in respect of areas, services
and facilities shared by users of the Project and users of any other
property, to the extent Landlord performs or contributes to the same as a
result of its ownership of the
Project;
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(xii)
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engineering,
accounting, legal and other consulting and professional services related
to Common Facilities;
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(xiii)
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business
taxes, if any, on Common
Facilities;
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(xiv)
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capital
taxes in respect of Landlord’s ownership or other interest in the Project,
namely any tax or taxes exigible under any provincial or federal
legislation based upon or computed by reference to the paid-up capital or
place of business of Landlord as determined for the purposes of such tax
or based upon or computed by reference to the taxable capital employed in
Canada, or any similar tax levied, imposed or assessed in the future in
lieu thereof or in addition thereto by any governmental
authority;
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(xv)
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Sales
Taxes payable by Landlord on the purchase of goods and services included
in Operating Costs (excluding any such Sales Taxes which are available to
and claimed by Landlord as a credit or refund in determining Landlord’s
net tax liability on account of Sales Taxes, but only to the extent that
such Sales Taxes are included in Operating
Costs);
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(xvi)
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the
fair rental value of space occupied by Landlord for management,
supervisory or administrative purposes relating to the Project;
and
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(xvii)
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a
management fee of five (5%) percent of gross amounts received or
receivable by Landlord in respect of the Project for all items, including
all such items as are included in the Lease as Rent, assuming full
occupancy and disregarding any reduction, limitation, deferral or
abatement of any amounts in the nature of
Rent.
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(b)
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Operating
Costs, however, shall be reduced by the following to the extent actually
received by Landlord:
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(i)
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proceeds
of insurance and damages received by Landlord from third parties to the
extent of costs otherwise included in Operating
Costs;
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(ii)
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contributions
from parties other than tenants of the Project, if any, in respect of
Operating Costs, such as contributions made by parties for sharing the use
of Common Facilities, but not including rent or fees charged directly for
the use of any Common Facilities such as parking fees and rent for Storage
Areas; and
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(iii)
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amounts
in the nature of Excess Costs, as defined in subsection 7.3(a), to the
extent received by Landlord from tenants of the
Project.
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(c)
Operating
Costs, however, shall exclude the following:
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(i)
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expenses
incurred by Landlord in respect of other tenants’ leasehold improvements;
and
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(ii)
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repairs
or replacements to the extent that the cost of the same is recovered by
Landlord pursuant to original construction
warranties.
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2.18
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“Premises”
shall have the meaning given to it in Section
4.1.
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2.19
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“Project”
means those lands described in Schedule “A” hereto and all buildings,
structures, improvements, equipment and facilities of any kind erected or
located thereon from time to time, as such lands, buildings, structures,
improvements, equipment and facilities may be expanded, reduced or
otherwise altered by Landlord in its sole discretion from time to
time.
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2.20
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“Proportionate
Share” means a fraction which has as its numerator the Rentable Area of
the Premises and which has as its denominator the aggregate Rentable Area
of Leasable Areas within the Project, or such portion or portions of the
Leasable Areas within the Project to which Landlord, acting reasonably
shall allocate such cost of which Tenant is to pay its Proportionate
Share, subject to adjustment pursuant to subsections 7.3(b) and
7.3(c).
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2.21
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“Realty
Taxes” means all taxes, rates, duties, levies, fees, charges, local
improvement rates, levies and assessments whatever (“Taxes”), whether
municipal, provincial, federal or otherwise, which may be levied, assessed
or charged against or in respect of the Project or any part thereof or any
fixtures, equipment or improvements therein, or against Landlord in
respect of any of the same or in respect of any rental or other
compensation receivable by Landlord in respect of the same, and including
all Taxes which may be incurred by or imposed upon Landlord or the Project
in lieu of or in addition to the foregoing including, without limitation,
any Taxes on or in respect of real property rents or receipts as such (as
opposed to a tax on such rents as part of the income of Landlord) any
commercial concentration levy in respect of the Project, and any licence
fee measured by rents or other charges payable by occupants of space in
the Project.
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2.22
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“Rent”
shall have the meaning given to it in Section
5.1.
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2.23
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“Rent
Deposit Agreement” means the rent deposit agreement, if any, attached
hereto.
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2.24
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“Rentable
Area” of premises shall be the Usable Area of such premises plus the
relevant proportion, as determined by Landlord, of all areas not leased to
any one tenant such as, without limitation, hallways, elevator lobbies,
ground floor lobbies, washrooms, mechanical and service rooms. Every
Rentable Area shall be as determined by Landlord from time to time and
each such determination shall be binding upon the parties
hereto.
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2.25
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“Sales
Taxes” means all business transfer, multi-stage sales, sales, use,
consumption, value-added or other similar taxes imposed by any federal,
provincial or municipal government upon Landlord, or Tenant, or in respect
of this Lease, or the payments made by Tenant hereunder or the goods and
services provided by Landlord hereunder including, without limitation, the
rental of the Premises and the provision of administrative services to
Tenant hereunder.
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2.26
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“Storage
Areas” means all areas, if any, designated by Landlord from time to time
to be used by tenants exclusively or primarily for storage
purposes.
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2.27
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“Tenant’s
Work” shall have the meaning as set out on Schedule “H” attached
hereto.
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2.28
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“Term”
shall have the meaning given to it in Section
4.2.
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2.29
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“Usable
Area” when applied to the Premises or any Leasable Areas means the area
measured from the interior face of glass in exterior walls and windows,
from the exterior face of all walls and windows dividing any Leasable
Areas from Common Facilities, and from the centre line of all interior
walls separating any Leasable Areas from other Leasable Areas, all without
deduction for any space occupied by structures, columns, beams, conduits,
ducts or projections of any kind, and all without deduction for the
recessing of any entrance way or boundary wall from the lease line, but
excluding therefrom the area occupied by elevator shafts and building
standard stairwells, and their enclosing walls, which do not serve
exclusively a tenant occupying premises on more than one
floor.
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3.1
Net Lease
It is the
intent of the parties hereto that, except as expressly herein set out, this
Lease be absolutely net to Landlord and Landlord not be responsible for any
expenses or obligations of any kind whatsoever in respect of the Premises or the
Project.
4.1 Premises
Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord those premises
(“Premises”) being part of the Project and shown outlined on the plans attached
hereto as Schedules “B” and “B-1”. The purpose of Schedules “B” and “B-1” is to
show the approximate location of the Premises and its contents are not intended
as a representation as to the precise size or dimensions of the Premises or any
other aspects of the Project. The Premises shall extend from the upper surface
of the structural subfloor to the lower surface of the structural ceiling within
the boundaries of the Usable Area of the Premises. The Premises shall exclude
the exterior faces of all perimeter walls, windows and doors of the Premises,
notwithstanding the manner in which Rentable Area is measured.
4.2
Term
The term
of this Lease (the “Term”) shall be for the period described as the Term in
subsection 1(b) hereof, commencing on the Commencement Date and ending on the
Expiry Date, both dates as described in subsections l (c) and (d).
4.3 Fixturing
Period
From the
later of: (i) Tenant’s execution and delivery to Landlord of this Lease; (ii)
Tenant’s delivery to Landlord of insurance certificate(s) evidencing the
requisite insurance coverage under this Lease, (the “Commencement Date of the
Fixturing Period”), the Tenant shall be entitled to possession of Suite 103
Premises until the date preceding the Commencement Date in order to fixture
Suite 103 Premises for the Tenant’s business and, thereafter, if Tenant has
completed its fixturing, Tenant may be permitted continued occupancy of Suite
103 in order to commence carrying on business in Suite 103 Premises (“Fixturing
Period”). During the Fixturing Period, Tenant shall not be obligated to pay
Basic Rent, Operating Costs including utilities, or Realty Taxes but shall be
liable for all other costs and obligations including the costs of any additional
services in accordance with this Lease for which Tenant will continue to be
obligated to pay, and Tenant shall be subject to all the other terms and
conditions of this Lease insofar as they are applicable including, without
limitation, the obligation to maintain insurance, and the provisions relating to
the liability of Tenant for its acts and omissions, and the acts and omissions
of its servants, employees, agents, contractors, invitees, concessionaires and
licensees and the indemnification of Landlord and others under this
Lease.
For
clarity, as of the date hereof, the Tenant occupies the Suite 201 Premises under
a sublease agreement with the current tenant of the Suite 201 Premises and until
the Commencement Date hereof shall be bound by the lease
thereunder.
4.4 Acceptance
of Premises
Tenant
shall accept the Premises in the state and condition in which they are received
from Landlord and Tenant’s entering into possession of the Premises shall be
conclusive evidence of the acceptance by Tenant of the condition and state of
repair of the Premises.
4.5 Licence
to Use Common Facilities
Subject
to all other relevant provisions of this Lease, Landlord grants to Tenant the
nonexclusive licence during the Term to use for their intended purposes, in
common with others entitled thereto, such portions of the Common Facilities as
are reasonably required for the use and occupancy of the Premises during
Business Hours and such other hours as the Common Facilities are open for use,
as determined by Landlord from time to time.
4.6 Quiet
Enjoyment
Subject
to Tenant’s complying with all of the terms of this Lease, Tenant may peaceably
possess and enjoy the Premises for the Term without interruption by Landlord or
any person claiming through Landlord.
4.7 Fixturing
of Premises
By not
later than the Commencement Date, Tenant shall fully finish, furnish, fixture
and staff the whole of the Premises and shall commence its business upon the
whole of the Premises.
5.1 Tenant
to Pay
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(a)
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Tenant
shall pay in lawful money of Canada at such address as shall be designated
from time to time by Landlord Basic Rent and Additional Rent (all of which
is herein sometimes referred to collectively as “Rent”) as herein provided
without any deduction, set-off or abatement whatsoever, Tenant hereby
agreeing to waive any set-off rights it may have under any statute or at
law. Subject to subsection 5.1(b), on the Commencement Date and the first
day of each Fiscal Year thereafter and at any time during any Fiscal Year
when required by Landlord, Tenant shall deliver to Landlord as requested
by Landlord post-dated cheques for all payments of Basic Rent and
estimates by Landlord of Additional Rent or any portions thereof payable
during the balance of such Fiscal
Year.
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(b)
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Notwithstanding
anything contained in this Lease to the contrary, provided Tenant in
actual physical occupation of and actively and diligently conducting
business in the whole of Premises is Occulogix, Inc., Tenant shall not be
required to submit post-dated Rent cheques to Landlord in accordance with
the provisions of the preceding paragraph until the earlier to occur of:
(i) Landlord’s issuance of a notice of default to Tenant in accordance
with the provisions of this Lease; and (ii) the third (3rd) instance of
Tenant becoming late with the payment of Rent during the Term, whereupon
Tenant shall immediately deliver to Landlord post-dated Rent cheques for
each month then remaining in the Rental Year (and thereafter Tenant shall
deliver twelve (12) post-dated cheques to Landlord at the beginning of
each subsequent Rental Year).
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5.2
Basic
Rent
Subject
to Section 3 of Schedule “D” to this Lease, commencing on the Commencement Date,
Tenant shall pay to Landlord a fixed minimum annual rent (‘Basic Rent”) for each
Lease Year of the Term in the annual amount(s) described as Basic Rent in
subsection 1(e), to be paid in equal monthly instalments, as described as Basic
Rent in subsection 1(e), in advance on the first day of each month during the
Term. On the Commencement Date, if it is other than the first day of a calendar
month, Tenant shall pay to Landlord for such partial month Basic Rent computed
on a per diem basis. If an amount per square foot is specified in the
description of Basic Rent in subsection 1(e), then the Basic Rent is intended to
be such amount per square foot of Rentable Area of the Premises per annum, and
the Basic Rent shall be subject to adjustment based upon the Rentable Area of
the Premises determined pursuant to Section 2.24. Within thirty (30) days after
such adjustment, if any, being made, Tenant shall pay to Landlord any deficiency
in previous payments of Basic Rent and Additional Rent and, if Tenant is not in
default under the terms of this Lease, the amount of any overpayment by Tenant
of Basic Rent and Additional Rent shall be paid to Tenant or credited to the
account of Tenant.
5.3
Additional
Rent
In
addition to Basic Rent, Tenant shall pay to Landlord, or as Landlord shall
direct, all other amounts as and when the same shall be due and payable pursuant
to the provisions of this Lease or pursuant to any other obligation in respect
of the Premises, all of which shall be deemed to accrue on a per diem basis; all
of such amounts are herein sometimes referred to as “Additional Rent”. Tenant
shall promptly deliver to Landlord upon request evidence of due payment of all
payments of Additional Rent required to be paid by Tenant
hereunder.
5.4
Deemed
Rent and Allocation
If Tenant
defaults in payment of any Rent (whether to Landlord or otherwise) as and when
the same is due and payable hereunder, Landlord shall have the same rights and
remedies against Tenant upon such default as if such sum or sums were rent in
arrears under this Lease. Landlord may allocate payments received from Tenant
among items of Rent then due and payable by Tenant. No acceptance by Landlord of
payment by Tenant of any amount less than the full amount payable to Landlord,
and no endorsement or direction on any cheque or other written instruction or
statement respecting any payment by Tenant shall be deemed to constitute payment
in full or an accord and satisfaction of any obligation of Tenant.
5.5
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Monthly
Payments of Additional Rent
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Landlord
may from time to time by written notice to Tenant estimate or re-estimate any
amount(s) payable by Tenant to Landlord hereunder including without limitation,
amounts in respect of Operating Costs, Realty Taxes and utilities, for the then
current or next following Fiscal Year, provided that the fiscal period used by
Landlord in respect of any particular item may correspond to a shorter period
within any Fiscal Year where such item, for example Realty Taxes, is payable in
full by Landlord over such shorter period. The amounts so estimated shall be
payable by Tenant in advance in equal monthly instalments over the Fiscal Year
or other fiscal period on the same days as the monthly payments of Basic Rent.
Landlord may, from time to time, alter the fiscal period selected in each case.
As soon as practical after the expiration of each Fiscal Year, Landlord shall
furnish to Tenant an audited statement which sets out the total amount of
Operating Costs and Realty Taxes for the Project, together with a statement
(“Final Statement”) which sets out the Tenant’s Proportionate Share of Operating
Costs, its share of Realty Taxes and the cost of its utilities and other charges
that are payable by it under any other relevant provisions of this Lease for
such Fiscal Year. Upon written request from Tenant (Tenant agreeing to act
reasonably and in a bona fide manner in making a request), Landlord shall, at
Tenant’s expense, provide Tenant with reasonable information within Landlord’s
possession or control in order to assist Tenant in substantiating Tenant’s
Proportionate Share of Operating Costs and its share of Realty Taxes, provided
that Tenant makes its request within sixty (60) days after delivery of the Final
Statement. If the amount determined to be payable by Tenant as aforesaid shall
be greater or less than the payments on account thereof previously made by
Tenant, then within thirty (30) days after delivery of such Final Statement the
appropriate adjustments will be made and Tenant shall pay any deficiency to
Landlord and, if Tenant is not in default under the terms of this Lease, the
amount of any overpayment shall be paid to Tenant or credited to the account of
Tenant. Such Final Statement of Landlord shall be final and binding and Tenant
shall have no right to dispute the accuracy or propriety of any amounts or
calculations included therein, except to the extent that Tenant shall have,
within sixty (60) days after being given such Final Statement, demonstrated to
the satisfaction of Landlord any error in such Final Statement.
6.1 Taxes
Payable by Tenant
Subject
to Section 3 of Schedule “D” to this Lease, commencing on the Commencement Date,
and thereafter at all times throughout the Term, Tenant shall pay to Landlord or
the relevant taxing authority, as required by Landlord, not later than the time
when they fall due all Realty Taxes levied, confirmed, imposed, assessed or
charged (herein collectively or individually referred to as “charged”) against
or in respect of the Premises and all buildings, furnishings, fixtures,
equipment, improvements and alterations in or forming part of the Premises, and
including, without limiting the generality of the foregoing, any such Realty
Taxes charged against the Premises in respect of:
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(i)
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the
land on which the Premises is situate;
and
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(ii)
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any
Common Facilities.
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In
addition, Tenant shall pay, in the same manner as it is required to pay or
contribute to Operating Costs pursuant to Section 7.2 hereof, the Proportionate
Share of Realty Taxes charged against or in respect of Common Facilities, and
that portion allocated to the Project by Landlord, acting reasonably, of the
amount, if any, of Realty Taxes charged against the Project in excess of the
amount of Realty Taxes, in the aggregate, charged against Leasable
Areas.
6.2 Determination
of Tenant’s Taxes
Whether
or not there is a separate bill for Realty Taxes charged against the Premises or
a separate assessment, the Realty Taxes charged against the Premises shall be
determined by Landlord acting reasonably, the cost of making such determination
to be included in Operating Costs; in making such determination Landlord shall
have the right, without limiting its right to do otherwise, to establish
separate assessments for the Premises and all other portions of the Project by
using such criteria as Landlord, acting reasonably, shall determine to be
relevant including, without limitation:
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(a)
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the
then current established principles of assessment used by the relevant
assessing authorities and on the same basis as the assessment actually
obtained for the Project as a whole or the part thereof in which the
Premises are located;
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(b)
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assessments
of the Premises and any other portions of the Project in previous periods
of time;
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(c)
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the
Proportionate Share; and
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(d)
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any
act, religion or election of Tenant or any other occupant of the Project
which results in an increase or decrease in the amount of Realty Taxes
which would otherwise have been charged against the Project or any portion
thereof.
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6.3
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Business
Taxes and Sales Taxes
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(a)
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Tenant
shall pay to the relevant taxing authority as and when the same are due
and payable all taxes charged in respect of any business conducted on, or
any use or occupancy of, the
Premises.
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(b)
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Tenant
shall pay to Landlord when due all Sales Taxes imposed on Landlord or
Tenant with respect to Rent payable by Tenant hereunder or in respect of
the rental of space under this
Lease.
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6.4 Tax
Bills and Assessment Notices
Tenant
shall deliver to Landlord forthwith upon Tenant’s receiving the same copies of
all assessment notices, tax bills, receipts and other documents received by
Tenant relating to Realty Taxes on the Premises or the Project.
6.5 Contest
of Realty Taxes
Landlord
may contest any Realty Taxes and appeal any assessments related thereto and may
withdraw any such contest or appeal or may agree with the relevant authorities
on any settlement in respect thereof. Tenant will co-operate with Landlord in
respect of any such contest and appeal and shall provide to Landlord such
information and execute such documents as Landlord requests to give full effect
to the foregoing. All costs of any such contest and appeal by Landlord shall be
included in Operating Costs. Tenant will not contest any Realty Taxes or appeal
any assessments related thereto.
7.1 Operation
of Project by Landlord
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(a)
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Landlord
shall repair, maintain and operate the Project, other than Leasable Areas,
in a reasonable manner having regard to its size, age, location and
character.
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(b)
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Landlord
may at its sole option, provide janitorial and cleaning services to the
Premises substantially in accordance with prevailing standards for office
buildings of a similar standard in the area in which the Project is
located. Landlord shall not be liable for any loss or damage caused in
performance of any maintenance or cleaning services provided to the
Premises, no matter how caused, whether by theft and whether or not
resulting from or contributed to by the negligence of Landlord, its
servants, agents, employees, contractors or persons for whom Landlord is
in law responsible. Without in any way limiting or affecting the
generality or interpretation of the foregoing, Landlord shall in no event
be liable for any indirect or consequential damages suffered by Tenant or
any others.
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7.2 Tenant’s
Payment of Operating Costs
Subject
to Section 3 of Schedule “D” to this Lease, commencing on the Commencement Date
and thereafter at all times throughout the Term Tenant shall pay to Landlord the
Proportionate Share of Operating Costs. Subject to Section 5.5, the amounts
payable by Tenant pursuant to this Section 7.2 shall be paid to Landlord within
ten (10) days after the submission to Tenant of a statement showing the amount
payable by Tenant from time to time. All amounts payable under this Article 7 in
respect of any period not falling entirely within the Term shall be adjusted on
a per diem basis.
7.3
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Adjustments
to Operating Costs
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(a)
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If
by reason of the conduct of business on the Premises outside Business
Hours, or by reason of the particular use or occupancy of the Premises or
any of the Common Facilities by Tenant, its employees, agents or persons
having business with Tenant, additional costs in the nature of Operating
Costs, such as utility charges, security costs, and costs of heating,
ventilating and air conditioning, are incurred in excess of the costs
which would otherwise have been incurred for such items (“Excess Costs”),
then Landlord shall have the right to determine on a reasonable basis and
require Tenant to pay such Excess
Costs.
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(b)
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If
Tenant or any other tenant of the Project, pursuant to its lease or
otherwise by arrangement with Landlord, provides at its cost any goods or
services the cost of which would otherwise be included in Operating Costs,
or if any goods or services the cost of which is included in Operating
Costs benefit any portion of the Project to a materially greater or lesser
extent than any other portion of the Project, then either the denominator
for determining a Proportionate Share, or alternatively the amount of
Operating Costs, may be adjusted as determined by Landlord acting
reasonably to provide for the equitable allocation of the cost of such
goods and services among the tenants of the
Project.
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(c)
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Further,
Tenant acknowledges that the Premises may form part of a multi-use project
comprising various office towers, and Tenant acknowledges that the
Operating Costs and Realty Taxes may be allocated on a reasonable basis
between each portion of the Project, based on reasonable cost-sharing
principles as applied by Landlord.
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8.1 Use
of Premises
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(a)
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To
the intent that this covenant shall run with the Premises for the benefit
for the Project, excluding the Premises, Tenant covenants that it shall
not use and shall not permit the Premises to be used for any purpose other
than as described as Use of Premises in subsection 1(h) hereof. Tenant
acknowledges that Landlord is making no representation or warranty as to
Tenant’s ability to use the Premises for its intended use and Tenant
shall, prior to executing this Lease, perform such searches and satisfy
itself that its use is permitted under all applicable Laws and that Tenant
will be able to obtain an occupancy
permit.
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(b)
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Tenant
acknowledges that it is aware of the nature of the exclusive use rights
granted to certain other tenants of the Building and the Project, more
particularly described in Schedule “E” attached hereto, and agrees that it
shall not be permitted at any time during the Term and all extensions or
renewals thereof to carry out any business in the Premises in such a
manner as to infringe upon any such exclusive use provisions. Tenant also
agrees that it shall not be permitted at any time during the Term and all
extensions or renewals thereof to carry on business in the Premises in
such a manner as to infringe upon any future exclusive uses which Landlord
may grant from time to time. Tenant shall indemnify and save Landlord
harmless from any and all liability, losses, damages and expenses incurred
or suffered by Landlord in connection with the infringement or alleged
infringement by Tenant of any of such exclusive use provisions listed or
in remedying or attempting to remedy such infringement or alleged
infringement including, without limitation, Landlord’s legal fees and
expenses on a substantial indemnity
basis.
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(c)
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Tenant
acknowledges and agrees that in no event will an exclusive use or a
restrictive covenant be inferred or implied in its favour by reason of any
restrictions on Tenant’s business or in the foregoing provisions of this
Section 8.1.
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8.2 Conduct
of Business
At all
times throughout the Term, Tenant shall continuously and actively and diligently
conduct its business in the whole of the Premises in a first class and reputable
manner.
8.3 Tenant’s
Fixtures
Tenant
shall install and maintain in the Premises at all times during the Term
first-class trade fixtures including furnishings and equipment adequate and
appropriate for the business to be conducted on the Premises, all of which shall
be kept in good order and condition. Tenant shall not remove any trade fixtures
or other contents from the Premises during the Term except, with the prior
written consent of Landlord, in the ordinary course of business or for the
purpose of replacing them with others at least equal in value and function to
those being removed.
Tenant
shall not erect, install or display any sign or display on or visible from the
exterior of the Premises except for a building standard sign on the main entry
door to the Premises and on the building directory board, if any, both to be
installed by Landlord at Tenant’s cost to be paid forthwith upon
request.
Tenant
shall not allow any refuse, garbage or any loose, objectionable material to
accumulate in or about the Premises or the Project and will at all times keep
the Premises in a clean and neat condition. Tenant at its expense shall at all
times comply with Landlord’s rules and regulations regarding the separation,
removal and disposal of waste from the Premises. Notwithstanding the foregoing,
Landlord shall have the option to take over the function of separating, removing
and/or disposing of the waste and the cost to Landlord of same shall be included
in Operating Costs and any proceeds obtained may be retained by Landlord for its
own account. Until removed from the Project all waste from the Premises shall be
kept in appropriate containers within the Premises.
Tenant
shall co-operate with Landlord and with any contractor(s) engaged by Landlord in
respect of pest extermination in the Premises and the Building.
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(a)
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Tenant
shall not cause, suffer or permit any waste or damage to the Premises or
leasehold improvements, fixtures or equipment therein nor permit any
overloading of the floors thereof and shall not use or permit to be used
any part of the Premises for any dangerous, noxious or offensive activity
or goods and shall not do or bring anything or permit anything to be done
or brought on or about the Premises or the Project which results in undue
noise or vibration or which Landlord may reasonably deem to be hazardous
or a nuisance or annoyance to any other tenants or any other persons
permitted to be on the Project, and Tenant shall immediately take steps to
remedy, remove or desist from any activity, equipment or goods or
conditions on or emanating from the Premises to which Landlord
objects on a reasonable basis. Tenant shall take every reasonable
precaution to protect the Premises and the Project from risk of damage by
fire, water or the elements or any other
cause.
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(b)
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Tenant
shall not itself, and shall not permit any of its employees, servants,
agents, contractors or persons having business with Tenant, to obstruct
any Common Facilities or use or permit to be used any Common Facilities
for other than their intended purposes. Without limiting the foregoing,
Tenant shall not permit any equipment, goods or material whatsoever to be
placed or stored anywhere in or on the Common Facilities, including
without limitation on the loading docks and other outside areas adjacent
to the Premises. Tenant shall not, and shall not permit anyone else to,
place anything on the roof of the Building or go on to the roof of the
Building for any purpose whatsoever, without Landlord’s prior written
consent, which may be arbitrarily withheld in Landlord’s sole
discretion.
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(c)
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Tenant
shall not use any advertising, transmitting or other media or devices
which can be heard, seen, or received outside the Premises, or which could
interfere with any communications or other systems outside the
Premises.
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(d)
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Tenant
shall be solely responsible for any contaminant, pollutant or toxic
substance at any time affecting the Premises resulting from any act or
omission of Tenant or any other person on the Premises or any activity or
substance on the Premises during the Term, and any period prior to the
Term during which the Premises were used or occupied by or under the
control of Tenant, and shall be responsible for the clean-up and removal
of any of the same and any damages caused by the occurrence, clean-up or
removal of any of the same, and Tenant shall indemnify Landlord in respect
thereof.
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(e)
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Tenant
agrees to complete the environmental questionnaire attached hereto as
Schedule “G” and to forthwith advise Landlord in writing of any changes in
its activities that may alter the information provided
herein.
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Tenant
shall be solely responsible for obtaining from all authorities having
jurisdiction all necessary permits, licences and approvals as may be necessary
to permit Tenant to occupy the Premises and conduct its business thereon, as
required by all applicable Laws. Tenant shall comply at its own expense with all
applicable Laws respecting the use, condition and occupation of the Premises,
and all leasehold improvements, fixtures, equipment and contents
thereof.
All
deliveries to and from the Premises, and loading and unloading of goods,
merchandise, refuse, materials and any other items, shall be made only by way of
such driveways, access routes, doorways, corridors and loading docks as Landlord
may from time to time designate and shall be subject to all applicable rules and
regulations made by Landlord from time to time pursuant to Section
17.4.
Tenant
shall comply with all rules and regulations from time to time made by Landlord
in respect of window coverings on the interior of the Premises, in order to
maximize the efficiency of the climate control equipment in or serving the
Premises or to maintain an attractive uniform appearance of the Project from the
exterior thereof.
Tenant
shall not cause, suffer or permit the Premises or any part thereof to be used at
any time during the Term for any of the following businesses or
activities:
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(a)
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any
retail or wholesale sales activities or any
auction;
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(b)
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any
vending machines or other coin operated machines, entertainment or games
machines or any other mechanical or electrical serving or dispensing
machines or devices whatsoever or the sale or supply of food or beverages
(other than food or beverages such as are routinely served in office
premises without charge to employees such as coffee and soft drinks)
unless expressly permitted in writing by Landlord, in its sole
discretion;
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(c)
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any
sale of tickets for theatre or other entertainment events or lottery
tickets;
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(d)
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any
type of business or business practice which would, in the sole opinion of
Landlord, tend to lower the character or image of the Project or any
portion thereof;
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(e)
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any
use which in any way contravenes any restrictive covenants in leases
granted by Landlord; Tenant covenants and agrees that it will not carry on
in the Premises any business which will in any way place Landlord in
breach of any such restrictive covenants and Tenant will indemnify and
save Landlord harmless from and against all actions, claims, demands and
costs with respect thereto; this subsection (e) shall not be interpreted
to prevent Tenant from carrying on in the Premises any business to the
extent expressly permitted pursuant to Section 8.1
hereof;
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(f)
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any
business or activity not in compliance with all
Laws;
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(g)
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a
consulate, embassy, trade commission or other representative of a foreign
government;
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(h)
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a
governmental agency, service or office, ministry, social services agency
(including a welfare, immigration office or any other governmental office
which would result in access to the Premises to the general
public);
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(i)
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an
office for any political action, lobbying or for the primary purpose of
any politically oriented or motivated
activities;
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(j)
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an
office for a union;
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(k)
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a
social services agency;
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(l)
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in
a manner which would result in people waiting in the Common Facilities of
the Project;
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(m)
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in
any manner which would result in unemployed or homeless people or those in
need of social assistance attending at the
Project;
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(n)
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for
a call centre; or
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(o)
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for
a school or training centre of any
kind.
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The
inclusion of the foregoing provisions of this Section 8.11 shall not be deemed
to be a representation or warranty of Landlord that any of the foregoing
activities will not be authorized by Landlord to be conducted on any part of the
Project.
Tenant
shall forthwith, upon the request of Landlord, discontinue any business, conduct
or practice carried on or maintained in or about the Premises which, in
Landlord’s sole opinion, may damage or reflect unfavourably upon Landlord, the
Project, or any other tenants or occupants thereof.
If, in
the opinion of Landlord, Tenant is in breach of any of the provisions of this
Section 8.11, Tenant shall immediately discontinue such use upon Landlord’s
written request.
9.
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SERVICES AND
UTILITIES
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9.1 Utilities
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(a)
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Tenant
shall promptly pay for, as and when they fall due, to Landlord or as
Landlord shall from time to time direct, all costs of supplying water,
electricity, gas, and any other utilities which are available and supplied
to or in respect of the Premises, and all costs for all fittings,
connections and meters and all work performed in connection with any
services or utilities provided to the Premises. Tenant shall promptly
execute and deliver any agreements required by Landlord or by utilities
suppliers in respect of the supply of any utilities to the Premises.
Tenant’s use of any such utilities shall not exceed the available capacity
of the existing systems from time to
time.
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(b)
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Should
there be no individual meters for the measurement of the consumption of
any utilities supplied to the Premises then Landlord, acting reasonably,
may allocate the cost of such utilities among the various users thereof.
If required by Landlord, Tenant shall install at its expense a separate
meter or meters to measure the consumption of any or all utilities in the
Premises. The cost of any utilities which are not charged to tenants of
the Building individually shall be included in Operating
Costs.
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9.2 Heating
and Air Conditioning
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(a)
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Tenant
shall be responsible for and promptly pay for as and when due, to Landlord
or as Landlord shall from time to time direct, all costs of heating,
ventilating, air conditioning and humidity control in the Premises. The
said costs payable by Tenant shall be as determined by separate meters, if
any, and otherwise as determined by Landlord acting reasonably. Tenant
shall install at its expense such meters and in such locations as shall be
required by Landlord to measure the supply of or costs to be charged for
heating, ventilating, air conditioning and humidity control in the
Premises.
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(b)
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Tenant
shall operate the heating, ventilating, air conditioning and humidity
control equipment within or serving the Premises in such manner as to
maintain such reasonable conditions of temperature, air circulation and
humidity within the Premises as determined by Landlord and, in any event,
in such manner that there shall be no direct or indirect use of heating,
ventilating, air conditioning and humidity control from the Common
Facilities for the Premises. Tenant shall comply with all rules and
regulations as Landlord shall make from time to time respecting the
maintenance, repair and operation of all such heating, ventilating and air
conditioning equipment.
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(c)
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Landlord
shall have the right to require Tenant to pay as Excess Costs, pursuant to
subsection 7.3(a), any increase in Operating Costs caused by: (a) the
particular use or occupancy of the Premises; (b) above-normal consumption
of electrical or other power on the Premises; (c) the configuration of
partitions or other items on the Premises; or (d) the failure of Tenant to
shade windows.
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9.3
Non-Liability
of Landlord
Landlord
shall not be liable for any damages, direct or indirect, resulting from or
contributed to by any interruption or cessation in supply of any utilities or
heating, ventilating, air conditioning and humidity control. Without limiting
the generality of the foregoing, Landlord shall not be liable for and Tenant
shall indemnify Landlord against any and all indirect or consequential damages
or damages for personal discomfort or illness of Tenant or any persons permitted
by it to be on the Premises, by reason of the suspension or non-operation of any
utilities, heating, ventilating, air conditioning or humidity
control.
9.4
Landlord’s
Suspension of Utilities
In order
to effect any maintenance, repairs, replacements or alterations to any of such
utilities, heating, ventilating, air conditioning or humidity control equipment
or systems, or any other part of the Project, Landlord shall have the right to
modify or temporarily discontinue or suspend the operation of any such equipment
or systems as required from time to time.
10.
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MAINTENANCE, REPAIRS
AND ALTERATIONS
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10.1
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Maintenance
and Repairs of Premises
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At all
times throughout the Term, Tenant at its sole expense shall perform such
maintenance (including painting and repair or replacement of any interior
finishings), repairs and replacements as required to keep the Premises, all
contents thereof and all services and equipment located in or primarily serving
the Premises, in first-class appearance and condition, and in accordance with
all Laws and Landlord’s reasonable requirements, subject only to the obligations
of Landlord expressly provided in Section 10.7. For the purposes of this Section
10.1, the Premises shall include, without limitation, all leasehold
improvements, perimeter walls and glass and doors.
10.2 Approval
of Repairs and Alterations
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(a)
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Tenant
shall not make any repairs, replacements, changes, additions, improvements
or alterations (hereinafter referred to as “Alterations”) to the Premises
without Landlord’s prior written consent, which consent shall not be
unreasonably withheld unless such proposed Alterations might affect the
demising walls or entrances of the Premises or the structure of the
Building or the coverage of the Project for zoning purposes, or the
parking requirements for the Project, or impair the value or usefulness of
the Premises or the Project, in any of which cases Landlord’s consent may
be unreasonably withheld in Landlord’s sole
discretion.
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(b)
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With
its request for consent, Tenant shall submit to Landlord details of the
proposed Alterations including plans and specifications prepared by
qualified architects or engineers, and such Alterations shall be completed
in accordance with the plans and specifications approved in writing by
Landlord.
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(c)
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All
Alterations shall be planned and completed in compliance with all Laws and
Tenant shall, prior to commencing any Alterations, obtain at its expense
all necessary permits and licences. Prior to the commencement of any such
Alterations Tenant shall furnish to Landlord such evidence as reasonably
required by Landlord of the projected cost of Alterations and Tenant’s
ability to pay for same, together with such indemnification against costs,
liens and damages as Landlord shall reasonably require including, if
required by Landlord, a performance, completion and labour and materials
bond acceptable to Landlord guaranteeing completion of such
Alterations.
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(d)
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All
Alterations shall be performed at Tenant’s cost, promptly and in a good
and workmanlike manner and in compliance with Landlord’s rules and
regulations, by competent contractors or workmen who shall be first
approved in writing by Landlord, which approval shall not be unreasonably
withheld. Unless expressly authorized by Landlord in writing to the
contrary, all Alterations which might cost in excess of Ten Thousand
($10,000.00) Dollars to complete or which might require a building permit
or which might affect the structure or any mechanical, electrical,
utility, sprinkler, communications or other similar systems within the
Premises or the Project, shall, at Landlord’s option, be performed at
Tenant’s expense by Landlord or by contractors designated by Landlord and
under Landlord’s supervision and under the supervision of a qualified
architect or engineer approved by Landlord, in advance. For all
Alterations performed by Landlord or at Landlord’s expense or under
Landlord’s supervision, Tenant shall pay forthwith upon request all
amounts paid or payable by Landlord to third parties and all reasonable
charges of Landlord for its own personnel plus fifteen (15%) percent of
such amounts and charges for Landlord’s inspection and supervision. All
Alterations, the making of which might disrupt other tenants or occupants
of the Project or the public, shall be performed outside Business
Hours.
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(e)
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If
Tenant performs any such Alterations without compliance with all of the
foregoing provisions of this Article 10, Landlord shall have the right to
require Tenant to remove such Alterations
forthwith.
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(f)
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Tenant
shall pay to Landlord forthwith upon request all of Landlord’s reasonable
costs including, without limitation, fees of architects, engineers and
designers, incurred in dealing with Tenant’s request for Landlord’s
consent to any Alterations, whether or not such consent is granted, and in
inspecting and supervising any such Alterations and Landlord shall have
the right to require Tenant to pay Landlord a deposit on account of such
costs as a precondition to Landlord’s granting such
consent.
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10.3 Repair
According to Landlord’s Notice
Landlord
or any persons designated by it shall have the right to enter the Premises at
any time to view the state of repair and condition thereof and Tenant shall
promptly perform according to Landlord’s written notice any maintenance
(including painting and repair or replacement of any interior finishings),
repairs or replacements in accordance with Tenant’s obligations
hereunder.
Tenant
shall give immediate written notice to Landlord of any accident, defect or
damage in any part of the Premises or the Project which comes to the attention
of Tenant or any of its employees or contractors notwithstanding the fact that
Landlord may have no obligation in respect of the same.
10.5
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Ownership
of Leasehold Improvements
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All
leasehold improvements installed in or about the Premises shall forthwith upon
the installation thereof become the property of Landlord but without Landlord’s
thereby accepting any responsibility in respect of the maintenance, repair or
replacement thereof. The expression “leasehold improvements” where used in this
Lease includes, without limitation, all fixtures, installations, alterations and
additions from time to time made or installed in or about the Premises, and
includes all of the following, whether or not they are trade fixtures or easily
removable: doors, partitions and hardware; mechanical, electrical and utility
installations; carpeting, drapes, other floor and window coverings and drapery
hardware; heating, ventilating, air conditioning and humidity control equipment;
lighting fixtures; built-in furniture and finishings; counters in any way
connected to the Premises or to any utility services located therein. The only
exclusions from “leasehold improvements” are free-standing furniture, trade
fixtures and equipment not in any way connected to the Premises or to any
utilities systems located therein.
Tenant
shall make all payments and take all steps as may be necessary to ensure that no
lien is registered against the Project or any portion thereof as a result of any
work, services or materials supplied to Tenant or the Premises. Tenant shall
cause any such registrations to be discharged or vacated immediately after
notice from Landlord, or within ten (10) days after registration, whichever is
earlier. Tenant shall indemnify and save harmless Landlord from and against any
liabilities, claims, liens, damages, costs and expenses, including legal
expenses, arising in connection with any work, services or materials supplied to
Tenant or the Premises. If Tenant fails to cause any such registration to be
discharged or vacated as aforesaid then, in addition to any other rights of
Landlord, Landlord may, but shall not be obliged to, discharge the same by
paying the amount claimed into court, and the amounts so paid and all costs
incurred by Landlord, including legal fees and disbursements, shall be paid by
Tenant to Landlord forthwith upon demand.
Subject
to the provisions of Article 12 herein and subject to Tenant’s obligations
hereunder, to the extent that the failure to do so would materially
detrimentally affect access to or use of the Premises, on reasonable notice from
Tenant Landlord shall repair: (a) defects in the structure of the Project and
exterior walls of the Building; and (b) transportation, electrical, mechanical
and drainage equipment and systems forming part of the Project but not located
within the Premises and not serving exclusively the Premises. Landlord’s costs
of compliance with this Section 10.7 shall be included in Operating Costs to the
extent set out in Section 2.17. Provided that to the extent that such repair is
necessitated directly or indirectly by any act or omission of Tenant or any
servant, employee, agent, contractor, invitee or licensee of Tenant, Tenant
shall be solely responsible for the cost of such repairs in accordance with
Section 10.8 and shall indemnify Landlord in respect thereof.
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(a)
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Tenant
shall pay Landlord on demand all charges as determined and allocated by
Landlord acting reasonably in respect of all special services provided to
or for the benefit of Tenant beyond building standard services the costs
of which are included in Operating Costs. Unless otherwise expressly
agreed between Landlord and Tenant to the contrary in respect of any
specific matter from time to time, all work performed and materials
supplied by Landlord for Tenant or otherwise respecting the Premises
pursuant to the provisions hereof or otherwise shall be paid for by Tenant
to Landlord forthwith on demand at Landlord’s cost for the same plus
fifteen (15%) percent of such amounts and charges for inspection and
supervision.
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(b)
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Landlord
shall be the exclusive supplier in respect of the Premises, at Tenant’s
expense, for replacement of tubes, bulbs and ballasts, for any services
requiring drilling or otherwise penetrating floors, walls or ceilings, and
for locksmithing and security arrangements. If Landlord, in its sole
discretion, agrees in writing with Tenant that it shall not be the
exclusive supplier of any of the aforesaid services, then only persons
approved by Landlord acting reasonably may supply same to the
Premises.
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11.1 Vacating
of Possession
Forthwith
upon the expiry or earlier termination of the Term, Tenant shall deliver to
Landlord vacant possession of the Premises in such condition in which Tenant is
required to keep the Premises during the Term pursuant hereto and shall leave
the Premises in neat and clean condition and shall deliver to Landlord all keys
for the Premises and all keys or combinations to locks on doors or vaults in the
Premises.
11.2 Removal
of Trade Fixtures
Provided
Tenant has paid all Rent and is not otherwise in default hereunder, or if
otherwise authorized or requested by Landlord, at the expiry or earlier
termination of the Term Tenant shall remove its trade fixtures and repair all
damage resulting from the installation or removal of such trade fixtures. If at
the expiry or earlier termination of the Term Tenant does not remove its trade
fixtures or any of its other property on the Premises, Landlord shall have no
obligation in respect thereof and may sell or destroy the same or
have them removed or stored at the expense of Tenant; at the option
of Landlord, such trade fixtures or property shall become the
absolute property of Landlord without any compensation to Tenant.
11.3
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Removal
of Leasehold Improvements
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(a)
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Notwithstanding
that the leasehold improvements become the property of Landlord upon
installation, at the expiry or earlier termination of the Term Tenant
shall remove any or all of such leasehold improvements made or installed
in or about the Premises by Tenant, or by Landlord as Tenant’s
contractor, as required by Landlord and in so doing shall repair all
damage resulting from, and shall restore the Premises to their condition
prior to, the installation and removal of such leasehold
improvements.
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(b)
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Notwithstanding
anything in the foregoing to the contrary, provided Tenant in actual
physical occupancy of and actively and diligently conducting business in
the whole of the Premises is Occulogix, Inc., upon the expiry or earlier
termination or sooner surrender of this Lease, Tenant’s obligation for
removal of leasehold improvements shall extend only to: (i) those
leasehold improvements installed by or on behalf of Tenant without
Landlord’s prior written consent; and (ii) those Non-Standard Leasehold
Improvements as Landlord shall require to be removed, and Tenant shall
restore the Premises and the Project to the condition in which they
existed prior to the installation and removal of such improvements. The
term “Non-Standard Leasehold Improvements” shall mean: computer rooms
and/or any other raised-floor environments; non-standard heating,
ventilating and air conditioning systems installed for the specific use of
the Premises; internal stairwells; custom lighting and electrical
installations; dry-wall ceilings; telecommunication equipment (including
all cabling, wiring, and conduits which have been installed by or on
behalf of the Tenant); oversized boardrooms; training rooms; safes; vaults
and, whether located within the Premises or elsewhere in the Project, any
back-up and/or emergency power supplies, antennae, satellite dishes or
other communication facilities including, without limitation,
creating within the Premises a large number of small offices and corridors
which change direction or discontinue. Landlord may do or arrange to have
done the work necessary to remove such improvements from the Premises if
Tenant fails to do so, and Tenant shall pay for Landlord’s costs of so
doing, plus an administration fee representing Landlord’s costs to
supervise and inspect such work, in the amount of fifteen (15%) percent of
such costs, forthwith upon demand
therefor.
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11.4 Overholding
by Tenant
If Tenant
remains in possession of all or any part of the Premises after the expiry of the
Term with the consent of Landlord but without any further written agreement,
this Lease shall not be deemed thereby to have been extended and Tenant shall be
deemed to be occupying the Premises as a monthly tenant on the same terms as set
forth in this Lease insofar as they are applicable to a monthly tenancy except
the monthly Basic Rent shall be one hundred and fifty percent (150%) of the
monthly Basic Rent payable during the last twelve months of the
Term.
12.
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DAMAGE AND
DESTRUCTION
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12.1 Insured
Damage to Premises
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(a)
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If
there is damage to or destruction of the Premises caused by an occurrence
against which, and to not more than the extent that, Landlord either is
required to insure pursuant to this Lease or is otherwise
insured (“Insured Damage”), then the following provisions of this Section
12.1 shall apply.
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(b)
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If
such damage or destruction is such as to render the whole or any part of
the Premises unusable for the purpose of Tenant’s use and occupancy
thereof, Landlord shall deliver to Tenant within thirty (30) days
following the occurrence of such damage or destruction its reasonable
opinion as to whether or not the same is capable of being repaired, to the
extent of Landlord’s repair obligations hereunder, within one hundred
eighty (180) days following such
occurrence.
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(c)
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If
this Lease is not terminated as herein provided, Landlord, to the extent
of insurance proceeds which it receives or would have received had it
maintained such insurance as it is required to maintain hereunder, and to
the extent that any mortgagee(s) entitled to be paid such
insurance proceeds consents to the use of the same for repair
of such damage or destruction, shall diligently proceed to perform repairs
to the Premises to the extent of its obligations pursuant to Section 10.7
hereof; and Tenant, commencing as soon as practicable but without
interfering with Landlord’s repairs, shall diligently perform such repairs
as are Tenant’s responsibility pursuant
hereto.
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(d)
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If
in Landlord’s reasonable opinion, the Premises are not capable of being
repaired as aforesaid within one hundred eighty (180) days following such
occurrence, Landlord may elect, by written notice to the Tenant within
thirty (30) days after delivery by Landlord of the
opinion provided for in subsection 12.1(b) above, to terminate
this Lease, whereupon Tenant shall immediately surrender possession of the
Premises and Basic Rent and all other payments for which Tenant is liable
pursuant hereto shall be apportioned to the effective date of such
termination.
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(e)
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If
the damage is such as to render the whole or any part of the Premises
unusable in whole or in part for the purpose of Tenant’s use and occupancy
thereof for a period of five (5) days or more, then the Basic
Rent payable hereunder shall abate for the portion of such period in
excess of five (5) days, to the extent that Tenant’s use and occupancy of
the Premises is in fact diminished, which determination shall be made by
Landlord, until the earlier of: (i) the thirtieth (30th) day after the
Premises are determined by Landlord to be ready for Tenant to commence its
repairs to the Premises; and (ii) the date on which Tenant first commences
the conduct of business in any part of the Premises which had been
damaged.
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(f)
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The
respective obligations of Landlord and Tenant with respect to repair of
the Premises following any damage or destruction shall be performed with
all reasonable speed and in accordance with all applicable obligations to
repair contained herein. Tenant acknowledges that its obligations to
repair the Premises after such damage or destruction shall be performed at
its sole cost without any contribution by Landlord whether or not the
damage or destruction was caused by Landlord’s fault and whether or not
Landlord had at any time made any contribution to the cost of any
leasehold improvements in the Premises. In any event, within thirty (30)
days after Landlord has completed its repairs to the Premises as
aforesaid, Tenant shall complete its repairs to the Premises and shall
recommence the conduct of business
thereon.
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12.2
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Uninsured
Damage and Last Two Years
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If there
is damage to or destruction of the Premises and if, in Landlord’s reasonable
opinion, of which notice is given to Tenant within fifteen (15) days after the
later of the date of such damage or destruction and the date upon which Landlord
is notified by Tenant of such damage or destruction, the Premises are not
capable of being repaired to the extent of Landlord’s repair obligations within
thirty (30) days following the giving of such notice and if: (a) such damage or
destruction is not Insured Damage; or (b) such damage or destruction occurs
within the last two (2) Lease Years of the Term and either Tenant has no
remaining rights to renew this Lease or, having the right to renew this Lease
fails to do so within fifteen (15) days after receipt of the said notice, then
Landlord, at its option to be exercised by written notice given to Tenant within
thirty (30) days after the later of the date of such damage or destruction and
the date upon which Landlord is notified by Tenant of such damage or
destruction, may terminate this Lease whereupon Tenant shall immediately
surrender possession of the Premises and Basic Rent and all other payments for
which Tenant is liable hereunder shall be apportioned to the effective date of
such termination. If this Lease is not terminated as aforesaid the parties shall
repair as provided in subsection 12.1(c) hereof and there shall be no abatement
of any Rent unless the damage or destruction is Insured Damage and then only to
the extent expressly provided in subsection 12.1(e) above.
If
twenty-five (25%) percent or more of the Rentable Area of Leasable Areas of the
Project is damaged or destroyed by any cause whatsoever, whether or not there is
any damage to the Premises, Landlord may, at its option, by notice given to
Tenant within sixty (60) days after such occurrence, terminate this Lease as of
a date specified in such notice, which date shall be not less than thirty (30)
days and not more than one hundred eighty (180) days after the giving
of such notice. In the event of such termination Tenant shall surrender vacant
possession of the Premises by not later than the said date of termination, and
Basic Rent and all other payments for which Tenant is liable hereunder shall be
apportioned to the effective date of termination. If Landlord does not so elect
to terminate this Lease, Landlord shall diligently proceed to repair and rebuild
the Project to the extent of its obligations pursuant hereto to the extent of
insurance proceeds which Landlord receives or would have received had it
maintained such insurance as required hereunder, and to the extent that any
mortgagee entitled to be paid such insurance proceeds consents to the use of
same for such purpose.
12.4
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Restoration
of Premises or Project
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If there
is damage to or destruction of the Premises or the Project and if this Lease is
not terminated pursuant hereto, Landlord, in performing its repairs as required
hereby, shall not be obliged to repair or rebuild in accordance with the plans
or specifications for the Premises or the Project as they existed prior to such
damage or destruction; rather, Landlord may repair or rebuild in accordance with
any plans and specifications chosen by Landlord in its sole discretion provided
that Tenant’s use of and access to the Premises and the general overall quality
of the Project are not materially detrimentally affected by any difference in
plans or specifications of the Premises or the Project.
12.5
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Determination
of Matters
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For the
purposes of this Article 12 all matters requiring determination such as, without
limitation, the extent to which any area(s) of the Premises or the Project are
damaged or are not capable of being used, or the time within which repairs may
be made, unless expressly provided to the contrary, shall be determined by
Landlord’s Architect, such determination to be final and binding on the
parties.
13.
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INSURANCE AND
INDEMNITY
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13.1
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Landlord’s
Insurance
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Landlord
shall obtain and maintain in full force and effect during the Term with respect
to the Project insurance against such occurrences and in such amounts, on such
terms and with such deductible(s) as would a prudent owner of such a project.
Such insurance may include, without limitation: (a) insurance on the Building
and any improvements therein which Landlord desires to insure, against damage by
fire and other risks covered by extended coverage fire insurance policies or, at
Landlord’s option, all risks insurance; (b) boiler and machinery insurance; (c)
rental income insurance; (d) public liability insurance; and (e) such other
insurance and in such amounts and on such terms as Landlord, in its discretion,
may reasonably determine. Notwithstanding that Tenant shall be contributing to
the costs of such insurance pursuant to the terms of this Lease, Tenant shall
not have any interest in or any right to recover any proceeds under any of
Landlord’s insurance policies.
13.2
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Tenant’s
Effect On Other Insurance
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(a)
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Tenant
shall not do or permit anywhere on the Premises or Project anything which
might: (i) result in any increase in the cost of any insurance policy of
Landlord on the Project; (ii) result in an actual or threatened
cancellation of or adverse change in any insurance policy of Landlord on
the Project; or (iii) be prohibited by any insurance policy of Landlord on
the Project.
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(b)
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If
the cost of any insurance policies of Landlord on the Project is increased
as a result of any improvements made by Tenant or anything done or
permitted by Tenant anywhere on the Premises or Project, Tenant shall pay
the full amount of such increase to Landlord forthwith upon demand.
Tenant’s responsibility for any increased cost of insurance as aforesaid
shall be conclusively determined by a statement issued by the
organization, company or insurer establishing the insurance rates for the
relevant policy.
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(c)
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If
there is an actual or threatened cancellation of or adverse change in any
policy of insurance of Landlord on the Project by reason of anything done
or permitted by Tenant anywhere on the Premises or Project, and if Tenant
fails to remedy the situation giving rise to such actual or threatened
cancellation or change within twenty-four (24) hours after notice from
Landlord, then Landlord may, at its option, either: (i) terminate this
Lease forthwith by written notice; or, (ii) remedy the situation giving
rise to such actual or threatened cancellation or change, all at the cost
of Tenant to be paid to Landlord forthwith upon demand, and for such
purpose Landlord shall have the right to enter upon the Premises without
further notice.
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(a)
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Tenant
shall, at its sole expense, maintain in full force and effect at all times
throughout the Term and such other times, if any, as Tenant occupies the
Premises or any portion thereof, such insurance as would be maintained by
a prudent tenant of premises such as the Premises, which insurance shall
include at least all of the
following:
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(i)
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commercial
general liability insurance on an occurrence basis with respect to any use
and occupancy of or things on the Premises, and with respect to the use
and occupancy of any other part of the Project by Tenant or any of its
employees, servants, agents, invitees, licensees, subtenants, contractors
or persons for whom Tenant is in law responsible, with coverage for any
occurrence of not less than Five Million ($5,000,000.00) Dollars or such
higher amount as Landlord may reasonably require on not less than one (1)
month’s notice;
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(ii)
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all
risks insurance covering the leasehold improvements, trade fixtures and
contents on the Premises, for not less than the full replacement cost
thereof and with a replacement cost
endorsement;
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(iii)
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if
applicable, broad form comprehensive boiler and machinery insurance on all
insurable objects located on or about the Premises or which are the
property or responsibility of Tenant, for not less than the full
replacement cost thereof and with a replacement cost
endorsement;
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(iv)
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business
interruption insurance and/or extra expense insurance in such amounts as
necessary to fully compensate Tenant for direct or indirect loss of sales
or earnings or extra expenses incurred resulting from or attributable to
any of the perils required to be insured against under the
policies referred to in subsections 13.3(a)(ii) and (iii) and all
circumstances usually insured against by cautious tenants including losses
resulting from interference with or prevention of access to the Premises
or the Project as a result of such perils or for any other
reason;
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(v)
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tenant’s
legal liability insurance for the full replacement cost of the Premises,
and the loss of use thereof; and
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(vi)
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any
other insurance against such risks and in such amounts as Landlord or any
mortgagee of Landlord may from time to time reasonably require upon not
less than thirty (30) days’ notice to
Tenant.
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(b)
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Each
of Tenant’s insurance policies shall name Landlord and Landlord’s
Mortgagee as an additional insured with Landlord as loss payee, and shall
be taken out with insurers and shall be in such form and on such terms as
are satisfactory to Landlord from time to time. Without limiting the
generality of the foregoing, each of Tenant’s insurance policies shall
contain:
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(i)
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the
standard mortgage clause as may be required by any mortgagee of
Landlord;
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(ii)
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a
waiver by the insurer of any rights of subrogation to which such insurer
might otherwise be entitled against Landlord or any person for whom
Landlord is in law responsible;
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(iii)
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an
undertaking by the insurer that no material change adverse to Tenant or
Landlord or any mortgagee of Landlord will be made and the policy will not
lapse or be terminated, except after not less than thirty (30) days’
written notice to Tenant and Landlord and to any mortgagee of
Landlord;
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(iv)
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a
provision stating that Tenant’s insurance policy shall be primary and
shall not call into contribution any other insurance available to
Landlord;
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(v)
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a
disputed loss endorsement, where
applicable;
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(vi)
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a
severability of interests clause and a cross-liability clause;
and
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(vii)
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a
waiver, in respect of the interests of Landlord and any mortgagee of
Landlord, of any provision with respect to any breach of any warranties,
representations, declarations or conditions contained in the said
policy.
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(c)
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Tenant
shall ensure that Landlord shall at all times be in possession of either
certificates or certified copies of Tenant’s insurance policies which are
in good standing and in compliance with Tenant’s obligations
hereunder.
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(d)
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Tenant
hereby releases Landlord and its servants, agents, employees, contractors
and those for whom Landlord is in law responsible from all losses, damages
and claims of any kind in respect of which Tenant is required to maintain
insurance hereunder or is otherwise
insured.
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13.4
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Landlord’s
Right to Place Tenant’s Insurance
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If Tenant
fails to maintain in force, or pay any premiums for, any insurance required to
be maintained by Tenant hereunder, or if Tenant fails from time to time to
deliver to Landlord satisfactory proof of the good standing of any such
insurance or the payment of premiums therefor, then Landlord, without prejudice
to any of its other rights and remedies hereunder, shall have the right but not
the obligation to effect such insurance on behalf of Tenant and the cost thereof
and all other reasonable expenses incurred by Landlord in that regard shall be
paid by Tenant to Landlord forthwith upon demand.
13.5
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Landlord’s
Non-Liability
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Tenant
agrees that Landlord shall not be liable or responsible in any way for any
injury or death to any person or for any loss or damage to any property, at any
time on or about the Premises or any property owned by or being the
responsibility of Tenant or any of its servants, agents, customers, contractors
or persons for whom Tenant is in law responsible elsewhere on or about the
Project, no matter how the same shall be caused and whether or not resulting
from the negligence of Landlord, its servants, agents, employees, contractors or
persons for whom Landlord is in law responsible. Without limiting the generality
of the foregoing, Landlord shall not be liable or responsible for any such
injury, death, loss or damage to any persons or property caused or contributed
to by any of the following: fire, explosion, steam, water, rain, snow, dampness,
leakage, electricity or gas. Without limiting or affecting the generality or
interpretation of the foregoing, and notwithstanding the foregoing, it is agreed
that Landlord shall in no event be liable for any indirect or consequential
damages suffered by Tenant.
13.6
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Indemnity
of Landlord
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Tenant
shall indemnify Landlord and all of its servants, agents, employees, contractors
and persons for whom Landlord is in law responsible against any and all
liabilities, claims, damages, losses and expenses, including all reasonable
legal fees and disbursements, arising from: (a) any breach by Tenant of any of
the provisions of this Lease; (b) any act or omission of any person on the
Premises or any use or occupancy of or any things in the Premises; (c) any act
or omission of Tenant or any of its servants, agents, employees, invitees,
licensees, sub-tenants, concessionaires, contractors or persons for whom Tenant
is in law responsible on the Premises or elsewhere on or about the Project; or
(d) any injury or death of persons, or any loss or damage to property of Tenant
or any of its servants, agents, employees, invitees, licensees, subtenants,
contractors or persons for whom Tenant is in law responsible, on the Premises or
elsewhere on or about the Project.
13.7 Landlord’s
Employees and Agents
Every
indemnity, exclusion, release of liability and waiver of subrogation contained
in this Lease for the benefit of Landlord shall extend to and benefit all of
Landlord’s servants, agents, employees, and others for whom Landlord is in law
responsible. Solely for such purpose, and to the extent that Landlord expressly
chooses to enforce the benefits of this section for the foregoing persons, it is
agreed that Landlord is the agent or trustee for such persons.
14.
ASSIGNMENT, SUBLETTING AND
CHANGE OF CONTROL
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(a)
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Tenant
shall not assign this Lease in whole or in part and shall not sublet or
part with or share possession of all or any part of the Premises and shall
not grant any licences or other rights to others to use any portion of the
Premises (all of the foregoing being hereinafter referred to as a
“Transfer”; a party making a Transfer is referred to as a “Transferor” and
a party taking a Transfer is referred to as a “Transferee”) without the
prior written consent of Landlord in each instance, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, Landlord
shall be entitled to arbitrarily or unreasonably withhold its consent to
any Transfer in respect of which Landlord exercises its right to terminate
this Lease, or to take a Transfer of the Premises or any portion thereof,
pursuant to Section 14.3. The provisions of this Article 14 shall apply to
any Transfer which might occur by inheritance or operation of
law.
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|
(b)
|
Notwithstanding
and without in any way affecting or limiting the interpretation of the
foregoing, it is agreed that it shall be reasonable for Landlord to
withhold its consent to a Transfer unless it is shown to Landlord’s
satisfaction that: (i) the proposed Transferee has a good business and
personal reputation; (ii) the proposed Transferee or its principal
shareholders has not been bankrupt or the holder of twenty
(20%)
percent or more
of the issued shares of any class of shares of a corporation or of an
interest in a partnership, either of which has been bankrupt in the ten
(10) years preceding the date of the proposed Transfer; (iii) the proposed
Transferee has good financial strength at least equal to that of Tenant at
the date of this Lease, and at least sufficient to satisfy all of the
obligations of Tenant hereunder; (iv) the proposed Transferee is not an
existing occupant of any part of the Project; (v) the proposed Transferee
has not then recently been a prospect involved in bona fide negotiations
with Landlord respecting the leasing of any premises in the Project and is
not in any way affiliated with such bona fide prospect; (vi) the Transfer
would not result in a breach of any agreement by which Landlord is bound
with respect to any part of the Project; and (vii) without affecting the
interpretation of Section 8.1 or any other provision hereof, the business
proposed to be carried on by the Transferee on the Premises will not be
incompatible with the uses of other tenants of the Project, and will not
be more burdensome on the Project, in terms of parking requirements or any
other factor, than the business previously carried on by Tenant on the
Premises.
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|
(c)
|
If
Landlord withholds, delays or refuses to give consent to any Transfer,
whether or not Landlord is entitled to do so, Landlord shall not be liable
for any losses or damages in any way resulting therefrom and Tenant shall
not be entitled to terminate this Lease or exercise any other remedy
whatever in respect thereof except to seek the order of a court of
competent jurisdiction compelling Landlord to grant any such consent which
Landlord is obliged to grant pursuant to the terms of this
Lease.
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|
(d)
|
No
Transfer may be made where any portion of Rent is lower than that provided
for herein or otherwise on terms more favourable to the Transferee than
the terms set forth herein.
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All
requests to Landlord for consent to any Transfer shall be made to Landlord in
writing together with a copy of the agreement pursuant to which the proposed
Transfer will be made, accompanied by such information in writing as a landlord
might reasonably require respecting a proposed Transferee including, without
limitation, name, business and home addresses and telephone numbers, business
experience, credit information and rating, financial position and banking and
personal references, description of business proposed to be conducted by the
Transferee on the Premises and parking requirements for such business. Tenant
shall promptly pay all costs incurred by Landlord in considering and processing
the request for consent including legal costs and all costs of completing any
documentation to implement any Transfer, which shall be prepared by Landlord or
its solicitor if required by Landlord, and as a prior condition to considering
any request for consent Landlord may require from Tenant payment of a reasonable
deposit, of at least Six Hundred ($600.00) Dollars, on account of Landlord’s
said costs.
Notwithstanding
the other provisions contained in this Article 14, after Landlord receives a
request for consent to a Transfer with the information and copy of agreement
hereinabove required, it shall have the option, to be exercised by written
notice to Tenant within fifteen (15) days after the receipt of such request,
information, deposit and agreement to: (a) to terminate this Lease as it relates
to the portion of the Premises which is the subject of the proposed Transfer
(“Transferred Premises”) effective as of the date on which the proposed Transfer
was to have occurred; or (b) take a Transfer from Tenant of the Transferred
Premises on the same terms as the Transfer in respect of which Tenant has
requested Landlord’s consent, as aforesaid. If Landlord gives Tenant notice
either electing to terminate this Lease or to take a Transfer of the Transferred
Premises, as aforesaid, Tenant shall have the right, to be exercised by written
notice to Landlord within ten (10) days after receipt of such Landlord’s notice,
to withdraw the request for consent to the Transfer, in which case Tenant shall
not proceed with such Transfer, the Landlord’s notice shall be null and void and
this Lease shall continue in full force and effect. If, pursuant to this Section
14.3, Landlord terminates this Lease as it relates to a portion of the Premises
or takes a Transfer of a portion of the Premises, Tenant hereby grants to
Landlord and any others entitled to use the same, to use for their intended
purposes all portions of the Premises in the nature of common areas (such as
corridors, washrooms, lobbies and the like), or which are reasonably required
for proper access to or use of the Transferred Premises (such as reception
areas, interior corridors, mechanical or electrical systems and ducts and the
like).
In the
event of a Transfer, Landlord shall have the following rights, in default of any
of which no such Transfer shall occur or be effective:
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(a)
|
to
collect a deposit or further deposit to be held as a security deposit
pursuant to Section 16.6 such that the security deposit held by Landlord
shall be equivalent to at least the Basic Rent payable for the last two
(2) months of the Term in respect of the premises which are the subject of
the Transfer;
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(b)
|
to
require Tenant and the Transferee to enter into a written agreement to
implement any amendments to this Lease to give effect to Landlord’s
exercise of any of its rights
hereunder;
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(c)
|
to
require the Transferee to enter into an agreement with Landlord in writing
and under seal to be bound by all of Tenant’s obligations under this Lease
in respect of the Transferred Premises, and to waive any right it, or any
person on its behalf, may have to disclaim, repudiate or terminate this
Lease pursuant to any bankruptcy, insolvency, winding-up or other
creditors’ proceeding, including, without limitation, the
Bankruptcy and Insolvency Act
(Canada)
or the
Companies’ Creditors
Arrangement Act (Canada),
and to agree that in the event of any
such proceeding Landlord will comprise a separate class for voting
purposes;
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(d)
|
to
receive all amounts to be paid to Tenant under the agreement in respect of
such Transfer less only any consideration which is bona fide being paid to
Tenant for equipment, furnishings and other property to be conveyed by
Tenant as part of or together with the transaction of Transfer and which
is not reasonably attributable to Tenant’s interest in this Lease and
less, in the case of a sublease, all amounts receivable by Tenant under
the sublease equal to the amounts payable by Tenant hereunder each month
during the term of the sublease in respect of the Transferred
Premises;
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(e)
|
to
require the Transferee to waive any right it, or any person on its behalf,
may have to disclaim, repudiate or terminate this Lease pursuant to any
bankruptcy, insolvency, winding-up or other creditors’ proceedings, and to
waive any rights, pursuant to Sections 21 or 39(2) of the
Commercial Tenancies Act
(Ontario) R.S.O. 1990, c, L7 and any amendments thereto and any
other statutory provisions of the same or similar effect, to pay Rent less
than any amount payable hereunder;
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|
(f)
|
to
require, if the Transfer is a sublease or other transaction other than an
assignment, that upon notice from Landlord to the Transferee all amounts
payable by the Transferee each month shall be paid directly to Landlord
who shall apply the same on account of Tenant’s obligations under this
Lease;
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(g)
|
to
require that this Lease be amended to delete therefrom any right of
renewal and any option or right of first refusal to purchase the
Premises.
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|
(a)
|
No
consent of Landlord to a Transfer shall be effective unless given in
writing and executed by Landlord and no such consent shall be presumed by
any act or omission of Landlord or by Landlord’s failure to respond to any
request for consent or by Landlord’s accepting any payment of any amount
payable hereunder from any party other than Tenant. No Transfer and no
consent by Landlord to any Transfer shall constitute a waiver of the
necessity to obtain Landlord’s consent to any subsequent or other
Transfer.
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|
(b)
|
In
the event of any Transfer or any consent by Landlord to any Transfer,
Tenant shall not thereby be released from any of its obligations hereunder
but shall remain bound by all such obligations pursuant to this Lease for
the balance of the Term. If this Lease is renewed or extended by any
Transferee or if any Transferee exercises a right to lease additional
premises, pursuant to any right of Tenant contained in this Lease, each
Transferor shall be liable for all of the obligations of Tenant throughout
the Term as renewed or extended.
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|
(c)
|
Every
Transferee shall be obliged to comply with all of the obligations of
Tenant under this Lease, and any default of any Transferee shall also
constitute a default of Tenant hereunder. If this Lease is ever
disclaimed, repudiated or terminated by or on behalf of a Transferee
pursuant to any bankruptcy, insolvency, winding-up or other creditors’
proceeding, including, without limitation, any proceeding under the
Bankruptcy and Insolvency Act
(Canada)
or the
Companies’ Creditors
Arrangement Act (Canada),
or if this Lease is ever terminated by
Landlord as a result of any act or default of any Transferee, Tenant shall
nevertheless remain responsible for fulfilment of all obligations of
Tenant hereunder for what would have been the balance of the Term but for
such disclaimer, repudiation or termination, and shall upon Landlord’s
request enter into a new lease of the Premises for such balance of the
Term and otherwise on the same terms and conditions as in this
Lease.
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14.6 No
Advertising of Premises
Tenant
shall not advertise this Lease or all or any part of the Premises or the
business or fixtures or contents therein for sale without Landlord’s prior
written consent.
The
restrictions on Transfer as aforesaid shall apply to any assigning, subletting,
mortgaging, charging or otherwise transferring of the Premises or this Lease for
the purpose of securing any obligation of Tenant.
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(a)
|
If
Tenant or any occupant of the Premises at any time is a corporation, no:
(I) transfer of the issued shares in the capital stock or transfer,
issuance or division of any shares of the corporation or of any affiliate
of the corporation sufficient to transfer control to others than the then
present shareholders of the corporation (collectively called “Sale”); or
(II) merger, amalgamation, consolidation or other corporate restructuring
or reorganization (collectively called “Reorganization”) shall take place,
without first obtaining the prior written consent of Landlord, not to be
unreasonably withheld. Upon request, Tenant shall make the corporate books
and records of Tenant and of any affiliate of Tenant available to Landlord
and its representatives for inspection in order to ascertain whether or
not there has been any Sale or Reorganization. Tenant acknowledges that,
in addition to Landlord’s rights under this Lease and at Law to withhold
consent to any Transfer, Landlord may withhold consent to any Sale or
Reorganization unless it is shown to Landlord’s reasonable satisfaction
that the financial strength of Tenant will not be adversely affected by
such Sale or Reorganization.
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|
(b)
|
This
Section shall not apply to a Sale by Tenant if and as long as Tenant is in
occupancy of the Premises and is a corporation whose shares are listed and
traded on any recognized public stock exchange in Canada or the United
States.
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14.9
|
Assignment
by Landlord
|
If
Landlord sells, leases, mortgages or otherwise disposes of the Project or any
part thereof or assigns its interest in this Lease, to the extent that the
purchaser or assignee agrees with Landlord to assume the covenants and
obligations of Landlord hereunder, Landlord shall thereupon be released from all
liability pursuant to the terms of this Lease.
15.
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STATUS AND
SUBORDINATION OF LEASE
|
Tenant
shall, within ten (10) days after written request from Landlord, execute and
deliver to Landlord, or to any actual or proposed lender, purchaser or assignee
of Landlord, a statement or certificate in such form as requested by Landlord
stating (if such is the case, or stating the manner in which such may not be the
case): (a) that this Lease is unmodified and in full force and effect; (b) the
date of commencement and expiry of the Term and the dates to which Basic Rent
and any other Rent, including any prepaid rent, have been paid; (c) whether or
not there is any existing default by Landlord under this Lease and, if so,
specifying such default; and (d) that there are no defences, counter claims or
rights of set-off in respect of the obligations hereunder of Tenant and (e) full
details of the financial and credit standing and details of the corporate
organization of Tenant, including audited financial statements for such period
of time as Landlord may require, it being intended that any such statement
delivered pursuant hereto may be relied upon by an actual or prospective lender,
purchaser and assignee of any interest of Landlord under this Lease or in the
Premises.
At the
option of Landlord to be expressed in writing from time to time, this Lease and
the rights of Tenant hereunder are and shall be subject and subordinate to any
and all mortgages, trust deeds and charges (any of which is herein called
“Mortgage”) on the Project or any part thereof now or in the future, including
all renewals, extensions, modifications and replacements of any Mortgages from
time to time. Tenant shall at any time on notice from Landlord or holder of a
Mortgage attorn to and become a tenant of the holder of any such Mortgage upon
the same terms and conditions as set forth herein and shall execute promptly on
request any certificates, agreements, instruments of postponement or attornment
or other such instruments or agreements, including without limitation any short
form or notice of this Lease for the purpose of registration on title to the
Project, as requested from time to time to give full effect to this Article 15.
Provided Tenant is not in default hereunder, Landlord shall use reasonable
efforts to obtain from the holder of any Mortgage, in respect of which tenant
has executed and delivered an instrument of postponement, subordination or
attornment as required hereby, its agreement to permit Tenant to continue to
occupy the Premises in accordance with the terms of this Lease.
15.3
|
Tenant’s
Failure to Comply
|
If Tenant
fails to execute any certificate, agreement, instrument, or other document as
required by the foregoing provisions of this Article 15 within ten (10) days
after request by Landlord, then Landlord shall have the right, without limiting
any other rights of Landlord hereunder or at law, to terminate this Lease or to
execute any such certificate, agreement, instrument or document on behalf of
Tenant and in Tenant’
s
name,
for which purpose
Tenant hereby appoints Landlord as Tenant’s attorney pursuant to the
Substitute Decisions Act
(Ontario).
Tenant
shall not register on title to the Project this Lease or any short form or
notice hereof except in such form as has been approved by Landlord, acting
reasonably, in writing, provided that Tenant shall pay Landlord’s reasonable
expenses, including legal fees, of such approval. Tenant shall forthwith provide
to Landlord a duplicate registered copy of any short form or notice of this
Lease or other document registered on title.
16.1 Default
and Remedies
If any of
the following shall occur:
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(a)
|
Tenant
fails, for any reason, to make any payment of Rent as and when the same is
due to be paid hereunder and such default continues for five (5) days
after notice is given to Tenant;
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(b)
|
Tenant
fails, for any reason, to observe or perform any obligation of Tenant
pursuant to this Lease other than the payment of any Rent, and such
default continues for fifteen (15) days, or such shorter period as
expressly provided herein, after notice thereof to Tenant, provided that
if the default could not, in the reasonable opinion of Landlord, be
remedied within fifteen (15) days after notice and provided Tenant has
commenced to remedy such failure not later than five (5) days after notice
and proceeds thereafter to diligently and continuously remedy it, the
number of days shall be extended to that number of days which would in the
opinion of Landlord, acting reasonably, then suffice for the remedying of
such default;
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(c)
|
Tenant
shall purport to make a Transfer affecting the Premises, or the Premises
shall be used by any person or for any purpose, other than in compliance
with this Lease;
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(d)
|
Tenant
or any other occupant of the Premises makes an assignment for the benefit
of creditors or becomes bankrupt or insolvent or takes the benefit of any
statute for bankrupt or insolvent debtors or makes any proposal or
arrangement with creditors, or Tenant makes any sale in bulk of any
property on the Premises (other than in conjunction with a Transfer
approved in writing by Landlord and made pursuant to all applicable
legislation), or steps are taken for the winding up or other termination
of Tenant’s existence or liquidation of its
assets;
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(e)
|
a
trustee, receiver, receiver-manager, or similar person is appointed in
respect of the assets or business of Tenant or any other occupant of the
Premises;
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(f)
|
Tenant
attempts to or does abandon the Premises or remove or dispose of any goods
from the Premises, so that there would not be sufficient goods on the
Premises subject to distress to satisfy all arrears of Rent and all Rent
payable hereunder for a further period of at least six (6) months, or if
the Premises are vacant or unoccupied for a period of five (5) consecutive
days or more without the prior written consent of
Landlord;
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|
(g)
|
this
Lease or any other property of Tenant is at any time seized or taken in
execution which remains unsatisfied for a period of five (5) days or
more;
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|
(h)
|
termination
or re-entry by Landlord is permitted under any provision of this Lease or
at law;
|
then the
then current and the next three (3) months’ Rent shall be forthwith due and
payable and, in addition to any other rights or remedies to which Landlord is
entitled hereunder or at law, Landlord shall have the following rights and
remedies, which are cumulative and not alternative, namely:
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(i)
|
to
terminate this Lease in respect of the whole or any part of the Premises
by written notice to Tenant;
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|
(ii)
|
as
agent of Tenant to relet the Premises and take possession of any
furniture, fixtures, equipment or other property thereon and, upon giving
notice to Tenant, to store the same at the expense and risk of Tenant or
sell or otherwise dispose of the same at public or private sale without
further notice, and to make alterations to the Premises to facilitate
their reletting and to apply the net proceeds of the sale of any
furniture, fixtures, equipment, or other property or from the
reletting of the Premises, less all expenses incurred by Landlord in
making the Premises ready for reletting and in reletting the Premises, on
account of the Rent due and to become due under this Lease and Tenant
shall be liable to Landlord for any deficiency and for all such expenses
incurred by Landlord as aforesaid; nothing done by Landlord shall be
construed as an election to terminate this Lease unless written notice of
such termination is given by Landlord to
Tenant;
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|
(iii)
|
to
remedy any default of Tenant in performing any repairs, work or other
obligations of Tenant hereunder, and in so doing to enter upon the
Premises, without any liability to Tenant therefor and without
constituting a re-entry of the Premises or termination of this Lease or
breach of Landlord’s covenant of quiet enjoyment, and, in such case,
Tenant shall pay to Landlord forthwith upon demand all reasonable costs of
Landlord in remedying or attempting to remedy any such default plus
fifteen (15%) percent of such amounts and charges for inspection and
supervision; and
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(iv)
|
to
obtain damages from Tenant including, without limitation, if this Lease is
terminated, all deficiencies between all amounts which would have been
payable by Tenant for what would have been the balance of the Term, but
for such termination, and all net amounts actually received by Landlord
for such period.
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|
(a)
|
All
amounts of Rent shall bear interest from their respective due dates until
the dates of payment at the rate of five (5%) percent per annum in excess
of the prime rate of interest charged by Landlord’s bank in Ontario from
time to time.
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|
(b)
|
Further,
on each occurrence of default in the payment of Rent, Tenant shall pay to
Landlord on demand in addition to the aforesaid interest an administration
fee equal to the greater of: (i) Two Hundred ($200.00) Dollars; and (ii)
two (2%) percent of the amount of Rent in
default.
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|
(c)
|
Tenant
shall pay to Landlord forthwith upon demand all costs incurred by
Landlord, including, without limitation, legal expenses on a substantial
indemnity basis and reasonable compensation for all time expended by
Landlord’s own personnel, arising as a result of any default in Tenant’s
obligations under this Lease.
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16.3
|
Bankruptcy
and Insolvency
|
Tenant
hereby waives any right it, or any person on its behalf, may have to disclaim,
repudiate or terminate this Lease pursuant to any bankruptcy, insolvency,
winding-up or other creditors’ proceeding, including, without limitation, the
Bankruptcy and Insolvency Act
(Canada)
or the
Companies’ Creditors Arrangement Act
(Canada),
and agrees that in the event of any such proceeding Landlord
will comprise a separate class for voting purposes.
16.4
|
Distress
and Tenant’s Property
|
Tenant
hereby waives and renounces the benefit of any present or future statute taking
away or limiting Landlord’s right of distress and agrees with Landlord that,
notwithstanding any such statute, all goods and chattels from time to time on
the Premises shall be subject to distress for Rent. All Tenant’s
personal property on the Premises shall at all times be the
unencumbered property of Tenant.
16.5
|
Intentionally
Deleted
|
In order
to induce Landlord to enter into this Lease, Tenant agrees to execute the Rent
Deposit Agreement attached hereto as Schedule “17”.
No waiver
of any of Tenant’s obligations under this Lease or of any of Landlord’s rights
in respect of any default by Tenant hereunder shall be deemed to have occurred
as a result of any condoning, overlooking or delay by Landlord in respect of any
default by Tenant or by any other act or omission of Landlord including, without
limitation, the acceptance of any Rent less than the full amount thereof or the
acceptance of any Rent after the occurrence of any default by Tenant. The waiver
by Landlord of any default of Tenant or of any rights of Landlord, which shall
be effected only by an express written waiver executed by Landlord, shall not be
deemed to be a waiver of any term, covenant or condition in respect of which
such default or right has been waived and shall not be deemed to be a waiver of
any subsequent default of Tenant or right of Landlord. All rights and remedies
of Landlord under this Lease and at law shall be cumulative and not alternative,
and the exercise by Landlord of any of its rights pursuant to this Lease or at
law shall at all times be without prejudice to any other rights of Landlord,
whether or not they are expressly reserved. The Tenant’s obligations under this
Lease shall survive the expiry or earlier termination of this Lease and shall
remain in full force and effect until fully complied with.
16.8
|
Impossibility
of Performance
|
If and to
the extent that either Landlord or Tenant shall be delayed in the fulfillment of
any obligation under this Lease, other than the payment by Tenant of any Rent,
by reason of unavailability of material, equipment, utilities, services or by
reason of any Laws, or by reason of any other similar cause beyond its control
and not avoidable by the exercise of reasonable foresight (excluding the
inability to pay for the performance of such obligation), then the party being
delayed shall be entitled to extend the time for fulfillment of such obligation
by a time equal to the duration of such delay and the other party shall not be
entitled to any compensation for any loss or inconvenience occasioned thereby.
The party delayed will, however, use its best efforts to fulfill the obligation
in question as soon as is reasonably practicable by arranging an alternate
method of providing the work, services or materials.
17.1
Landlord’s Control
The
Project is at all times subject to the exclusive control and management of
Landlord. Without limiting the generality of the foregoing, Landlord shall have
the right to obstruct or close off or restrict entry to all or any part of the
Project for purposes of performing any maintenance, repairs or replacements or
for security purposes or to prevent the accrual of any rights to any person or
the public or any dedication thereof, provided that in exercising any such right
Landlord shall use reasonable efforts to minimize interference with Tenant’s
access to and use of the Premises. The Project shall be open for access to the
Premises during Business Hours, and at any other time access to premises in the
Building shall be subject to compliance with all applicable rules and
regulations of Landlord, including without limitation those related to
security.
17.2
|
Alterations
of the Project
|
|
(a)
|
At
any time or times Landlord shall have the right to make any changes in,
additions to, deletions from or relocations of any part of the Project
including the Premises and any of the Common Facilities (any of
which are herein referred to as “Changes”) as Landlord shall consider
desirable, including the construction of additional floors in the
Building. If Landlord makes any Changes to the Premises, including
relocation of the Premises, Landlord shall ensure that the
Premises, as affected by such Changes, shall be substantially the same in
size and shall be in all other material respects reasonably comparable to
the Premises originally demised hereby. If the Premises are relocated as a
result of such Changes, Landlord shall be responsible for the direct cost
of moving Tenant to the relocated Premises and constructing
replacement leasehold improvements therein, but not for any
indirect costs or losses of Tenant. Tenant shall not have the right to
object to or make any claim on account of the exercise by Landlord of any
of its rights under this Section 17.2, except that Tenant shall be
entitled to an abatement of Basic Rent for any period of time in excess of
ten (10) consecutive days that Tenant is unable to conduct business in the
Premises as a result of the making of such Changes. Landlord shall make
any such Changes as expeditiously as is reasonably possible and so as to
interfere as little as is reasonably possible with Tenant’s business on
the Premises.
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|
(b)
|
Tenant
acknowledges that portions of the Project may be under construction during
the Term, and that such construction activities may cause temporary noise
and disturbance to existing tenants of the Project. Landlord will use
reasonable efforts to minimize interference with Tenant’s occupation of
the Premises as a result of such construction activities, but Tenant
acknowledges that in no event shall any noise or other disturbance caused
by such construction constitute a breach of Tenant’s right to quiet
enjoyment of the Premises.
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17.3
|
Use
of Common Facilities
|
Tenant
shall not itself and shall not permit any of its employees, servants, agents,
contractors or persons having business with Tenant, to obstruct any Common
Facilities including driveways, laneways or access routes, or to park vehicles
in any portion of the Common Facilities other than such areas as expressly
authorized by Landlord, and Landlord shall have the right, at Tenant’s expense
payable on demand, to remove any such obstruction or improperly parked vehicles,
without liability for any damage caused thereby.
17.4
|
Rules
and Regulations
|
Landlord
may from time to time make and amend reasonable rules and regulations for the
management and operation of the Project and Tenant and all persons under its
control shall comply with all of such rules and regulations of which notice is
given to Tenant from time to time, all of which shall be deemed to be
incorporated into and form part of this Lease. Landlord shall not make any rules
or regulations which conflict with any express provision of this Lease unless
and only to the extent required by any applicable Laws. Landlord shall act
reasonably in enforcing such rules and regulations but shall not be liable for
their nonenforcement.
|
(a)
|
Without
limiting any other rights Landlord may have pursuant hereto or at law,
Landlord shall have the right to enter the Premises at any time for any of
the following purposes: (i) to examine the Premises and to perform any
maintenance, repairs or alterations to any part of the Premises or to any
equipment and services serving the Premises or any other part of the
Project; (ii) in cases of emergency; (iii) to read any utility or other
meters; (iv) during the last twelve (12) months of the Term to show the
Premises to prospective tenants and to permit prospective tenants to make
inspections, measurements and plans; and (v) at any time during the Term
to show the Premises to prospective purchasers or
lenders.
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|
(b)
|
Landlord
shall have the right to run through the Premises conduits, wires, pipes,
ducts and other elements of any systems for utilities, heating,
ventilating, air conditioning and humidity control, telephone and other
communications systems and any other such systems to serve the Premises or
the Project.
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(c)
|
Landlord
shall exercise its rights pursuant to this Section 17.5 in such manner and
at such times as Landlord, acting reasonably but in its sole discretion,
shall determine. At any time that entry by Landlord is desired in case of
emergency, and if no personnel of Tenant are known by Landlord to be
present on the Premises or if such personnel fail for any reason to
provide Landlord immediate access at the time such entry is desired,
Landlord may forcibly enter the Premises without liability for damage
caused thereby.
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17.6
Expropriation
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(a)
|
If
the Premises or any part thereof shall be expropriated (which for the
purposes of this Article 17 shall include a sale by Landlord to any
authority with the power to expropriate) by any competent authority,
then:
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(i)
|
Landlord
and Tenant shall co-operate with each other so that Tenant may receive
such award to which it is entitled in law for relocation costs, business
interruption, and the value of leasehold improvements paid for by Tenant
and the amortized portion, if any, of leasehold improvements paid for by
Tenant, and so that Landlord may receive the maximum award to which it may
be entitled in law for all other compensation arising from such
expropriation including, without limitation, all compensation for the
value of Tenant’s leasehold interest in the
Premises;
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(ii)
|
except
for such compensation to which Tenant shall be entitled as aforesaid, all
Tenant’s other rights in respect of such expropriation are hereby assigned
to Landlord, and within ten (10) days after request by Landlord Tenant
shall execute such further documents as requested by Landlord to give
effect to such assignment, failing which Landlord is hereby irrevocably
appointed, pursuant to the
Substitute Decisions Act
(Ontario),
Tenant’s attorney to do so on behalf of Tenant and in
its name; and
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(iii)
|
Landlord
shall have the option, to be exercised by written notice to Tenant, to
terminate this Lease, effective on the date the expropriating authority
takes possession of the whole or any portion of the
Premises.
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(b)
|
If
the whole or any part of the Project shall be expropriated, then subject
to the foregoing provisions respecting expropriation of the
Premises:
|
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(i)
|
all
compensation resulting from such expropriation shall be the absolute
property of Landlord and all of Tenant’s rights, if any, to any such
compensation are hereby assigned to Landlord and within ten (10) days
after request by Landlord Tenant shall execute such further documents as
requested by Landlord to give effect to such assignment, failing which
Landlord is hereby irrevocably appointed, pursuant to the
Substitute Decisions Act
(Ontario)
Tenant’s attorney to do so on behalf of Tenant and in its
name; and
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(ii)
|
if
the expropriation of part of the Project is such as to render undesirable,
in Landlord’s reasonable opinion, the continuing operation of the portion
of the Project in which the Premises are situate, Landlord shall have the
right to terminate this Lease as of the date the expropriating authority
takes possession of all or any portion of the
Project.
|
If
Landlord withholds, delays or refuses to give consent as provided by the terms
of this Lease, whether or not Landlord is entitled to do so, Landlord shall not
be liable for any losses or damages in any way resulting therefrom and Tenant
shall not be entitled to terminate this Lease or exercise any remedy whatever in
respect thereof except to seek the order of a court of competent jurisdiction
compelling Landlord to grant any such consent which Landlord is obliged to grant
pursuant to the terms of this Lease.
18.1 Notices
All
notices, statements, demands, requests or other instruments (“Notices”) which
may be or are required to be given under this Lease shall be in writing and
shall be delivered in person or sent by prepaid registered Canadian mail
addressed, if to the Tenant, at the Address for Service of Notice on Tenant, and
if to the Landlord at the Address for Service of Notice on Landlord, all as
provided in subsection 1(i) hereof.
All such
Notices shall be conclusively deemed to have been given and received upon the
day the same is personally delivered or, if mailed as aforesaid, four (4)
business days (excluding Saturdays, Sundays, holidays and days upon
which regular postal service is interrupted or unavailable for any reason) after
the same is mailed as aforesaid. Any party may at any time by notice in writing
to the other change the Address for Service of Notice on it. If two or more
persons are named as Tenant, any Notice given hereunder shall be sufficiently
given if delivered or mailed in the foregoing manner to any one of such
persons.
There are
no covenants, representations, agreements, warranties or conditions in any way
relating to the subject matter of this Lease or the tenancy created hereby,
expressed or implied, collateral or otherwise, except as expressly set forth
herein, and this Lease constitutes the entire agreement between the parties and
may not be modified except by subsequent written agreement duly executed by
Landlord and Tenant.
Time is
of the essence of all terms of this Lease.
This
Lease shall be governed by and interpreted in accordance with the laws of the
Province of Ontario. The parties agree that the Courts of Ontario shall have
jurisdiction to determine any matters arising hereunder.
If any
provision of this Lease is illegal, unenforceable or invalid, it shall be
considered separate and severable and all the remainder of this Lease shall
remain in full force and effect as though such provision had not been included
in this Lease but such provision shall nonetheless continue to be enforceable to
the extent permitted by law.
18.6
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Section
Numbers and Headings
|
The table
of contents and all section numbers and headings of this Lease are inserted for
convenience only and shall in no way limit or affect the interpretation of this
Lease. References in this Lease to section numbers refer to the applicable
section of this Lease, unless a statute or other document is specifically
referred to.
Whenever
a word importing the singular or plural is used in this Lease, such word shall
include the plural and singular respectively. Where any party is comprised of
more than one entity, the obligations of each of such entities shall be joint
and several. Words importing persons of either gender or firms or corporations
shall include persons of the other gender and firms or corporations as
applicable. Subject to the express provisions contained in this Lease, words
such as “hereof”, “herein”, “hereby”, “hereafter”, and “hereunder” and all
similar words or expressions shall refer to this Lease as a whole and not to any
particular section or portion hereof.
This
Lease shall enure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, successors, assigns and other
legal representatives except only that this Lease shall not enure to the benefit
of any of such parties unless and only to the extent expressly permitted
pursuant to the provisions of this Lease.
Except as
may be otherwise expressly provided herein, all monetary amounts set out in this
Lease are in Canadian currency and are exclusive of Canadian Goods and Services
Tax and any other applicable Sales Taxes.
18.10
|
Demolition
or Substantial Alterations
|
If
Landlord wishes to demolish or substantially alter or renovate all or a
substantial portion of the Building containing the Premises, Landlord shall have
the right, to be exercised by not less than nine (9) months written notice to
Tenant, to terminate its Lease. Tenant agrees that upon the termination date
specified in such notice, Tenant shall vacate the Premises and deliver up vacant
possession of the Premises in accordance with the terms of this Lease. Tenant
acknowledges that it shall have no claim against Landlord as a result of the
exercise by Landlord of its right hereunder and upon such termination, all Rent
shall be apportioned to the effective date of such termination and upon
compliance by each of the parties with their respective obligations under the
Lease up to and including the termination date, each of the parties shall
thereafter be released from all future obligations arising under this
Lease.
Tenant
hereby consents to the collection, use and disclosure of personal information
collected by or on behalf of Landlord by Bentall Real Estate Services Limited
Partnership (`Bentall”) or any of Landlord’s or Bentall’s agents, affiliates, or
service providers for the purposes of: (i) considering this Lease and
determining the suitability of Tenant both for the initial Term and any renewals
or extensions thereafter, if applicable; (ii) taking action for collection of
Rents in the event of default by Tenant; (iii) facilitating the
preauthorization payment plan, if applicable; and (iv) otherwise complying
with Bentall’s Privacy Policy, a copy of which is available at
www.Bentall.com
.
Consent under
this Lease includes the disclosure of such information to credit agencies,
collection agencies and existing or potential lenders, investors and purchasers.
Tenant also consents to, and confirms its authority to consent to Bentall’s
collection, use and disclosure, for such purposes, of personal information about
employees of Tenant and other individuals whose personal information is provided
to or collected by Bentall in connection with this Lease.
IN WITNESS WHEREOF
the parties
have executed this Lease.
|
BENTALL REAL ESTATE SERVICES
LIMITED
PARTNERSHIP
(By its
General Partner, Bentall Real Estate Services G.P. Ltd.) As Authorized
Agent for
PENYORK
PROPERTIES III INC.
(Landlord)
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Per:
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“Tony Vadacchino”
|
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(Authorized
Signatory)
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c/s
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Per:
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“Stuart Wanlin”
|
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(Authorized
Signatory)
|
|
|
|
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I/We
have the authority to bind the
Corporation.
|
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OCCULOGIX, INC.
(Tenant)
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Per:
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“John
Caloz”
|
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Name:
|
John
Caloz
|
|
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Title:
|
Chief
Financial Officer
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c/s
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Per:
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“William
G. Dumencu”
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Name:
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William
G. Dumencu
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Title:
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Vice
President, Finance
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|
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I/We
have the authority to bind the
Corporation.
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SCHEDULE
"A"
LEGAL DESCRIPTION OF
PROJECT
ALL AND
SINGULAR those lands and premises situated, lying and being in the City of
Mississauga, in the Regional Municipality of Peel, and being those parts of
Block 10 on a Plan of Subdivision registered in the Land Registry Office for the
Land Titles Division of Peel as No. 43M-533 designated as Parts 1 and 2 on a
Plan of Survey deposited in the Land Registry Office as No.
43R-14899.
SUBJECT
TO an easement over the said Part 2, Plan 43R-14899 save and except Parts I and
2, Plan 43R-16904, as more particularly set out by Instrument No. 495246 as
amended by Instrument No. LT 1058959;
SUBJECT
TO an easement in favour of Bell Telephone Company of Canada and Mississauga
Hydro Electric-Commission, over so much of Block 10 on Plan 43M-523 as is
unencumbered by buildings, or other structures, as more particularly set out in
Instrument No. 495241;
Being all
of Parcel Block 10-5, Section 43M-533.
Schedule
"B"
OUTLINE PLAN OF
PREMISES
Building 9, Suite
201
Schedule
“B-1”
OUTLINE PLAN OF
PREMISES
Building 9, Suite
103
Schedule
"C"
SECURITY
AGREEMENT
Intentionally
Deleted
Schedule
"D"
SPECIAL
PROVISIONS
1.
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Estimate of Operating Costs and
Realty Taxes
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The
parties agree that Landlord has estimated that Tenant’s obligations hereunder in
respect of Operating Costs and Realty Taxes for the year 2005 would be
approximately $10.93 per square foot of the Rentable Area of the Premises; it is
understood that this estimate by Landlord is a bona fide estimate made September
21, 2005, but that it is not intended by Landlord to be relied upon by Tenant
and is not binding and does not impose liabilities on Landlord or affect
Tenant’s obligations hereunder.
2.
|
Conditions to Tenant’s
Rights
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If:
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(a)
|
Tenant
pays the Rent and other sums payable hereunder and performs each and every
of the covenants, provisos and agreements herein contained on the part of
Tenant to be paid and performed, punctually and in accordance with the
provisions of the Lease;
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(b)
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Tenant
has not become insolvent or bankrupt, and has not made any assignment for
the benefit of creditors and has not, becoming bankrupt or insolvent,
taken the benefit of any Act now or hereafter in force for bankrupt or
insolvent debtors;
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(c)
|
a
petition in bankruptcy has not been filed against Tenant and a receiving
order has not been made against Tenant, and no proceedings have been
commenced respecting the winding-up or termination of the existence of
Tenant;
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(d)
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no
receiver or other person has taken possession or effective control of the
assets or business of Tenant or a substantial portion thereof pursuant to
any security or other agreement or by any other means whatsoever, and
there are no outstanding writs of execution against
Tenant;
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(e)
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Tenant
has not assigned the Lease or sublet or permitted a change in occupancy of
any portion or portions of the Premises, and there has been no change in
ownership of the majority of the capital stock of Tenant and no change in
the name under which the business on the Premises is
conducted;
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(f)
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Tenant
has continuously, actually physically occupied all of the Premises for the
active and diligent conduct of business in accordance with the terms of
the Lease; and
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(g)
Tenant
has executed and delivered to Landlord the Lease in a form satisfactory to
Landlord,
then, and
only then, Tenant shall have the rights conferred under Sections 3, 4 and 6 of
this Schedule “D”.
Subject
to the provisions of Section 2 of this Schedule “D”, Tenant shall not be
responsible for the payment of:
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(i)
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Basic
Rent, Operating Costs and Realty Taxes for the first two (2) months of the
initial Term of the Lease (the “First Rent Free Period”) but the Tenant
shall be responsible for the payment of all other items of Additional Rent
during the First Rent Free Period;
and
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(ii)
|
Basic
Rent for the third month of the initial Term of the Lease (the “Second
Rent Free Period”) but the Tenant shall be responsible for the payment of
all items of Additional Rent during the Second Rent Free
Period.
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If at any
time during the Term:
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(a)
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the
Lease is terminated by reason of a default of
Tenant;
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(b)
|
Tenant
has become bankrupt or insolvent or has taken the benefit of any statute
for bankrupt or insolvent debtors, or has filed a proposal, or has made an
assignment for the benefit of creditors or any arrangement or
compromise,
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then in
such event, and without prejudice to any of Landlord’s other rights and remedies
available to it under the Lease and at law, the unamortized portion of the First
Rent Free Period and Second Rent Free Period calculated from the date that
Landlord no longer actually receives payments of Rent under the Lease (whether
by way of Court Order or otherwise) on the basis of an assumed rate of
depreciation on a straight line basis to zero over the Term of the Lease shall
immediately become due and payable to Landlord as Additional
Rent.
Subject
to the provisions of Section 2 of this Schedule “D, and subject to existing
tenants’ prior rights, Tenant shall have a one time only right of first offer to
lease:
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(i)
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any
space in Building 9 (“First ROFO Space”);
and/or
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(ii)
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Suite
200 in Building 10 (“Second ROFO Space”) (collectively the “ROFO
Space”)
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whenever
such space becomes available for re-leasing from time to time by the Landlord,
after the termination, surrender or expiry of the existing leases of such space
to occur following the date of the Lease or the leases of tenants relocated to
all or a portion of the ROFO Space (it being hereby acknowledged that, as of the
date hereof, the Second ROFO Space is currently available for lease and that
despite the foregoing, the Landlord shall be entitled to enter into a lease with
a third party for the ROFO Space or any part thereof at any time, from time to
time, until the whole of the ROFO Space is leased, without triggering the within
right of first offer) have expired or been terminated either by the tenant
(pursuant to any rights of termination it may have under its lease)
or by the Landlord (as a result of an event of default) and after any options to
renew or extend the ROFO Space granted to such tenant(s) under the
terms of such lease(s) have not been exercised or have expired. Further, if any
such tenant(s) either fail(s), or elect(s) not, to exercise its option to renew
or extend or if such tenant(s) do(es) not have an option to renew or extend
contained in its lease for the ROFO Space, Landlord shall, despite anything
contained in this Section 4 to the contrary, be free to enter into an agreement
with such tenant(s) extending the term of its lease for the ROFO Space without
triggering the within right of first offer.
In the
event that ROFO Space becomes available the Landlord shall provide the Tenant
with written notice (“Landlord’s Notice”), specifying what space is available
(i.e. either the whole or any part of the ROFO Space, as the case may
be) (“Available ROFO Space”) and the availability date for the Available
ROFO Space and the Tenant shall have ten (10) business days from
receipt of the Landlord’s Notice within which to deliver written notice (“ROFO
Notice”) to the Landlord of its agreement to lease the whole of the Available
ROFO Space on the same terms and conditions as contained in the Lease for the
Premises save and except that: (a) there shall be no Landlord’s Work, rent free
period or other financial inducements; (b) the basic rent payable for the
Available ROFO Space shall be ROFO Market Rent (“ROFO Market Rent” means the
annual basic rental which could reasonably be obtained by Landlord for the
Available ROFO Space from a willing tenant or willing tenants dealing at arms’
length with Landlord in the market prevailing for a term commencing on the
commencement date of the term of lease for the Available ROFO Space, having
regard to all relevant circumstances including the size and location of the
Available ROFO Space, the facilities afforded, the terms of the lease thereof
(including its provisions for Additional Rent), the terms aforesaid regarding
tenant inducements, the condition of the Available ROFO Space and the use of the
Available ROFO Space, and having regard to rentals currently being obtained for
space in the Building and for comparable space in other buildings comparably
located, and inducements being offered to tenants (including rent free periods,
allowances and other inducements); (c) the commencement date shall be as
specified by the Landlord in the Landlord’s Notice, and (d) the expiration date
shall be coterminous with the expiry date of the Lease, failing which this right
of first offer shall be null and void with respect to the Available ROFO Space
and the Landlord shall be free to lease the Available ROFO Space or any part
thereof to a third party on such terms and conditions as the Landlord, in its
sole discretion, determines and this right of first offer shall only apply to
the balance of the ROFO Space. For greater certainty, if the ROFO Market Rent is
not agreed upon between the parties within thirty (30) days of the delivery of
the Landlord’s Notice, the ROFO Market Rent shall be established in the manner
set out in Section 5 below and, in such event, there shall be no delay to the
commencement date of the Available ROFO Space as set forth in the Landlord’s
Notice and, until such time as the ROFO Market Rent is determined, the Tenant
shall pay to the Landlord the Basic Rent then payable hereunder for the
Premises, as applicable to the Available ROFO Space, and upon determination of
the ROFO Market Rent for the Available ROFO Space, either Landlord shall pay to
Tenant any excess, or Tenant shall pay to Landlord any deficiency, in the
payments of Basic Rent previously made by Tenant with respect to the Available
ROFO Space, without interest.
The
Tenant shall execute an agreement (to be prepared by the Landlord) amending the
provisions of the Lease in order to incorporate the terms of the
foregoing.
Any
Available ROFO Space which is made available to the Tenant under this Section 4
shall be dealt with as a whole.
Either
Landlord or Tenant (the “Requesting Party”) shall be entitled to notify the
other party hereto (the “Receiving Party”) of the name of an expert for the
purpose of determining the ROFO Market Rent. Within fifteen (15) days after such
notice from the Requesting Party, the Receiving Party shall notify the
Requesting Party either approving the expert proposed by the Requesting Party or
naming another expert for the purpose of determining the ROFO Market Rent.
Should the Receiving Party fail to give notice to the Requesting Party within
the said fifteen (15) day period, the expert named in the notice given by the
Requesting Party shall perform the expert’s functions hereinafter set forth. If
Landlord and Tenant are unable to agree upon the selection of the expert within
fifteen (15) days after such notice from the Receiving Party to the Requesting
Party, then either party shall be entitled to apply to a court to appoint an
expert in the same manner as an arbitrator may be appointed by a court under the
Arbitration Act, 1991
(Ontario),
as amended or replaced. The expert appointed, either by
Landlord and/or Tenant or by a court, shall be qualified by education,
experience and training to value real estate for rental purposes in the Province
of Ontario and have been ordinarily engaged in the valuation of real property in
the municipality in which the Project is located for at least the immediately
preceding five (5) years. Within thirty (30) days after being appointed the
expert shall make a determination of the Market Rent for the ROFO Space, without
receiving evidence from either Landlord or Tenant. The cost of such
determination shall be borne by the Tenant. The determination of the expert as
to the ROFO Market Rent shall be conclusive and binding upon Landlord and Tenant
and not subject to appeal.
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(a)
|
Subject
to Section 2 of this Schedule “U’, throughout the Term, Tenant shall have
the right to use:
|
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(i)
|
seven
(7) reserved underground parking spaces;
and
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(ii)
|
twelve
(12) unreserved surface parking spaces (on a “first-come, first-served”
basis)
|
for
parking automobiles (collectively the “Parking Spaces”) in the parking
facilities at the Project (the “Parking Facility”), in such locations as
designated from time to time by Landlord or the operator of the Parking
Facility, and subject to the terms set out below. For each of such Parking
Spaces, Tenant shall pay to Landlord, whether or not Tenant actually uses the
Parking Spaces or any of them, the prevailing monthly rates charged from time to
time by Landlord or the operator of the Parking Facility for the use of reserved
and unreserved Parking Spaces respectively. Notwithstanding anything to the
contrary contained herein, there shall be no licence fee payable by Tenant to
Landlord or Landlord’s parking operator for Tenant’s use of the Parking Spaces
in the Parking Facility during the initial Term only, but, for greater
certainty, Tenant shall be responsible for payment to Landlord of its
Proportionate Share or share, as of the case may be, of Operating Costs and
Realty Taxes associated with the Parking Facility.
|
(b)
|
Tenant
shall ensure that Landlord is at all times in possession of up-to-date
information as to the owner, licence plate number and description of each
automobile authorized to use such Parking
Spaces.
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(c)
|
Landlord
may from time to time make and amend such rules and regulations for the
management and operation of the Parking Facility as Landlord shall
determine and Tenant and all persons under its control, including without
limitation all users of the Parking Spaces, shall be bound by and shall
comply with all of such rules and regulations of which notice is given to
Tenant from time to time and all of such rules and regulations shall be
deemed to be incorporated into and form a part of the
Lease.
|
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(d)
|
For
emphasis only, and without affecting or limiting the meaning of any
provision of the Lease, it is agreed that the following sections of the
Lease apply to the rights granted to Tenant hereunder in respect of the
Parking Spaces, namely Sections 13.5 (“Landlord’s Non-Liability”) and 13.6
(“Indemnity of Landlord”).
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(e)
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If
Tenant or any person permitted by Tenant to use any of the Parking Spaces
fails to comply with the provisions of the Lease in respect of the Parking
Spaces, including without limitation the rules and regulations from time
to time applicable to the Parking Facility, then Landlord shall have the
right to terminate or suspend the privileges of the offending party to use
the Parking Facility, provided that the exercise of such right by Landlord
shall not limit or affect the obligation of Tenant hereunder to pay for
all Parking Spaces.
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(f)
|
No
motor vehicle other than a private passenger automobile, station wagon or
van shall be parked on or in any part of the Common Facilities of the
Project, including without limitation the Parking Facility, nor shall any
repairs other than emergency repairs immediately necessary for operation
of a vehicle be made to any motor vehicle in or on any of the Common
Facilities, including without limitation the Parking Facility, and no
motor vehicle shall be driven on any part of the Common Facilities other
than on a driveway or in the Parking
Facility.
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(g)
|
It
is understood and agreed that Landlord is not responsible for theft of or
damage to the vehicle or its equipment or articles left in the
vehicle.
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(h)
|
It
is understood and agreed that no vehicle powered by propane, hydrogen or
natural gas are allowed in any underground portion of the Parking
Facility.
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(i)
|
Tenant
may be required to pay to the Landlord a deposit amount for each parking
pass issued. Such parking deposit shall be held by the Landlord in the
event that any of the parking passes so issued are damaged, lost or
destroyed. Upon the expiry or earlier termination of the Lease, if the
deposit amounts have not previously been deducted at any time during the
Term, the deposit amounts shall be refunded to the Tenant in full upon
presentation to the Landlord of the same number of parking passes
originally issued to the Tenant, in good condition and
repair.
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(j)
|
If
requested by Landlord, Tenant shall execute Landlord’s standard form of
parking agreement to give effect to the
foregoing.
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Concurrently
with Tenant’s execution and delivery of this Lease to Landlord, Tenant shall
deliver to Landlord such information as the Landlord requires (“Information”) to
satisfy itself as to the financial strength of Tenant and Tenant
hereby consents to Landlord making independent credit inquiries for that
purpose. This Lease is conditional for a period of ten (10) business days after
receipt by Landlord of such Information, together with this Lease and the Rent
Deposit Agreement duly executed by Tenant, for Landlord to (i) satisfy itself as
aforesaid; and (ii) obtain the approval of its senior management.
If
Landlord notifies Tenant in writing within such conditional period that either
condition has not been satisfied, then this Lease and the Rent Deposit Agreement
shall be null and void and of no further force or effect. In the event of such
termination, Landlord shall return any deposits received by it to Tenant without
interest or deduction and Landlord shall not be liable for any losses, damages
or costs whatsoever. These conditions have been inserted for the sole benefit of
Landlord and may be waived by Landlord in its sole and absolute discretion at
any time on notice in writing to Tenant.
Schedule
"E"
EXCLUSIVE USES OF OTHER
TENANTS
2600 Skymark Avenue,
Mississauga, Ontario
None as
of the date of this Lease.
Schedule
"F"
RENT DEPOSIT
AGREEMENT
THIS RENT DEPOSIT AGREEMENT
is
dated October 17, 2005,
BETWEEN:
|
(hereinafter
called “
Tenant
”)
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OF THE
FIRST PART
|
PENYORK
PROPERTIES III INC.
|
|
(hereinafter
called “
Landlord
”)
|
OF THE
SECOND PART
WHEREAS:
A.
|
By
a lease of even date (“Lease”) between Landlord and Tenant, Landlord
leased to Tenant premises known as Suites 103 and 201, Building 9 (the
“Premises”) in the building municipally known as 2600 Skymark
Avenue, Mississauga, Ontario, as more particularly described in the Lease,
for a term of One (1) Year and Six (6) Months, commencing on February 1,
2006 and expiring on July 31, 2007;
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B.
|
To
induce Landlord to enter into the Lease, Tenant has agreed to deliver to
Landlord a rent deposit in the amount of Twenty Four Thousand Six Hundred
and Thirty-Four Dollars and Sixty-Two Cents ($24,634.62) (the “Rent
Deposit”), to be held without interest and applied on the terms and
conditions set out in this
Agreement;
|
NOW, THEREFORE
, for good and
valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged by the parties hereto, the parties hereto make the following
agreement:
1.
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Tenant
shall deposit with Landlord the Rent Deposit. Provided Tenant is not then
in default, the amount of Twelve Thousand Three Hundred and Seventeen
Dollars and Thirty-One Cents ($12,317.31) shall be applied towards first
Rent accruing due under the Lease, after expiry of the First Rent Free
Period and Second Rent Free Period (as both of the foregoing terms are
defined in the Lease). Landlord shall hold the balance of the Rent
Deposit, without interest, as a prepayment of the Rent payable by Tenant
under the Lease during the Term and any renewals or extensions thereof and
any tenancy resulting from an overholding, and to secure and may be
applied against the other amounts referred to in paragraph 7
below.
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2.
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If
at any time any Rent payable under the Lease shall be overdue, all or any
portion of the Rent Deposit shall, at Landlord’s option, be applied to the
payment of any Rent then due and owing. Further, if Tenant defaults in the
performance of any of the terms, covenants, conditions and provisions of
the Lease as and when the same are due to be performed by Tenant, then all
or any part of the Rent Deposit shall, at Landlord’s option, be applied on
account of any losses or damages sustained by Landlord as a result of such
default.
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3.
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If
all or any part of the Rent Deposit is applied by Landlord on account of
the payment of Rent or on account of any default or any losses or damages
sustained by Landlord as aforesaid, then Tenant shall, within three (3)
days after demand from Landlord, remit to Landlord a sufficient amount in
cash or by certified cheque to restore the Rent Deposit to the original
sum required to be deposited as set forth herein plus interest on the
amount of such default, loss or damages sustained by Landlord at a rate of
three (3%) percent per annum in excess of the rate of interest known as
the prime rate of interest charged by Landlord’s bank in Ontario and which
serves as the basis on which other interests rates are calculated for
Canadian dollar loans in Ontario from time to time, from the date of
default to the date the Rent Deposit is restored as
aforesaid.
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4.
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If
Tenant (i) complies with all of the terms, covenants, conditions and
provisions under the Lease and promptly pays all Rent therein throughout
the term; (ii) the Lease has not been Disclaimed (as hereinafter defined);
(iii) the Lease has not terminated for any reason prior to the natural
expiry date; and (iv) Tenant has complied with all of the obligations
under the Lease to the extent the same remains in Landlord’s possession
and is not applied to any of Tenant’s obligations hereunder, Landlord
shall return the balance of the Rent Deposit to Tenant within thirty (30)
days after the expiry of the Lease.
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5.
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Landlord
may deliver the Rent Deposit, or such portion thereof remaining on hand to
the credit of Tenant, to any purchaser, mortgagee or assignee of
Landlord’s interest in the Premises or the Project under the Lease or in
the Lease and thereupon Landlord shall be and is hereby discharged from
any further liability with respect to the Rent
Deposit.
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6.
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In
the event of any bankruptcy, insolvency, winding-up or other creditors’
proceeding, the Rent Deposit shall be the absolute property of Landlord
and shall, at Landlord’s option, be automatically appropriated and applied
against the Rent and any other amounts referred to in paragraph 7
below.
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7.
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The
Rent Deposit shall secure and may, at Landlord’s option, be applied on
account of any one or more of the following: (i) the due and punctual
payment of all Rent and all other amounts of any kind whatsoever payable
under the Lease by Tenant whether to Landlord or otherwise and whether or
not relating to or payable in respect of the Premises, including, without
limitation, any amount which would have become payable under the Lease to
the date of the expiry of the Lease had the Lease not been Disclaimed or
terminated; (ii) the prompt and complete performance of all obligations
contained in the Lease on the part of Tenant to be kept, observed and
performed; (iii) the due and punctual payment of all other amounts payable
by Tenant to Landlord; (iv) the indemnification of Landlord in respect of
any losses, costs or damages incurred by Landlord arising out of any
failure by Tenant to pay any rent or other amounts payable under the Lease
or resulting from any failure by Tenant to observe or perform any of the
other obligations contained in the Lease; (v) liquidated damages in
compensation for the money spent by Landlord with respect to the Premises
to make them ready for Tenant’s use and occupancy; (vi) the reduction in
value of the Premises as a result of Tenant’s default; (vii) the
performance of any obligation which Tenant would have been obligated to
perform to the date of the expiry of the Lease had the Lease not been
Disclaimed or terminated; (viii) the losses or damages suffered by
Landlord as a result of the Lease being Disclaimed or terminated or (ix)
the repayment of the unamortized portion as of the date the Lease is
disclaimed or terminated of any allowances, inducements or other
incentives paid by Landlord in conjunction with the
Lease.
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8.
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The
rights of Landlord hereunder in respect of the Rent Deposit shall continue
in full force and effect and shall not be waived, released, discharged,
impaired or affected by reason of the release or discharge of Tenant in
any receivership, bankruptcy, insolvency, winding-up or other creditor’s
proceedings, including, without limitation, any proceedings under the
Bankruptcy and Insolvency Act (Canada) or the Companies Creditors
Arrangement Act (Canada), or the surrender, disclaimer, repudiation or
termination of the Lease (individually and collectively referred to herein
as “Disclaimed”) in any such proceedings and shall continue with respect
to the periods thereto and thereafter as if the Lease had not been
Disclaimed.
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9.
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Capitalized
expressions used herein, unless separately defined herein, have the same
meaning as defined in the Lease unless separately defined
herein.
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10.
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Time
in all respects shall be of the
essence.
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11.
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This
Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective heirs, administrators, successors and
assigns.
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IN WITNESS WHEREOF
the parties
hereto have executed this Agreement.
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OCCULOGIX,
INC.
(Tenant)
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Per:
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Name:
Title:
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Per:
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Name:
Title:
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I/We
have the authority to bind the
Corporation.
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BENTALL
REAL ESTATE SERVICES LIMITED
PARTNERSHIP
(By its General Partner, Bentall Real
Estate Services G.P. Ltd.) As Authorized Agent for
PENYORK
PROPERTIES III INC.
(Landlord)
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Per:
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(Authorized
Signatory)
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Per:
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c/s
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(Authorized
Signatory)
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I/We
have the authority to bind the
Corporation.
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Schedule
"G"
ENVIRONMENTAL
QUESTIONNAIRE
Tenant’s
Name:
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Occulogix,
Inc.
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Premises:
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Being
all of the premises leased from time to time pursuant to the
Lease
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Address:
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2600
Skymark Avenue, Mississauga, Ontario
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Telephone:
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Fax:
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Person
Responsible:
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a)
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Describe
the business activities carried in the Premises and specify raw materials
used, goods manufactured and any resulting waste materials or by-products
that are generated;
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b)
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Will
the business activities to be carried on in the Premises entail the use,
generating or storing of any Hazardous Materials (as hereinafter defined)
in any quantity? (including but not limited to chemical products,
degreasers, corrosives, flammable or combustibles, fuels, solvents,
paints, medication, oil, gas, batteries, extinguisher,
etc.)
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NO
o
YES
o
(If so,
describe…)
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c)
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Indicate
the approximate amounts of Hazardous Materials which will be used or
generated, monthly or annually, in the Premises.
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d)
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How
do you intend to store the Hazardous Materials described in c)
?
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e)
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How
will you dispose of the Hazardous Materials generated in the Premises by
your business and who will be the carrier?
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f)
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Will
the business activities to be carried on in the Premises require that you
obtain any certificate of authorization, permit or environmental
approvals, or provide environmental data (ie. NPRI or Ontario Reg. 127) to
government agencies?
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NO
o
YES
o
(If
so, give details and attach your certificate)
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g)
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Will
the business activities to be carried on in the Premises entail the
discharge of Hazardous Materials into the sewer system, water system or
into the air? If so, will pollution control equipment be
required in the Premises to comply with Environmental Legislation and
applicable Laws?
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NO
o
YES
o
(If
so, give details and list standards to be met)
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h)
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Will
the business activities to be carried on in the Premises necessitate the
installation of an underground or surface storage tank in the Premises or
on the Common Facilities?
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NO
o
YES
o
(If
so, describe in detail the tank to be installed and material to be
stored)
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i)
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Do
you intend to have a prevention training or emergency plan in place to
prevent an environmental incident or to deal with one if it
occurs?
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NO
o
YES
o
(If
so, give details and attach a copy of the plan and/or training
procedure)
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J)
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Does
your firm have an environmental management program in
place?
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NO
o
YES
o
(If
so, give details and attach a copy of the program)
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k)
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Do
you have appropriate insurance to handle Hazardous
Materials?
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NO
o
YES
o
(If
so, give details and attach a copy of the policy)
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DATE:
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TENANT’S
SIGNATURE:
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All
defined terms where used herein shall have the meaning ascribed to them in the
lease of with this Schedule forms part.
Schedule
"H"
TENANT
WORK
Tenant
shall, at its cost and expense, complete or cause the completion of all
leasehold improvements which are required to complete the Premises for Tenant’s
business operations thereon prior to the Commencement Date (“Tenant’s Work”) in
accordance with the following provisions and those provisions of the Lease
applicable to the completion of Alterations to the Premises and in accordance
with the
“Tenant Design
Criteria Manual”,
if any, applicable to the Project.
Prior to
commencing any Tenant’s Work on the Premises, Tenant shall deliver to the
Landlord certified copies or certificates of insurance duly executed by Tenant’s
insurers evidencing the placement of insurance coverage in compliance with the
provisions of the Lease. Tenant shall also deliver to Landlord certified copies
or certificates of insurance from its contractors and/or sub-contractors engaged
to perform Tenant’s Work, evidencing insurance coverage satisfactory to
Landlord, acting reasonably.
Any
damage to the Premises, the Building or the Project caused during the
performance of Tenant’s Work by Tenant, its contractors, sub-contractors,
tradesmen or material suppliers shall immediately be repaired by Tenant to the
satisfaction of Landlord, or, at the Landlord’s option, by the Landlord at the
expense of Tenant payable on demand, plus fifteen (15%) percent of such costs
for Landlord’s supervision.
The
opinion in writing of the Landlord’s architect or other qualified consultant
shall be binding on both the Landlord and Tenant respecting all matters of
dispute regarding the Tenant’s Work, including the state of completion and
whether or not work is completed in a good and workmanlike manner and in
accordance with plans and specifications for Tenant’s Work as approved by the
Landlord and with this Schedule.
Tenant
shall furnish to the Landlord forthwith upon demand a statutory declaration or
other evidence satisfactory to the Landlord stating that there are no such
encumbrances, and that all accounts for work, services and materials have been
paid in full with respect to all of Tenant’s Work, together with evidence in
writing satisfactory to the Landlord that all assessments under the
Worker’s Compensation Act
have been paid. In addition to the foregoing, Tenant shall also submit to
the Landlord forthwith any other information requested by the Landlord regarding
the supply of work, services and materials in connection with Tenant’s Work,
including without limitation details of the costs actually expended by Tenant in
the performance of Tenant’s Work.
Notwithstanding
anything contained herein, including without limitation the provisions relating
to Landlord’s approval of the plans and specifications pertaining to the
Tenant’s Work and to any rights of Landlord to perform any work or do any other
thing on Tenant’s behalf, and notwithstanding any notice which may be received
by Landlord from any of Tenant’s contractors or sub-contractors, the Landlord
shall not be liable, and no lien or other encumbrance shall attach to the
Landlord’s interest in the Premises, pursuant to the
Construction Lien Act,
in
respect of materials supplied or work done by Tenant or on behalf of Tenant or
related to Tenant’s Work, and Tenant shall so notify or cause to be notified all
its contractors and sub-contractors and shall indemnify the Landlord from any
liability whatsoever arising out of the performance of Tenant’s Work. Tenant
hereby acknowledges and agrees that the provision of any materials, work or
services performed by the Landlord at Tenant’s expense in respect of any
Tenant’s Work or pursuant to any provision hereof shall be deemed to be provided
by Landlord on Tenant’s behalf as Tenant’s contractor.
Exhibit
10.33
LEASE
AMENDING AGREEMENT
THIS AGREEMENT
made as of the
9
th
day of March, 2007,
B
E T W E E N:
OCCULOGIX,
INC.
(the
“Tenant”)
A
N D:
2600
SKYMARK INVESTMENTS INC.
(the
“Landlord”)
WHEREAS
pursuant to a lease
dated the 17
th
day of
October, 2005 (the “Lease”), as supplemented by a Rent Deposit Agreement dated
October 17, 2005 (the “Rent Deposit Agreement”), the Landlord, by its
predecessor Penyork Properties III Inc., as landlord, leased to the Tenant
certain premises containing a Rentable Area of approximately 6,600 square feet
as set out in the Lease, being composed of part of the ground floor of Building
9, known as Suite 103, and part of the second floor of Building 9, known as
Suite 201, of the Project municipally designated as 2600 Skymark Avenue,
Mississauga, Ontario (the Project and Building as more particularly described in
the Lease) for a term now expiring July 31, 2007 at the rents and upon the terms
and conditions contained in the Lease;
AND WHEREAS
2600 Skymark
Investments Inc. is successor in interest and title as owner and landlord of the
Project and Building;
AND WHEREAS
the Landlord and
the Tenant have agreed to extend the Term of the Lease and to certain other
amendments to the Lease and to execute this Agreement to give effect
thereto;
NOW THEREFORE THIS AGREEMENT
WITNESSES
that in consideration of the mutual convenants contained herein
and the sum of TWO ($2.00) DOLLARS now paid by each party to the other and other
good and valuable consideration (the receipt and sufficiency of which is hereby
acknowledged), the parties hereby covenant and agree as follows:
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1.
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The
above recitals are true in substance and in
fact.
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2.
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The
Lease shall be and is hereby amended as
follows:
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(a)
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Section
1(b) Term is extended for a further Three (3) years from August 1, 2007 to
July 31, 2010;
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(b)
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Section
1(d) Expiry Date is extended to July 31,
2010;
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(c)
|
Section
1(e) Basic Rent shall be amended by adding the
following:
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Rental
Period
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Annual
Basic Rent
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Monthly
Basic Rent
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Annual
Rate per square foot of Rentable Area
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August
1, 2007 to July 31, 2010
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$79,200.00
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$6,600.00
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$12.00
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(e)
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The
Landlord’s address for service in Section 1(i) shall be deleted and
replaced with the following:
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2600
Skymark Investments Inc.
Suite
300
1 St.
Clair Avenue West
Toronto,
Ontario, M4V 1K6
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(d)
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The
Tenant shall have no right or option to extend or renew the Lease or the
term of the Lease.
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(e)
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The
Tenant accepts the Premises in their current “as is” condition and the
Landlord shall not provide any Landlord’s Work. There shall be
no rental credit, rent free period, tenant allowance, Landlord’s Work,
Fixturing Period, leasehold improvements or other tenant inducement
whatsoever provided by the
Landlord.
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(f)
|
The
Tenant’s right of first offer to lease the ROFO Space is hereby terminated
and Sections 4 and 5 of Schedule D to the Lease are hereby deleted from
the Lease.
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(g)
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Section
5.5 of the Lease is hereby amended by deleting the word “audited” from the
ninth line thereof, so that the statement of Operating Costs and Realty
Taxes for the Project to be provided annually by the Landlord to the
Tenant shall not be required to be in audited
form.
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3.
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The
Landlord and the Tenant hereby acknowledge, confirm and agree that in all
other respects the terms of the Lease and the Rent Deposit Agreement are
to remain in full force and effect, unchanged and unmodified except in
accordance with this Agreement.
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4.
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Except
as specifically stated in this Agreement, any expression used in this
Agreement has the same meaning as the corresponding expression in the
Lease.
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5.
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This
Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective permitted successors and permitted
assigns.
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6.
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This
Agreement may be executed by the parties hereto in separate counterparts,
each of which so executed shall be deemed to be an
original. Such counterparts together shall constitute one and
the same instrument and, notwithstanding the date of execution, shall be
deemed to bear the effective date set forth
above.
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IN WITNESS WHEREOF
each of the
parties hereto have executed this Agreement as of the date first written
above.
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Tenant:
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OCCULOGIX,
INC.
|
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Per:
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“TomReeves”
|
|
|
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Name:
|
Tom
Reeves
|
|
|
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Title:
|
President
& COO
|
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Per:
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“William
Dumencu”
|
|
|
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Name:
|
William
Dumencu
|
|
|
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Title:
|
CFO
& Treasurer
|
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I/We
have authority to bind the Corporation
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Landlord:
|
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2600
SKYMARK INVESTMENTS INC.
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Per:
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“Michael Bunston”
|
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Name:
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Michael
Bunston
|
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Title:
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President
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I
have authority to bind the Corporation
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Exhibit
10.34
(formerly
VASCULAR SCIENCES CORPORATION)
2002
STOCK OPTION PLAN, AS AMENDED IN 2007
1.
Establishment, Purpose and
Term of Plan.
1.1
Establishment
.
The
OccuLogix, Inc. 2002 Stock Option Plan (the
“
Plan
”
)
was established effective as of the effective date of the Delaware
reincorporation of OccuLogix Corporation (the predecessor corporation to the
Company) (the
“
Effective
Date
”
) and
amended effective as of the closing of the Company’s initial public
offering.
1.2
Purpose
.
The
purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract, retain and
reward persons performing services for the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group.
1.3
Term of Plan.
The
Plan shall continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing Options granted under the Plan have
lapsed. However, all Options shall be granted, if at all, within
ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the stockholders of the
Company.
2.
Definitions and
Construction.
2.1
Definitions.
Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a)
“
Board
”
means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan,
“
Board
”
also means such Committee(s).
(b)
“
Code
”
means the Internal Revenue Code of 1986, as amended, and any applicable
regulations promulgated thereunder.
(c)
“
Committee
”
means the Compensation Committee or other committee of the Board duly appointed
to administer the Plan and having such powers as shall be specified by the
Board. Unless the powers of the Committee have been specifically
limited, the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(d)
“
Company
”
means OccuLogix, Inc., a Delaware corporation, or any successor corporation
thereto.
Updated
July 5, 2007
(e)
“
Consultant
”
means a person engaged to provide consulting or advisory services (other than as
an Employee or a Director) to a Participating Company, provided that the
identity of such person, the nature of such services or the entity to which such
services are provided would not preclude the Company from offering or selling
securities to such person pursuant to the Plan in reliance on either the
exemption from registration provided by Rule 701 under the Securities Act or, if
the Company is required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act, registration on a Form S-8 Registration Statement under the
Securities Act.
(f)
“
Director
”
means a member of the Board or of the board of directors of any other
Participating Company.
(g)
“
Disability
”
means the inability of the Optionee, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of the Optionee’s
position with the Participating Company Group because of the sickness or injury
of the Optionee.
(h)
“
Employee
”
means any person treated as an employee (including an Officer or a Director who
is also treated as an employee) in the records of a Participating Company and,
with respect to any Incentive Stock Option granted to such person, who is an
employee for purposes of Section 422 of the Code; provided, however, that
neither service as a Director nor payment of a director’s fee shall be
sufficient to constitute employment for purposes of the Plan. The
Company shall determine in good faith and in the exercise of its discretion
whether an individual has become or has ceased to be an Employee and the
effective date of such individual’s employment or termination of employment, as
the case may be. For purposes of an individual’s rights, if any,
under the Plan as of the time of the Company’s determination, all such
determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.
(i)
“
Exchange
Act
”
means the Securities Exchange Act of 1934, as amended.
(j)
“
Fair Market
Value
”
means, as of any date, the value of a share of Stock or other property as
determined by the Board, in its discretion, or by the Company, in its
discretion, if such determination is expressly allocated to the Company herein,
subject to the following:
(i) If,
on such date, the Stock is listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be the closing
price of a share of Stock (or the mean of the closing bid and asked prices of a
share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, The Nasdaq SmallCap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in
The Wall Street
Journal
or such other source as the Company deems reliable. If
the relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Board, in its discretion.
Updated
July 5, 2007
(ii) If,
on such date, the Stock is not listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be as
determined by the Board in good faith without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(k)
“
Incentive Stock
Option
”
means an Option intended to be (as set forth in the Option Agreement) and which
qualifies as an incentive stock option within the meaning of Section 422(b)
of the Code.
(l)
“
Insider
”
means an Officer, a Director of the Company or other person whose transactions
in Stock are subject to Section 16 of the Exchange Act.
(m)
“
Nonstatutory
Stock Option
”
means an Option not intended to be (as set forth in the Option Agreement) or
which does not qualify as an Incentive Stock Option.
(n)
“
Officer
”
means any person designated
by the Board as an officer of the Company.
(o)
“
Option
”
means a right to purchase Stock pursuant to the terms and conditions of the
Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.
(p)
“
Option
Agreement
”
means a written agreement between the Company and an Optionee setting forth the
terms, conditions and restrictions of the Option and Stock Appreciation Right
granted to the Optionee and any shares acquired upon the exercise
thereof. An Option Agreement may consist of a form of “Notice of
Grant of Stock Option” and a form of “Stock Option Agreement” incorporated
therein by reference, or such other form or forms as the Board may approve from
time to time.
(q)
“
Optionee
”
means a person who has been granted one or more Options and Stock Appreciation
Rights.
(r)
“
Parent
Corporation
”
means any present or future “parent corporation” of the Company, as defined in
Section 424(e) of the Code.
(s)
“
Participating
Company
”
means the Company or any Parent Corporation or Subsidiary
Corporation.
(t)
“
Participating
Company Group
”
means, at any point in time, all corporations collectively which are then
Participating Companies.
Updated
July 5, 2007
(u)
“
Prior Plan
Options
”
means,
any option granted pursuant to the OccuLogix Corporation 1997 Stock Option Plan
which is outstanding on or after the date on which the Board adopts the Plan or
which is granted thereafter and prior to the Effective Date.
(v)
“
Rule
16b-3
”
means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.
(w)
“
Securities
Act
”
means the Securities Act of 1933, as amended.
(x)
“
Service
”
means an Optionee’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a
Consultant. An Optionee’s Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee’s
Service. Furthermore, an Optionee’s Service with the Participating
Company Group shall not be deemed to have terminated if the Optionee takes any
military leave, sick leave, or other bona fide leave of absence approved by the
Company; provided, however, that if any such leave exceeds ninety (90) days, on
the ninety-first (91st) day of such leave the Optionee’s Service shall be deemed
to have terminated unless the Optionee’s right to return to Service with the
Participating Company Group is guaranteed by statute or
contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Optionee’s Option
Agreement. The Optionee’s Service shall be deemed to have terminated
either upon an actual termination of Service or upon the corporation for which
the Optionee performs Service ceasing to be a Participating
Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Optionee’s Service has terminated and the effective
date of such termination.
(y)
“
Stock
”
means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2.
(z)
“
Stock
Appreciation Right
”
means a right to surrender to the Company all or a portion of an Option in
exchange for an amount equal to the excess, if any, of:
(i) the
Fair Market Value as of the date such Option or portion thereof is surrendered
of the Stock issuable on exercise of such Option or portion thereof over (ii)
the exercise price of such Option or portion thereof relating to such
stock.
(aa)
“
Subsidiary
Corporation
”
means any present or future “subsidiary corporation” of the Company, as defined
in Section 424(f) of the Code.
(bb)
“
Ten Percent Owner
Optionee
”
means an Optionee who, at the time an Option is granted to the Optionee, owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company within the meaning of
Section 422(b)(6) of the Code.
Updated
July 5, 2007
2.2
Construction.
Captions
and titles contained herein are for convenience only and shall not affect the
meaning or interpretation of any provision of the Plan. Except when
otherwise indicated by the context, the singular shall include the plural and
the plural shall include the singular. Use of the term “or” is not
intended to be exclusive, unless the context clearly requires
otherwise. Where a Stock Appreciation Right has been granted in
conjunction with an Option, the term “Option” shall include the related Stock
Appreciation Right where the context permits.
3.
Administration.
3.1
Administration by the
Board.
The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Option
shall be determined by the Board, and such determinations shall be final and
binding upon all persons having an interest in the Plan or such
Option.
3.2
Authority of
Officers.
Any Officer shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation,
determination or election which is the responsibility of or which is allocated
to the Company herein, provided the Officer has apparent authority with respect
to such matter, right, obligation, determination or election.
3.3
Powers of the Board
.
In
addition to any other powers set forth in the Plan and subject to the provisions
of the Plan, the Board shall have the full and final power and authority, in its
discretion:
(a) to
determine the persons to whom, and the time or times at which, Options and Stock
Appreciation Rights shall be granted and the number of shares of Stock to be
subject to each Option and Stock Appreciation Right;
(b) to
designate Options as Incentive Stock Options or Nonstatutory Stock
Options;
(c) to
determine the Fair Market Value of shares of Stock or other
property;
(d) to
determine the terms, conditions and restrictions applicable to each Option and
Stock Appreciation Right (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option and Stock Appreciation Right or
such shares, including by the withholding or delivery of shares of stock, (iv)
the timing, terms and conditions of the exercisability of the Option and Stock
Appreciation Right or the vesting of any shares acquired upon the exercise
thereof, (v) the time of the expiration of the Option and Stock
Appreciation Right, (vi) the effect of the Optionee’s termination of Service
with the Participating Company Group on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;
Updated
July 5, 2007
(e) to
approve one or more forms of Option Agreement;
(f) to
amend, modify, extend, cancel, renew, reduce the exercise price of or in any
other manner re-price any outstanding Option and Stock Appreciation Right or to
waive any restrictions or conditions applicable to any outstanding Option and
Stock Appreciation Right or any shares acquired upon the exercise
thereof;
(g) to
accelerate, continue, extend or defer the exercisability of any Option and Stock
Appreciation Right or the vesting of any shares acquired upon the exercise
thereof, including with respect to the period following an Optionee’s
termination of Service with the Participating Company Group;
(h) to
prescribe, amend or rescind rules, guidelines and policies relating to the Plan,
or to adopt supplements to, or alternative versions of, the Plan, including,
without limitation, as the Board deems necessary or desirable to comply with the
laws of, or to accommodate the tax policy or custom of, foreign jurisdictions
whose citizens may be granted Options and Stock Appreciation Rights;
and
(i) to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Option Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Option and Stock Appreciation
Right as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
3.4
Administration with Respect to
Insiders.
With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered
pursuant to Section 12 of the Exchange Act, the Plan shall be administered
in compliance with the requirements, if any, of Rule 16b-3.
3.5
Indemnification.
In
addition to such other rights of indemnification as they may have as members of
the Board or officers or employees of the Participating Company Group, members
of the Board and any officers or employees of the Participating Company Group to
whom authority to act for the Board or the Company is delegated shall be
indemnified by the Company against all reasonable expenses, including attorneys’
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any right granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
Updated
July 5, 2007
4.
Shares Subject to
Plan.
4.1
Maximum Number of Shares
Issuable.
Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be 6,456,000. This share reserve shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof. However, the share reserve, determined at any
time, shall be reduced by the number of shares subject to Prior Plan
Options. If an outstanding Option, including any Prior Plan Option,
for any reason expires or is terminated or canceled or if shares of Stock are
acquired upon the exercise of an Option, including any Prior Plan Option,
subject to a Company repurchase option and are repurchased by the Company at the
Optionee’s exercise price, the shares of Stock allocable to the unexercised
portion of such Option or Prior Plan Option or such repurchased shares of Stock
shall again be available for issuance under the Plan. However, except
as adjusted pursuant to Section 4.2, in no event shall more than 6,456,000
shares of Stock be available for issuance pursuant to the exercise of Incentive
Stock Options (the
“
ISO
Share Issuance Limit
”
). Notwithstanding
the foregoing, at any such time as the offer and sale of securities pursuant to
the Plan is subject to compliance with Section 260.140.45 of Title 10 of the
California Code of Regulations (
“
Section
260.140.45
”
),
the total number of shares of Stock issuable upon the exercise of all
outstanding Options (together with options outstanding under any other stock
option plan of the Company) and the total number of shares provided for under
any stock bonus or similar plan of the Company shall not exceed thirty percent
(30%) (or such other higher percentage limitation as may be approved by the
stockholders of the Company pursuant to Section 260.140.45) of the then
outstanding shares of the Company as calculated in accordance with the
conditions and exclusions of Section 260.140.45.
4.2
Adjustments for Changes in Capital
Structure
.
In
the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the capital
structure of the Company, appropriate adjustments shall be made in the number
and class of shares subject to the Plan and to any outstanding Options, in the
ISO Share Issuance Limit set forth in Section 4.1, and in the exercise
price per share of any outstanding Options. If a majority of the
shares which are of the same class as the shares that are subject to outstanding
Options are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event, as defined in Section 8.1) shares of
another corporation (the
“
New
Shares
”
),
the Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded down to the nearest whole number, and in no
event may the exercise price of any Option be decreased to an amount less than
the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be
final, binding and conclusive.
Updated
July 5, 2007
5.
Eligibility and Option
Limitations.
5.1
Persons Eligible for
Options
.
Options
may be granted only to Employees, Consultants, and Directors. For
purposes of the foregoing sentence,
“
Employees,
”
“
Consultants
”
and
“
Directors
”
shall include
prospective Employees, prospective Consultants and prospective Directors to whom
Options are granted in connection with written offers of an employment or other
service relationship with the Participating Company Group. Eligible
persons may be granted more than one (1) Option. However, eligibility
in accordance with this Section shall not entitle any person to be granted an
Option, or, having been granted an Option, to be granted an additional
Option.
5.2
Option Grant Restrictions
.
Any
person who is not an Employee on the effective date of the grant of an Option to
such person may be granted only a Nonstatutory Stock Option. An
Incentive Stock Option granted to a prospective Employee upon the condition that
such person become an Employee shall be deemed granted effective on the date
such person commences Service with a Participating Company, with an exercise
price determined as of such date in accordance with
Section 6.1.
5.3
Fair Market Value
Limitation
.
To
the extent that options designated as Incentive Stock Options (granted under all
stock option plans of the Participating Company Group, including the Plan)
become exercisable by an Optionee for the first time during any calendar year
for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portions of such options which exceed such amount shall be
treated as Nonstatutory Stock Options. For purposes of this
Section 5.3, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of stock shall be determined as of the time the option with respect to such
stock is granted. If the Code is amended to provide for a different
limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the
Code. If an Option is treated as an Incentive Stock Option in part
and as a Nonstatutory Stock Option in part by reason of the limitation set forth
in this Section 5.3, the Optionee may designate which portion of such
Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate certificates
representing each such portion shall be issued upon the exercise of the
Option.
6.
Terms and Conditions of
Options.
Options
shall be evidenced by Option Agreements specifying the number of shares of Stock
covered thereby, in such form as the Board shall from time to time
establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option
Agreement. Option Agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
Updated
July 5, 2007
6.1
Exercise Price
.
The
exercise price for each Option shall be established in the discretion of the
Board; provided, however, that (a) the exercise price per share for an
Incentive Stock Option shall be not less than the Fair Market Value of a share
of Stock on the effective date of grant of the Option, (b) the exercise
price per share for a Nonstatutory Stock Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option, and (c) no Option granted to a Ten
Percent Owner Optionee shall have an exercise price per share less than one
hundred ten percent (110%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option. Notwithstanding the foregoing,
an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may
be granted with an exercise price lower than the minimum exercise price set
forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.2
Exercisability and Term of
Options
.
Options
shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as
shall be determined by the Board and set forth in the Option Agreement
evidencing such Option; provided, however, that (a) no Option shall be
exercisable after the expiration of ten (10) years after the effective date of
grant of such Option, (b) no Incentive Stock Option granted to a Ten
Percent Owner Optionee shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, (c) no Option
granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences
Service with a Participating Company, and (d) with the exception of an Option
granted to an Officer, a Director or a Consultant, no Option shall become
exercisable at a rate less than twenty percent (20%) per year over a period of
five (5) years from the effective date of grant of such Option, subject to the
Optionee’s continued Service. Subject to the foregoing, unless
otherwise specified by the Board in the grant of an Option, any Option granted
hereunder shall terminate ten (10) years after the effective date of grant of
the Option, unless earlier terminated in accordance with its
provisions.
6.3 Payment
of Exercise Price.
(a)
Forms of
Consideration Authorized.
Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Optionee having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the assignment
to the Company of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of
the Federal Reserve System) (a
“
Cashless
Exercise
”
),
(iv) by such other consideration as may be approved by the Board from time
to time to the extent permitted by applicable law, or (v) by any
combination thereof. The Board may at any time or from time to time,
by approval of or by amendment to the standard forms of Option Agreement
described in Section 7, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of
consideration.
Updated
July 5, 2007
(b) Limitations
on Forms of Consideration.
(i)
Tender of
Stock.
Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock. Unless otherwise provided by the Board, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months (and not used for another Option exercise
by attestation during such period) or were not acquired, directly or indirectly,
from the Company.
(ii)
Cashless
Exercise.
The Company reserves, at any and all times, the
right, in the Company’s sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise.
(iii)
Payment by Promissory
Note.
No promissory note shall be permitted if the exercise of
an Option using a promissory note would be a violation of any
law. Any permitted promissory note shall be on such terms as the
Board shall determine. The Board shall have the authority to permit
or require the Optionee to secure any promissory note used to exercise an Option
with the shares of Stock acquired upon the exercise of the Option or with other
collateral acceptable to the Company. Unless otherwise provided by
the Board, if the Company at any time is subject to the regulations promulgated
by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company’s securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations.
6.4
Tax Withholding
.
The
Company shall have the right, but not the obligation, to deduct from the shares
of Stock issuable upon the exercise of an Option, or to accept from the Optionee
the tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the federal, state, local
and foreign taxes, if any, required by law to be withheld by the Participating
Company Group with respect to such Option or the shares acquired upon the
exercise thereof. Alternatively or in addition, in its discretion,
the Company shall have the right to require the Optionee, through payroll
withholding, cash payment or otherwise, including by means of a Cashless
Exercise, to make adequate provision for any such tax withholding obligations of
the Participating Company Group arising in connection with the Option or the
shares acquired upon the exercise thereof. The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group’s tax
withholding obligations have been satisfied by the Optionee.
Updated
July 5, 2007
6.5
Repurchase Rights
.
Shares
issued under the Plan may be subject to a right of first refusal, one or more
repurchase options, or other conditions and restrictions as determined by the
Board in its discretion at the time the Option is granted. The
Company shall have the right to assign at any time any repurchase right it may
have, whether or not such right is then exercisable, to one or more persons as
may be selected by the Company. Upon request by the Company, each
Optionee shall execute any agreement evidencing such transfer restrictions prior
to the receipt of shares of Stock hereunder and shall promptly present to the
Company any and all certificates representing shares of Stock acquired hereunder
for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.
6.6 Effect
of Termination of Service.
(a)
Option
Exercisability
.
Subject to
earlier termination of the Option as otherwise provided herein and unless
otherwise provided by the Board in the grant of an Option and set forth in the
Option Agreement, an Option shall be exercisable after an Optionee’s termination
of Service only during the applicable time period determined in accordance with
this Section 6.6 and thereafter shall terminate:
(i)
Disability.
If the
Optionee’s Service terminates because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee’s Service terminated, may be exercised by the Optionee (or the
Optionee’s guardian or legal representative) at any time prior to the expiration
of twelve (12) months (or such longer period of time as determined by the Board,
in its discretion) after the date on which the Optionee’s Service terminated,
but in any event no later than the date of expiration of the Option’s term as
set forth in the Option Agreement evidencing such Option (the
“
Option Expiration
Date
”
).
(ii)
Death.
If the
Optionee’s Service terminates because of the death of the Optionee, the Option,
to the extent unexercised and exercisable on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee’s legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee’s death at any time prior to the expiration of twelve (12) months (or
such longer period of time as determined by the Board, in its discretion) after
the date on which the Optionee’s Service terminated, but in any event no later
than the Option Expiration Date. The Optionee’s Service shall be
deemed to have terminated on account of death if the Optionee dies within three
(3) months (or such longer period of time as determined by the Board, in its
discretion) after the Optionee’s termination of Service.
(iii)
Other Termination of
Service.
If the Optionee’s Service terminates for any reason,
except Disability or death, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee’s Service
terminated, may be exercised by the Optionee at any time prior to the expiration
of three (3) months (or such longer period of time as determined by the Board,
in its discretion) after the date on which the Optionee’s Service terminated,
but in any event no later than the Option Expiration Date.
Updated
July 5, 2007
(b)
Extension if
Exercise Prevented by Law
.
Notwithstanding
the foregoing, if the exercise of an Option within the applicable time periods
set forth in Section 6.6(a) is prevented by the provisions of
Section 10 below, the Option shall remain exercisable until three (3)
months (or such longer period of time as determined by the Board, in its
discretion) after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration
Date.
(c)
Extension if
Optionee Subject to Section 16(b
).
Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in
Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the
tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee’s termination of Service, or
(iii) the Option Expiration Date.
(d)
Extension during
Blackout Period
.
Notwithstanding
the foregoing, if there is in effect during the applicable time periods set
forth in Section 6.6(a) a Company-imposed trading blackout to which the Optionee
is subject (including an Optionee that is an Insider) and provided that neither
Section 6.6(b) nor Section 6.6(c) is applicable to the circumstances at hand,
the Option shall remain exercisable until the end of the tenth business day
following the end of the trading blackout.
6.7
Transferability of
Options.
During the lifetime of the Optionee, an Option shall
be exercisable only by the Optionee or the Optionee’s guardian or legal
representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted
by the Board, in its discretion, and set forth in the Option Agreement
evidencing such Option, a Nonstatutory Stock Option shall be assignable or
transferable subject to the applicable limitations, if any, described in Section
260.140.41 of Title 10 of the California Code of Regulations, Rule 701 under the
Securities Act, and the General Instructions to Form S-8 Registration Statement
under the Securities Act.
7
.
terms and
conditions of stock appreciate rights.
7.1 The
Committee may, from time to time, grant Stock Appreciation Rights to any
Employee, Consultant or Director in connection with the grant of any
Option. Any such grant of Stock Appreciation Rights shall be included
in the Option Agreement.
7.2 Stock
Appreciation Rights shall be exerciseable only at the same time, by the same
person and to the same extent, that the Option related thereto is
exerciseable. Upon exercise of any Stock Appreciation Right, the
corresponding portion of the related Option shall be surrendered to the
Company.
7.3 The
Company has the absolute right, at any time and from time to time, to require an
Optionee to exercise an Option in lieu of the related Stock Appreciation
Right.
Updated
July 5, 2007
8.
Standard Forms of Option
Agreement.
8.1
Option Agreement
.
Unless
otherwise provided by the Board at the time the Option is granted, an Option
shall comply with and be subject to the terms and conditions set forth in the
form of Option Agreement approved by the Board concurrently with its adoption of
the Plan and as amended from time to time.
8.2
Authority to Vary Terms
.
The
Board shall have the authority from time to time to vary the terms of any
standard form of Option Agreement described in this Section 7 either in
connection with the grant or amendment of an individual Option or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Option Agreement are not inconsistent with the terms of the
Plan.
9
.
Change in
Control
.
9.1
Definitions.
(a) An
“
Ownership Change
Event
”
shall be deemed to have occurred if any of the following occurs with respect to
the Company: (i) the direct or indirect sale or exchange in a single
or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or
consolidation in which the Company is a party; (iii) the sale, exchange, or
transfer of all or substantially all of the assets of the Company; or (iv) a
liquidation or dissolution of the Company.
(b) A
“
Change in
Control
”
shall
mean an Ownership Change Event or a series of related Ownership Change Events
(collectively, a
“
Transaction
”
) wherein the stockholders
of the Company immediately before the Transaction do not retain immediately
after the Transaction, in substantially the same proportions as their ownership
of shares of the Company
’
s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 8.1(a)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the
“
Transferee
”
), as the case may
be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from
ownership of the voting securities of one or more corporations or other business
entities which own the Company or the Transferee, as the case may be, either
directly or through one or more subsidiary corporations or other business
entities. The Board shall have the right to determine whether
multiple sales or exchanges of the voting securities of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
Updated
July 5, 2007
9.2
Effect of Change in Control on
Options
.
In
the event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or other business entity or parent thereof, as the case
may be (the
“
Acquiring
Corporation
”
),
may, without the consent of the Optionee, either assume the Company’s rights and
obligations under outstanding Options or substitute for outstanding Options
substantially equivalent options for the Acquiring Corporation’s
stock. Any Options which are neither assumed or substituted for by
the Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control shall terminate and cease to be
outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise
of an Option prior to the Change in Control and any consideration received
pursuant to the Change in Control with respect to such shares shall continue to
be subject to all applicable provisions of the Option Agreement evidencing such
Option except as otherwise provided in such Option
Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options immediately
prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and
immediately after such Ownership Change Event less than fifty percent (50%) of
the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall
not terminate unless the Board otherwise provides in its
discretion.
10.
Provision of
Information.
At least
annually, copies of the Company’s balance sheet and income statement for the
just completed fiscal year shall be made available to each Optionee and
purchaser of shares of Stock upon the exercise of an Option. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assure them access to equivalent
information. Furthermore, the Company shall deliver to each Optionee
such disclosures as are required in accordance with Rule 701 under the
Securities Act.
Updated
July 5, 2007
11.
Compliance with Securities
Law.
The grant
of Options and the issuance of shares of Stock upon exercise of Options shall be
subject to compliance with all applicable requirements of federal, state and
foreign law with respect to such securities. Options may not be
exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may
be exercised unless (a) a registration statement under the Securities Act
shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (b) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company’s legal counsel to be necessary to the lawful
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained. As a condition
to the exercise of any Option, the Company may require the Optionee to satisfy
any qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or warranty
with respect thereto as may be requested by the Company.
12.
Termination or Amendment of
Plan.
Without
the approval of the Company’s stockholders, the Board may terminate or amend the
Plan at any time. However, subject to changes in applicable law,
regulations or rules that would permit otherwise, without the approval of the
Company’s stockholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by operation
of the provisions of Section 4.2), (b) no change in the class of persons
eligible to receive Incentive Stock Options, (c) no extension of the term of an
Option granted to an Insider, other than as provided for in Section 6.6(d), (d)
no reduction in the exercise price of an Option granted to an Insider, other
than in connection with adjustments for changes in the Company’s capital
structure as permitted pursuant to Section 4.2 and (e) no other amendment of the
Plan that would require approval of the Company’s stockholders under any
applicable law, regulation or rule. No termination or amendment of
the Plan shall adversely affect any then outstanding Option unless expressly
agreed to by the affected Participant or required by applicable law, legislation
or rule. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option without the consent of the
Optionee, unless such termination or amendment is required to enable an Option
designated as an Incentive Stock Option to qualify as an Incentive Stock Option
or is necessary to comply with any applicable law, regulation or
rule.
13.
Stockholder
Approval
.
The Plan
or any increase in the maximum aggregate number of shares of Stock issuable
thereunder as provided in Section 4.1 (the
“
Authorized
Shares
”
)
shall be approved by the stockholders of the Company within twelve (12) months
of the date of adoption thereof by the Board. Options granted prior
to stockholder approval of the Plan or in excess of the Authorized Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.
Updated
July 5, 2007
PLAN
HISTORY
June
2002
|
Board
of Directors of OccuLogix Corporation, a Florida corporation (“OccuLogix”)
adopts Plan, with an initial reserve of Two Million Six Hundred
Seventy-Eight Thousand Nine Hundred and Ninety-Seven (2,678,997)
shares. This share reserve includes the number of shares of
stock underlying outstanding options and the number of shares available
for grant as options under the OccuLogix Corporation 1997 Stock Option
Plan. However, this share reserve, at any time, shall be
reduced by the number of shares subject to Prior Plan
Options.
|
June
2002
|
Stockholders
of OccuLogix approve Plan, with an initial reserve of Two Million Six
Hundred Seventy-Eight Thousand Nine Hundred and Ninety-Seven
(2,678,997)
shares. This
share reserve includes the number of shares of stock underlying
outstanding options and the number of shares available for grant as
options under the OccuLogix Corporation 1997 Stock Option
Plan. However, this share reserve, at any time, shall be
reduced by the number of shares subject to Prior Plan
Options.
|
June
2002
|
Effective
date of Delaware reincorporation of
OccuLogix.
|
December
2004
|
Board
of Directors of OccuLogix, Inc. amends Plan to increase the share reserve
to 4,456,000.
|
April
2007
|
Board
of Directors of OccuLogix, Inc. resolves to submit to the stockholders of
OccuLogix, Inc., for their authorization at the 2007 Annual Meeting, a
proposal to increase the share reserve under the Plan by 2,000,000, from
4,456,000 to 6,456,000.
|
June
2007
|
Stockholders
of OccuLogix, Inc. approve the proposal to increase the share reserve
under the Plan by 2,000,000, from 4,456,000 to
6,456,000.
|
Updated
July 5, 2007
Exhibit
10.35
�
Deacons
***Sections
3.3(2), 3.3(3), 3.3(7), 3.3(8) and 4.1, Schedule 1 and Annexures A and B in
their entirety have been omitted pursuant to a request for confidential
treatment and have been filed separately with the U.S. Securities and Exchange
Commission.
Dated
October 25, 2007
Manufacturing
and development
agreement
Parties
MiniFAB
(Aust) Pty Ltd
ACN 100
768 474
OcuSense,
Inc.
Contact
Bernard O'Shea
Partner
Level 15,
RACV Tower, 485 Bourke Street, Melbourne, Victoria 3000
|
Telephone:
|
+61
(0)3 8686 6573
|
|
Email:
|
bernard.oshea@deacons.com.au
|
|
Website:
|
www.deacons.com.au
|
Contents
|
|
|
|
|
|
1.
|
Definitions
and interpretation
|
1
|
2.
|
Development
of the First Product
|
6
|
3.
|
Supply
of Products
|
6
|
4.
|
Price
|
13
|
5.
|
Development
of New Products
|
14
|
6.
|
OcuSense
Licence
|
18
|
7.
|
Obligations
of MiniFAB
|
20
|
8.
|
Meeting
|
20
|
9.
|
Payment
and invoicing
|
21
|
10.
|
Amendments
to Specifications
|
21
|
11.
|
Registrations,
safety and Product liability
|
22
|
12.
|
Insurance
|
23
|
13.
|
Warranties
|
23
|
14.
|
Third
party licensors and contractors; Technology Transfer.
|
23
|
15.
|
Term,
breach and termination
|
26
|
16.
|
Liability
and indemnity
|
27
|
17.
|
Goods
and services tax
|
29
|
18.
|
Confidentiality
|
29
|
19.
|
Disputes
|
31
|
20.
|
Force
Majeure
|
33
|
21.
|
Notices
|
33
|
22.
|
General
|
34
|
Schedule
1 First Product
|
36
|
Schedule
2 Form of Development Order
|
37
|
Manufacturing and Development
Agreement
dated October 25, 2007
|
Parties
|
MiniFAB (Aust) Pty Ltd
ACN 100 768 474
|
of 9 The
Centreway, Mount Waverley, Victoria 3149, Australia (
MiniFAB
)
OcuSense,
Inc.
of 12707
High Bluff Dr., Suite 200, San Diego, CA 92130,
U.S.A.
(
OcuSense
)
Introduction
|
A.
|
MiniFAB
is a micro-nano-bio company that offers customised manufacturing
and advanced product development
services.
|
|
B.
|
OcuSense
is an in-vitro diagnostics company that is developing and desires to
commercialise a proprietary tear testing platform, TearLab™, capable of
accurately and rapidly diagnosing various eye diseases at the
point-of-care.
|
|
C.
|
MiniFAB
and OcuSense are parties to that certain development agreement for a tear
collection interface (
“
TCI
”
) device comprised of
Terms of Business and the Project Proposal for Project Tear-Sense (Stage
0), each dated 17 November 2006 (collectively, the
"Development
Agreement"
).
|
|
D.
|
OcuSense
wishes to acquire the services of MiniFAB in the manufacture and
supply of the TCI Device developed under the Development
Agreement, as well as potential development and manufacture of other TCI
Devices, and MiniFAB has agreed to provide such services, on the terms of
this Agreement.
|
It
is agreed
|
1.
|
Definitions
and interpretation
|
In this
Agreement:
|
(1)
|
Agreement
means this
document, including any schedule or annexure to
it;
|
|
(2)
|
Annual Production
Capacity
means, in respect of each Product, the
quantity
|
|
of
the Product that MiniFAB is reasonably capable of manufacturing each year,
and as varied in accordance with clause 3.5. The Annual Production
Capacity for the First Product is specified in Schedule 1 and the Annual
Production Capacity for the New Products is to be agreed between the
parties pursuant to clause 5.8;
|
|
(3)
|
Business Day
means a day
that is not a Saturday, Sunday or any other day which is a public holiday
or a bank holiday in Melbourne,
Australia;
|
|
(4)
|
cGMP
means current Good
Manufacturing Practices, as established by
the FDA;
|
|
(5)
|
Commencement Date
means
October 19, 2007;
|
|
(6)
|
Commercially Reasonable
Efforts
means the exercise of such efforts and commitment of
such resources by MiniFAB as would be expended on, or committed by MiniFAB
for, a comparable development or manufacturing program of a similar scope
and at a similar stage in development or product lifecycle, comparable
profit margin and potential, competitive landscape, and risk profile, in
each case with due regard to the nature of efforts and cost required for
such development or manufacturing and taking into account payments made by
OcuSense, or obligated to be made by OcuSense, under this
Agreement;
|
|
(7)
|
Confidential Information
of a party means any Information (and all tangible and intangible
embodiments thereof of any kind whatsoever) provided by that party or its
Representatives to the other party or its Representatives whether provided
orally or in any form and is marked, identified as or otherwise
acknowledged to be confidential at the time of disclosure to the other
party; provided, however, that information, data and results generated by
MiniFAB under the Development Agreement, or in the course of performing
activities under this Agreement, that relate to OcuSense's technology or
to the development of Products or prototypes thereof shall be deemed the
Confidential Information of
OcuSense;
|
|
(8)
|
Default Rate
means 10%
per annum;
|
|
(9)
|
Delivery Point
means the
premises of MiniFAB located at 1 Dalmore Drive, Scoresby, Victoria,
AUSTRALIA;
|
|
(10)
|
Development Expenses
means all costs and expenses incurred by MiniFAB for the development
of a New Product as more particularly described in clause
5.5(1)
(a),
but does not include the capital expenditures referred to in clause
5.5(1)
(b);
|
|
(11)
|
Development Order
means
a document substantially in the form set out in Schedule 2 executed
by or on behalf of MiniFAB and OcuSense which details a New Product
to be developed by MiniFAB in accordance with clause
5;
|
|
(12)
|
Development Request
has
the meaning given in clause 5.2;
|
|
(13)
|
EXW
means "ex works",
according to the Incoterms 2000 published by the International
Chamber of Commerce (ICC) as amended from time to
time;
|
|
(14)
|
FDA
means the United
States Food and Drug
Administration;
|
|
(15)
|
First Product
means the
TCI Device developed under the Development Agreement, together with
the capsule and applicable packaging, all as further described in Schedule
1;
|
|
(16)
|
Force Majeure
means any
cause which is not within the reasonable control of the party affected by
it including, but not limited to, acts of God, war declared or undeclared,
civil disturbance, acts or omissions of government or other competent
authority, fire, lightning, explosion or flood, but excludes any cause due
to lack of demand or market success for the
Products;
|
|
(17)
|
Governmental Agency
means any court, administrative agency or commission or other
governmental agency, body or instrumentality, domestic or
foreign;
|
|
(18)
|
Information
means any
information or know-how pertaining to, or in the possession or
control of, a party including, but not limited to,
information concerning its business, systems, technology and afairs,
such as:
|
|
(a)
|
financial,
technological, strategic or business information, concepts,
plans,
strategies, directions or
systems;
|
|
(b)
|
research,
development, operational, legal, marketing or accounting
information,
concepts, plans, strategies, directions or
systems;
|
|
(c)
|
technology,
source and object codes for computer sofware, intellectual
property
rights and technical and historical information relating
thereto;
|
|
(d)
|
customer
and supplier information; and
|
|
(e)
|
information
relating to the Products;
|
|
(19)
|
Insolvency Event
in the
context of a person means:
|
|
(a)
|
a
receiver, receiver and manager, official manager,
trustee, administrator, other controller (as defined in the
Corporations Act
2001
(Cth)) or similar official is appointed, or steps are
taken for such appointment, over any of the equipment or undertaking
of the person;
|
|
(b)
|
the
person is or becomes unable to pay its debts when they are due or is
or becomes unable to pay its debts within the meaning of the
Corporations Act
2001
(Cth) or is presumed to be insolvent under the
Corporations Act
2001
(Cth);
|
|
(c)
|
the
person ceases or threatens to cease to carry on business;
or
|
|
(d)
|
an
application or order is made for the liquidation of the person or a
resolution
is passed or any steps are taken to liquidate or pass a resolution for the
liquidation of the person otherwise than for the purpose of an
amalgamation or
reconstruction;
|
|
(20)
|
Intellectual Property
means any copyright, design (whether registered or unregistered),
trademark (whether registered or unregistered), patent or patent
application or invention, circuit layout, know-how, confidential
information (whether such information is in writing or recorded in any
other form) and other proprietary or personal rights arising from
intellectual activity in the business, industrial, scientific or artistic
fields;
|
|
(21)
|
Supply Start Date
has
the meaning given in clause 3.2(2);
|
|
(22)
|
Loss
means any loss,
damage, cost, interest, expense, fee, penalty, fine, forfeiture,
assessment, demand, liability or damages incurred by a person to the
extent resulting from any action, suit, claim, proceeding or cause of
action brought against such party by a third
party.
|
|
(23)
|
Minimum Orders
means, in
respect of each Product, the minimum quantity of Product that
OcuSense must purchase from MiniFAB during a specified period. The
Minimum Orders are specified in clause
3.3(7);
|
|
(24)
|
New Products
means any
TCI Devices developed pursuant to this Agreement and any other goods
that the parties agree are New Products. For the avoidance of doubt,
New Products do not include the First
Product;
|
|
(25)
|
OcuSense
IP
has the meaning
given in clause 6.1;
|
|
(26)
|
Price
means, in respect
of each Product, the price payable by OcuSense to MiniFAB for the
supply of that Product, inclusive of all packaging, labelling and all
other handling charges (other than the freight
costs);
|
|
(27)
|
Products
means the First
Product and any New Products;
|
|
(28)
|
Prototype First Product
means a pre-production prototype of the First Product conforming to
the First Product Requirement Definitions, and mayinclude prototype units
of the First Product at different stages of development
(such
as, for example, alpha prototypes and beta
prototypes).
|
|
(29)
|
Purchase Order
has the
meaning given in clause 3.4;
|
|
(30)
|
Quarter
means a period
of three months commencing on 1 January, 1 April, 1 July or 1
October;
|
|
(31)
|
R&D Services
means
those development services for New Products as specified in clause
5.1;
|
|
(32)
|
Registrations
means all
registrations or approvals required from the relevant Regulatory
Authority or Authorities for the export, import, storage,
promotion, supply, sale or other distribution in the of the
Products;
|
|
(33)
|
Regulatory Authority
means any Governmental Agency having responsibility for the
regulation of, oversight of or whose approval is required for
the manufacture, marketing, sale or supply of the Products or the
facilities in which it is
manufactured;
|
|
(34)
|
Regulatory Requirements
means, collectively:
|
|
(a)
|
all
laws and regulations and any and all other requirements of the FDA or
any other Regulatory Authority that are mandatory to the manufacture,
packaging, labelling, storage, handling and shipment of the Products by
MiniFAB and, subject to clause 2.1, includes cGMP;
and
|
|
(b)
|
all
standards set by the International Organization for Standardization (ISO)
that are mandatory to the manufacture, packaging, labelling, storage,
handling and shipment of the Products by MiniFAB, including without
limitation ISO 13485:2003 (Medical Devices Quality Management System), ISO
10993-1 (Biocompatibility), ISO 10993-5 (Biocompatibility: Cytotoxicity),
and ISO 10993-10 (Biocompatibility: Sensitization and Irritation), but
excludes
|
|
(c)
|
any
law, regulation, requirement or standards that apply to the design,
trials, marketing, sales or supply of the Products (and which do not also
apply to the manufacture of Products and/or to MiniFAB's supply to
OcuSense hereunder);
|
|
(35)
|
Representative
of a
party means the employees, directors, agents or advisors of that
party;
|
|
(36)
|
Requirement Definitions
means, with respect to any Product, the written documentation guiding
MiniFAB's development of such Product, including detailed requirement
definitions for such Product, as agreed by the parties. The initial
Requirement Definitions for the First Product have been agreed by the
parties as of the Commencement Date. The Requirement Definitions may be
modified from time to time by mutual agreement of OcuSense and MiniFAB in
the course of development work for such Product, and MiniFAB agrees to use
Commercially Reasonable Efforts to accommodate changes to the Requirement
Definitions as OcuSense may from time to time
request;
|
|
(37)
|
Second Product
means the
first New Product developed pursuant to this Agreement, which the parties
intend to be a TCI Device similar to the First Product, provided that such
product would be designed to measure either (i) a marker other than
osmolarity, or (ii) both osmolarity and one other additional
marker;
|
|
(38)
|
Specifications
means,
with respect to any Product, the definitive written documentation
guiding MiniFAB's manufacture, packaging, labelling, storage and handling
of such Product, prepared and agreed in accordance with clause 3.1; in
each case, and as modified from time to time by mutual agreement of
OcuSense and MiniFAB in accordance with clause
10;
|
|
(39)
|
Successful Completion
has the meaning provided in clause
5.10;
|
|
(40)
|
TCI
Device
means any tear
collection interface device or any microfluidicbased
device;
|
|
(41)
|
Technical Agreement
means the technical agreement entered into between MiniFAB and OcuSense
with respect to each Product, as may be amended from time to time, which
specifies their respective responsibilities for quality control and
quality assurance and related activities and qualifications with respect
to the applicable Product. The Technical Agreement for the First Product
shall be entered into concurrently with this Agreement. Mutually agreed
Technical Agreements for other Products shall be entered into prior to
commercial manufacture and supply of such
Products;
|
|
(42)
|
Term
means the term of
this Agreement, including any extended term underclause 15.1;
and
|
|
(43)
|
Wholesale Price
of a
Product at a particular time means the highest wholesale price at
which OcuSense has sold such Product to third parties during the
previous 3 months period.
|
|
(a)
|
one
gender includes the others;
|
|
(b)
|
a
person includes a body corporate;
|
|
(c)
|
a
party includes the party's executors, administrators, successors
and permitted assigns;
|
|
(d)
|
a
statute, regulation, code or other law or a provision of any of
them includes:
|
|
(i)
|
any
amendment or replacement of it; and
|
|
(ii)
|
another
regulation or other statutory instrument made under it,
or
made under it as amended or replaced;
and
|
|
(e)
|
dollars
means Australian dollars unless otherwise
stated.
|
|
(2)
|
"Including"
and similar expressions are not words of
limitation.
|
|
(3)
|
Where
a capitalized word or expression is given a particular meaning,
other parts of speech and grammatical forms of that capitalized word
or expression have a corresponding
meaning.
|
|
(4)
|
Headings
and any table of contents or index are for convenience only and do not
form part of this Agreement or affect its
interpretation.
|
|
(5)
|
A
provision of this Agreement must not be construed to the disadvantage of a
party merely because that party was responsible for the preparation of the
Agreement or the inclusion of the provision in the
Agreement.
|
|
(6)
|
If
an act must be done on a specified day which is not a Business Day, it
must be done instead on the next Business
Day.
|
|
(1)
|
If
a party consists of more than 1 person, this Agreement binds each of
them separately and any 2 or more of them
jointly.
|
|
(2)
|
An
obligation, representation or warranty in favour of more than 1 person is
for the benefit of them separately and
jointly.
|
|
(3)
|
A
party which is a trustee is bound both personally and in its capacity as
a trustee.
|
|
2.
|
Development
of the First Product
|
|
2.1
|
Regulatory approvals and
exemptions
|
As
between the parties, OcuSense shall be responsible, in its discretion, for
activities in seeking Registrations and other regulatory approvals from
applicable Regulatory Authorities with respect to Products (including any CLIA
waiver from the FDA in respect of the FDA 510(k) application for the OcuSense
system which uses the Products developed under this Agreement).
|
2.2
|
Design Development
completed
|
The
parties agree that the development of the design for the First Product has
been completed, and the Requirement Definitions of the First Product are as
annexed to Annexure A.
|
2.3
|
Prototype Acceptance
Testing
|
|
(1)
|
The
parties agree that MiniFAB has manufactured and supplied to OcuSense
sufficient units of the Alpha Prototype First Product for the purposes of
testing on or about 26 July 2007, and that prior to the Commencement Date,
OcuSense has tested such units to determine whether the Alpha Prototype
First Product is as described in "Design Specification Stage 1 Work
package
|
1.1 Final
Report", and has generated and provided MiniFAB with feedback regarding areas of
improvement with respect to the First Product, to be addressed by MiniFAB prior
to manufacturing and supplying OcuSense with the Beta Prototype First
Product.
|
(2)
|
The
parties acknowledge that, as of the Commencement Date, manufacture, supply
and testing of units of the Beta Prototype First Product has not yet
occurred, and further acknowledge that the terms and conditions of the
Development Agreement continue to apply with respect to such
activities.
|
|
(3)
|
MiniFAB
will, in accordance with its obligations under the
Development Agreement, develop and optimise its manufacturing process
such that MiniFAB can manufacture the First Product to meet the
Minimum Orders of the First
Product.
|
|
(1)
|
The
initial Specifications for the First Product have been agreed by the
parties prior to execution of this Agreement. Promptly after
OcuSense's Acceptance of a New Product as set forth in clause 5.9, MiniFAB
shall prepare, on the basis of the most recent Requirement Definitions for
such New Product, and provide to OcuSense for approval, the definitive
Specifications for the applicable Product, for MiniFAB's use to
manufacture, package, label, store and handle the applicable
Product.
|
|
(2)
|
OcuSense
will review the Specifications submitted by MiniFAB under
clause 3.1(1) and may request amendments or modifications to the
Specifications if:
|
|
(a)
|
the
Specifications are inconsistent with the Requirement
Definitions;
|
|
(b)
|
the
Specifications are inconsistent with the Regulatory
Requirements;
|
|
(c)
|
the
requirements of the Specifications are unreasonable or uncommercial
having regard to the Price or proposed Price of the relevant Product;
or
|
|
(d)
|
the
requirements of the Specifications are unrelated to the
Product.
|
|
(3)
|
MiniFAB
must act reasonably and accommodate any requests for amendment to the
Specifications made by OcuSense under clause
3.1(2).
|
|
(4)
|
OcuSense
must accept the Specifications when it is satisfied that the
Specifications are consistent with the Requirement Definitions and the
Regulatory Requirements, and are reasonable and commercial having regard
to the Price or proposed Price of the relevant
Product.
|
|
(5)
|
The
parties agree that the definitive Specifications for the First Product are
set forth in Annexure B.
|
|
(6)
|
The
Specifications for any Product may be modified or amended by mutual
written agreement of the Parties. In the event that OcuSense requests
changes to the Specifications for reasons other than those set forth in
clause 3.1(2) above, MiniFAB agrees to use Commercially Reasonable Efforts
to accommodate such requested
changes.
|
|
3.2
|
Capital investments and Supply
Start Date
|
|
(a)
|
in
respect of the First Product - from the Commencement Date;
and
|
|
(b)
|
in
respect of each New Product - in accordance with the project
plan specified in the Development Order for that New
Product,
|
use
Commercially Reasonable Eforts to acquire, construct or develop such plant,
equipment, raw materials, labour, utilities and capital improvements as are
necessary to manufacture the Product to meet the Minimum Orders of that Product.
MiniFAB shall set up the manufacturing process, manufacture the Products, and
assemble and package the Products, all in accordance with the Specifications and
all Regulatory Requirements. MiniFAB shall label the Products with such labels,
tradenames, and trademarks as directed by OcuSense.
|
(2)
|
MiniFAB
will notify OcuSense when MiniFAB reasonably believes that it has the
necessary plant and equipment to manufacture a particular Product to meet
the Minimum Orders of that Product. Promptly following such notification
by MiniFAB, the parties shall mutually agree on and set the date (
Supply Start Date
for
that Product) on which OcuSense may begin placing binding Purchase Orders
for that Product pursuant to clause
3.4.
|
|
(3)
|
It
is the intention of the parties that the Supply Start Date for the First
Product shall take place no later than March 15, 2008 (the initial
"Cut-Off Date"
). If the
Supply Start Date for the First Product has not taken place on or prior to
the Cut-Off Date, then, provided that MiniFAB has used Commercially
Reasonable Efforts to meet the Cut-Off Date, the parties
will:
|
|
(a)
|
meet
and discuss the reasons for the
failure;
|
|
(b)
|
negotiate
a mutually agreed remedy plan to address the reasons for the failure;
and
|
|
(c)
|
acting
reasonably, agree on a revised Cut-Off Date, subject to clause 3.2(4)
.
|
MiniFAB
must implement the remedy plan and use Commercially Reasonable Efforts to meet
the revised Cut-Off Date.
|
(4)
|
The
procedures described in clause 3.2(3) will apply for at least two times,
but the revised Cut-Off Date shall not be later than sixty (60) days
following the initial Cut-Off Date specified in clause 3.2(3), above. If
MiniFAB fails to meet the Cut-Off Date for the third time, then OcuSense
may immediately terminate this Agreement, which shall be effective upon
written notice to MiniFAB.
|
|
3.3
|
Supply and Purchase
Obligations
|
|
(1)
|
MiniFAB
shall manufacture the Products exclusively for OcuSense; and MiniFAB
shall sell the Products exclusively to OcuSense or its designee; and
MiniFAB shall not otherwise manufacture, sell, or distribute the Products
to any third party. MiniFAB acknowledges that OcuSense may manufacture
Products itself and/or engage one or more third parties in addition to
MiniFAB to supply the Products to
OcuSense.
|
***Section
3.3(2) and 3.3(3) in their entirety have been omitted pursuant to a request for
confidential treatment and have been filed separately with the U.S. Securities
and Exchange Commission.
|
(4)
|
MiniFAB
hereby acknowledges that OcuSense needs to obtain a reliable supply of the
Products that meets certain quality, quantity and timing requirements, and
agrees to comply with the following
Supply
Requirements
:
|
|
(a)
|
subject
to clause 3.2(3), ensure that the Supply Start Date for the First Product
occurs on or prior to the Cut-Off
Date;
|
|
(b)
|
ensure
that the Supply Start Date for the Second Product occurs on or prior to
the applicable cut-off date as specified in the Development Order for the
Second Product;
|
|
(c)
|
ensure
that each batch of Product are in full compliance with the Specifications
(including without limitation any failure rates specified therein), the
Technical Agreement, and the Regulatory Requirements;
and
|
|
(d)
|
ensure
that, for each 3 month period, at least 95% of shipments of Products are
delivered by the delivery date required under clause
3.6.
|
|
(5)
|
If
MiniFAB fails to comply with the Supply Requirements then, subject
to clause 3.3(6):
|
|
(a)
|
MiniFAB
must provide OcuSense with the reasons for
the non-compliance;
|
|
(b)
|
the
parties must meet and discuss the reasons given by
MiniFAB;
|
|
(c)
|
the
parties must, acting reasonably, negotiate a mutually agreed remedy
plan to address the reasons for the non-compliance;
and
|
|
(d)
|
MiniFAB
must implement the agreed remedy
plan.
|
|
(6)
|
If
MiniFAB fails to comply with the same Supply Requirement again within
a period of 3 months after the first non-compliance, then MiniFAB is
deemed to have committed a material breach of this Agreement for the
purposes of clause 15.2(1).
|
***Section
3.3(7) and 3.3(8) in their entirety have been omitted pursuant to a request for
confidential treatment and have been filed separately with the U.S. Securities
and Exchange Commission.
|
(9)
|
OcuSense
shall have no purchase obligations under this Agreement, except as
expressly set forth in this clause 3.3. For the avoidance of doubt,
subject to clauses 3.3(2), 3.3(7) and 3.3(8), OcuSense shall have the
right to engage any third party to manufacture and supply any
Products.
|
|
3.4
|
Forecast and
ordering
|
|
(1)
|
Not
less than 3 months prior to the Supply Start Date for a Product and on
or before the 1st date of each calendar month thereafter, OcuSense
must submit to MiniFAB a non-binding forecast of the quantity of each of
the Products that OcuSense expects to purchase in each of the 3rd through
the 6th month following the month for which the forecast is due (e.g., the
forecast due on January 1, 2010 would contain a forecast for April through
June of 2010).
|
|
(2)
|
OcuSense
must order the Products 45 days prior to their requested deliverydates (as
determined in accordance with clause 3.6) by sending binding written
purchase orders to MiniFAB stating the Product, unit quantities and any
other information reasonably required by MiniFAB from time to time (
Purchase Orders
).
OcuSense may begin placing Purchase Orders for any particular Product
commencing with the Supply Start Date for that Product. OcuSense shall use
reasonable endeavours to ensure that the quantities of Products set forth
in its Purchase Orders are consistent with the then-current
forecast.
|
|
(3)
|
A
Purchase Order constitutes an irrevocable offer made by OcuSense to
MiniFAB for the supply of the Products specified in the Purchase Order on
the terms and conditions of this Agreement. Once received by MiniFAB, the
Purchase Order is firm and may not be cancelled or modified without
MiniFAB's prior written consent.
|
|
(4)
|
Subject
to clauses 3.4(5) or 3.5, MiniFAB must accept a Purchase Order if the
quantity of the Product the subject of the Purchase Order is between 80%
and 150% of the most recent forecast. In addition, MiniFAB agrees to use
Commercially Reasonable Efforts to accept and satisfy Purchase Orders
exceeding 150% of the most recent forecast. In the event that OcuSense
places a Purchase Order that exceeds 150% of the most recent forecast,
MiniFAB shall (i) accept the Purchase Order with respect to quantities at
least equal to 150% of the most recent Purchase Order, and (ii) notify
OcuSense in writing of those quantities (if any) exceeding 150% of the
most recent forecast with respect to which MiniFAB is rejecting the
Purchase Order.
|
|
(5)
|
If
MiniFAB believes, on reasonable grounds, that a Purchaser Order is
materially incorrect or, to the extent a Purchase Order exceeds 150% of
forecast amounts, it is not capable of satisfying the Purchase Order with
respect to excess amounts so ordered, then MiniFAB may reject the Purchase
Order and must notify OcuSense as soon as possible. If MiniFAB does not
reject to a Purchaser Order within 5 Business Days of receipt of the
Purchase Order, then MiniFAB is deemed to have accepted the Purchaser
Order. Any rejection by MiniFAB of a Purchase Order that is not provided
for in this clause 3.4(5) or 3.5 is deemed to be a material breach of this
Agreement for the purposes of clause
15.2(1).
|
|
3.5
|
Annual Production
Capacity
|
|
(1)
|
Despite
clause 3.4(4), MiniFAB may, in its absolute discretion, refuse
to accept any Purchase Order for a particular Product if the Purchase
Order would require MiniFAB to exceed the Annual Production Capacity of
that Product during that year.
|
|
(2)
|
The
parties may, from time to time, vary the Annual Production Capacity of a
particular Product by agreement in writing. If OcuSense requests MiniFAB
to increase the Annual Product Capacity, the parties shall promptly confer
and discuss such matter in good faith, and MiniFAB shall endeavor to
inform OcuSense within thirty (30) days whether MiniFAB will agree to the
requested increase in the Annual Production
Capacity.
|
MiniFAB
will manufacture and deliver the Products EXW (Incoterms 2000) the Delivery
Point within 45 days afer the date of Purchase Order, unless the Purchase Order
specifies a later delivery date. MiniFAB shall pay pre-pay all freight,
insurance charges, taxes, import and export duties, inspection fees and other
charges applicable to the transport and delivery of the Products, and add all
such charges to invoices to OcuSense as a separate line item at pass-through
cost.MiniFAB shall use such shipping method and carrier, and shall provide such
carrier with such shipping instructions, as specified by OcuSense. In the even
that any two or more consecutive shipments ordered by OcuSense in accordance
with clause 3.4 are delivered more than five (5) business days after the
delivery date indicated in the first sentence of this clause 3.6, then OcuSense
shall be entitled to a thirty percent (30%) discount on the Price of the actual
Products in such shipments which were not actually delivered by the required
delivery date. The parties acknowledge and agree that such discount is
independent of, and without prejudice to, other applicable remedies that may be
available to OcuSense for failures of MiniFAB to supply
Products
in accordance with this Agreement.
|
3.7
|
Inspection and Nonconforming
Goods
|
|
(1)
|
OcuSense
must inspect the Products within 14 days after delivery (or
such longer time as provided in the Technical Agreement) and must
accept the Products if they meet the Specifications, the requirements
of the Technical Agreement, and the Regulatory Requirements. If OcuSense
fails to object in writing within the applicable period, then OcuSense
must accept the delivered Products. OcuSense may reject the delivered
Products only if the Products fail to meet the Specifications, the
requirements of the Technical Agreement,and/or the Regulatory
Requirements. If OcuSense rejects the delivered Products, OcuSense must
provide MiniFAB in writing the reasons for the rejection and the
reasonably available evidence to substantiate those reasons.
|
|
(2)
|
If OcuSense rejects the
relevant Product, then MiniFAB shall promptly supply conforming
replacement Products as soon as possible, whether or not MiniFAB agrees
that OcuSense properly rejected such Products. MiniFAB agrees to notify
OcuSense in writing if such replacement Products will not be shipped
within five (5) business days.
|
|
(3)
|
If
OcuSense properly rejected the original Products, then OcuSense's payment
for the rejected Products shall be deemed payment for the replacement
Products. If OcuSense was not entitled to reject the original Products,
then OcuSense shall pay for both the rejected Products and the replacement
Products.
|
|
(4)
|
If
the parties disagree whether OcuSense properly rejected the original
Products, then the parties shall refer such matter to a mutually
acceptable, independent testing laboratory (the
Testing Lab
) to
determine whether such Products were properly rejected. The fees and costs
of the Testing Lab shall be borne by OcuSense if the Testing Lab
determines that the Products were improperly rejected and by MiniFAB if
the Testing Lab determines that the Products were properly rejected. If
the Testing Lab is unable to determine whether the rejected Products met
the Specifications, the requirements of the Technical Agreement or the
Regulatory Requirements, then either party may submit the matter to the
dispute resolution process in clause
19.
|
|
(5)
|
OcuSense
may withhold payment for any rejected Products (and only the rejected
Products) until:
|
|
(a)
|
MiniFAB
re-delivers conforming Products, or
|
|
(b)
|
the
Testing Lab or dispute resolution process determines that
the Products rejected by OcuSense met the Specifications,
the requirements of the Technical Agreement and the
Regulatory Requirements.
|
MiniFAB
and OcuSense shall enter into a Technical Agreement with respect to the First
Product promptly following (and no later than sixty (60) days after) the
Commencement Date, and the manufacture, production and supply of the First
Product shall be conducted in accordance with such Technical Agreement. The
parties shall enter into a Technical Agreement with respect to each New Product
promptly following agreement upon the applicable Requirement Definitions, and no
later than ninety (90) days prior to the applicable Supply Start Date for such
New Product. MiniFAB and OcuSense shall determine in good faith those
subcontractors (if any) performing any manufacturing activities with respect to
Products with whom OcuSense shall enter into separate written technical or
quality agreements. Technical Agreement will address matters such as shelf life,
storage, release requirements, facility registrations, recordkeeping, retention
and review of documentation, annual product review, shipping products only upon
release, and the like, which are not addressed in this Agreement.
MiniFAB
shall conduct all quality control testing of the Products supplied hereunder
prior to shipment in accordance with the Technical Agreements and applicable
Laws. MiniFAB shall, and shall cause its subcontractors to, retain records and
samples of Products relating to such testing, and samples (identified by batch
number) of Products supplied to OcuSense, in each case in conditions and for
times as required by applicable Law (collectively, "Shipment Samples"), and
shall provide OcuSense with reasonable access to the Shipment Samples for
testing and other purposes on OcuSense's request. If OcuSense conducts quality
control testing of Products
supplied
hereunder afer delivery thereof to OcuSense, OcuSense shall also use the same
analytical methodology as used by MiniFAB. Upon written request from OcuSense,
MiniFAB shall provide a reasonably detailed description of the analytical
methodology used by MiniFAB for quality control testing of the
Products.
***Section
4.1 has been omitted in its entirety pursuant to a request for confidential
treatment and has been filed separately with the U.S. Securities and Exchange
Commission.
|
(1)
|
When
the Minimum Orders requirement for the Second Product has
been satisfied, the parties will meet and discuss any revision to the
Price of the Second Product, with the intent that the price will be
adjusted as mutually agreed by the parties to
reflect:
|
|
(a)
|
the
fact that the initial capital expenses incurred by MiniFAB have
been amortised;
|
|
(b)
|
any
further capital expenses incurred by MiniFAB to meet expected demand;
and
|
|
(c)
|
any
cost savings and efficiency improvements (which will be
shared equally unless otherwise agreed between the
parties).
|
|
(2)
|
The
parties agree to act reasonably when negotiating the revision to the
Price of the Second
Product.
|
|
5.
|
Development
of New Products
|
|
(1)
|
R&D
Services for New Products include:
|
|
(a)
|
project
management services relating to the development of the
New Product;
|
|
(b)
|
assisting
OcuSense in the development, validation and finalisation of the
Requirement Definitions for the New
Product;
|
|
(c)
|
assisting
OcuSense in the development, validation and finalisation of the
Specifications for the New Product;
|
|
(d)
|
using
Commercially Reasonable Efforts to develop processes, methodology and
technology to manufacture the New Product;
|
|
|
using
Commercially Reasonable Efforts to evaluate and recommend appropriate
technology necessary to manufacture the New
Product;
|
|
(f)
|
using
Commercially Reasonable Efforts to develop and construct plant and
equipment necessary to manufacture the New Product;
and
|
|
(g)
|
such
other services as specified in a Development
Order.
|
|
(2)
|
R&D
Services exclude:
|
|
(a)
|
the
initial formulation of and research on the Requirement
Definitions for the New
Product;
|
|
(b)
|
carrying
out experiments, clinical tests or other validation methodologies in
relation to the New Product;
|
|
(c)
|
preparations
or filings relating to obtaining Registration for the
New Product;
|
|
(d)
|
sales,
distribution, marketing or public release of the New
Product;
|
|
(f)
|
legal
or other professional advisory
services.
|
|
5.2
|
Request for
development
|
|
(1)
|
OcuSense
may, from time to time, request MiniFAB in writing to provide
R&D Services to develop a New Product (
Development
Request
).
|
|
(2)
|
Subject
to clause 5.2(4), if and when OcuSense elects, in its discretion,
to develop a Second Product, OcuSense agrees that it will provide an
opportunity for MiniFAB to provide the R&D Services with respect to
the Second Product, as follows:
|
|
(a)
|
OcuSense
shall provide a written Development Request for the Second Product
pursuant to clauses 5.2(1) and
5.2(3);
|
|
(b)
|
the
parties shall discuss in good faith the anticipated activities
under the Development Request and capabilities required to perform
such activities;
|
|
(c)
|
if
MiniFAB does not wish to undertake to perform the applicable R&D
Services for the Second Product, MiniFAB agrees to promptly notify
OcuSense in writing;
|
|
(d)
|
if
MiniFAB wishes to perform the applicable R&D Activities for the Second
Product, MiniFAB shall propose the financial terms under which it is
willing to undertake the R&D Services specified in the Development
Request; and
|
|
(e)
|
if
MiniFAB has appropriate capability to perform such R&D Activities for
the Second Product as set forth in the Development Request, and offers to
perform such activities on financial terms that are at least as favorable
to OcuSense as other bids for conducting such R&D Services OcuSense
receives from third parties with capability of performing such R&D
Services, then OcuSense shall engage MiniFAB for the conduct of such
R&D Services for the Second Product. In such event, the parties shall
prepare and sign a mutually agreed written Development Order, which shall
set forth the activities to be conducted, timelines, deliverables,
financial terms, and other mutually agreed terms and conditions regarding
such R&D Services. Such Development Order shall be consistent with the
intellectual property provisions and other applicable terms and conditions
of this Agreement.
|
Subject
to the foregoing, OcuSense may engage any other person to provide R&D
Services and OcuSense shall have no obligation to offer to MiniFAB the
opportunity, or to engage MiniFAB, to perform any R&D Services. For clarity,
OcuSense shall not be obligated to engage MiniFAB to perform R&D Services
for any New Product other than the Second Product.
|
(3)
|
A
Development Request must include:
|
|
(a)
|
a
detailed description of the New
Product;
|
|
(b)
|
draft
Requirement Definitions for the New Product;
and
|
|
(c)
|
a
draft project plan including a proposed
timetable.
|
|
(4)
|
MiniFAB
will consider a Development Request and notify OcuSense in
writing whether or not MiniFAB accepts the Development Request within
20 Business Days of receipt of the request. If MiniFAB fails to respond
within that time period, then it is deemed to have rejected the
Development Request. To avoid doubt, MiniFAB is not required to provide
any reason for rejecting a Development Request. It is understood that the
Development Request is intended as an opportunity for the parties to
negotiate terms and conditions on which MiniFAB may conduct the applicable
R&D Services for OcuSense. Accordingly, (i) MiniFAB shall not be
obligated to accept any Development Request, and (ii) except as expressly
set forth in clause 5.2(2)(e) with respect to the Second Product, OcuSense
shall not be obligated to engage MiniFAB to conduct R&D Services.
Without limiting the foregoing, if MiniFAB rejects (or is deemed to have
rejected) the Development Request for the Second Product, then despite
clause 5.2(2), OcuSense may engage another service provider to provide
R&D Services in respect of that Development Request. OcuSense shall
have no obligation to offer to MiniFAB any further opportunity, or to
engage MiniFAB, to perform any R&D Services except as expressly set
forth under clause 5.2(2).
|
|
(1)
|
If
MiniFAB accepts a Development Request,
then:
|
|
(a)
|
MiniFAB
will provide OcuSense with a revised draft project plan. including
proposed milestones and payment milestones;
and
|
|
(b)
|
the
parties must meet within 20 Business Days of the acceptance to meet and
discuss the Development Request with the intent to finalise a Development
Order.
|
|
(2)
|
The
parties will act reasonably in negotiating the terms of the
Development Order.
|
|
(3)
|
To
avoid doubt, neither party is bound by a Development Request,
a Development Order or any obligations to develop a New Product until
the relevant Development Order is signed by both
parties.
|
|
5.4
|
Provision of R&D
Services
|
|
(1)
|
MiniFAB
will provide the R&D Services in accordance with the
relevant Development Order in a diligent and ethical manner, with due
care and skill and to a high professional standard, in accordance with
this Agreement, and all applicable Regulatory
Requirements.
|
|
(2)
|
MiniFAB
will use Commercially Reasonable Efforts to meet any milestones agreed in
the relevant Development Order. Each Development Order may specify the
agreed-upon remedies that shall apply for any failure by MiniFAB to meet
such milestones, or otherwise fail to perform the R&D Services in
accordance with clause 5.4(1).
|
|
5.5
|
Responsibilities of each
party
|
|
(1)
|
MiniFAB
is responsible for and will bear the costs and expenses
associated with:
|
|
(a)
|
the
provision of the R&D Services in accordance with the relevant
Development Order (
Development Expenses
);
and
|
|
(b)
|
the
construction and acquisition of any plant and equipment and other related
capital expenditures relating to the R&D
Services.
|
|
(2)
|
OcuSense
will develop, validate and finalise the Requirement Definitions and the
Specifications of the New Product in consultation with MiniFAB. MiniFAB
will assist OcuSense in accordance with the R&D
Services.
|
|
(3)
|
OcuSense
is solely responsible for and will bear all costs and
expenses associated with all activities relating to the research and
development of the New Product that are not expressly included as
part of R&D Services or that are expressly excluded from the
R&D Services.
|
|
5.6
|
Ownership of Requirement
Definitions and
Specifications
|
The
Requirement Definitions and the Specifications of any Product and all
Intellectual Property rights relating to any Product, the Requirement
Definitions and the Specifications therefor are and will remain to be owned
solely by OcuSense. MiniFAB hereby assigns all Intellectual Property subsisting
in the foregoing to
OcuSense.
|
5.7
|
Payment for R&D
Services
|
OcuSense
will pay MiniFAB for the provision of the R&D Services in accordance with
payment milestones specified in. the relevant Development Order.
|
5.8
|
Other matters relating to
Development Order
|
Prior to
the Successful Completion of a New Product, the parties will meet and negotiate
(acting reasonably) the following items relating to the New
Product:
|
(1)
|
the
Price for the New Product (provided that the Price for the Second
Product is set in accordance with clause
4.1(2));
|
|
(2)
|
the
percentage applicable to calculating the amount payable under clause
3.3(8)(c)
|
|
(3)
|
the
Minimum Orders requirement for the New Product, if any (provided
that the Minimum Order for the Second Product is set in accordance
with clause 3.3(7)(c)); and
|
|
(4)
|
the
Annual Production Capacity for the New
Product.
|
|
5.9
|
Prototype
Acceptance Testing
|
|
(1)
|
If
required under the relevant Development Order, the parties will
conduct acceptance testing of the New Product in accordance with this
clause 5.9.
|
|
(2)
|
Promptly
upon completion of the development of the New Product, MiniFAB shall
manufacture and supply to OcuSense a reasonable number of prototype units
for the purposes of OcuSense's testing and evaluation, together with such
documentation (including without limitation the QA test report), materials
and equipment reasonably necessary for OcuSense to perform testing and
evaluation of the prototype. It is understood that the mutually agreed
Development Order may provide for the supply and testing of multiple sets
of prototype units for the New Product at different stages of development
(such as, for example, alpha prototypes and beta
prototypes).
|
|
(3)
|
OcuSense
may reject the prototype of the New Product only if it does not conform to
the Requirement Definitions. OcuSense must accept the prototype of the New
Product if it conforms to the Requirement
Definitions.
|
|
(4)
|
If
OcuSense rejects the prototype then OcuSense must notify MiniFAB of the
reasons for such rejection and MiniFAB will have thirty (30) days to cure
such defect or non-conformance or dispute Ocusense's rejection pursuant to
the dispute resolution process under clause 19. OcuSense may require
MiniFAB to resubmit revised prototype units to OcuSense for testing and
evaluation until the prototype fully conforms to the Requirement
Definitions of the Product.
|
|
(5)
|
Upon
OcuSense's acceptance of the New Product (
“Acceptance”
),
OcuSense shall promptly inform MiniFAB in
writing.
|
|
5.10
|
Successful
Completion
|
Successful
Completion in relation to a New Product means:
|
(1)
|
if
the relevant Development Order provides a definition - the
meaning ascribed to that term in the Development Order;
or
|
|
(2)
|
the
Acceptance of a New Product by OcuSense, as such term is defined
in clause 5.9.
|
|
5.11
|
Discontinuance - Unable to
finalise Requirement
Definitions
|
If the
parties are unable to finalise the Requirement Definitions for the New Products
by the deadline specified in the relevant Development Order (or after a
reasonable time if no such deadline is specified), then either party may
discontinue the relevant Development Order by notifying the other party in
writing, in which case OcuSense will be solely responsible for all Development
Expenses incurred up to that point in time and any other unavoidable costs
reasonably incurred by MiniFAB in connection with the
discontinuance.
|
5.12
|
Discontinuance -
OcuSense
|
OcuSense
may discontinue the development of any New Product at any time upon written
notice, in which case MiniFAB will invoice, and OcuSense must pay, all
outstanding amounts that are payable in accordance with the payment milestones
specified in the Development Order for the R&D Services actually rendered by
MiniFAB prior to the termination of the relevant Development Order. It is
understood and agreed that any R&D Services with respect to the Second
Product and any other New Product will be undertaken in reasonable stages in
order to provide OcuSense an opportunity to evaluate the results of the R&D
Services in each such stage and to determine whether OcuSense, in its
discretion, wishes to cease development of the Second Product or other New
Product. In the event that OcuSense unilaterally discontinues development of the
Second Product and terminates the corresponding R&D Services (other than as
a result of MiniFAB's inability or unwillingness to conduct such R&D
Services, or as set forth in clause 15.2) prior to MiniFAB's shipment of beta
prototypes, then OcuSense agrees that it will provide an opportunity for MiniFAB
to provide the R&D Services with respect to development of its next
subsequent New Product (excluding any New Products then already under contract
for development by third parties) as set forth in clause 5.2(2), subject to the
terms of clause 5.2(4).
|
(1)
|
Subject
to the terms and conditions of this Agreement, OcuSense grants
to MiniFAB during the Term a limited, royalty free, non-exclusive
licence (without the right to sublicense) under any Intellectual Property,
know-how and technical information owned (or licensed with the right to
sublicense) by OcuSense relating to the development or manufacture of the
Products (
OcuSense
IP
) to use OcuSense IP to perform MiniFAB's obligations under this
Agreement (
OcuSense
Licence
).
|
|
(2)
|
MiniFAB
may only use OcuSense IP to the extent necessary or desirable
to develop and manufacture the Products and New Products or
otherwise necessary for the purposes of this
Agreement.
|
|
6.2
|
Provision of
OcuSense
IP
materials
|
OcuSense
will provide or otherwise make available all information and materials relating
to the OcuSense IP known to or possessed by OcuSense that are reasonably
necessary to enable MiniFAB to perform its obligations under this
Agreement.
|
6.3
|
Ownership of
OcuSense
IP
and Improvements to
OcuSense
IP
|
All
OcuSense IP, and all improvements to OcuSense IP, including any
modifications and developments made thereto by MiniFAB shall be the sole
property of OcuSense and MiniFAB hereby assigns to OcuSense its entire right,
title and interest therein. Such improvements, modifications and developments
will be included in OcuSense IP and covered by the OcuSense Licence. All
injection moulds directed to the Products, and all rights in and to such
injection moulds, shall be owned by OcuSense and part of the OcuSense IP.
MiniFAB will cooperate with OcuSense in good faith to assist OcuSense in such
manner as OcuSense may reasonably request if such moulds are required to be
duplicated, but may otherwise retain them whilst MiniFAB has an obligation to
continue to manufacture the relevant Product. All OcuSense IP shall be
treated by MiniFAB as Confidential Information of OcuSense. MiniFAB shall
promptly disclose to OcuSense all improvements, modifications and developments
to OcuSense IP made or conceived by or on behalf of MiniFAB, and provide
OcuSense with copies of all information available to MiniFAB regarding such
improvements, modifications and developments. To the extent any of the rights
that the parties intend to be assigned by MiniFAB to OcuSense (as set forth in
clause 5.6 and this clause 6.3) cannot be assigned by MiniFAB to OcuSense,
MiniFAB hereby grants to OcuSense an exclusive, royalty-free, transferable,
irrevocable, worldwide license (with rights to sublicense through multiple tiers
of sub-licensees) to practice such non-assignable rights, title and interest. To
the extent any of such rights can be neither assigned nor licensed by MiniFAB to
OcuSense, MiniFAB hereby irrevocably waives and agrees never to assert such
non-assignable and non-licensable rights, title and interest against OcuSense or
any of OcuSense's licensees or successors in interest to such non-assignable and
non-licensable rights.
|
6.4
|
IP Warranties and
indemnity
|
|
(1)
|
OcuSense
warrants that OcuSense has the right and authority to grant MiniFAB
the OcuSense Licence.
|
|
(2)
|
OcuSense
shall indemnify and at all times holds harmless MiniFAB against any Losses
resulting from a third person's claim against MiniFAB alleging that the
use of OcuSense IP by MiniFAB constitutes an infringement of any
Intellectual Property of that third person; provided, however, that
OcuSense shall not be obligated to indemnify MiniFAB, and MiniFAB shall
indemnify and at all times hold harmless OcuSense against any such Losses
(i.e., Loses arising from third party claims of infringement), to the
extent the alleged infringement results from any modifications and
developments made to OcuSense IP by MiniFAB other than in accordance with
instructions contained in any
Specifications.
|
|
6.5
|
Termination of
licence
|
The
OcuSense Licence terminates automatically upon the termination or expiry of
this Agreement for any reason.
|
6.6
|
Infringement and protection of
OcuSense
IP
|
OcuSense
is solely responsible for the protection, defence and maintenance of
the OcuSense IP. However, MiniFAB will promptly notify OcuSense if
MiniFAB is aware of any infringement of the OcuSense IP by any third
person.
|
7.
|
Obligations
of MiniFAB
|
|
7.1
|
Cooperation with
OcuSense
|
MiniFAB
will (a) provide OcuSense with analytical and manufacturing documentation,
internal progress reports, regulatory compliance files and quality assurance
files, and other relevant information as requested by OcuSense regarding quality
control for the Products supplied under this Agreement, (b) reasonably cooperate
with OcuSense in responding to all requests for information from customers and
the relevant Regulatory Authorities having jurisdiction to make such requests,
and (c) on a quarterly basis, prepare and submit to OcuSense a production
capacity development plan addressing MiniFAB's efforts to increase production
capacity to meet OcuSense's forecasts, and participate in a review thereof with
OcuSense. OcuSense must bear any reasonable pre-approved out-of-pocket costs
incurred by MiniFAB pursuant to this clause 7.1. If OcuSense refuses to
pre-approve any such reasonable costs described in the preceding sentence on
request by MiniFAB, then MiniFAB is released from its obligations under this
clause 7.1 in respect of the obligations that are subject of, and to the extent
subject of, those costs that OcuSense refused to pre-approve.
MiniFAB
must at its own cost obtain and comply with all necessary licences, consents,
permits and regulations which may from time to time be required by the relevant
Regulatory Authorities in Australia to carry out its development and
manufacturing services under this Agreement. Without limiting the generality of
the foregoing, prior to commencing the manufacture of the First Product, MiniFAB
shall be certified to meet ISO 13485 for manufacturing. OcuSense is responsible
for
obtaining
all Registrations and approvals for the export of the Products from Australia or
supply of the Products anywhere in the world.
Without
limiting the generality of clause 7.1, on a monthly basis, MiniFAB must
retain and furnish to OcuSense for analysis by OcuSense's Quality
Department:
|
(1)
|
samples
of each batch of Products manufactured under this Agreement;
and
|
|
(2)
|
batch
production and quality control
records,
|
to the
extent required by the Specifications and all applicable Regulatory
Requirements.
OcuSense
shall have the right, during normal business hours and upon reasonable notice,
to audit MiniFAB's facility at which the Products are manufactured for
compliance with the Specifications, the Regulatory Requirements, and the terms
and conditions of this Agreement. MiniFAB shall give OcuSense prior written
notice (whenever reasonably feasible) of any Governmental Agency inspection of
the MiniFAB facility, and MiniFAB shall permit a representative of OcuSense to
be present at such inspection. MiniFAB shall promptly provide to OcuSense copies
of all notices, correspondence and other materials delivered to or received from
the Governmental Agency regarding such MiniFAB facility or the
Products.
|
8.1
|
During
the Term, the parties will endeavour to meet at least every 6 months to
discuss and review the state of the relationship between
them. Each party must ensure that at least one of its senior
representatives attend each meeting. Any meeting may be
teleconferenced.
|
|
8.2
|
Each
party will alternate to organise the meeting. The party responsible
for organising the meeting must prepare a formal agenda prior to the
meeting and organise formal minutes to be taken and distributed to all
attendees after the meeting takes place. Each party may provide its
suggest agenda items. The compulsory topics for the agenda are as
follows:
|
|
(1)
|
review
of previous minutes; and
|
|
(2)
|
progress
of any development and
registration.
|
|
(1)
|
In
relation to the supply of Products, MiniFAB will invoice OcuSense on
a monthly in arrears basis.
|
|
(2)
|
In
relation to the provision of R&D Services, MiniFAB will invoice
OcuSense in accordance with the Development Agreement for the First
Product and the payment milestone specified in the relevant Development
Order for New Products.
|
OcuSense
must pay all undisputed invoices within 40 days after receipt of the
invoice or, if later, within 40 days after delivery of the relevant
Products to the Delivery Point.
If
OcuSense fails to pay an amount on the due date for any undisputed
payment, OcuSense must pay MiniFAB interest at the Default Rate on that
amount, calculated and payable monthly, computed from the due date until
the amount is paid in full.
|
10.
|
Amendments
to Specifications
|
|
10.1
|
Compliance with Regulatory
Requirements
|
In the
event that OcuSense or MiniFAB becomes aware of any changes or any pending
changes in any applicable Regulatory Requirements which could affect the
manufacture of a Product, OcuSense or MiniFAB, as applicable must promptly
notify the other party in writing of any such change or proposed change and the
Specifications of that Product must then, if necessary be amended by mutual
written agreement of the parties. Such change will become effective and binding
on MiniFAB from a date agreed by the parties. Costs and expenses reasonably
incurred by MiniFAB to implement the amendments to the Specifications required
under this clause 10.1 may be reflected in the Price of Products as set forth in
clause 10.3.
Either
party may suggest changes in the Specifications of any of the Products by
notifying the other party in writing in reasonable detail of such suggested
changes. The parties must negotiate in good faith with a view to agreeing to the
same and who will bear the cost of the same. If the parties agree in writing
upon the suggested changes, including the lead-time for implementing such
changes, the Specifications must be amended accordingly, and any such change
will become effective and binding on MiniFAB from a date agreed by the parties.
Notwithstanding the foregoing, OcuSense shall not be obligated to agree to any
change to Specifications proposed by MiniFAB.
|
10.3
|
Cost of amendments to
Specifications or changes in Regulatory
Requirements
|
Unless
otherwise agreed by the parties, it is understood that the Price of
applicable Products will be adjusted up or down by an amount equal to the
increase or decrease
in
MiniFAB's costs (as determined by the parties' mutually agreed cost model, which
shall not include amounts allocable to other products or to facilities or
equipment not utilized for Products) as a result of changes in Regulatory
Requirements and/or changes in the Specifications. Subject to clauses 10.1 and
10.2, OcuSense is responsible for all pre-approved reasonable out-of-pocket
costs and expenses incurred by MiniFAB to implement any changes to the
Specifications under this clause 10. It is understood and agreed that if
OcuSense pays for the purchase of capital equipment under this clause 10.3, then
(i) OcuSense shall be the owner of such equipment, (ii) such equipment shall not
be used in the manufacture or testing of any products other than Products, and
(iii) and the parties shall reasonably cooperate to execute and file such
documents as are reasonably required to evidence and protect OcuSense's
ownership interest in such equipment. In the event MiniFAB proposes an upward
adjustment in the Price of any Product under this clause 10.3, OcuSense shall
have the right, at its sole cost, to designate an independent accounting firm
reasonably acceptable to MiniFAB to audit MiniFAB's books and records to verify
the amount of the cost increase claimed by MiniFAB to determine the rights of
the parties as described above in this clause 10.3.
|
11.
|
Registrations,
safety and Product liability
|
|
11.1
|
Registrations of
Products
|
OcuSense
is responsible for the sales, marketing and distribution of the Products,
and is
also responsible for:
|
(1)
|
obtaining
all necessary Registrations for the Products;
and
|
|
(2)
|
maintaining
records of all sales of Product sufficient to adequately administer a
recall, market withdrawal or correction for such period as is required
under applicable regulations.
|
MiniFAB
agrees to maintain all applicable records relating to the manufacture of the
Products supplied hereunder for a period of 5 years after the Product is
supplied hereunder, as more particularly set forth in the Technical Agreement.
Thereafter, MiniFAB shall notify OcuSense in writing before destroying any such
records and, if requested by OcuSense, agrees to transfer all such records to
OcuSense or its designee at OcuSense's expense.
OcuSense
must promptly disclose to MiniFAB during the Term any information it acquires
which relates to the safety of the Product, including, inter alia, all side
effects, injury, toxicity or sensitivity reactions including unexpected or
increased incidence and severity thereof. All such information will be treated
as Confidential Information of OcuSense.
|
11.3
|
Notification of
defects
|
In the
event that MiniFAB becomes aware of any defect in the Product it will
immediately
notify OcuSense in writing and provide it with a full disclosure of the
defect or
non-compliance.
|
(1)
|
The
parties each must notify the other promptly and in writing if any Product
is requested or required to be the subject of a recall, market
withdrawal or correction (
Recall
).
|
|
(2)
|
OcuSense
is solely responsible for the handling and disposition of any
Recall and will assume all regulatory responsibility for such
matters, including responsibility for all communications with the
relevant Governmental Agencies. MiniFAB shall diligently cooperate
with OcuSense in the administration of any
recall.
|
|
(3)
|
If
a Recall is due to a non compliance with the Specifications or
the Regulatory Requirements of the Product that is caused by the
fault MiniFAB then MiniFAB will bear the reasonable cost of the
Recall. In all other cases OcuSense is solely responsible for the
cost of the Recall.
|
|
12.1
|
Required Insurance from
MiniFAB
|
MiniFAB
must take out prior to the Cut-Off Date, and thereafter maintain during
the Term:
|
(1)
|
all
insurances required by law, including workers compensation insurance in
accordance
with relevant law; and
|
|
(2)
|
public
liability insurance for an amount of not less than A$5 Million per claim
and
in the aggregate.
|
|
12.2
|
Required Insurance from
OcuSense
|
OcuSense
must take out prior to the Cut-Off Date, and thereafter maintain during
the Term:
|
(1)
|
all
insurances required by law, including workers compensation insurance
in accordance with relevant law;
and
|
|
(2)
|
product
liability insurance for an amount of not less than US$5 Million
per claim in the aggregate.
|
|
12.3
|
Evidence of
insurance
|
Each
party must, if reasonably requested by the other party, provide the other party
with
evidence that the each insurance required to be taken out by the party pursuant
to this
clause 12 exists and is current.
MiniFAB
warrants that (a) the Products manufactured by MiniFAB under this Agreement will
comply with the Specifications of the Products and shall be free from defects in
material and workmanship, and (b) MiniFAB's facility for manufacture of Products
shall be maintained and operated in compliance with all applicable Regulatory
Requirements, and all Products shall be manufactured, packaged, labelled,
stored, handled, and shipped by MiniFAB in compliance with all applicable
Regulatory Requirements and the applicable Technical Agreement.
|
14.
|
Third
party licensors and contractors; Technology
Transfer
|
Except
with respect to laser ablation and etching and injection molding activities,
which activities shall be conducted at MiniFAB's facilities unless otherwise
agreed by the parties, MiniFAB may engage sub-contractors to perform MiniFAB's
obligations under this Agreement upon express prior written consent of OcuSense,
which consent shall not be unreasonably withheld. Without limitation, it is
agreed that if OcuSense is not comfortable that a proposed sub-contractor has
the requisite capabilities and that such proposed sub-contractor will protect
OcuSense's intellectual property rights and that such proposed sub-contractor
will comply with the terms and conditions set forth in this Agreement (including
assignment of intellectual property), or if such proposed sub-contractor is
involved in the manufacture, development or commercialization of products
competing with the Products, then it shall be reasonable for OcuSense to
withhold approval of such proposed subcontractor. The appointment of
sub-contractors shall not affect or diminish MiniFAB's responsibilities and
obligations under this Agreement, and MiniFAB shall ensure the compliance of
each such subcontractor with the confidentiality obligations and other
obligations of MiniFAB set forth in this Agreement. If OcuSense engages a third
party to manufacture the Products, it will impose similar restrictions to the
foregoing on that third party.
|
14.2
|
Cooperation with
Sensortec
|
MiniFAB
acknowledges that OcuSense has entered into that certain development and option
agreement with Sensortec Limited (
“Sensortec”
), pursuant to
which Sensortec may provide certain services and a license with respect to
certain of its technology, in each case pertaining to the manufacture of the
Products. MiniFAB agrees that upon request of OcuSense, MiniFAB shall coordinate
its activities under this Agreement with Sensortec, as may be necessary or
useful for MiniFAB's and Sensortec's performance of their respective
obligations to OcuSense regarding the Product. Upon request of MiniFAB, OcuSense
shall act as a liaison between MiniFAB and Sensortec to facilitate productive
cooperation between them.
|
14.3
|
Non exclusive
arrangement
|
Nothing
in clause 14.2 prevents either party from contracting with Sensortec
independently for purposes unrelated to this Agreement.
|
14.4
|
Evaluation and licensing of
other third party technology
|
If the
parties agree or MiniFAB recommends (pursuant to the provision of R&D
Services) that a particular technology is necessary to manufacture any New
Product, then OcuSense will evaluate such recommendation, and if OcuSense
determines in its sole discretion that licensing of such technology is
desirable, OcuSense will be solely responsible for procuring (at its own cost
and expenses) the requisite licences from the owner of that technology for the
purposes of including the relevant technology in the New Product.
|
14.5
|
Technology Ownership and
Licensing; Technology
Transfer
|
|
(1)
|
OcuSense
shall retain ownership of any pre-existing intellectual property rights in
materials and information provided by OcuSense to MiniFAB for use by
MiniFAB for the purposes of undertaking activities under this Agreement.
MiniFAB shall retain ownership of any pre-existing intellectual property
rights in materials, information, tools and methodologies provided by
MiniFAB for the purposes of undertaking activities under this Agreement
(and any improvements to them, except to the extent that those
improvements comprise patented or unpatented intellectual property owned
or controlled by OcuSense or that have application in the field of
measuring osmolarity or osmolality of, or other characteristic of or any
biomarker in, human tear fluid) (collectively,
"MiniFAB Background IP"
)
and MiniFAB hereby grants OcuSense a worldwide, non-exclusive,
royalty-free license (with the right to grant and authorize sublicenses)
to make, have made, use, offer for sale, sell and otherwise exploit
MiniFAB Background IP as may be required to make, have made, use, offer
for sale, sell and otherwise exploit Licensed Products or incorporated
into processes or procedures for manufacturing or testing Licensed
Products. As used herein,
"Licensed Product"
means
any article, item, product, equipment, process, data, report or other
deliverable designed or developed in whole or part for OcuSense by MiniFAB
under the Development Agreement or this Agreement, whether or not such
development or design is completed or successfully meets intended
criteria, including without limitation the First Product, Second Product
and any other New Products developed in whole or part under the
Development Agreement or in R&D Services performed by MiniFAB under
this Agreement.
|
|
(2)
|
Subject
to clause 14.5(1) and the requirement for OcuSense to pay MiniFAB all
outstanding fees and charges due to MiniFAB, MiniFAB agrees to assign and
hereby assigns to OcuSense all right, title and interest in and to any
trade dress, trademarks and design registrations or design patents, and
any inventions, whether patentable or not, and any other discoveries,
trade secrets or know-how which:
|
|
(a)
|
are
embodied in a Licensed Product; and
|
|
(b)
|
were
made, developed, conceived or first reduced to practice by or for
MiniFAB
as a direct result of MiniFAB undertaking activities under the Development
Agreement or this Agreement
|
along
with all patents, copyrights, and any other intellectual property rights
therein, including the right to apply for and maintain the rights described in
this clause 14.5(2) in all countries worldwide (such rights comprising the
'Project IP'
) and MiniFAB
will (at the OcuSense's request and cost) do those things that may be reasonably
necessary to effect the registration of such intellectual property. OcuSense
must provide to MiniFAB full details (including copies of all relevant
documentation) of any application for registration (whether as a registered
patent, a registered design or otherwise) of the Project IP or any part of
it.
|
(3)
|
At
any time during the term of this Agreement, or in the event of
any termination of this Agreement, OcuSense shall have the right to
require MiniFAB:
|
|
(a)
|
to
provide all reasonable assistance as requested by OcuSense, including
without limitation transfer of technology, materials,
information
and documentation, to enable OcuSense to manufacture
the
Products internally or to secure the production and supply of the Products
by a third party contractor (whether or not all or part of such
technology, materials, information and documentation falls within the
MiniFAB Background IP owned by MiniFAB);
and
|
|
(b)
|
to
provide OcuSense with the consultancy services of all key
engineering
personnel of MiniFAB to effect or support such transfer of
technology
and/or the license to MiniFAB Background
IP.
|
OcuSense
shall pay MiniFAB for the time spent by MiniFAB's key personnel in conducting
such technology transfer activities as may be requested by OcuSense, at
MiniFAB's reasonable and customary rates for similar consultancy, and shall
reimburse MiniFAB's out-of-pocket expenses incurred in conducting such
technology transfer.
|
(4)
|
All
MiniFAB Background IP shall be treated by OcuSense and its sublicensees
and their third party manufacturers as Confidential Information of
MiniFAB; provided, however, that (i) OcuSense may disclose the
MiniFAB Background IP to actual and potential investors,
sublicensees, advisors and/or contract manufacturers of Licensed
Products, in each case under reasonable and customary terms of
confidentiality; and (ii) OcuSense and its sublicensees and contract
manufacturers may disclose such information as is reasonably
necessary in seeking regulatory approvals in connection with the
manufacture, clinical development, use or commercialization of
Licensed Products. For clarity, this clause 14.5(4) shall not be construed
to prevent the use of MiniFAB Background IP in under authority of the
license set forth in clause 14.5(1)
above.
|
|
(5)
|
This
clause 14.5 will survive termination of this
Agreement.
|
|
15.
|
Term,
breach and termination
|
|
(1)
|
This
Agreement commences on the Commencement Date and continues for an
initial period of ten (10) years after the Commencement
Date.
|
|
(2)
|
This
Agreement shall automatically renew for additional terms of three
(3)
years
each, unless either party provides the other party with a written notice
of
non-renewal
at least 180 days prior to the scheduled expiration of the then
current
term.
|
|
15.2
|
Termination for
cause
|
Notwithstanding
clause 15.1, either party may terminate this Agreement effective immediately
upon the giving of written notice to the other party (
Defaulting Party
)
if:
|
(1)
|
the
Defaulting Party commits a material breach of this Agreement and fails to
correct the breach within 30 days after written notice to do
so;
|
|
(2)
|
the
Defaulting Party fails to carry out any material provision of this
Agreement and the failure is not capable of remedy;
and/or
|
|
(3)
|
an
Insolvency Event occurs in relation to the Defaulting
Party.
|
In the
event that OcuSense is entitled to terminate this Agreement under clause 15.2(1)
or 15.2(2) above and the applicable default or breach relates to the R&D
Services under one or more Development Orders, OcuSense may, in its discretion,
elect to terminate such Development Orders without terminating this Agreement
with respect to manufacture and supply of Products.
|
15.3
|
Effect of
termination
|
|
(1)
|
Upon
termination or expiry of this Agreement for any reason other than
for material breach by MiniFAB or due to an Insolvency Event in
relation to OcuSense, MiniFAB will complete the delivery of all
outstanding Purchase Orders.
|
|
(2)
|
Upon
termination of this Agreement for material breach by
MiniFAB, OcuSense may elect to cause MiniFAB to complete the delivery
of all outstanding Purchase Orders or to cancel any or all
outstanding Purchase Orders (in whole or in
part).
|
|
(3)
|
Upon
termination or expiry of this Agreement for any
reason
|
|
(a)
|
OcuSense
must pay all outstanding undisputed invoices for all
completed
Purchase Orders;
|
|
(b)
|
all
Development Orders are deemed to be discontinued
and:
|
|
(i)
|
if
this Agreement is terminated under clause 15.2 and MiniFAB is the
Defaulting Party, then MiniFAB will be responsible for
all Development Expenses incurred;
and
|
|
(ii)
|
if
this Agreement is terminated for any other reason, then OcuSense must
pay MiniFAB all Development Expenses incurred and any other
unavoidable costs incurred by MiniFAB in connection with the
termination, as set forth in clause 5.12;
and
|
|
(c)
|
each
party must immediately return the Confidential Information of
the other party to the other
party.
|
|
(4)
|
Except
as provided in clause 15.4, termination is without prejudice to
the rights of either party for any prior
breach.
|
|
(1)
|
If
this Agreement is terminated for any reason, other than where MiniFAB
is the Defaulting Party, and the Minimum Orders requirements set
forth in clause 3.3(7) have not been satisfied on or before the effective
date of termination (other than as a result of the inability or failure of
MiniFAB to timely supply conforming Products in quantities ordered by
OcuSense), then OcuSense shall be deemed to have failed to meet the
Minimum Orders requirement, and shall pay MiniFAB the amounts specified in
clause 3.3(8) (
Termination Fee
);
provided, however, the Termination Fee shall not include any amounts with
respect to Minimum Orders requirements for Second Products as set forth in
clause 3.3(7)(c) and 3.3(8)(c) unless such termination is effective after
the date MiniFAB notifies OcuSense pursuant to clause 3.2(2) that MiniFAB
has put in place the necessary plant and equipment to manufacture the
Second Product to meet the Minimum Orders of that
Product.
|
|
(2)
|
The
parties acknowledge and agree that (i) the Termination Fee is a genuine
pre-estimate of the anticipated loss or damage which would be suffered by
MiniFAB as a result of the early termination of this Agreement, (ii) the
agreed upon Termination Fee shall be in lieu of any actual or alleged
damages, losses or harm to MiniFAB resulting from such Termination and/or
from any failure of OcuSense to order or purchase Products from MiniFAB
under this Agreement (
Termination Losses
), and
(iii) MiniFAB waives its right to seek recovery or reimbursement of all
Termination Losses other than the Termination
Fee.
|
All
clauses that by their nature survive expiration or termination of this Agreement
will remain in force. For the avoidance of doubt, clauses 1, 5.6, 6.3,
6.4(2), 11.1, 11.4, 13, 14.5, 15, 16, 17, 18, 19, 21 and 22 survive
termination.
|
16.
|
Liability
and indemnity
|
|
16.1
|
Indemnity by
OcuSense
|
OcuSense
shall indemnify MiniFAB and its Representatives against all Losses
incurred
by them as result of claims by third persons against MiniFAB arising directly
or
indirectly as a result of:
|
(1)
|
any
grossly negligent, unlawful, fraudulent or wilful misconduct committed
by
OcuSense
or its Representatives in the performance of this
Agreement;
|
|
(2)
|
the
marketing, promotion, sale or supply of the Product by OcuSense;
or
|
|
(3)
|
OcuSense's failure
to obtain, maintain or comply in any respect with any
Registrations,
|
except,
in each case, to the extent Losses result from any event described
in clause 16.2.
|
16.2
|
Indemnity by
MiniFAB
|
MiniFAB
shall indemnify OcuSense and its Representatives against all Losses incurred by
them as a result of claims by third persons against OcuSense arising directly or
indirectly, to the extent resulting from:
|
(1)
|
any
grossly negligent, unlawful, fraudulent or wilful misconduct committed by
MiniFAB or its Representatives in the performance of this
Agreement;
|
|
(2)
|
any
manufacturing defect in any Product supplied by MiniFAB to OcuSense, or
any failure of any such Product to conform to the Specifications or the
Regulatory Requirements therefor;
or
|
|
(3)
|
MiniFAB's
failure to obtain and maintain all necessary governmental permits for the
development and manufacture of Products
hereunder.
|
|
16.3
|
General provisions applicable
to indemnities
|
A party
(the "Indemnitee") that intends to claim indemnification under this clause 16
shall promptly notify the other party (the "Indemnitor") of any claim, demand,
action or other proceeding for which the Indemnitee intends to claim such
indemnification. The Indemnitor shall have the right to assume and control the
defense thereof with counsel selected by the Indemnitor; provided, however, that
the Indemnitee shall have the right to retain its own counsel to participate in
the defense, subject to Indemnitor's right to control the defense. The indemnity
obligations under this clause 16 shall not apply to amounts paid in settlement
of any Loss if such settlement is effected without the prior express written
consent of the Indemnitor, which consent shall not be unreasonably withheld or
delayed. The failure to deliver notice to the Indemnitor within a reasonable
time after notice of any relevant claim, or the commencement of any such action
or other proceeding shall not relieve such Indemnitor of all liability to the
Indemnitee under this clause 16 with respect thereto, but if such failure is
prejudicial to the Indemnitor's ability to defend such claim, and if such
prejudice results in Losses that otherwise would likely have been avoided or
reduced if timely notice had been given, then the Indemnitor shall be relieved
of said part of the Losses. The Indemnitor may not settle or otherwise consent
to an adverse judgment in any such claim, that diminishes the rights or
interests of the Indemnitee without the prior express written consent of the
Indemnitee, which consent shall not be unreasonably withheld or delayed (it
being understood that no consent by the Indemnitee is required for the
Indemnitor to obtain a full release of all claims by a third person against an
Indemnitee in exchange solely for the payment of a settlement amount by
Indemnitor). The Indemnitee, its employees and agents, shall reasonably
cooperate with the Indemnitor and its legal representatives in the investigation
of any claim covered by this clause 16. The indemnities contained in this clause
16 do not negate the obligation of the party having the benefit of such
indemnity to mitigate its losses; and are continuing obligations on each party,
separate and independent of any other obligation.
|
16.4
|
No consequential
damages
|
Except
for any liability under clause 18 or the indemnity provided under clauses 16.1
or 16.2, to the extent permitted by law, neither party will be liable to the
other party in any circumstances for any special, incidental, punitive,
exemplary, consequential or any other indirect loss or damage, or in any event
for any loss of revenue, loss of production, loss of profit or loss of
data.
|
17.
|
Goods
and services tax
|
|
(1)
|
GST
means GST as
defined in
A New Tax System (Goods and Services Tax)
Act
1999 as amended (
GST
Act
) or any replacement or other relevant legislation and
regulations;
|
|
(2)
|
words
or expressions used in this clause which have a particular meaning
in
the
GST
law
(as defined in the GST Act, and also including any
applicable
legislative
determinations and Australian Taxation Office public rulings) have
the
same meaning, unless the context otherwise
requires;
|
|
(3)
|
any reference to GST payable
by a party includes any corresponding GST payable by the representative
member of any GST group of which that party is a
member;
|
|
(4)
|
any
reference to an input tax credit entitlement by a party includes
any
corresponding
input tax credit entitlement by the representative member of any GST group
of which that party is a member;
and
|
|
(5)
|
if
the GST law treats part of a supply as a separate supply for the purpose
of
determining
whether GST is payable on that part of the supply or for the
purpose
of determining the tax period to which that part of the supply is
attributable,
such part of the supply is to be treated as a separate
supply.
|
|
17.2
|
Unless
GST is expressly included, the consideration to be paid or provided under
any other clause of this Agreement for any supply made under or in
connection with this Agreement does not include
GST.
|
|
17.3
|
To
the extent that any supply made under or in connection with this Agreement
is a taxable supply, the GST exclusive consideration otherwise to be paid
or provided for that taxable supply is increased by the amount of any GST
payable in respect of that taxable supply and that amount must be paid at
the same time and in the same manner as the GST exclusive consideration is
otherwise to be paid or provided. A party's right to payment under this
clause is subject to a valid tax invoice being delivered to the recipient
of the taxable supply.
|
|
17.4
|
To
the extent that one party is required to reimburse or indemnify another
party for aloss, cost or expense incurred by that other party, that loss,
cost or expense does notinclude any amount in respect of GST for which
that other party is entitled to claim aninput tax
credit.
|
Neither
party may, without the other party's prior written consent, copy or disclose or
cause to be copied or disclosed any Confidential Information of the other party
other than to the extent that such Confidential Information must be
disclosed:
|
(1)
|
to
the party's sub-contractors, employees, legal advisers, auditors,
investors or other consultants in order for this Agreement to be
performed, provided that the recipients of the information undertake in
writing to the party to keep that information strictly confidential;
or
|
|
(2)
|
to
Regulatory Authorities as required to obtain or maintain any
regulatory approvals.
|
Each
party may only make use of Confidential Information of the other party to
the extent necessary to enable the party to perform its obligations or
exercise its rights under this Agreement.
|
18.3
|
Excluded
information
|
For the
purposes of this clause, Confidential Information does not include
any information which the receiving party can establish:
|
(1)
|
was
in the public domain when it was disclosed to the receiving
party;
|
|
(2)
|
becomes,
after being disclosed to the receiving party, part of the
public domain, except through disclosure contrary to this
Agreement;
|
|
(3)
|
was
already in the receiving party's possession when it was disclosed to the
receiving party and was not otherwise acquired from the other party
directly or indirectly; or
|
|
(4)
|
was
lawfully disclosed to the receiving party by a third party having the
unrestricted legal right to disclose that information without requiring
the maintenance of confidentiality.
|
Prior to
making a disclosure of information which the receiving party alleges is no
longer or never was Confidential Information by virtue of falling within one of
the above exceptions, the receiving party must give to the other party 10
Business Days notice of the proposed disclosure and the reasons for the
exception applying.
|
18.4
|
Compulsory
disclosures
|
The
obligations of confidentiality in this clause do not apply to a receiving party
where the receiving party is required under the lawful compulsion of any court,
tribunal, authority or regulatory body to disclose any Confidential Information
of the other party. Provided that before a party discloses any Confidential
Information pursuant to the foregoing it must provide the other party with
reasonable notice to enable it to seek a protective court order or other remedy
in respect of the Confidential Information, and it must provide the other party
with all assistance and co operation which the other party considers necessary
to obtain such protective court order or other remedy.
|
18.5
|
Protection of
information
|
Each
party must notify the other party in writing immediately upon the discovery of
any apparent unauthorised use or disclosure of any Confidential Information and
take all reasonable steps to enforce the confidentiality obligations imposed or
required to be imposed by this clause 18 including diligently prosecuting at its
cost any breach or threatened breach of any such confidentiality obligations by
any person to whom it has disclosed or allowed access to the Confidential
Information or at the other party's option making all reasonable efforts to
assist the other party to help regain possession of the Confidential Information
and prevent any further unauthorised disclosure or use.
|
18.6
|
Confidentiality of
agreement
|
The
parties must maintain absolute confidentiality concerning the existence and
subject matter of this Agreement and no public announcement or communication
relating to the negotiations of the parties or the existence, subject matter or
terms of this Agreement may be made or authorised by a party without the prior
written approval of the other party except that the following disclosures may be
made in relation to this Agreement:
|
(1)
|
by
either party to its sub-contractors, employees, auditors,
consultants, professional advisers, bankers, financial advisers,
financiers, investors and potential investors upon those persons
undertaking to keep confidential any information so disclosed;
or
|
|
(2)
|
to
comply with any applicable law or requirement of any
Governmental Agency or of any public stock exchange on which shares
of the disclosing party are
listed.
|
|
18.7
|
Return of Confidential
Information
|
Each
party agrees that on termination or expiration of this Agreement it will deliver
to that other party any and all materials containing or embodying that other
party's Confidential Information and any copies thereof; provided that each
party shall be entitled to retain one (1) copy of the other party's Confidential
Information, to be kept at such party's legal files for use solely for the
purpose of ensuring continued compliance with the terms of this
Agreement.
If a
dispute arises between the parties in connection with this Agreement then the
parties must use all reasonable endeavours acting in good faith to settle the
dispute as soon as practicable.
|
19.2
|
Limitations on Court
Proceedings
|
A party
must not commence court proceedings in relation to a dispute arising in
connection with this Agreement until it has exhausted the procedures in this
clause 19, unless the party seeks urgent interlocutory relief.
|
19.3
|
Disputes relating to
Product
|
If the
dispute relates to whether or not a particular Product meets the Specifications
and the Regulatory Requirements, then the parties must submit the dispute to an
independent laboratory, which will act as an expert in determining whether or
not the Product meets the Specifications and the Regulatory Requirements;
provided, however, that if it is not technically feasible to make such
independent laboratory determination in connection with a particular dispute
(e.g., if insufficient number of samples of a relevant batch of Products is
available), then such dispute shall be determined by arbitration under clause
19.5
If a
dispute does not relate to whether or not a particular Product meets the
Specifications and the Regulatory Requirements and the parties are unable in
good faith to settle the dispute within 20 Business Days after the dispute
arose, then either party may submit the matter to arbitration under clause
19.5.
|
(1)
|
If
any dispute arises under, or in connection with, this Agreement and/or any
Development
Order, or in connection with any breach or alleged breach of this
Agreement or any Development Order, and such matter is not resolved
pursuant to clause 19.1 or 19.3 or by other agreement of the parties, such
matter shall be finally resolved through binding arbitration as set forth
in this clause 19.5. Either party may initiate arbitration of such a
matter, and the party initiating arbitration of such dispute must give to
the other party or parties to the dispute notice specifying the dispute
and requiring its resolution under this clause 19.5 (
Notice of Dispute
). Such
Notice of Dispute shall be given in accordance with the arbitration rules
specified under this clause
19.5.
|
|
(2)
|
Each
such dispute is by this clause 19.5 referred to binding arbitration for
final resolution. The arbitration must be conducted
in:
|
|
(a)
|
Melbourne,
Australia if the Notice of Dispute is given by
OcuSense; and
|
|
(b)
|
San
Diego California, USA, if the Notice of Dispute is given
by MiniFAB.
|
|
(3)
|
If
the parties have not agreed upon the arbitrator within 7 days after the
Notice of Dispute is given, the arbitrator is the person appointed by the
Chair of the Victorian Chapter of the Institute of Arbitrators and
Mediators Australia (
Principal Appointor
) or
the Principal Appointor's nominee, acting on the request of any party to
the dispute.
|
|
(4)
|
The
arbitrator must not be a present or former member, officer, employee or
agent of a party to the dispute or a person who has acted as a mediator or
advised any party in connection with the
dispute.
|
|
(5)
|
The
arbitration shall be conducted in accordance with the then-current rules
of the International Centre for Dispute Resolution by one (1) arbitrator
appointed in accordance with such rules. The arbitrator shall determine
what discovery will be permitted, consistent with the goal of limiting the
cost and time which the parties must expend for discovery; provided the
arbitrator shall permit such discovery as the arbitrator deems necessary
to permit an equitable resolution of the dispute. The arbitrator shall not
order or require discovery against either party of a type or scope that is
not permitted against the other party. The costs of the arbitration,
including administrative and arbitrators' fees, shall be shared equally by
the parties, and each party shall bear its own costs and attorneys' and
witness' fees incurred in connection with the arbitration. Any arbitration
subject to this Article shall be completed within one (1) year from the
filing of notice of a request for such arbitration. No punitive damages
may be granted by the arbitrator. The arbitration proceedings and the
decision shall not be made public without the joint consent of the
parties, and each party shall maintain the confidentiality of such
proceedings and decision unless otherwise permitted by the other party,
except to the extent (and solely to the extent) either party is required
to disclose such information by applicable securities or other laws. The
parties agree that the decision shall be the sole, exclusive and binding
remedy between them regarding any and all disputes, controversies, claims
and counterclaims presented to the arbitrator. Any award may be entered in
a court of competent jurisdiction for a judicial recognition of the
decision and applicable orders of enforcement, and either party may apply
to any court of competent jurisdiction for appropriate temporary
injunctive relief pending resolution of any arbitration proceeding. The
arbitrator shall provide a written arbitration award setting forth the
arbitrator's findings on material questions of law and of fact, including
references to the evidence on which the findings of fact were based. Each
party may be represented by a qualified legal practitioner or other
representative.
|
|
(6)
|
This
clause 19.5 applies even where the Agreement is otherwise void
or voidable.
|
|
19.6
|
Continuing
Obligations
|
|
19.7
|
Except
as specifically provided in this Agreement, the parties must continue
to perform their obligations under this Agreement despite the
existence of a dispute or any steps being taken under this clause
19.
|
Where a
party is required under this Agreement to perform an obligation or do any act or
thing by a designated time or date (
Obligation
), the party is not
liable for any delay in performing or for failure to perform an Obligation where
the delay or failure arises from Force Majeure and that party has complied with
this clause.
|
20.2
|
Notice of Force
Majeure
|
A party
who claims Force Majeure must:
|
(1)
|
give
the other party prompt notice of the Force Majeure with reasonably full
particulars and an estimate of the extent and duration of its delay in
performance, or inability to perform;
and
|
|
(2)
|
use
all possible diligence to resume normal performance of the delayed
obligations as quickly as possible.
|
|
20.3
|
Termination in case of Force
Majeure
|
If the
delay continues beyond 30 days after the notice given under clause 20.2, the
parties must meet to discuss in good faith a mutually satisfactory resolution of
the problem and, if unable to achieve such a resolution within a further 60
days, either party may elect to terminate this Agreement by 30 days prior
written notice to the other.
|
21.1
|
A
notice or other communication connected with this Agreement (
Notice
) has
no legal effect unless it is in
writing.
|
|
21.2
|
In
addition to any other method of service provided by law, the Notice may
be:
|
|
(1)
|
sent
by prepaid post to the address of the addressee set out in this
Agreement or subsequently
notified;
|
|
(2)
|
sent
by facsimile to the facsimile number of the
addressee;
|
|
(3)
|
sent
via email to the email address of the addressee;
or
|
|
(4)
|
delivered
at the address of the addressee set out in this Agreement or
subsequently
notified.
|
|
21.3
|
If
the Notice is sent or delivered in a manner provided by clause 21.2, it
must be treated as given to and received by the party to which it is
addressed:
|
|
(1)
|
if
sent by facsimile or email, on the next Business Day at the place of
receipt, unless a transmission failure notice is received by the
sender; or
|
|
(2)
|
if
sent by post or otherwise, upon receipt by the
addressee.
|
|
21.4
|
Despite
clause 21.3(1):
|
|
(1)
|
a
facsimile is not treated as given or received unless at the end of
the transmission the sender's facsimile machine issues a report
confirming the transmission of the number of pages in the
Notice;
|
|
(2)
|
a
facsimile is not treated as given or received if it is not received in
full and in
legible
form and the addressee notifies the sender of that fact by the close of
the
Business Day on which it would otherwise be treated as given and
received.
|
Each
party must promptly at its own cost do all things (including executing and if
necessary delivering all documents) necessary or desirable to give full effect
to this Agreement, to the extent commercially reasonable to do so.
|
22.2
|
Entire
understanding
|
This
Agreement is the entire agreement and understanding between the parties on
everything connected with the subject matter of this Agreement and supersedes
any prior agreement or understanding on anything connected with that subject
matter. Notwithstanding the foregoing, the Development Agreement continues to
govern the development of the First Product; provided, however, that in the
event of a conflict between any provision of the Development Agreement and any
provision of this Agreement, the relevant provision of this Agreement shall
govern.
An
amendment or variation to this Agreement is not effective unless it is in
writing and signed by the parties.
A party's
failure or delay to exercise a power or right does not operate as a waiver of
that
power or right. The exercise of a power or right does not preclude either its
exercise
in the future or the exercise of any other power or right. A waiver is not
effective
unless it is in writing. Waiver of a power or right is effective only in respect
of the
specific instance to which it relates and for the specific purpose for which it
is
given.
Each
party must pay its own costs and outlays connected with the
negotiation, preparation and execution of this Agreement.
|
22.6
|
Governing law and
jurisdiction
|
This
Agreement shall be governed and construed in accordance with the laws of
England,
United Kingdom.
[Signature
page follows]
Executed
as an agreement.
Executed
by
MiniFAB (Aust) Pty
Ltd
ACN 100
768 474 in accordance with
section
127 of the
Corporations Act
2001:
/s/
Michael Wilkinson
|
/s/
Erol Harvey
|
Director/company
secretary
|
Director
|
|
|
Michael Wilkinson
|
Erol Harvey
|
Name
of director/company secretary
|
Name
of director
|
(BLOCK
LETTERS)
|
(BLOCK
LETTERS)
|
Signed
for and on behalf of
OcuSense, Inc.
by its
authorised
representative
in the presence of:
/s/
Stephen Zmina
|
/s/
Eric Donsky
|
Signature
of witness
|
Signature
of authorised representative
|
|
|
Stephen Zmina
|
ERIC DONSKY,
CEO
|
Name
of witness
|
Name
of authorised representative
|
(BLOCK
LETTERS)
|
(BLOCK
LETTERS)
|
Address
of witness
12707
High Bluff Dr. #200
San
Diego, CA 92130
U.S.A.
***Schedule
1 in its entirety has been omitted pursuant to a request for confidential
treatment and has been filed separately with the U.S. Securities and Exchange
Commission.
Schedule
2
Form
of Development Order
Development
Order made between MiniFAB and OcuSense pursuant to the Manufacturing and
Development Agreement dated ###
Date of
Development Order
|
1.
|
Description of New
Product
|
###
|
2.
|
Draft New Product Development
Requirements
|
#Insert
draft#
|
3.
|
Estimated Development
Expenses
|
###
#Please
insert a project plan for carrying out the development.#
|
5.
|
Development Milestones and
Payments (if not included in the Project
Plan)
|
#Each
payment milestone should specify the amount payable and when it is payable.
Other payment terms (if any) should be specified.#
#Please
insert criteria for Successful Completion. If this is left blank, then the
default provisions in clause 5.10 will apply.#
#Insert
any other applicable terms relevant to the development of the new
product.#
MiniFAB
and OcuSense agree that MiniFAB will provide the R&D Services pursuant to
the Manufacturing and Development Agreement between the parties to develop the
New Product as detailed in this Development Order.
Signed
for and on behalf of MiniFAB
Signed
for and on behalf of OcuSense
***Annexures A
and B in their entirety have been omitted pursuant to a request for confidential
treatment and have been filed separately with the U.S. Securities and Exchange
Commission.
Exhibit
10.37
*The
identity of the counterparty to this Agreement and certain other pieces of
information that could reasonably be expected to identify the counterparty to
this Agreement have been omitted pursuant to a request for confidential
treatment and have been filed separately with the U.S. Securities and Exchange
Commission.
**Quantitative
information contained in Sections IV(c) of this Agreement and in Paragraphs 1
and 9 of Exhibit A to this Agreement has been omitted pursuant to a request for
confidential treatment and has been filed separately with the U.S. Securities
and Exchange Commission.
***Paragraphs
5 and 7 of Exhibit A to this Agreement have been omitted in their entirety
pursuant to a request for confidential treatment and have been filed separately
with the U.S. Securities and Exchange Commission.
RESEARCH
AGREEMENT
THIS AGREEMENT
, made as of the
13
th
day of December, 2007 (the “Effective Date”), by and between
*
, a Delaware corporation with
a principal place of business at
*
and
OcuSense, Inc.
(“Contractor”),
a Delaware corporation having its principal place of business at 12707 High
Bluff Dr, Suite 200, San Diego, California 92130.
WITNESSETH:
WHEREAS
,
*
and Contractor desire to
engage in research regarding the clinical validation of Contractor’s TearLab™
system for the measurement of osmolarity in the tear film (“TearLab™ System”);
and
WHEREAS
,
*
and the Contractor desire to
engage in such research in accordance with the terms and conditions contained
herein.
NOW, THEREFORE
, in
consideration of the mutual covenants and promises set forth herein, it is
agreed by and between
*
and Contractor as follows:
SECTION
I
NATURE OF
RESEARCH
*
and Contractor shall engage
in research regarding Contractor’s TearLab™ System via validation activities and
clinical studies of osmolarity in ocular tears as set forth in Exhibit A (the
“Research”).
*
and
Contractor agree to use their commercially reasonable efforts on and to keep
each other informed regarding the Research.
*
and Contractor agree that
all Research shall be performed in accordance with Good Clinical Practices and
all applicable laws and regulations. Exhibit A is incorporated into this
Agreement and made an essential part of this Agreement by this
reference.
SECTION
II
TIME DEVOTED TO
RESEARCH
The
parties agree that the amount of time devoted by Contractor in performance of
Research will be entirely within the control of Contractor, and that the amount
of time devoted by
*
in
performance of the Research will be entirely within the control of
*
.
SECTION
III
PAYMENT
*
will pay Contractor as set
forth in Exhibit A. Such payment shall be made within thirty (30) days of
*’
s receipt of Contractor’s
invoice.
SECTION
IV
TERM AND
TERMINATION
This
Agreement shall begin on the Effective Date and shall expire on December 31,
2009. Notwithstanding the above, the Agreement may be terminated as
follows:
(a)
|
In
the event that any material term or condition of this Agreement is
breached by either party, the non-breaching party upon thirty (30) days’
written notice to the other may terminate this Agreement. If any such
breach is corrected within the applicable notice period, this Agreement
shall continue in force.
|
(b)
|
*
may terminate this
Agreement at any time and for any reason upon written notice to
Contractor. Upon such termination of the Agreement,
*
shall be entitled to
retain all beta units of the TearLab™ System and associated test cards set
forth in Paragraph 5 of Exhibit A and use such units solely for
*
’s internal business
purposes.
|
(c)
|
Contractor
may terminate the Agreement for safety reasons associated with the
Research upon written notice to
*
. In the event of such
termination by Contractor,
*
’s option set forth in
Paragraph 9 of Exhibit A shall survive the termination by thirty (30)
days. In the event of such termination by Contractor before the beginning
of the Contractor clinical studies set forth in Paragraph 1 of Exhibit A,
Contractor shall refund $
**
to
*
. In the event of such
termination by Contractor before delivery of all beta units of the
TearLab™ System and associated test cards as set forth in Paragraph 5 of
Exhibit A, Contractor shall refund to
*
a pro rata portion of
the $
**
payment
made by
*
for the
beta TearLab™ System and associated test cards. For the purposes of any
such refund, $
**
shall be allocated to the beta TearLab™ Systems ($
**
per unit), and $
**
shall be allocated to
the associated test cards ($
**
per
unit).
|
**Quantitative
information contained in Section IV(c) has been omitted pursuant to a request
for confidential treatment and has been filed separately with the U.S.
Securities and Exchange Commission.
|
(d)
|
In
the event of any termination of this Agreement other than material breach
by Contractor, all rights of
*
and obligations of
Contractor under Paragraphs 2, 3, 4, and 6 of Exhibit A shall
terminate.
|
|
(e)
|
In
the event of any termination of this Agreement other than material breach
by
*
, all rights
of Contractor and obligations of
*
under Paragraph 7 of
Exhibit A shall terminate.
|
SECTION
V
INDEPENDENT
CONTRACTOR
In the
performance of the Research, the status of the parties, including their
respective employees and agents, shall be that of independent contractors and
not as employees or agents, or fiduciaries of the other party, and as such each
party shall have no right to make any commitments for or on behalf of the other
party. Nothing in this Agreement shall create any association, partnership, or
joint venture between the parties.
SECTION
VI
CONFIDENTIALLITY AND
DOCUMENTS
The
parties entered into a confidentiality agreement dated November 26, 2007
regarding the potential use of the TearLab™ System in
*
and Contractor clinical
studies of osmolarity in ocular tears (the “Confidentiality Agreement”). The
parties hereby agree that the Confidentiality Agreement shall be applicable to
the Research and this Agreement; provided, however that the permitted use by
*
and Contractor as
receiving parties of the Confidential Information of the other party shall
include the use of Confidential Information of the other party to the extent
necessary for the purposes of this Agreement.
Each
party shall maintain records, in sufficient detail and in good scientific manner
appropriate for patent and regulatory purposes, which shall be complete and
accurate and shall fully and properly reflect all work done and results achieved
in the performance of the Research. Each party shall maintain such records and
all Confidential Information of the other party contained therein in confidence
in accordance with the Confidentiality Agreement. Subject to the terms and
conditions of this Agreement, all files, records, documents, and other materials
prepared by a party in connection with the Research are and shall remain the
exclusive property of such party.
Except as
expressly provided in this Agreement, nothing contained herein shall be
construed as conferring any license or other rights by implication, estoppel or
otherwise. Without limiting the generality of the non-use restrictions set forth
in the Confidentiality Agreement, neither party shall (or cause, assist or
permit any third party to): (a) use the Confidential Information of the other
party, or any data, information or materials derived directly therefrom, to
reproduce, generate, create or produce, through reverse-engineering or
otherwise, the technology of the party or any derivatives thereof, or (b) file,
prosecute, or maintain, in any country, any patent application which directly
claims, uses, or relies for support upon the Confidential Information of the
other party, or any data, information or materials derived directly therefrom.
For sake of clarity, the exceptions to the obligations of confidentiality and
non-use assumed by the parties on page 2 of the Confidentiality Agreement are
applicable to the immediately preceding sentence.
SECTION
VII
INDEMNIFICATION
Contractor
shall indemnify, defend, and hold
*
harmless from and against
all third party claims and actions, and all expenses incidental to such claims
or actions, including reasonable attorney’s fees, based upon or arising out of
damage to property or injuries or death to persons or other tortious acts
directly caused or contributed to by Contractor or anyone acting under its
direction or control, or on its behalf in the course of the Research provided
Contractor’s aforesaid indemnity and hold harmless agreement shall not be
applicable to the extent any such claims or actions are based upon the
negligence or intentional malfeasance of
*
.
*
shall indemnify, defend, and
hold Contractor harmless from and against all third party claims and actions,
and all expenses incidental to such claims or actions, including reasonable
attorney’s fees, based upon or arising out of damage to property or injuries or
death to persons or other tortious acts caused or contributed to by
*
or anyone acting under its
direction or control, or on its behalf in the course of the Research provided
*
’s aforesaid indemnity
and hold harmless agreement shall not be applicable to the extent any such
claims or actions are based upon the negligence or intentional malfeasance of
Contractor.
SECTION
VIII
NOTICE
For the purposes of this Agreement,
notices and demands shall be deemed given when received at the following
address:
To
*
:
|
*
|
|
|
|
|
|
|
To
Contractor:
|
|
OCUSENSE,
INC.
|
|
|
12070
High Bluff Dr., Suite 200
|
|
|
San
Diego, California 92130
|
|
|
Attention:
|
Eric
Donsky, CEO
|
Either
party may change such address by giving the other party notice of such change in
the aforesaid manner, except notices of changes of address shall only be
effective upon receipt.
SECTION
IX
SEVERABILITY
The
invalidity of any such provision or provisions of this Agreement shall not
affect any other provisions of this Agreement, which shall remain in full force
and effect, nor shall the invalidity of a portion of any provision of this
Agreement affect the balance of such provision.
SECTION
X
REMEDIES
Nothing
in the Agreement shall be construed to limit the parties’ remedies at law or in
equity.
SECTION
XI
INSURANCE
Contractor
and
*
shall maintain at
their expense appropriate insurance or self-insurance adequate to meet their
respective obligations under Section VII hereinabove. Each party shall furnish
certificates of insurance showing compliance with the foregoing requirement upon
the other party’s written request.
SECTION
XII
FORCE
MAJEURE
Neither
party shall be responsible or liable for its failure to perform its obligations
during any period in which such performance is prevented by acts of God, fire,
flood, war, embargo, strikes, explosion, riots, or laws, rules, regulations,
instructions, or orders of any governmental authority not brought on by the
party unable to perform.
SECTION
XIII
MISCELLANEOUS
No
provisions of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to in writing signed by officers of
Contractor and
*
. No
waiver by either party hereto at any time of any breach by the other party
hereto or of compliance with any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreement or representations, oral, or otherwise, express or implied, have been
made by either party with respect to the subject matter hereof that are not set
forth expressly in this Agreement (other than the Confidentiality Agreement.)
This Agreement shall be governed by and construed in accordance with the laws of
the State of
*
. This
Agreement supersedes, amends, restates and replaces any prior agreement(s)
entered into between Contractor and
*
relating to the subject
matter hereof, and all such prior agreement(s) are hereby canceled and
terminated and are of no further force of effect, with the exception that the
Confidentiality Agreement shall remain in effect in accordance with its terms
and shall apply to the Research and this Agreement. Except as otherwise
specifically provided herein, neither party shall assign this Agreement or any
rights hereunder without the consent of the other party, such consent to not be
unreasonably withheld, and any attempted or purported assignment without such
consent shall be void, except that either party may assign this Agreement
without the other party’s consent to any parent, affiliate, or subsidiary of
such party, or in connection with a merger, acquisition, sale of controlling
interest, or similar event. This Agreement shall otherwise bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY IN ANY
MANNER, UNDER ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT (INCLUDING
WITHOUT LIMITATION NEGLIGENCE), INDEMNITY, BREACH OF WARRANTY OR OTHER THEORY,
FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, PUNITIVE, STATUTORY OR
SPECIAL DAMAGES ARISING IN CONNECTION WITH THIS AGREEMENT, INCLUDING LOST
PROFITS AND LOSS OF DATA, REGARDLESS OF WHETHER SUCH PARTY WAS ADVISED OF OR WAS
AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
parties as of the date first above written.
*
OCUSENSE,
INC.
By:
|
“Eric Donsky”
|
|
|
Eric
Donsky
|
|
|
Chief
Executive Officer
|
|
Date:
|
12-13-07
|
|
EXHIBIT
A
1)
|
*
shall pay Contractor
$
**
for (a) the
support of Contractor clinical studies of osmolarity in ocular tears using
Contractor’s TearLab™ System, including without limitation the study
entitled “A Prospective Study to Establish Normative Values, Demographic
Variations, Referent Diagnostic Values, Disease Severity Correlations for
Dry Eye Disease, and Tearlab Osmometry” ($
**
) and (b) the items
outlined in Paragraph 5 ($
**
). Contractor shall
invoice
*
for such
payment upon execution of this
Agreement.
|
**Quantitative
information contained in Paragraph 1 has been omitted pursuant to a request for
confidential treatment and has been filed separately with the U.S. Securities
and Exchange Commission.
2)
|
Contractor
agrees that
*
shall be the sole third party corporate sponsor of such Contractor
clinical studies and that
*
shall receive
appropriate acknowledgement in the publication of such
studies.
|
3)
|
Contractor
agrees to provide
*
, under the
confidentiality terms of the Agreement, access to all data at the
completion of the supported clinical studies described in Paragraph 1
above.
*
shall
have the right to use such data solely for the purposes of evaluating same
in connection with consideration of a continuing business relationship
with Contractor relating to the results of the Research.
*
shall not make any
other use of such data without the prior written consent of
Contractor.
|
4)
|
*
shall be the only
third party corporate institution to have access to the data described in
Paragraph 3 above prior to the publication of the data. Notwithstanding
the foregoing,
*
agrees that such data can be shared with and presented by corporate
entities that do not compete with
*
in the field of
ophthalmology (or their Key Opinion Leaders) for the purpose of supporting
product launch of the TearLab™
System.
|
***Paragraph
5 in its entirety has been omitted pursuant to a request for confidential
treatment and has been filed separately with the U.S. Securities and Exchange
Commission.
6)
|
Contractor
agrees to provide
*
with a limited
exclusive access to Contractor’s TearLab™ System solely as follows: Until
FDA clearance of the first 510(k) for Contractor’s TearLab™ System
osmolarity equipment, Contractor agrees that
*
shall be only third
party corporate entity that will have access to the beta units of the
TearLab™ System osmolarity equipment for the purpose of conducting dry eye
clinical studies for the commercial development of therapeutic compounds
indicated for the treatment of dry eye in countries where the TearLab™
System is not approved for commercial sale and use. Contractor reserves
the right to provide third parties with access to Contractor’s TearLab™
System in any manner that does not conflict with the foregoing
restriction, including without limitation (a) providing commercial units
of Contractor’s TearLab™ System to any third parties in countries where
Contractor’s TearLab™ System is approved for commercial sale and use, (b)
providing access to Contractor’s TearLab™ System to any academic or other
non-profit institutions (but not for the purpose of participating in dry
eye clinical studies of a third party for the commercial development of
therapeutic compounds indicated for the treatment of dry eye), and (c)
providing access to the beta units of the TearLab™ System to any third
party, including countries where the TearLab™ System is not approved for
commercial sale and use, for any purpose other than conducting clinical
studies for the commercial development of therapeutic compounds indicated
for the treatment of dry eye.
|
***Paragraph
7 has been omitted in its entirety pursuant to a request for confidential
treatment and has been filed separately with the U.S. Securities and Exchange
Commission.
8)
|
If
*
desires to
publish or make public any results of the Research or any data disclosed
by Contractor to
*
under Paragraph 3 above,
*
shall first submit to
Contractor for comment any such proposed manuscript or public release of
information at least 45 days prior to its submission or release. No
publication or presentation shall be made unless and until all of
Contractor’s comments on the proposed publication or presentation have
been considered by
*
and any Contractor
Confidential Information has been removed. If requested in writing by
Contractor,
*
shall withhold material from submission for publication or presentation
for an additional 90 days to allow for the filing of a patent application
or the taking of other measures to establish and preserve Contractor’s
proprietary rights. In any publication of studies described in Paragraph
7,
*
shall
acknowledge Contractor’s provision of the beta
units.
|
9)
|
During
the term of the Agreement, Contractor hereby grants
*
an option to enter
into a supply agreement for the purchase of up to
**
commercial units of
the Contractor’s TearLab™ System and up to
**
commercial units of
the associated test cards for use in
*
clinical studies at
prices not to exceed $
**
per commercial unit
of the TearLab™ System and $
**
per commercial unit
of the test cards.
*
, in its sole
discretion, shall exercise this option via written notice to the
Contractor. Upon receipt of such notice,
*
and Contractor shall
negotiate in good faith an appropriate supply agreement for such TearLab™
Systems and test cards with estimated quantity forecasts and other
commercially reasonable terms and
conditions.
|
**Quantitative
information contained in Paragraph 9 has been omitted pursuant to a request for
confidential information and has been filed separately with the U.S. Securities
and Exchange Commission.
Exhibit
10.38
Execution
Copy
STOCK PURCHASE
AGREEMENT
This
STOCK PURCHASE AGREEMENT (the “
Agreement
”) is made
and entered into as of the 19th day of December, 2007, by and between OccuLogix,
Inc., a Delaware corporation (“
OccuLogix
”), and Solx
Acquisition, Inc., a Delaware corporation (the “
Company
”).
For good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
(a)
Authorization
. The
Board of Directors of OccuLogix, on or before the Closing (as defined below),
shall have duly authorized the sale of one thousand (1,000) shares of Common
Stock, $.001 par value per share, of Solx, Inc. (“
Solx
”), a Delaware
corporation and wholly owned subsidiary of OccuLogix (the “
Solx Stock
”), which
consists of all of the issued and outstanding capital stock of Solx, and which
currently is owned by OccuLogix, to the Company pursuant to the terms and
conditions of this Agreement.
(b)
Sale of
Shares
. On the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined below), the Company will acquire
100% of the issued and outstanding Solx Stock (the “
Transaction
”).
(c)
The
Closing
. The closing of the Transaction shall take place at
the offices of Rackemann, Sawyer & Brewster, P.C., 160 Federal Street,
Boston, Massachusetts (the “
Closing
”), at 11
a.m., eastern time, on December 19, 2007 or such other date and place as is
mutually agreeable to the Company and OccuLogix (the “
Closing
Date
”). At the Closing, OccuLogix shall deliver to the Company
a stock certificate representing the Solx Stock, duly endorsed in blank for
transfer and accompanied by all required stock transfer taxes (if
any). By making such transfer, OccuLogix (i) warrants and represents
that the Solx Stock is being sold free and clear of all liens, claims, options,
charges, encumbrances or rights of others, other than the rights established by
this Agreement, and (ii) further warrants and represents that OccuLogix is the
record and beneficial owner of such Solx Stock and that the acquisition by the
Company of the Solx Stock is in compliance with or exempt from the registration
requirements of U.S. federal and state securities laws and, if applicable, from
the prospectus and registration requirements of the securities laws of the
provinces of Canada.
(d)
Purchase
Price
. The consideration for the acquisition of the Solx Stock
will consist of: (i) on the Closing Date, the assumption by the
Company of all of the liabilities of OccuLogix, as they relate to Solx’s
business, incurred on or after December 1, 2007 (the “
Assumed
Liabilities
”), including, among other things, the payroll liabilities of
Solx incurred on and after December 1, 2007, and the obligation to make future
payments to the Participating Rights Holders under the Agreement and Plan of
Merger, dated as of August 1, 2006, by and among OccuLogix, OccuLogix Mergeco,
Inc., Solx, Inc. and Doug P. Adams, John Sullivan and Peter M. Adams, as amended
(the “
Merger
Agreement
”) and the loan and security documents delivered pursuant to the
Merger Agreement (the “
PRH Payment
”); (ii)
on or prior to February 15, 2008, the payment by the Company of all of the
expenses that OccuLogix has paid to the Closing Date, as they relate to Solx’s
business during the period commencing on December 1, 2007, and as set forth in
Schedule A
to
this Agreement (the “
Pre-paid Expenses
”);
(iii) during the period commencing on the Closing Date and ending on the date on
which Solx achieves a positive cash flow, the payment by the Company of a
royalty equal to 3% of the worldwide Net Sales (as defined in Section 6) of
Solx’s Ti-Sapphire Laser and Shunt products (as defined in Section 6) (together,
the “
Royalty
Products
”), to be paid on a quarterly basis and in accordance with
Section 6; and (iv) following the date on which Solx achieves a positive cash
flow, the payment by the Company of a royalty equal to 5% of Net Sales of the
Royalty Products, to be paid on a quarterly basis and in accordance with Section
6. The payments referred to in (iii) and (iv) are hereinafter
referred to as the “
Royalty
Payments
”.
Notwithstanding
the assumption by the Company of the Assumed Liabilities on the Closing Date,
OccuLogix will continue to cover the payroll liabilities of Solx during the
period between the Closing Date and December 31, 2007 inclusive (the “
December Payroll
”),
but, on or prior to January 15, 2008, the Company will reimburse OccuLogix for
the total amount of the December Payroll. Without OccuLogix’s prior
written consent, the Company shall not increase, or cause or allow to increase,
the payroll liabilities of Solx during the period between the Closing Date and
December 31, 2007. For greater certainty, the term “December Payroll”
shall be understood to include the costs of providing benefits to the
individuals on Solx’s payroll, consistent with past practice.
(e)
Royalty
Payments
. The Royalty Payments shall be calculated and paid as
provided in Section 6. In the event that OccuLogix believes that a
Royalty Payment received from the Company is inaccurate, OccuLogix shall inform
the Company of such issue in writing no later than fourteen (14) business days
after receipt of the Royalty Payment. In such written notice,
OccuLogix may request to review and audit the financial records of the Company
solely with regards to the payment of the Royalty Payments hereunder, and shall
request such review at a reasonable time and place. The Company shall
grant such request promptly but shall have the right to postpone OccuLogix’s
review and audit for up to fourteen (14) days if to grant OccuLogix’s request
for a review and audit, at the originally requested time, would place an undue
burden upon the Company. The parties shall work amicably to determine
the correct amounts of all Royalty Payments, and, in the event of any shortfall
in payment, the Company shall provide all additional amounts due to OccuLogix
within ten (10) days of the determination of such discrepancy. If it
is determined that the Company has overpaid any amounts for Royalty Payments,
OccuLogix shall return such overpaid amounts to the Company within ten (10) days
of the determination of such discrepancy.
(f)
Great Plains
Software
. No later than ten (10) days after the Closing Date,
OccuLogix shall re-assign to Solx, or otherwise return to Solx, all right, title
and interest in the Great Plains accounting software that Solx had assigned, or
otherwise transferred to, OccuLogix on or after September 1, 2006 (the “
Merger
Date
”). In
this regard, OccuLogix shall return to Solx all materials, in OccuLogix’s
possession, in whatever form, relating to the Great Plains software to be
re-assigned or otherwise returned to Solx pursuant to this Section 1(f),
including, without limitation, but only to the extent applicable, all codes,
programs and software. The parties shall cooperate in regards to the
transition of the Great Plains Software.
(g)
Discharge of Pre-December 1,
2007 Liabilities
. OccuLogix agrees that it shall discharge
fully all of the outstanding liabilities of Solx and OccuLogix, as they relate
to Solx’s business, that were incurred prior to December 1, 2007, consistent
with OccuLogix’s payment practice;
provided
, however,
that (i) OccuLogix shall be obligated to pay only 50% of the amount stated to be
owing under the November 2007 invoice of the McGarvey Group for services
rendered by the McGarvey Group during the period between November 1, 2007 and
November 30, 2007 inclusive (being 50% of $37,800) and (ii) OccuLogix shall owe
no obligation to the Company in respect of the letter of OccuLogix, dated May 1,
2007, addressed to Mr. Michael Davin of Cynosure, Inc., and all related purchase
orders (collectively, the “
Cynosure
PO
”).
(h)
Cynosure
. The
Company shall use commercially reasonable efforts to obtain Cynosure, Inc.’s
agreement to release OccuLogix from all obligations under the Cynosure PO, in
consideration of the Company’s agreement to purchase products from Cynosure,
Inc. or such other consideration as the Company and Cynosure, Inc. may
agree. For greater certainty, it is acknowledged and agreed that all
obligations under the Cynosure PO are, and shall continue to be, those of
OccuLogix solely and not those of Solx or the Company.
(i)
Employees
. Notwithstanding
OccuLogix’s agreement to cover the December Payroll pursuant to Section 1(d) and
to be reimbursed the total amount thereof on or prior to January 15, 2008, on
the Closing Date, the Company shall employ the individuals listed in Schedule
1(i), all of whom are employees of OccuLogix who are engaged primarily in Solx’s
business, on terms and conditions substantially equivalent, taken as a whole, to
the terms and conditions of their employment immediately prior to the
Closing. In addition, the Company hereby assumes all of the
employer’s obligations under the employment offer letter of Solx, Inc., dated on
or about February 1, 2006, addressed to Kim Tietz. The Company will
not assume any liability for the accrued but unpaid vacation pay, to the Closing
Date, of the individuals listed in Schedule 1(i), which liability will remain
with OccuLogix. With respect to Kevin Lamarche, it is understood
that, notwithstanding the Company’s employment of Mr. Lamarche on the Closing
Date, Mr. Lamarche has informed OccuLogix and the Company, and the Company has
agreed, that he will take most of his accrued but unused vacation during
December 2007, and OccuLogix hereby agrees to cover Mr. Lamarche’s wages during
December 2007. Accordingly, the December Payroll shall not include
wages paid to Mr. Lamarche during December 2007, and the Company shall not be
obligated to reimburse OccuLogix with respect to such wages pursuant to Section
1(d).
(j)
Purdue University Research
Agreement
. As partial consideration for OccuLogix entering
into this Agreement and consummating the Transaction, the Company agrees to
cause Doug P. Adams, or an entity to be organized by Doug P. Adams, to execute
and deliver to OccuLogix, promptly following the Closing, the Term Sheet, of
even date herewith, pursuant to which, among other things, OccuLogix shall be
entitled to receive a certain royalty on the commercialization of Joint
Intellectual Property (as such term is defined in the Research Agreement, dated
as of October 30, 2006, between Solx and Purdue University).
(k)
Removal of Officers and
Directors
. As of the Closing, (i) Elias Vamvakas and Thomas P.
Reeves shall be removed as directors of Solx, and (ii) Elias Vamvakas and
William G. Dumencu shall be removed from their respective offices of Chief
Executive Officer of Solx and Chief Financial Officer of Solx.
2.
Guaranty
. Doug
P. Adams, President and sole stockholder of the Company, hereby guarantees (i)
the payment by the Company of the Prepaid Expenses and (ii) the reimbursement by
the Company to OccuLogix of the total amount of the December Payroll, as set
forth in Section 1(d), and pursuant to the terms and conditions set forth in the
Limited Guaranty by and between Doug P. Adams and OccuLogix of even date
herewith.
3.
Security; Effect of
OccuLogix Bankruptcy
. In order to induce OccuLogix to enter into the
Transaction, immediately following the Closing, the Company shall cause Solx to
grant to OccuLogix a subordinated security interest in certain existing and
future intellectual property of Solx associated with the Royalty Products as
provided in the Security Agreement of even date herewith (the “
Security Agreement
”),
as specifically described therein, and on the terms and conditions
thereof. In the event that OccuLogix or any successor in interest
(voluntarily or involuntarily) files for bankruptcy or similar legal and/or
administrative action in the United States or equivalent in Canada and the
Transaction is adjudicated to be a voidable preferential transaction, fraudulent
transfer, or otherwise voidable, and it is so voided, the Solx Stock, along with
all of the Assumed Liabilities of the Transaction, including, but not limited to
the PRH Payment, shall be returned to the bankruptcy estate or similar body, and
all Royalty Payments, obligations and liabilities to OccuLogix hereunder shall
immediately cease as of the date of such filing.
4.
Representations and
Warranties of the Company
.
In order
to induce OccuLogix to enter into this Agreement and to sell the Solx Stock, the
Company hereby represents and warrants that the statements contained in this
Section 4 are complete and accurate as of the Closing Date.
(a)
Organization
. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all required power and authority
to own its property, carry on its business as presently conducted and
contemplated to be conducted, to enter into and perform this Agreement and to
carry out the transactions contemplated by this Agreement.
(b)
Authorization
of this
Agreement
. This Agreement has been duly authorized, executed
and delivered by the Company and is the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution,
delivery and performance of this Agreement by the Company, the consummation of
the transactions contemplated hereby and the compliance with provisions of this
Agreement by the Company have been duly authorized by all corporate and
stockholder action and do not and will not result in any violation of or
conflict with, or constitute a default under, (i) the Certificate of
Incorporation or Bylaws of the Company, (ii) any contract, agreement, document
or instrument to which the Company is party or by which it or any of its
properties is bound or (iii) any law, rule, regulation, judgment or order to
which the Company or any of its properties is subject.
(c)
Authorization of the
Security Agreement
. Following the Closing, the Security
Agreement will have been duly authorized by Solx and, when executed and
delivered by Solx, will be the legal, valid and binding obligation of Solx,
enforceable in accordance with its terms. The execution, delivery and
performance of the Security Agreement by Solx, the consummation of the
transactions contemplated thereby and the compliance with the provisions of the
Security Agreement will be duly authorized by all corporate and stockholder
action and will not result in any violation of or conflict with, or constitute a
default under, (i) the Certificate of Incorporation or Bylaws of Solx, (ii) any
contract, agreement, document or instrument to which Solx is party or by which
it or any of its properties is bound or (iii) any law, rule, regulation,
judgment or order to which Solx or any of its properties is subject.
(d)
Governmental
Consents
. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in connection with
the execution and delivery of this Agreement or the transactions contemplated by
this Agreement.
(e)
Compliance
. The
Company has, in all material respects, complied with all laws, regulations and
orders applicable to its business and has obtained all material permits,
licenses and other authorizations required thereby.
(f)
Accredited Investor
Status
. Each of the Company and Doug P. Adams is an
“accredited investor” as such term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended.
(g)
Pre-December 1, 2007
Liabilities
.
Schedule B
to this
Agreement (the “
Non-Assumed Liabilities
Schedule
”) discloses all of the outstanding liabilities of Solx and
OccuLogix, as they relate to Solx’s business, that were incurred prior to
December 1, 2007, except for current liabilities incurred in the ordinary course
of business consistent with past practice. Other than as disclosed on
the Non-Assumed Liabilities Schedule, there are no liabilities of Solx or
OccuLogix of the type described in the immediately preceding sentence incurred
by, or under the direction or authorization of, an Excluded Individual (as
defined in Section 5).
5.
Representations and
Warranties of OccuLogix
.
In order
to induce the Company to enter into this Agreement and to buy the Solx Stock,
OccuLogix hereby represents and warrants that the statements contained in this
Section 5 are complete and accurate as of the Closing Date. For
purposes of this Section 5, “
Knowledge of
OccuLogix
” means the actual knowledge of any of Thomas P. Reeves, Bill
Dumencu, Nozhat Choudry, Suh Kim and Bunmi Dosunmu (being the President and
Chief Operating Officer, the Chief Financial Officer and Treasurer, the Vice
President, Clinical Research, the General Counsel and the Controller of
OccuLogix, respectively), after reasonable investigation and
inquiry. For purposes of this Section 5, a “
Non-Solx
Representative
” means (i) an employee of OccuLogix, other than Doug P.
Adams and the individuals named in Schedule 1(i) (each, an “
Excluded
Individual
”), acting under his or her own authority or direction or under
the authority or direction of one or more other employees of OccuLogix, none of
whom is an Excluded Individual, or (ii) an agent or representative of OccuLogix
acting under the authority or direction of one or more employees of OccuLogix,
none of whom is an Excluded Individual.
(a)
Organization, Good Standing
and Qualification
. Solx is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to carry on its business as
now conducted. OccuLogix has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to perform its obligations under, and to carry out the
provisions of, this Agreement.
(b)
Capitalization
. The
total number of shares of Solx Stock (all of which are held by OccuLogix) is one
thousand (1,000) shares of Common Stock, $.001 par value, and there are not
outstanding any options, warrants, instruments, rights (including conversion or
pre-emptive rights and rights of first refusal), proxy or stockholder
agreements, or other agreements or instruments of any kind, including
convertible debt instruments, for the purchase or acquisition of Solx
Stock.
(c)
Authorization; Binding
Obligations; Governmental Consents
. All corporate action on
the part of OccuLogix, its officers, directors and stockholders necessary for
the authorization, execution and delivery of this Agreement, and the performance
of all obligations of OccuLogix hereunder, have been taken prior to the Closing
Date. This Agreement is a valid and legally binding obligation of
OccuLogix, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. No consent, approval,
permit, order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental authority
on the part of OccuLogix is required in connection with the execution and
delivery of this Agreement or the consummation of the Transaction contemplated
hereby, except for (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws and the securities laws of any foreign country
in connection with the Transaction, and (ii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a change or effect that, when taken individually or
together with all other adverse changes or effects, is or is reasonably likely
to be materially adverse to the business, results of operations and financial
condition of Solx, taken as a whole (“
Material Adverse
Effect
”), and would not prevent, or materially alter or delay, any of the
transactions contemplated by this Agreement.
(d)
Assumed
Liabilities
.
Schedule C
to this
Agreement (the “
Assumed Liabilities
Schedule
”) discloses all of the outstanding liabilities of Solx and
OccuLogix, as they relate to Solx’s business, that were incurred on and after
December 1, 2007, and that either were incurred by OccuLogix or were brought to
OccuLogix’s attention by the Company. Since December 1, 2007,
OccuLogix has not incurred, on behalf of Solx, any contingent liabilities not
disclosed in the Assumed Liabilities Schedule, except current liabilities
incurred in the ordinary course of business consistent with past
practice.
(e)
Indebtedness
. Except
as disclosed in the Non-Assumed Liabilities Schedule and the Assumed Liabilities
Schedule, Solx has no indebtedness outstanding on the date hereof that was
incurred by, or under the direction or authorization of, a Non-Solx
Representative. Except as disclosed in Schedule 5(e), neither
OccuLogix on behalf of Solx nor, to the Knowledge of OccuLogix, Solx is in
default with respect to any outstanding indebtedness or any instrument relating
thereto, nor is there any event which, with the passage of time or giving of
notice, or both, would (i) result in a default under or termination of any such
instrument, (ii) cause the indebtedness under such instrument to become due and
payable prior to its stated maturity or (iii) give rise to any other remedies by
a counterparty to any such instrument. Complete and correct copies of
all instruments (including all amendments, supplements, waivers and consents)
relating to any indebtedness of Solx incurred by a Non-Solx Representative have
been furnished to the Company.
(f)
Litigation
. Except
as disclosed on Schedule 5(f) or as may be known by an Excluded Individual,
there is no action, suit, proceeding or investigation pending with respect to
Solx which was not pending prior to the Merger Date or, to the Knowledge of
OccuLogix, currently threatened against Solx or any of its officers, directors
or employees, nor, to the Knowledge of OccuLogix, is there any basis for any of
the foregoing. Other than as may be known by an Excluded Individual,
OccuLogix (with respect to Solx) and/or Solx is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit,
proceeding or investigation by OccuLogix (with respect to Solx) currently
pending or that OccuLogix intends to initiate, and there is no action, suit,
proceeding or investigation by a Non-Solx Representative, on behalf of Solx,
currently pending.
(g)
Changes
. Except
as reflected in the unaudited financial statements of Solx (including balance
sheet, income statement and statement of cash flows) as of November 30, 2007
(the “
Financial
Statements
”), since
the date of the Financial Statements, none of the following has been caused or
effected (directly or indirectly) by a Non-Solx Representative:
(i) Any
change in the assets, liabilities, financial condition or operations of Solx
from that reflected in the Financial Statements, other than changes in the
ordinary course of business consistent with past practice, none of which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect;
(ii) Any
material change, except in the ordinary course of business consistent with past
practice, in the contingent obligations of Solx by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(iii) Any
waiver by OccuLogix of a right or of a debt owed to or by Solx;
(iv) Any
indebtedness, obligation or liability incurred, assumed or guaranteed by Solx,
except those for immaterial amounts and for current liabilities incurred in the
ordinary course of business consistent with past practice and except also for
the Assumed Liabilities;
(v) Any
sale, assignment, transfer or license of any patents, trademarks, copyrights,
trade secrets or other intangible assets of Solx;
(vi) Any
change in any material agreement to which Solx is a party, or by which it is
bound, which has had, or could reasonably be expected to have, a Material
Adverse Effect; or
(vii) Any
other event or condition of any character that, either individually or
cumulatively, has had, or could reasonably be expected to have, a Material
Adverse Effect.
(h)
Disclosure
. OccuLogix
has provided the Company with all the information that the Company has requested
for deciding whether to execute and deliver this Agreement. Except as
set forth in this Agreement, to the Knowledge of OccuLogix, there is no material
fact with respect to Solx that OccuLogix has not disclosed to the Company , or
that is otherwise known to the Company, and of which any of its officers or
directors is aware that could reasonably be expected to result in a Material
Adverse Effect or which could reasonably be expected to be material to the
Company.
(i)
FDA and
Regulatory Matters
. From and after the Merger
Date:
(i) Other
than as may be known by an Excluded Individual, Solx is in compliance with all
requirements of the U.S. Food and Drug Administration (the “
FDA
”) and non-United
States equivalent agencies and similar state and local laws applicable to the
maintenance, compilation and filing of reports, including medical device
reports, with regard to any products currently under development by Solx
(collectively, the “
Products
”);
(ii) Other
than as may be known by an Excluded Individual, neither Solx nor OccuLogix has
received any written notice or other written communication from the FDA or any
other governmental authority (i) contesting the pre-market clearance or approval
of, the uses of or the labeling and promotion of any of the Products or (ii)
otherwise alleging any violation of any laws by Solx or OccuLogix;
(iii) Other
than as may be known by an Excluded Individual, each of Solx and OccuLogix, on
behalf of Solx, has conducted, and is continuing to conduct, all clinical trials
sponsored by Solx with reasonable care and in accordance with all applicable
laws and the stated protocols for such clinical trials; and
(iv) Subject
to the statement made in the immediately following sentence, all filings with
and submissions to the FDA and any corollary entity in any other jurisdiction
made by each of Solx and OccuLogix with regard to the Products, whether oral,
written or electronically delivered, were true, accurate and complete as of the
date made and, to the extent required to be updated, as so updated, remain true,
accurate and complete as of the date hereof and do not materially misstate any
of the statements or information included therein or omit to state a material
fact necessary to make the statements therein not misleading. The
statement made in the immediately preceding sentence, with respect to those of
Solx’s filings and submissions made by, or under the direction or authorization
of an Excluded Individual, is qualified entirely to the Knowledge of
OccuLogix.
(j)
Taxes
.
(i)
Filing of Tax Returns and
Payment of Taxes
. With respect to Solx, OccuLogix has timely
filed all tax returns required to be filed by it for all periods subsequent to
the Merger Date, each such tax return has been prepared in compliance with all
applicable laws and regulations, and all such tax returns are true, accurate and
complete in all material respects. All taxes that have become due and
payable by OccuLogix with respect to Solx have been timely paid, and Solx is not
and will not be liable for any additional taxes in respect of any taxable period
or any portion thereof, beginning on the Merger Date and ending on or before the
date of the Financial Statements and any taxes of Solx arising after such date
have been or will be incurred in the ordinary course of Solx’s
business. OccuLogix has delivered to the Company true, correct and
complete copies of all tax returns with respect to income taxes filed by, or
with respect to, Solx subsequent to the Merger Date and has delivered or made
available to the Company all relevant documents and information with respect
thereto.
(ii)
Liens
. There
are no liens for taxes (other than current taxes not yet due and payable), for
any period subsequent to the Merger Date, on any of the assets of
Solx.
(iii)
Pending
Proceedings
. There is no action, suit, proceeding or audit
with respect to any tax related to Solx, for any period subsequent to the Merger
Date, now in progress, pending or, to the Knowledge of OccuLogix, threatened
against or with respect to Solx.
(iv)
Withholding
Taxes
. OccuLogix has timely withheld and timely paid all taxes
which are required to have been withheld and paid by it in connection with Solx
and with amounts paid or owing to any employee, independent contractor, creditor
or other person.
(k)
Insurance
. OccuLogix
agrees to work in good faith with the Company and its insurers to separate the
policies related to Solx from the policies related to OccuLogix and its
affiliates and subsidiaries so that such Solx-related policies may be provided
to the Company as soon as reasonably possible, but in any event, no later than
January 15, 2008.
(l)
No
Default
. Other than as disclosed on Schedule 5(l), Solx is not
in default, nor, to the Knowledge of OccuLogix, is any third party in default,
under or with respect to any contract, agreement, lease or other instrument to
which it is a party with respect to Solx.
6.
Royalty
Payments; Calculation
. As provided in Section 1(d), the
Company shall make Royalty Payments, which will consist
of: (i) during the period commencing on the Closing Date and
ending on the date on which Solx achieves a positive EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization), adjusted for items considered
to be non-cash items under generally accepted accounting principles in the U.S.
(“
GAAP
”),
consistently applied, an amount equal to 3% of the worldwide Net Sales (as
defined below) of the Royalty Products; and (ii) following the date on which
Solx achieves a positive cash flow (determined in accordance with GAAP,
consistently applied), an amount equal to 5% of worldwide Net Sales of the
Royalty Products. The Company shall make the Royalty Payments on a
quarterly basis, on the forty-fifth (45th) day following the end of Solx’s
preceding fiscal quarter (and, in the event that the forty-fifth (45th) day
following the end of Solx’s preceding fiscal quarter is not a business day, the
next succeeding business day). “
Net Sales
” means the
aggregate dollar amounts recorded as having been received by the Company or Solx
from the sales of Royalty Products to unaffiliated third parties, either
directly or through one or more affiliates, in accordance with GAAP,
consistently applied, in connection with the preparation of the Company’s
financial statements,
less
2% of such
amounts to compensate the Company for possible returns and bad debt
deductions. “Net Sales” shall not include any amounts received by the
Company or Solx in connection with (i) sales taxes, tariff duties and/or use or
excise taxes, value added taxes, custom or import duties, imposed with reference
to sales or (ii) outbound transportation prepaid or allowed and transportation
insurance. All Royalty Payments will be paid in United States
Dollars, and the rate of exchange to be used in computing the amount of currency
equivalent to the United States Dollars due as a Royalty Payment, if necessary,
shall be the commercial exchange rate in effect in New York, New York on the
last business day of the calendar quarter for which payment is being
made. As used herein, the term “Royalty Products” shall be limited:
(i) with respect to the “Ti-Sapphire Laser”, to Solx’s titanium sapphire
flashlamp pumped laser intended for use in treatment of glaucoma, whether alone
or in combination with other devices or drugs, including, without limitation, in
the performance of laser trabeculoplasty and the titration of the Shunt (defined
below); and (ii) with respect to the “Shunt”, to Solx’s implantable device
intended for use in the reduction and/or management of intraocular
pressure. For greater certainty, the term “Royalty Products” includes
next-generation or future models or versions of the Ti-Sapphire Laser and the
Shunts that are in existence on the Closing Date. Without derogating
from the generality of the foregoing, the parties acknowledge and agree that a
titratable version of the Shunt is being contemplated to be developed and that
such version would be considered a “Royalty Product” when and if it ever comes
into existence.
7.
Strategic
Transaction
. In the event of any proposed transaction (an
“
Acquisition
Transaction
”), the consummation of which would be reasonably likely to
result in any person or entity, other than the Company, assuming control or
exerting influential decision-making authority over the manufacture and sale of
the Royalty Products (the “
Acquiror
”)
(including, but not limited to, (i) a sale or transfer of the Company or Solx,
(ii) a sale, transfer or license of the business, or all or substantially all of
the assets, of the Company or Solx or (iii) a sale, transfer or license of the
business, or all or substantially all of the assets, of the Company or Solx as
they relate only to Royalty Products), the Company shall not consummate such
Acquisition Transaction unless and until the Acquiror assumes all of the
Company’s outstanding obligations under this Agreement as though the Acquiror
were the Company hereunder, including, without limitation, the obligation to
make the Royalty Payments pursuant to Section 6. This Section 7 shall
apply regardless of the form and structure of the Acquisition Transaction in
question, whether it may consist of a single transaction or a related series of
transactions or whether it may be effected by merger, consolidation, sale or
other transaction or whether it may be for valuable consideration or
not.
8.
Indemnification;
Set-Off
. Each of the parties (the “
Indemnifying Party
”)
agrees to indemnify and hold harmless the other party (the “
Indemnified Party
”)
and each of the Indemnified Party’s officers, directors, employees, stockholders
and agents, from and against all liabilities, damages, claims, actions, suits,
proceedings, demands, judgments, losses, costs and expenses (including
reasonable attorneys’ fees) (“
Claims
”) arising from
or in connection with any breach of, or inaccuracy in, any representation or
warranty of the Indemnifying Party set forth in this Agreement or (ii) any
breach or non-fulfillment of any agreement on the part of the Indemnifying Party
contained herein. In a case where OccuLogix is the Indemnifying
Party, any amounts judicially determined to be due and payable to the Company
pursuant to this Section 8 may be set off and deducted by the Company, at the
sole discretion of the Company, from any Royalty Payments due to OccuLogix as
set forth herein. Each of the parties shall provide the other party
with timely written notice of all Claims and reasonable cooperation and further
assurances with regards to all Claims. The indemnification
obligations under this Section 8 shall survive the Closing Date for a period of
eighteen (18) months.
9.
Arbitration
. All
controversies and/or disputes arising under or in connection with, or relating
to any dispute under, or alleged breach of, this Agreement shall be decided by
arbitration in the City of Boston, Massachusetts in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by a single
arbitrator selected in accordance with the guidelines of the American
Arbitration Association. Such arbitrator shall be selected by the
parties or, failing agreement within one month of the demand for arbitration, by
the American Arbitration Association. The arbitrator shall be a
qualified U.S. lawyer, law professor or retired judge experienced in U.S.
corporate and commercial matters. The findings and decision of the
arbitrator shall be conclusive and binding on the parties hereto and may be
entered before and enforced by any court of competent
jurisdiction. Each party shall bear its own costs, expenses and fees,
including, without limitation, attorneys’ fees and expert fees with respect to
any such arbitration;
provided
, that the
final decision of the arbitrator shall assign such costs to one or more or the
parties in proportions as the arbitrator deems fair and reasonable in the
circumstances.
10.
General
Provisions
.
(a)
Further
Actions
. The parties hereto agree to execute such further
instruments and to take such further actions as may reasonably be necessary to
carry out the intent of this Agreement.
(b)
Notices
. All
notices in connection with this Agreement shall be in writing and shall be
personally delivered or sent by recognized overnight delivery service or
facsimile transmission:
|
to
the Company at:
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Solx
Acquisition, Inc.
c/o
Doug P. Adams
890
Winter Street, Suite 115
Waltham,
MA
Tel:
(800) 939-7659
Fax: (781)
547-4099
Email: doug@solx.com
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with
a copy to:
|
Jamey
A. Wachta
Rackemann,
Sawyer & Brewster
160
Federal Street
Boston,
MA 02110
Tel:
(617) 951-1141
Fax: (617)
542-7437
Email: jwachta@rackemann.com
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to
OccuLogix at:
|
Elias
Vamvakas
OccuLogix,
Inc.
2600
Skymark Avenue, Building 9, Suite 201
Mississauga,
Ontario
L4W
5B2
Tel: (905)
602-0887
Fax: (905)
602-7623
Email: elias.vamvakas@occulogix.com
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|
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with
a copy to:
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Andrew
J. Beck
Torys
LLP
237
Park Avenue
New
York, NY 10017-3142
Tel: (212)
880-6010
Fax: (212)
682-0200
Email: abeck@torys.com
|
All such
notices shall be deemed delivered (i) upon personal delivery, (ii) three (3)
business days after being deposited with a recognized overnight delivery
service, or (iii) upon receipt of confirmation of facsimile
transmission.
(c)
Expenses
. Each
party to the Agreement will pay its own expenses in connection with the
transactions contemplated by this Agreement, whether or not the transactions are
consummated.
(d)
Assignment; Binding
Effect
. This Agreement may not be assigned by either party
without the prior written consent of the other party. This Agreement
shall inure to the benefit of and shall be binding upon the parties and their
respective successors and permitted assigns.
(e)
Jurisdiction
. This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware, without regard to any conflicts of laws
principles that would require application of the laws of another
jurisdiction.
(f)
Entire
Agreement; Amendment
. This Agreement represents the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings with respect to the subject
matter hereof.
(g)
Survival of Representations
and Warranties
. The representations and warranties of the
parties contained herein shall survive the Closing and shall not be affected
thereby.
(h)
Exhibits
. Any
Exhibits or Schedules to this Agreement are incorporated herein by reference and
made a part hereof.
(i)
Captions
. The
section and paragraph headings used herein are for convenience only and shall
not affect the interpretation hereof.
(j)
Gender
. For
purposes of this Agreement, the singular shall include the plural, and the
masculine gender shall include the feminine and neuter, and vice versa, as the
context requires.
(k)
Counterparts
. This
Agreement may be executed in counterparts, including by facsimile copy and copy
communicated by e-mail, all of which together shall constitute one and the same
instrument.
11.
Further
Assurances
. The parties shall execute, acknowledge and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purpose of this Agreement and
the Transaction.
[
Signatures to
follow
]
IN
WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement
under seal as of the day and year first above written.
|
OCCULOGIX,
INC.
|
|
SOLX
ACQUISITION, INC.
|
|
|
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|
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|
|
By:
|
“Elias Vamvakas”
|
|
By:
|
“Doug P. Adams”
|
|
Name:
|
Elias
Vamvakas
|
|
Name:
|
Doug
P. Adams
|
|
Title:
|
Chief
Executive Officer
|
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Title:
|
President
|
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ACKNOWLEDGED
AND AGREED BY DOUG P. ADAMS SOLELY WITH RESPECT TO SECTIONS 1(g) and
2:
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Witness:
|
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“Doug P. Adams”
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Doug
P. Adams
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Print
Name of Witness
|
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14
Exhibit 10.39
Execution
Copy
AMENDING
AGREEMENT
THIS AMENDING AGREEMENT
is
made and entered into as of December 19,
2007 by and among (i)
OccuLogix, Inc. (the “Parent”), a Delaware corporation, (ii) Solx, Inc. (the
“Company”), a Delaware corporation, and (iii) Peter M. Adams, acting for and on
behalf of the Stockholder Representative Committee referred to in the Merger
Agreement (defined below).
WHEREAS,
the Parent, OccuLogix Mergeco, Inc., the Company and Doug P. Adams, John
Sullivan and Peter M. Adams, acting, in each case, in his capacity as a member
of the Stockholder Representative Committee, referred to therein, entered into
an Agreement and Plan of Merger dated as of August 1, 2006;
WHEREAS,
such Agreement and Plan of Merger dated as of August 1, 2006 was amended
subsequently;
WHEREAS,
such Agreement and Plan of Merger, dated as of August 1, 2006, as amended, is
referred to hereinafter as the “Merger Agreement”;
WHEREAS,
at the Effective Time (defined below), OccuLogix Mergeco, Inc. merged with and
into Solx, Inc., following which time the Company continued as the surviving
corporation;
WHEREAS,
the Parent proposes to sell to Solx Acquisition, Inc. (“Acquireco”), a Delaware
corporation owned or controlled by Doug P. Adams, all of the issued and
outstanding shares of the capital stock of the Company for, among other things,
the assumption by Acquireco of certain of the Parent’s liabilities incurred in
connection with, or otherwise relating, to the Company’s business, including the
Parent’s obligation, under Section 1.7(b) of the Merger Agreement and as
evidenced by the Secured Promissory Note (defined below), to pay $5,000,000 from
the Holdback Amount (defined below) to the Participating Rights Holders (defined
below) on September 1, 2008 (the “Outstanding Payment Obligation”);
WHEREAS,
Section 10.5 of the Merger Agreement provides, in part, that the Parent may
assign all of its rights and obligations thereunder to a person that acquires
all of the capital stock, or substantially all of the assets, of the Company or
any division or business unit of the Parent responsible for the business of the
Company (provided that, in the event of such an assignment, the amount of the
Holdback Amount theretofore unpaid, less the amount of the Indemnity Holdback
Amount (defined below) permitted to be withheld pursuant to Section 1.7(b), if
any, shall be paid immediately to the Participating Rights Holders and allocated
among them in accordance with Section 2.1, and provided, further, that such
person assumes the Merger Agreement, in writing, and agrees to be bound by and
to comply with all of the terms and conditions thereof);
WHEREAS,
the parties hereto acknowledge that, without such assumption of the Outstanding
Payment Obligation by Acquireco, it is unlikely that the Outstanding Payment
Obligation would be paid by the Parent to the Participating Rights
Holders;
WHEREAS,
the parties hereto do not wish the assignment of the Outstanding Payment
Obligation by the Parent to Acquireco, and the assumption thereof by Acquireco,
to cause any amount owing to the Participating Rights Holders under the Merger
Agreement to become due and payable immediately;
WHEREAS,
the Parent executed and delivered a Secured Promissory Note, dated September 1,
2006 and in the aggregate principal amount of $13,000,000, to the Stockholder
Representative Committee (the “Secured Promissory Note”) in order to evidence
the Parent’s obligation to pay the Holdback Amount pursuant to the Merger
Agreement, including, among other obligations, the Outstanding Payment
Obligation and the FDA Milestone Payment;
WHEREAS,
Peter M. Adams has been duly designated, pursuant to Section 2.5(a) of the
Merger Agreement, the single member representative of the Stockholder
Representative Committee upon whose instruction the Parent and the Company are
entitled to rely without investigation or inquiry (the “Single Member
Representative”);
WHEREAS,
pursuant to Section
2.5(b) of the Merger Agreement, the Stockholder Representative Committee has the
authority to execute and deliver this Amending Agreement for and on behalf of
the Participating Rights Holders;
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained and intending to be legally bound hereby, the
Parent, the Company and Peter M. Adams, acting in his capacity as the Single
Member Representative for and on behalf of the Stockholder Representative
Committee, hereby agree as follows:
1.
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Capitalized
terms used in this Amending Agreement but not otherwise defined herein
have the respective meanings attributed to such terms in the Merger
Agreement.
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2.
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Section
10.5 of the Merger Agreement is hereby amended by deleting the following
words from the second sentence
thereof:
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(provided
that, in the event of such an assignment, the amount of the Holdback Amount
theretofore unpaid, less the amount of the Indemnity Holdback Amount permitted
to be withheld pursuant to Section 1.7(b), if any, shall be paid immediately to
the Participating Rights Holders and allocated among them in accordance with
Section 2.1, and provided, further, that such person assumes this Agreement, in
writing, and agrees to be bound by and to comply with all of the terms and
conditions hereof).
3.
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The
parties hereto acknowledge and agree that the FDA Milestone will not be
met and that, accordingly, the FDA Milestone Payment will never become due
and payable.
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4.
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Peter
M. Adams, in his capacity as the Single Member Representative acting for
and on behalf of the Stockholder Representative Committee, hereby
acknowledges and confirms: (i) the agreement of the Stockholder
Representative Committee to the assignment by the Parent to Acquireco, and
the assumption by Acquireco, of all of the outstanding obligations and
liabilities of the Parent under the Secured Promissory Note, including,
without limitation, the Outstanding Payment Obligation; and (b) the full
and final release and discharge, by the Stockholder Representative
Committee, of the Parent and its affiliates and subsidiaries, and their
respective officers, directors, shareholders, agents, servants,
representatives, successors, heirs and assigns, from the Outstanding
Payment Obligation and from any and all claims, demands, obligations,
suits and causes of action, of any nature whatsoever, whether known or
unknown, which the Stockholder Representative Committee or any of the
Participating Rights Holders ever had, now has or might have in the future
in connection with, or as a result of or otherwise arising from, any or
all of the outstanding obligations and liabilities of the Parent under the
Secured Promissory Note, including, without limitation, the Outstanding
Payment Obligation.
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5.
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The
Merger Agreement remains in full force and effect, unamended, other than
as amended by this Amending
Agreement.
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6.
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This
Amending Agreement may be executed and delivered (including by facsimile
transmission and e-mail communication) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original but all of which
taken together shall constitute one and the same
agreement.
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7.
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This
Amending Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed and
performed in that state.
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[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the Parent, the Company and Peter M. Adams, acting in his
capacity as the Single Member Representative for and on behalf of the
Stockholder Representative Committee, have duly executed this Amending Agreement
as an instrument under seal as of the date first above written.
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By:
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“
Elias
Vamvakas
”
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Name:
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Elias Vamvakas
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Chief
Executive Officer
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Solx,
Inc.
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By:
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“
Douglas
P.
Adams
”
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Name:
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Douglas P. Adam
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Title:
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President
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Single
Member Representative, Acting for and on behalf of the Stockholder
Representative Committee
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“Peter M. Adams”
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Peter M. Adams
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-5-
Exhibit
10.40
Execution
Copy Version #3
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 19th day of December, 2007 by and between Doug P. Adams (the
“Employee”
), a resident of the
Commonwealth of Massachusetts, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of September 1, 2006 (the
“Employment
Agreement”
);
AND WHEREAS,
the Employee has
been serving the Employer as its President & Founder, Glaucoma Division
pursuant to the Employment Agreement;
AND WHEREAS,
the Employer is
intending to sell to Solx Acquisition, Inc., a Delaware corporation, owned by
the Employee, all of the issued and outstanding shares in the capital stock of
Solx, Inc. (
“Solx”
), the
wholly owned subsidiary of the Employer that has carried on the Employer’s
glaucoma business the (
“Transaction”
);
AND WHEREAS,
in anticipation
of the closing of the Transaction, the Employee’s employment with the Employer
shall be terminated pursuant to Section 8.1.3 of the Employment Agreement,
effective on the date hereof (the
“Termination
Date”
);
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee hereby resigns his employment with the Employer, and the Employee’s
employment with the Employer shall be terminated pursuant to Section 8.1.3 of
the Employment Agreement, effective on the Termination Date. The
Employer hereby waives the requirement, under Section 8.1.3 of the Employment
Agreement, to provide one month’s prior written notice to the Employer of the
Employee’s intention to terminate his employment with the Employer.
2.1 The
Employee hereby certifies that he has returned to the Employer all property of
the Employer (other than property of Solx, any of which property shall be
retained by the Employee) in the Employee’s possession, including, without
limitation, all keys, business cards, computer hardware, including, without
limitation, Blackberry units, printers, mice and other hardware accessories, and
computer software. The Employee hereby further certifies that he has
returned to the Employer, or destroyed, all tangible material embodying
Confidential Information (as such term is defined in the Employment Agreement,
as modified below) in any form whatsoever, including, without limitation, all
paper copy copies, summaries and excerpts of Confidential Information and all
electronic media or records containing or derived from Confidential
Information. For purposes of this Section 2.1, the term
“property of the Employer”
does not include any property of Solx, and the term
“Confidential Information”
does not include Confidential Information relating to the business or affairs of
Solx.
3.1 The
Employee hereby acknowledges and agrees that no amounts are due or payable to
him by the Employer pursuant to Sections 9 or 10 of the Employment
Agreement.
4.1 In
full and complete compromise and settlement of a disputed claim regarding
accrued but unpaid vacation during the current Year of Employment (as such term
is defined in the Employment Agreement), the Employee and the Employer hereby
agree that the Employer shall pay to the Employee two weeks’ of accrued but
unpaid vacation pay.
5.
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MUTUAL
RELEASE AND TERMINATION
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5.1 In
consideration of the Employer entering into the Transaction, the Employee, on
behalf of himself and his administrators, assigns and anyone claiming through
him, hereby releases completely and forever discharges the Employer and its
affiliates and subsidiaries, and their respective officers, directors,
shareholders, agents, servants, representatives, underwriters, successors, heirs
and assigns (collectively, the
“Employer Representatives”
),
from any and all claims, demands, obligations and causes of action, of any
nature whatsoever, whether known or unknown, which the Employee ever had, now
has or might have in the future as a result of the Employee’s employment with
the Employer or the termination thereof, including, without limitation, any
claim relating to the Employment Agreement or the termination thereof pursuant
to Section 5.2 of this Agreement or any claim relating to any violation of any
U.S. federal or state statute or regulation, any claim for wrongful discharge or
breach of contract or any claim relating to U.S. state or federal laws
(including, without limitation, Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act of 1968, the Employment Retirement Income
and Security Act, the Fair Labor Standards Act, the Americans with Disabilities
Act and the Rehabilitation Act). Notwithstanding the foregoing,
nothing herein shall be construed as depriving the Employee of any
indemnification rights to which he is entitled under the Amended and Restated
By-laws of the Employer on or prior to the Termination Date or of any protection
to which he may be entitled, on, prior to or after the Termination Date, under
the Employer’s directors’ and officers’ liability insurance policy from time to
time.
5.2 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, with the exception of Sections 12 (Non-competition), 13 (No
Solicitation of Customers), 14 (No Solicitation of
Employees). Notwithstanding the fact that Sections 12, 13 and 14 of
the Employment Agreement are expressly stated to survive the termination of the
Employment Agreement, they are hereby terminated and rendered null and
void. Although Section 15 (Confidentiality) of the Employment
Agreement shall survive the termination of the Employment Agreement, the term
“Confidential Information”
as used therein is hereby amended to exclude Confidential Information of
Solx. Although Section 16 (Remedies) of the Employment Agreement also
shall survive the termination of the Employment Agreement, it shall be read and
construed to apply only to a breach of threatened breach by the Employee of the
provisions of Section 15 of the Employment Agreement, as such Section 15 has
been amended pursuant to this Section 5.2. The Employee hereby agrees
to abide by the provisions of Sections 15 and 16 of the Employment Agreement, as
such Sections 15 and 16 have been amended pursuant to this Section
5.2.
5.3 The
Employer, on behalf of itself, the Employer Representatives and anyone claiming
through any of them, hereby releases completely and forever discharges the
Employee and his administrators, heirs and assigns from any and all claims,
demands, obligations and causes of action, of any nature whatsoever, whether
known or unknown, which the Employer ever had, now has or might have in the
future as a result of the Employee’s employment with the Employer or the
termination thereof, including, without limitation, any claim relating to the
Employment Agreement or the termination thereof pursuant to Section 5.2 of this
Agreement or any claim relating to any violation of any U.S. federal or state
statute or regulation.
6.
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THIRD
PARTY COMMUNICATIONS
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6.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that he and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 6.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
7.1 The
Employee hereby acknowledges that:
(a)
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He
has had sufficient time to review and consider this Agreement
thoroughly;
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(b)
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He
has read and understands the terms of this Agreement and his obligations
hereunder;
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(c)
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He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Agreement; and
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(d)
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He
is entering this Agreement voluntarily and without any pressure from the
Employer.
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8.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
8.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
8.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective trustees, administrators, successors and
assigns.
8.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
8.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
8.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Massachusetts, without regard to its conflicts of laws rules
which shall be deemed inapplicable to this Agreement.
8.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF
the parties
hereto have executed this Agreement.
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OCCULOGIX,
INC.
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By:
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“Elias
Vamvakas”
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Elias
Vamvakas
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Chairman
and Chief Executive Officer
|
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“Doug
P. Adams”
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Signature
of Witness
|
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Doug
P. Adams
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Name
of Witness (
please
print
)
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5
Exhibit
10.41
Execution
Copy
LIMITED
GUARANTY
This LIMITED GUARANTY (the “Guaranty”)
is made and entered into as of the 19
th
day of
December, 2007 by Doug P. Adams (“Guarantor”), for the benefit of OccuLogix,
Inc., a Delaware corporation (“Seller”).
RECITALS
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1.
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Guarantor
is the sole stockholder of Solx Acquisition, Inc., a Delaware corporation
(“Buyer”).
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2.
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Pursuant
to a Stock Purchase Agreement (the “Agreement”), dated as of the date
hereof, by and between Buyer and Seller, Buyer has agreed to purchase all
of the issued and outstanding capital stock of Solx, Inc., a wholly owned
Delaware corporation subsidiary of
Seller.
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3.
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Notwithstanding
the assumption by Buyer, pursuant to the Agreement, of liabilities
relating to the business of Solx, Inc. as of December 1, 2007, the
Agreement provides that Seller will cover the payroll of the employees of
Solx, Inc. during the period from December 1, 2007 to December 31, 2007,
inclusive, and that Buyer will reimburse Seller the December Payroll (as
such term is defined in the Agreement) on or before January 15, 2008 (the
“December Payroll Reimbursement Date”). In addition, pursuant
to the Agreement, Buyer is obligated to pay the Pre-paid Expenses (as such
term is defined in the Agreement) on or prior to February 15, 2008 (the
“Pre-paid Expenses Reimbursement Date”). Such obligations of
Buyer, as they may be amended, modified or extended from time to time, are
hereinafter referred to, collectively, as the
“Obligations”.
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NOW, THEREFORE, FOR AND IN
CONSIDERATION of the benefits derived by Guarantor under the Agreement by virtue
of his status as the sole stockholder of Buyer, Guarantor
absolutely,
unconditionally and irrevocably guarantees to Seller and its successors and
assigns, the prompt payment by Buyer of the Obligations on the December Payroll
Reimbursement Date and the Pre-paid Expenses Reimbursement Date, as
applicable.
1.
Consideration
. This
Guaranty is made for good and valuable consideration and in order to induce
Seller to enter into the Agreement. Guarantor acknowledges the
receipt and adequacy of the consideration received by Guarantor for this
Guaranty.
2.
Unconditional Nature of
Guaranty
.
(a) This
is a guaranty of payment and performance of the Obligations, and not only of
collection. The liability of Guarantor under this Guaranty shall be
primary, direct and immediate and not conditional or contingent upon the pursuit
of any remedies against Buyer or any other person or entity, nor against any
security or liens that may be available to Seller. Seller may proceed
to enforce or collect the Obligations directly against Guarantor without first
proceeding against Buyer, and Guarantor hereby waives any right to require that
an action be brought against Buyer or any other person or entity or to require
that resort be had to any security or liens.
(b) The
liability of Guarantor hereunder shall not be waived, limited, diminished,
discharged or otherwise reduced by: (i) any release, compromise or indulgence
granted by Seller with respect to the Obligations or any of them; (ii) the
release, discharge, addition or substitution of any other guarantor of the
Obligations or any of them; (iii) any modification, discharge or extension of
the Obligations, or any of them, or any amendment, modification, stay or cure of
Seller’s rights that may occur in any bankruptcy or reorganization case or
proceeding concerning Buyer or any other guarantor; (iv) the granting of
forbearance or extension of time to Buyer or any other guarantor; (v) any course
of dealing, delay, abstention, failure, neglect or omission by Seller concerning
the Obligations or any of them; (vi) any agreement or arrangement among Seller
and Buyer or any other guarantor; (vii) the bankruptcy, insolvency, termination
or dissolution of Buyer or any other guarantor; or (viii) any of the Obligations
being illegal, invalid or unenforceable or, for any reason, limited, modified,
voided, released or discharged or subject to any set-off, counterclaim or
defense by Buyer. If any full or partial payment of the Obligations
or any of them is voided, rescinded, limited or otherwise required to be
returned, reversed or disgorged by Seller as a result of any bankruptcy or
reorganization or otherwise, Guarantor’s liability hereunder shall be revived
and reinstated with respect to such payment.
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3.
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Payment of Expenses of
Collection
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Guarantor agrees to pay Seller, on
demand, all expenses, including reasonable attorneys’ fees, paid or incurred by
Seller in enforcing this Guaranty against Guarantor.
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4.
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Waiver of Defenses by
Guarantor
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Guarantor
agrees that his obligations hereunder shall not be affected or impaired by all
or any of the following and hereby waives all and any defense based thereon: (i)
all notices and rights to notice to which he might be entitled as a guarantor,
including notice of acceptance hereof, notice of default and notice of any
action taken by Seller in reliance hereon; (ii) presentment, demand and protest
of any instrument; (iii) all suretyship and equitable defenses; (iv) all rights
of counterclaims, defenses and set-offs against Seller; (v) all claims against
Buyer whether in the nature of subrogation or otherwise as a creditor resulting
from this Guaranty or any payments hereunder; (vi) any statute of limitations in
any action hereunder or for the collection of amounts owing in connection with
the Obligations, or any of them, or the performance thereof; (vii) the
incapacity or lack of authority of Buyer, Guarantor or any other person or
entity or the failure of Seller to file or enforce a claim against the estate
(either in bankruptcy or any other proceeding) of Buyer or Guarantor or any
other person or entity; (viii) any election of remedies by Seller which destroys
or otherwise impairs any subrogation rights of Guarantor or the right of
Guarantor to proceed against Buyer for reimbursement, or both; (ix) the
illegality, invalidity or unenforceability of the Obligations or any of them; or
(x) any other cause or facts similar or dissimilar to the foregoing, it being
the intention that the obligation of Guarantor to guaranty payment of the
Obligations is absolute, unconditional and irrevocable.
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5.
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Representations and
Warranties
.
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Guarantor
represents, warrants and covenants to Seller that, as of the date hereof and at
all times hereafter until the Obligations have been satisfied in
full:
(a) This
Guaranty has been duly executed and delivered by Guarantor and constitutes the
legal, valid and binding obligation of Guarantor, enforceable against Guarantor
in accordance with its respective terms, subject to laws of general application
affecting creditors’ rights.
(b) Guarantor
is not contemplating the filing of a petition or proceeding under any state or
federal bankruptcy or insolvency or reorganization laws or the liquidating of
all or a major portion of Guarantor’s property.
(c) The
entering into of the Agreement by Buyer and Seller constitutes a material
economic benefit to Guarantor.
6.
Termination
. This
Guaranty will terminate and be of no further force and effect without any action
of Seller upon payment in full of the Obligations.
7.
General
Provisions
(a)
Entire Agreement;
Amendment
. This Guaranty sets forth the entire agreement of
Guarantor with respect to the subject matter hereof and supersedes all other
agreements and understandings, whether oral or written, with respect to such
subject matter. The provisions of this Guaranty may be amended,
modified, or waived only by a writing signed by Guarantor and
Seller. No waiver of Seller’s right on any one occasion shall
constitute a continuing waiver or a waiver of any rights for any subsequent
occasion.
(b)
Severability
. If
any provision of this Guaranty shall be determined by a court of competent
jurisdiction to be invalid or unenforceable, such determination shall not affect
the remaining provisions of this Guaranty, all of which shall remain in full
force and effect.
(c)
Governing
Law
. This Guaranty shall be governed by, and be construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to any conflict of law principles that would require the application of the laws
of another jurisdiction.
(d)
Assignment; Binding
Effect
. This Guaranty may not be assigned by either Seller or
Guarantor. The provisions of this Guaranty shall be binding upon
Guarantor and its successors and assigns and shall inure to the benefit of
Seller and his successors and assigns.
(f)
Captions
.
Captions are used for convenience of reference only and are not to be construed
as part of the terms of this Guaranty.
Executed
under seal as of the day and year first above written.
Witness:
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“Doug P.
Adams”
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Doug
P. Adams
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4
Exhibit
10.42
SECURITY
AGREEMENT
SOLX,
INC.
This
SECURITY
AGREEMENT
dated as of December
19, 2007 is made by Solx, Inc. (“
Solx
”), a Delaware
corporation, in favor of OccuLogix, Inc. (“
OccuLogix
”), a
Delaware corporation.
WHEREAS:
A.
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On
the date hereof, Solx Acquisition, Inc. (“
Solx
Acquisition
”) acquired all of the issued and outstanding shares of
the capital stock of Solx pursuant to the Stock Purchase Agreement, of
even date herewith, between Solx Acquistion and OccuLogix (the “
Stock Purchase
Agreement
”);
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B.
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Solx
Acquisition owes certain enumerated obligations to OccuLogix under the
Stock Purchase Agreement, including the obligation to pay the Royalty
Payments (as such term is defined in the Stock Purchase Agreement);
and
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C.
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Pursuant
to the Stock Purchase Agreement, and as an inducement to OccuLogix to
enter into the same, Solx Acquisition agreed to cause Solx to execute and
deliver this Security Agreement.
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NOW THEREFORE THIS AGREEMENT
WITNESSES
that, in consideration of payment of the sum of $1.00 by
OccuLogix to Solx and of the premises and other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged by Solx), Solx
hereby covenants and agrees in favor of OccuLogix as follows:
1.
INTERPRETATION
1.1
Definitions
In this
Agreement, unless the context shall otherwise require, all capitalized terms
used but not expressly defined herein shall have the meanings ascribed thereto
in the Stock Purchase Agreement, as it may be amended, supplemented, replaced
and/or amended and restated from time to time, and the following words and terms
shall have the following meanings:
“
Event of Default
” has
the meaning given to it in Section 4.1;
“
Intellectual
Property
” means the IP Collateral, other than any proceeds or
payments;
“
License
” means any
license, sub-license, lease, right of use or control, agreement to license or
sub-license, or to lease or to grant a right of use or control, in respect of or
in connection with the acquisition, ownership, use, control or exploitation, of
the Intellectual Property, together with any amendments, supplements,
modifications, extensions, renewals or replacements thereof;
“
Lien
” means any
mortgage, pledge, deed of trust, pledge, hypothecation, assignment, security
interest, lien (whether statutory or otherwise), charge, claim or encumbrance,
or preference, priority or other security agreement or preferential arrangement
held or asserted in respect of any asset of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, or any lease having substantially the same economic effect as any of
the foregoing, or the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code (as adopted in the State of Delaware from time
to time) or a comparable law of any jurisdiction;
“
Merger Agreement
”
means the Agreement and Plan of Merger, dated as of August 1, 2006, by and among
OccuLogix, Inc., OccuLogix Mergeco, Inc., Solx, Inc. and Doug P. Adams, John
Sullivan and Peter M. Adams, acting, in each case, in his capacity as a member
of the Stockholder Representative Committee referred to therein, as
amended;
“
Obligations
”
has the meaning given to
it in Section 2.2(a);
“
PRH Security
Agreement
” has the meaning given to it in Section 2.5; and
“
Security Interest
”
has the meaning given to it in Section 2.2(a).
This
Security Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to any
conflicts of laws principles that would require application of the laws of
another jurisdiction.
1.3
|
Incorporation
of Schedules
|
The
schedules attached hereto are incorporated into, and form part of, this Security
Agreement.
1.4
Captions
The
section and paragraph headings used herein are for convenience only and shall
not affect the interpretation hereof.
2.1
|
Grant
of Security Interest
in
IP Collateral
|
As
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations, Solx hereby grants, transfers, collaterally assigns and sets over
to OccuLogix a fully perfected, priority security interest in, assignment of,
general lien on and right of set-off of, all of the collateral set forth on
Schedule “A” hereto, solely as the same is directly related to the Royalty
Products (collectively, the “
IP Collateral
”), in
each case, whether now existing or hereafter arising and whether now owned or
hereafter acquired.
|
(a)
|
The
security interests granted hereby (collectively, the “
Security
Interest
”) are granted as continuing collateral security for the
due payment and performance of Solx Acquisition’s obligations to pay the
Royalty Payments, at any time due or accruing due, to OccuLogix under the
Stock Purchase Agreement, or any of such obligations (collectively, and
together with the expenses, costs and charges set out in Section 2.2(b)
(collectively, the “
Obligations
”).
|
|
(b)
|
All
reasonable expenses, costs and charges incurred by or on behalf of
OccuLogix in connection with the enforcement of OccuLogix’s rights and
remedies hereunder, including the realization of the IP Collateral, and
including all reasonable legal fees and disbursements, court costs,
receiver’s or agent’s remuneration and other expenses of taking possession
of, repairing, protecting, insuring, preparing for disposition, realizing,
collecting, selling, licensing, transferring, delivering or obtaining
payment of the IP Collateral, will be added to and form a part of the
Obligations.
|
Solx and
OccuLogix hereby acknowledge that: (i) value has been given; (ii)
Solx has rights in the IP Collateral (other than hereafter acquired IP
Collateral); and (iii) Solx and OccuLogix have not agreed to postpone the time
of attachment of the Security Interest.
2.4
|
Scope
of Security Interest
|
|
(a)
|
Until
the Security Interest will have become enforceable, the grant of the
Security Interest in the Intellectual Property will not affect, in any
way, Solx’s rights to exploit commercially the Intellectual Property, to
defend the Intellectual Property, to enforce Solx’s rights in or with
respect to the Intellectual Property against third parties in any court or
to claim and be entitled to receive any damages with respect to any
infringement or violation thereof.
|
|
(b)
|
OccuLogix
will not be deemed in any manner to have assumed any obligation of Solx
under any License or otherwise relating to or arising in connection with
any of the IP Collateral, nor will OccuLogix be liable to any official
body or party to a license or any other third party by reason of any
default by any person under any
contract.
|
2.5
|
Subordination
of Security Interest
|
OccuLogix
hereby acknowledges and agrees that the first priority security interest granted
by Solx in the IP Collateral pursuant to the Security Agreement (the “
PRH Security
Agreement
”), dated as of September 1, 2006, by Solx in favor of Doug P.
Adams, John Sullivan and Peter M. Adams, acting, in each case, in his capacity
as a member of the Stockholder Representative Committee under the Merger
Agreement, is, and shall remain, superior in priority and rank to the Security
Interest. For avoidance of doubt, under the PRH Security Agreement,
Solx granted rights to the Secured Party (as defined therein) in all of the
intellectual property of Solx. OccuLogix agrees to do, from time to
time, whether before or after the Security Interest will have become
enforceable, all such acts and things and execute and deliver all such deeds,
transfers, assignments and instruments as Solx may reasonably require for
assuring the superior rank of the first priority security interest granted by
Solx pursuant to the PRH Security Agreement. Solx hereby agrees to
give OccuLogix prompt notice of any change or amendment to the collateral
described in, or covered by, the PRH Security Agreement. In the event
that any such change or amendment affects the description of all or any part of
the collateral described in, or covered by, the PRH Security Agreement that
coincides or overlaps with all or any part of the IP Collateral, if requested by
OccuLogix, Solx shall amend the definition of “IP Collateral” in this Agreement
to conform it to the collateral description or coverage provided in and by the
PRH Security Agreement, provided, however, that IP Collateral shall always
remain directly related to the Royalty Products.
OccuLogix
hereby furthermore acknowledges and agrees that the Security Interest will be
subordinate to any and all Liens that Solx proposes to grant in the IP
Collateral to persons or entities proposing to provide financing to Solx
Acquisition or Solx, upon terms and conditions to be mutually agreed among the
parties interested in such subordination. Solx hereby agrees to give
OccuLogix prompt notice of any such future Liens, and OccuLogix hereby agrees
that it will take all actions reasonably requested by Solx Acquisition or Solx
to evidence the subordination of the Security Interest to such
Liens.
3.1
|
Borrower’s
Dealing with IP Collateral
|
Solx will
not, without the prior written consent of OccuLogix, sell, exchange, license,
release or abandon or otherwise dispose of the IP Collateral or create, assume
or permit any Lien in, on or of the IP Collateral, except as provided in Section
2.5.
3.2
|
Maintenance
of Registrations
|
Solx will
keep all registrations and applications of the Intellectual Property in good
standing and will renew all registrations and file new applications, where
commercially reasonable. Solx will not allow any material registered
or pending patent or trademark forming part of the IP Collateral to lapse,
expire, become abandoned, expunged or cancelled.
Solx
agrees to provide to OccuLogix, within 60 days after the acquisition by Solx of
any rights in or to any registrable or unregistrable Intellectual Property,
including the entitlement to the benefit of any application or registration for
a patent or trademark, written notice of such acquisition containing a detailed
description of the Intellectual Property so acquired, and Solx agrees to execute
and deliver, from time to time, amendments to this Security Agreement or the
schedules hereto or additional security agreements or schedules as may be
reasonably required by OccuLogix. Solx will advise OccuLogix of the
occurrence of any event which adversely affects the status of the Intellectual
Property, including, without limitation, any changes to the status of the
Intellectual Property resulting from expungement, cancellation, expiration,
non-renewal, abandonment of, or opposition to, or claim, action or suit against,
any of the Intellectual Property.
3.4
|
Litigation
and Proceedings
|
Solx
will:
|
(a)
|
commence
and diligently prosecute such suits, administrative proceedings or other
actions for infringement or other causes of action as are, in its
reasonable business judgment, necessary to protect the IP Collateral;
and
|
|
(b)
|
diligently
defend all suits, administrative proceedings, oppositions or other actions
brought by third parties in respect of the IP Collateral or use
thereof.
|
Solx
hereby agrees to provide to OccuLogix, on reasonable request, any information
with respect to any such suits, administrative proceedings or other
action. Following Solx becoming aware thereof, Solx will promptly
notify OccuLogix of the institution of, or any adverse determination in, any
proceeding in any patent or trade-mark office or by another regulatory authority
or a court or other adjudicative body, whether in the United States or
elsewhere.
3.5
|
Protective
Disbursements
|
If Solx
fails to perform any covenant on its part contained in this Security Agreement,
then OccuLogix, in its absolute discretion, may perform (but has no obligation
to perform) any such covenant capable of being performed by it. If
any such covenant requires the payment or expenditure of money, OccuLogix may
make, but will be under no obligation to make, such payment or expenditure, and
all sums so paid or expended by OccuLogix will be immediately payable by Solx,
will bear interest at the per annum rate equal to the “Prime Rate” as announced
from time to time by Bank of America, N.A., or its successor, plus 2%, until
paid and will be secured hereby, having the benefit of the Security Interest
hereby created in priority to the other indebtedness secured by this Security
Agreement. No such performance or payment will relieve Solx from any
default under this Security Agreement or any consequences of such
default.
The
Security Interest will be and become enforceable against Solx (i) upon the
failure to pay, when due and payable, any of the Royalty Payments; or (ii) if
any petition should be filed by or against Solx or Solx Acquisition for
liquidation or reorganization, if Solx or Solx Acquisition becomes insolvent or
makes an assignment for the benefit of any creditor or creditors, if a receiver
or trustee is appoited for all or any signficant part of the assets of either
Solx or Solx Acquisition or if either of Solx or Solx Acquisition consents to
the winding up, liquidation or dissolution of its affairs (each, an “
Event of
Default
”).
Whenever
the Security Interest has become enforceable, OccuLogix may realize upon the IP
Collateral and enforce its rights by:
|
(a)
|
sale,
assignment, license, sub-license, grant of rights or options to purchase
or any other disposal of the IP Collateral and, if applicable, any
goodwill associated therewith;
|
|
(b)
|
collection
of any proceeds arising in respect of the IP
Collateral;
|
|
(c)
|
the
exercise of any of Solx’s contractual, legal or other rights or interests
under or in respect of the IP
Collateral;
|
|
(d)
|
the
institution of proceedings in a court of competent jurisdiction for the
appointment of a receiver of the IP
Collateral;
|
|
(e)
|
the
appointment by instrument in writing of a receiver or agent of the IP
Collateral and the removal or replacement of such receiver or agent from
time to time;
|
|
(f)
|
the
institution of proceedings in any court of competent jurisdiction for sale
or foreclosure of the IP
Collateral;
|
|
(g)
|
filing
proof of claim and other documents to establish claims and any proceeding
relating to Solx; and
|
|
(h)
|
any
other remedy or pr
o
ceeding authorized or
permitted by any applicable laws.
|
In
addition, upon the occurrence of an Event of Default, Solx will grant to
OccuLogix a royalty-free non-exclusive license to use the Intellectual
Property.
Such
remedies may be exercised from time to time separately or in combination and are
in addition to and not in substitution for any other rights of OccuLogix,
however created. OccuLogix may proceed by way of any action, suit or
other proceeding available at law, and no right, remedy or power OccuLogix will
be exclusive of, or dependent on, any other. OccuLogix may exercise
any of its rights, remedies or powers separately or in combination and at any
time. OccuLogix will not be bound to exercise any such rights or
remedies, and the exercise of such rights and remedies will be without prejudice
to the rights of OccuLogix in respect of the Obligations, including the right to
any claim for any deficiency.
In
addition to the remedies of OccuLogix set forth in Section 4.2, whenever the
Security Interest has become enforceable, OccuLogix may demand, commence,
continue or defend any judicial or administrative proceedings for the purpose of
protecting, seizing, collecting, realizing or obtaining possession or payment of
the IP Collateral, and give valid and effectual receipts and discharges
therefor, and compromise or give time for the payment or performance of all or
any part of the accounts or any contact or any other obligation of any third
party to Solx relating to the IP Collateral.
No
judgment recovered by OccuLogix will operate by way of merger of or in any way
affect the Security Interest, which is in addition to and not in substitution
for any other security now or hereafter held by OccuLogix in respect of the
Obligations.
No
amendment, consent or waiver by OccuLogix will be effective unless made in
writing and signed by an authorized officer of OccuLogix, and then such
amendment, waiver or consent will be effective only in the specific instance and
for the specific purpose for which it is given.
Solx,
from time to time, whether before or after the Security Interest will have
become enforceable, will do all such acts and things and execute and deliver all
such deeds, transfers, assignments and instruments as OccuLogix may reasonably
require for the protection of the IP Collateral or perfecting the Security
Interest and for exercising all rights, remedies, powers, authorities and
discretions hereby conferred upon OccuLogix, and Solx, from time to time after
the Security Interest has become enforceable, will do all such acts and things
and execute and deliver all such deeds, transfers, assignments and instruments
as OccuLogix may require for facilitating the sale or other dealing with the IP
Collateral in connection with any realization thereof, including, without
limitation, the execution and delivery of assignments of the Intellectual
Property in form acceptable to OccuLogix for filing with the United States
Patent and Trademark Office.
5.5
|
Successors
and Assigns
|
This
Security Agreement will be binding upon Solx, its successors and permitted
assigns and will enure to the benefit of OccuLogix and its successors and
assigns. Solx may not assign or novate any of its rights or
obligations under this Security Agreement without the prior written consent of
OccuLogix.
IN WITNESS WHEREOF
Solx hereto
has caused this Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the day and year first above
written.
SOLX,
INC.
|
|
|
|
|
|
“Doug P.
Adams”
|
|
Name:
Doug P. Adams
|
|
Title:
President
|
|
Schedule
“A”
IP
Collateral
“IP
Collateral” means, solely as the same is directly related to the Royalty
Products, intellectual property or proprietary rights of any description,
including (i) rights in any patent, patent application (including any
provisionals, continuations, divisions, continuations-in-part, extensions,
renewals, reissues, revivals and reexaminations, any national phase PCT
applications, any PCT international applications and all foreign counterparts),
copyright, industrial design, URL, website, domain name, trademark, service
mark, logo, trade dress or trade name, (ii) related registrations and
applications for registration, (iii) trade secrets, moral rights or publicity
rights, (iv) inventions, discoveries, improvements, modification, know-how,
technique, methodology, writing, work of authorship, design or data, whether or
not patented, patentable, copyrightable or reduced to practice, including any
inventions, discoveries, improvements, modification, know-how, technique,
methodology, writing, work of authorship, design or data embodied or disclosed
in any (1) computer source codes (human readable format) and object codes
(machine readable format), (2) specifications, (3) manufacturing, assembly,
test, installation, service and inspection instructions and procedures, (4)
engineering, programming, service and maintenance notes and logs, (5) technical,
operating and service and maintenance manuals and data, (6) hardware reference
manuals and (7) user documentation, help files or training materials and (v)
goodwill related to any of the foregoing.
Exhibit
10.43
BY
E-MAIL
Mr. Doug
Adams
Solx
Acquisition, Inc.
890
Winter Street, Suite 115
Waltham,
MA 02451
U.S.A.
Dear
Doug:
Re:
Section 1(d) of the Stock
Purchase Agreement
As we
agreed on the phone this morning, the business deal between OccuLogix, Inc.
(“OccuLogix”) and Solx Acquisition, Inc. (“Solx Acquisition”) is, and had always
been, that Solx Acquisition would reimburse the payroll liabilities of Solx,
Inc. (“Solx”) during the period between December 1, 2007 and December 31, 2007
(including the costs of providing benefits to the individuals on Solx’s payroll,
consistent with past practice). It was brought to my attention that
the defined term “December Payroll” in the second paragraph of Section 1(d) the
Stock Purchase Agreement, dated as of December 19, 2007, between OccuLogix and
Solx Acquisition, Inc. (the “Stock Purchase Agreement”) refers to the period
between the Closing Date and December 31, 2007.
In order
to avoid confusion in the future regarding this point, I would appreciate it if
you would confirm our mutual understanding that Solx Acquisition will reimburse
Solx’s payroll liabilities during the period between
December 1, 2007
(as
opposed to the Closing Date) and December 31, 2007 (including the costs of
providing benefits to the individuals on Solx’s payroll, consistent with past
practice) on or prior to January 15, 2008 and that the defined term “December
Payroll” in the Stock Purchase Agreement should be read
accordingly.
Please
indicate your acknowledgement by signing this letter, in the appropriate
signature block below, and returning a signed copy to me.
|
Sincerely,
|
|
|
|
|
|
“Bill
Dumencu”
|
|
|
|
Bill
Dumencu
|
|
Chief
Financial Officer & Treasurer
|
OccuLogix,
Inc.
International
Corporate Office:
2600 Skymark
Ave., Bldg. 9, Ste. 201, Mississauga, Ontario Canada L4W
5B2
T
905 602-0887
F
905 602-7623
U.S.
Corporate Office: 890 Winter Street, Suite 115, Waltham,
Massachusetts 02451
T
781 547-4050
F
781 547-4099
www.occulogix.com
ACKNOWLEDGED
AND AGREED TO
this
20th
day of
December, 2007
SOLX
ACQUISITION, INC.
By:
|
“Doug P. Adams”
|
|
|
Name:
|
Doug
P. Adams
|
|
|
Title:
|
President
|
|
OccuLogix,
Inc.
International
Corporate Office:
2600 Skymark
Ave., Bldg. 9, Ste. 201, Mississauga, Ontario Canada L4W
5B2
T
905 602-0887
F
905 602-7623
U.S.
Corporate Office: 890 Winter Street, Suite 115, Waltham,
Massachusetts 02451
T
781 547-4050
F
781 547-4099
www.occulogix.com
Exhibit
10.44
Execution
Copy Version #5
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 4th day of January, 2008 by and between John Cornish (the
“Employee”
), a resident of the
State of Florida, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of April 1, 2005,
pursuant to which the Employee has been serving the Employer as its Vice
President, Operations, which employment agreement was amended as of June 1, 2005
and then further amended as of April 13, 2006 (as so amended, the
“Employment
Agreement”
);
AND WHEREAS,
capitalized terms
used in this Agreement, but not otherwise defined, shall have the respective
meanings attributed to such terms in the Employment Agreement;
AND WHEREAS,
the Employment
Agreement entitles the Employee to receive from the Employer, in addition to
accrued but unpaid Salary, if any, a lump sum payment equal to 12 months’ of his
Salary and 2.5% of his Salary in respect of his entitlement to Benefits (the
“Employee’s Severance”
),
less any amounts owing by the Employee to the Employer for any reason, when the
Employee’s employment under the Employment Agreement has been terminated by the
Employer for any reason other than Just Cause (including the occurrence of
Disability) pursuant to Section 8.1.2 of the Employment Agreement;
AND WHEREAS,
the Employee and
the Employer mutually have agreed that the services of the Employee no longer
are required and, accordingly, have agreed to the termination of the Employee’s
employment with the Employer pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
each of the
Employee and the Employer agrees that it would not be in the bests interests of
either of them to obligate the Employer to pay all of the Employee’s Severance
upon the termination of the Employee’s employment with the Employer pursuant to
Section 8.1.2 of the Employment Agreement;
AND WHEREAS,
the Employment
Agreement is further amended by this Agreement;
AND WHEREAS,
the Employee has
been granted an aggregate of 135,000 time-based stock options (the
“Stock Options”
) pursuant to
the Employer’s 2002 Stock Option Plan, as amended (the
“Stock Option
Plan”
);
AND WHEREAS,
notwithstanding
the proposed termination of the Employee’s employment with the Employer and
subject to the Employer obtaining the requisite approval of its stockholders
therefor, the Compensation Committee of the Employer’s board of directors and
the Employer’s board of directors have approved the extension of the term of the
Stock Options to the tenth anniversaries of their respective dates of
grant;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee and the Employer hereby agree that the Employee’s employment with the
Employer is terminated pursuant to Section 8.1.2 of the Employment Agreement,
effective at the close of business on the date hereof (the
“Termination
Date”
).
2.1 Subject
to Section 2.2, the Employee hereby agrees that, by no later than the end of the
Salary Continuance Period (defined below), he will certify, in writing, that he
has returned to the Employer, and he will have returned to the Employer, all
property of the Employer in the Employee’s possession, including, without
limitation, all keys, business cards, computer hardware, including, without
limitation, Blackberry units, printers, mice and other hardware accessories, and
computer software. The Employee hereby further agrees that, by no
later than the end of the Salary Continuance Period (defined below), he will
certify, in writing, that he has returned to the Employer or destroyed, and he
will have returned to the Employer or destroyed, all tangible material embodying
Confidential Information in any form whatsoever, including, without limitation,
all paper copy copies, summaries and excerpts of Confidential Information and
all electronic media or records containing or derived from Confidential
Information.
2.2 Notwithstanding
Section 2.1, on or prior to the last day of the Salary Continuance Period
(defined below), the Employee may purchase from the Employer, at its then
present net book value, as determined by the Employer acting in good faith, the
Blackberry unit of the Employer that is in the Employee’s possession on the
Termination Date (the
“Blackberry
Unit”
).
3.1 The
Employee and the Employer hereby agree that, notwithstanding Section 9 of the
Employment Agreement, the Employee’s Severance shall not be paid to him in a
lump sum on the Termination Date. In lieu thereof, during the period
from the Termination Date to March 31, 2008 inclusive (the
“Salary Continuance Period”
),
the Employer shall pay the Employee, on a semi-monthly basis according to the
Employer’s regular payroll practices, amounts equal to the basic wages that the
Employee was earning from the Employer immediately prior to the Termination Date
(less applicable deductions and withholdings). The aggregate net
amount paid by the Employer to the Employee during (i) the period between
December 31, 2007 and the date immediately preceding the Termination Date
inclusive and (ii) the Salary Continuance Period, together with the aggregate
amount of deductions and withholdings withheld by the Employer, in accordance
with its regular payroll practices and pursuant to this Section 3.1, are
hereinafter referred to, collectively, as the
“Salary Continuance
Amount”
.
3.2 Subject
to Section 3.3, on the earliest to occur of (i) June 30, 2008, (ii) the date on
which the Employer closes a financing for total gross proceeds in an aggregate
amount of at least U.S.$10,000,000, whether by way of debt, equity or otherwise,
and whether such financing is effected in a single transaction or a series of
related or unrelated transactions, and (iii) a Change of Control (defined
below), the Employer shall pay the Employee, in a lump sum, an amount equal to
(A) the Employee’s Severance
minus
(B) the Salary
Continuance Amount, less applicable deductions and withholdings (the
“Severance
Balance”
). If the Employee advises the Employer that he wishes
to exercise his right to purchase the Blackberry Unit pursuant to Section 2.2,
the Employer may set off against, or deduct from, the Severance Balance the
purchase price of the Blackberry Unit.
“Change of Control”
shall be
deemed to have occurred when: (a) any Person, other than a Person or
a combination of Persons presently owning, directly or indirectly, more than 20%
of the issued and outstanding voting securities of the Employer, acquires or
becomes the beneficial owner of, or a combination of Persons acting jointly and
in concert acquires or becomes the beneficial owner of, directly or indirectly,
more than 50% of the voting securities of the Employer, whether through the
acquisition of previously issued and outstanding voting securities or of voting
securities that have not been previously issued, or any combination thereof, or
any other transaction having a similar effect; (b) the Employer merges with one
or more corporations, including, without limitation, any Subsidiary or Affiliate
of the Employer; (c) the Employer sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether pursuant to one or more
transactions; (d) any Person not part of existing management of the Employer or
any Person not controlled by existing management of the Employer enters into any
arrangement to provide management services to the Employer which results in
either (Y) the termination by the Employer, for any reason other than Just
Cause, of the employment of any two of the Chairman and Chief Executive Officer,
President and Chief Operating Officer, Chief Financial Officer and General
Counsel within three months of the date such arrangement is entered into or (Z)
the termination by the Employer, for any reason other than Just Cause, of the
employment of all such senior executive personnel within six months of the date
that such arrangement is entered into; or (e) the Employer enters into any
transaction or arrangement which would have the same, or similar, effect as the
transactions referred to in (a), (b), (c) or (d) of this sentence.
3.3 If,
prior to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should the
Employer become insolvent or make an assignment for the benefit of any creditor
or creditors, or should a receiver or trustee be appointed for all or any
significant part of the Employer’s assets, or should the Employer consent to the
winding-up, liquidation or dissolution of itself or its affairs (each, a
“Bankruptcy Event”
), then an
amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of the
Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall become due
and payable immediately to the Employee. If a Bankruptcy Event occurs
on or after March 31, 2008, then the Severance Balance shall become due and
payable immediately to the Employee.
3.4 The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, Bill Dumencu, David Eldridge, Julie Fotheringham,
Stephen Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should become
entitled to receive severance pursuant to his or her executive employment
agreement at any time before the Employer has paid, in full, the amount due and
payable to him pursuant to Section 3.2 or 3.3, as the case may be, the Employer
shall not pay any OLT Member a percentage of his or her severance entitlement
(without regard to applicable deductions and withholdings) that exceeds the
percentage that (i) the Salary Continuance Amount
plus
the aggregate
amount paid to the Employee pursuant to Sections 3.2 and 3.3, together with the
aggregate amount of deductions and withholdings withheld by the Employer,
represents of (ii) the amount of the Employee’s Severance.
3.5 For
greater certainty, all amounts due and payable by the Employer to the Employee
pursuant to this Article 3 shall be paid, net of applicable deductions and
withholdings.
4.
|
TRANSITION
MATTERS AND E-MAIL ACCOUNT
|
4.1 The
Employee hereby agrees to make himself available to the Employer during the
Salary Continuance Period, whenever reasonably requested by the Employer, in
order to assist the Employer with respect to transition matters falling within
the scope of the Employee’s duties and responsibilities prior to the Termination
Date.
4.2 The
Employee shall be entitled to continued access to his Occulogix.com e-mail
account during the Salary Continuance Period. However, such access
may be denied by the Employer at any time for reason of Just Cause or if the
Employer determines, in good faith and acting reasonably, that such access could
give rise to or result in, or lead to, any harm or legal liability to or for the
Employer.
5.1 Notwithstanding
the termination hereunder of the Employee’s employment with the Employer but
subject to the Employer obtaining the requisite approval of its stockholders
therefor in accordance with the provisions of the Stock Option Plan and all
applicable laws, regulations and rules (including, without limitation, the rules
of the Toronto Stock Exchange) (the
“Requisite Stockholder
Approval”
), the term of the Stock Options shall be extended to, and the
Stock Options shall remain exercisable until, the tenth anniversaries of their
respective dates of grant, being (i) August 12, 2012 for 25,000 of the Stock
Options, (ii) July 1, 2013 for 80,000 of the Stock Options and (iii) July 3,
2017 for 30,000 of the Stock Options. Such term extension shall
become effective on the date on which the Requisite Stockholder Approval is
obtained, if ever, and all of the agreements pursuant to which the Stock Options
were granted shall be deemed to be amended accordingly on the date on which the
Requisite Stockholder Approval is obtained, if ever.
5.2 The
Employer shall use commercially reasonable efforts to obtain the Requisite
Stockholder Approval, which covenant shall terminate and become null and void,
and be of no more force or effect, upon the earlier to occur of (i) the date on
which a meeting of the Employer’s stockholders may be convened to obtain the
Requisite Stockholder Approval and (ii) June 30, 2008.
6.
|
RELEASE
AND TERMINATION
|
6.1 The
Employee hereby agrees, on behalf of himself and his administrators, heirs,
assigns and anyone claiming through him, to release completely and forever
discharge the Employer and its affiliates and subsidiaries, and their respective
officers, directors, shareholders, agents, servants, representatives,
underwriters, successors, heirs and assigns, from any and all claims, demands,
obligations and causes of action, of any nature whatsoever, whether known or
unknown, which the Employee ever had, now has or might have in the future as a
result of the Employee’s employment with the Employer or the termination thereof
hereunder, including, without limitation, any claim relating to the Employment
Agreement or the termination thereof hereunder or any claim relating to any
violation of any U.S. federal or state statute or regulation, any claim for
wrongful discharge or breach of contract or any claim relating to U.S. state or
federal laws (including, without limitation, Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1968, the Employment
Retirement Income and Security Act, the Fair Labor Standards Act, the Americans
with Disabilities Act and the Rehabilitation Act),
provided
, however,
that such release and discharge shall be effective only upon the payment in full
by the Employer of the Severance Balance pursuant to Article 3. For
greater certainty, the release and discharge by the Employee pursuant to this
Section 6.1 shall have no force or effect whatsoever until such time, if ever,
that the Severance Balance is paid in full by the Employer to the
Employee. Notwithstanding the foregoing, nothing herein shall be
construed as depriving the Employee of any indemnification rights to which he is
entitled under the Amended and Restated By-laws of the Employer on or prior to
the Termination Date or of any protection to which he may be entitled, on, prior
to or after the Termination Date, under the Employer’s directors’ and officers’
liability insurance policy from time to time.
6.2 Section
12 of the Employment Agreement (Non-Competition) is hereby amended by replacing
the words “the business carried on during the Employment Period or at the end
thereof, as the case may be, by the Corporation or any of its Subsidiaries.”
with the words “(i) the Corporation’s RHEO business and/or (ii) the business of
OcuSense, Inc., as each of them was carried on during the Employment
Period.”.
6.3 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, including, without limitation, Section 12
(Non-Competition), as amended by Section 6.2 of this Agreement, and Sections 13
(No Solicitation of Patients), 14 (No Solicitation of Employees) 15
(Confidentiality) and 16 (Remedies). The Employee hereby agrees to
abide by such provisions, including, for greater certainty, Section 12 of the
Employment Agreement (Non-Competition), as amended by Section 6.2 of this
Agreement.
7.1 The
mitigation by the Employee of any damages or losses arising from the termination
hereunder of his employment with the Employer and the termination of the
Employment Agreement hereunder (including, without limitation, by obtaining
other employment) shall not, in any way, derogate from, or otherwise affect, the
Employee’s rights or the Employer’s obligations under this
Agreement. For greater certainty, and without derogating from the
generality of the foregoing statement, no amount to be paid by the Employer
under this Agreement shall be reduced by any compensation earned by the Employee
as a result of employment by another employer or otherwise after the Termination
Date.
8.
|
THIRD
PARTY COMMUNICATIONS
|
8.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that he and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 8.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
9.1
|
The
Employee hereby acknowledges that:
|
(a)
|
He
has had sufficient time to review and consider this Agreement
thoroughly;
|
(b)
|
He
has read and understands the terms of this Agreement and his obligations
hereunder;
|
(c)
|
He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Agreement; and
|
(d)
|
He
is entering this Agreement voluntarily and without any pressure from the
Employer.
|
10.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
10.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
10.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, trustees, administrators, successors and
assigns.
10.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
10.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
10.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Florida, without regard to its conflicts of laws rules which shall
be deemed inapplicable to this Agreement.
10.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Agreement.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“John
Cornish”
|
Signature
of Witness
|
|
John
Cornish
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
8
Exhibit
10.45
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 4th day of January, 2008 by and between Julie A. Fotheringham (the
“Employee”
), a resident of the
Province of Ontario, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of September 2004 (the
“Employment Agreement”
)
pursuant to which the Employee has been serving the Employer as its Vice
President, Marketing;
AND WHEREAS,
capitalized terms
used in this Agreement, but not otherwise defined, shall have the respective
meanings attributed to such terms in the Employment Agreement;
AND WHEREAS,
the Employee and
the Employer mutually have agreed that the services of the Employee no longer
are required and, accordingly, have agreed to the termination of the Employee’s
employment with the Employer pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
when the
Employee’s employment under the Employment Agreement has been terminated by the
Employer for any reason other than Just Cause pursuant to Section 8.1.2 of the
Employment Agreement, the Employee is entitled to receive from the Employer, in
addition to accrued but unpaid Salary, if any, a lump sum payment equal to 12
months’ of her Basic Salary and 2.5% of her Basic Salary in respect of her
entitlement to Benefits (the
“Employee’s Severance”
), less
any amounts payable to the Employee in lieu of notice where a Stop Work Notice
has been given pursuant to Section 8 of the Employment Agreement and any amounts
owing by the Employee to the Employer for any reason;
AND WHEREAS,
the Employee has
not been given a Stop Work Notice pursuant to Section 8 of the Employment
Agreement;
AND WHEREAS,
each of the
Employee and the Employer agrees that it would not be in the bests interests of
either of them to obligate the Employer to pay all of the Employee’s Severance
upon the termination of the Employee’s employment with the Employer pursuant to
Section 8.1.2 of the Employment Agreement;
AND WHEREAS,
the Employment
Agreement is further amended by this Agreement;
AND WHEREAS,
the Employee has
been granted an aggregate of 110,000 time-based stock options (the
“Stock Options”
) pursuant to
the Employer’s 2002 Stock Option Plan, as amended (the
“Stock Option
Plan”
);
AND WHEREAS,
notwithstanding
the proposed termination of the Employee’s employment with the Employer and
subject to the Employer obtaining the requisite approval of its stockholders
therefor, the Compensation Committee of the Employer’s board of directors and
the Employer’s board of directors have approved the extension of the term of the
Stock Options to the tenth anniversaries of their respective dates of
grant;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee and the Employer hereby agree that the Employee’s employment with the
Employer is terminated pursuant to Section 8.1.2 of the Employment Agreement,
effective at the close of business on the date hereof (the
“Termination
Date”
). For greater certainty, the Employee hereby waives the
requirement, under Section 8.1.2 of the Employment Agreement, to provide 12
months’ prior written notice to the Employee of the Employer’s intention to
terminate her employment with the Employer.
2.1 Subject
to Section 2.2, the Employee hereby agrees that, by no later than the end of the
Salary Continuance Period (defined below), she will certify, in writing, that
she has returned to the Employer, and she will have returned to the Employer,
all property of the Employer in the Employee’s possession, including, without
limitation, all keys, business cards, computer hardware, including, without
limitation, Blackberry units, printers, mice and other hardware accessories, and
computer software. The Employee hereby further agrees that, by no
later than the end of the Salary Continuance Period (defined below), she will
certify, in writing, that she has returned to the Employer or destroyed, and she
will have returned to the Employer or destroyed, all tangible material embodying
Confidential Information in any form whatsoever, including, without limitation,
all paper copy copies, summaries and excerpts of Confidential Information and
all electronic media or records containing or derived from Confidential
Information.
2.2 Notwithstanding
Section 2.1, on or prior to the last day of the Salary Continuance Period
(defined below), the Employee may purchase from the Employer at their then
present net book value, as determined by the Employer acting in good faith, the
Employer’s laptop computer and Blackberry unit that are in the Employee’s
possession on the Termination Date (collectively, the
“Computer
Equipment”
).
3.1 The
Employee and the Employer hereby agree that, notwithstanding Section 9 of the
Employment Agreement, the Employee’s Severance shall not be paid to her in a
lump sum on the Termination Date. In lieu thereof, during the period
from the Termination Date to March 31, 2008 inclusive (the
“Salary Continuance Period”
),
the Employer shall pay the Employee, on a semi-monthly basis according to the
Employer’s regular payroll practices, amounts equal to the basic wages that the
Employee was earning from the Employer immediately prior to the Termination Date
(less applicable deductions and withholdings). The aggregate net
amount paid by the Employer to the Employee during (i) the period between
December 31, 2007 and the date immediately preceding the Termination Date
inclusive and (ii) the Salary Continuance Period, together with the aggregate
amount of deductions and withholdings withheld by the Employer, in accordance
with its regular payroll practices and pursuant to this Section 3.1, are
hereinafter referred to, collectively, as the
“Salary Continuance
Amount”
.
3.2 Subject
to Section 3.3, on the earliest to occur of (i) June 30, 2008, (ii) the date on
which the Employer closes a financing for total gross proceeds in an aggregate
amount of at least U.S.$10,000,000, whether by way of debt, equity or otherwise,
and whether such financing is effected in a single transaction or a series of
related or unrelated transactions, and (iii) a Change of Control (defined
below), the Employer shall pay the Employee, in a lump sum, an amount equal to
(A) the Employee’s Severance
minus
(B) the Salary
Continuance Amount, less applicable deductions and withholdings (the
“Severance
Balance”
). If the Employee advises the Employer that she
wishes to exercise her right to purchase the Computer Equipment pursuant to
Section 2.2, the Employer may set off against, or deduct from, the Severance
Balance the purchase price of the Computer Equipment.
“Change of Control”
shall be
deemed to have occurred when: (a) any Person, other than a Person or
a combination of Persons presently owning, directly or indirectly, more than 20%
of the issued and outstanding voting securities of the Employer, acquires or
becomes the beneficial owner of, or a combination of Persons acting jointly and
in concert acquires or becomes the beneficial owner of, directly or indirectly,
more than 50% of the voting securities of the Employer, whether through the
acquisition of previously issued and outstanding voting securities or of voting
securities that have not been previously issued, or any combination thereof, or
any other transaction having a similar effect; (b) the Employer merges with one
or more corporations, including, without limitation, any Subsidiary or Affiliate
of the Employer; (c) the Employer sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether pursuant to one or more
transactions; (d) any Person not part of existing management of the Employer or
any Person not controlled by existing management of the Employer enters into any
arrangement to provide management services to the Employer which results in
either (Y) the termination by the Employer, for any reason other than Just
Cause, of the employment of any two of the Chairman and Chief Executive Officer,
President and Chief Operating Officer, Chief Financial Officer and General
Counsel within three months of the date such arrangement is entered into or (Z)
the termination by the Employer, for any reason other than Just Cause, of the
employment of all such senior executive personnel within six months of the date
that such arrangement is entered into; or (e) the Employer enters into any
transaction or arrangement which would have the same, or similar, effect as the
transactions referred to in (a), (b), (c) or (d) of this sentence.
3.3 If,
prior to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should the
Employer become insolvent or make an assignment for the benefit of any creditor
or creditors, or should a receiver or trustee be appointed for all or any
significant part of the Employer’s assets, or should the Employer consent to the
winding-up, liquidation or dissolution of itself or its affairs (each, a
“Bankruptcy Event”
), then an
amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of the
Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall become due
and payable immediately to the Employee. If a Bankruptcy Event occurs
on or after March 31, 2008, then the Severance Balance shall become due and
payable immediately to the Employee.
3.4 The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, David Eldridge, Stephen
Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should become
entitled to receive severance pursuant to his or her executive employment
agreement at any time before the Employer has paid, in full, the amount due and
payable to her pursuant to Section 3.2 or 3.3, as the case may be, the Employer
shall not pay any OLT Member a percentage of his or her severance entitlement
(without regard to applicable deductions and withholdings) that exceeds the
percentage that (i) the Salary Continuance Amount
plus
the aggregate
amount paid to the Employee pursuant to Sections 3.2 and 3.3, together with the
aggregate amount of deductions and withholdings withheld by the Employer,
represents of (ii) the amount of the Employee’s Severance.
3.5 For
greater certainty, all amounts due and payable by the Employer to the Employee
pursuant to this Article 3 shall be paid, net of applicable deductions and
withholdings.
4.
|
TRANSITION
MATTERS AND E-MAIL ACCOUNT
|
4.1 The
Employee hereby agrees to make herself available to the Employer during the
Salary Continuance Period, whenever reasonably requested by the Employer, in
order to assist the Employer with respect to transition matters falling within
the scope of the Employee’s duties and responsibilities prior to the Termination
Date.
4.2 The
Employee shall be entitled to continued access to her Occulogix.com e-mail
account during the Salary Continuance Period. However, such access
may be denied by the Employer at any time for reason of Just Cause or if the
Employer determines, in good faith and acting reasonably, that such access could
give rise to or result in, or lead to, any harm or legal liability to or for the
Employer.
5.1 Notwithstanding
the termination hereunder of the Employee’s employment with the Employer but
subject to the Employer obtaining the requisite approval of its stockholders
therefor in accordance with the provisions of the Stock Option Plan and all
applicable laws, regulations and rules (including, without limitation, the rules
of the Toronto Stock Exchange) (the
“Requisite Stockholder
Approval”
), the term of the Stock Options shall be extended to, and the
Stock Options shall remain exercisable until, the tenth anniversaries of their
respective dates of grant, being (i) December 16, 2014 for 80,000 of the Stock
Options and (ii) July 3, 2017 for 30,000 of the Stock Options. Such
term extension shall become effective on the date on which the Requisite
Stockholder Approval is obtained, if ever, and all of the agreements pursuant to
which the Stock Options were granted shall be deemed to be amended accordingly
on the date on which the Requisite Stockholder Approval is obtained, if
ever.
5.2 The
Employer shall use commercially reasonable efforts to obtain the Requisite
Stockholder Approval, which covenant shall terminate and become null and void,
and be of no more force or effect, upon the earlier to occur of (i) the date on
which a meeting of the Employer’s stockholders may be convened to obtain the
Requisite Stockholder Approval and (ii) June 30, 2008.
6.
|
RELEASE
AND TERMINATION
|
6.1 The
Employee hereby agrees, on behalf of herself and her administrators, heirs,
assigns and anyone claiming through her, to release completely and forever
discharge the Employer and its affiliates and subsidiaries, and their respective
officers, directors, shareholders, agents, servants, representatives,
underwriters, successors, heirs and assigns, from any and all claims, demands,
obligations and causes of action, of any nature whatsoever, whether known or
unknown, which the Employee ever had, now has or might have in the future as a
result of the Employee’s employment with the Employer or the termination thereof
hereunder, including, without limitation, any claim relating to the Employment
Agreement or the termination thereof hereunder or any claim relating to any
violation of any Canadian federal or provincial statute or regulation, any claim
for wrongful discharge or breach of contract or any claim relating to Canadian
federal or provincial laws (including, without limitation, the
Employment Standards Act
(Ontario) and the Ontario
Human Rights Code
),
provided
, however,
that such release and discharge shall be effective only upon the payment in full
by the Employer of the Severance Balance pursuant to Article 3. For
greater certainty, the release and discharge by the Employee pursuant to this
Section 6.1 shall have no force or effect whatsoever until such time, if ever,
that the Severance Balance is paid in full by the Employer to the
Employee. Notwithstanding the foregoing, nothing herein shall be
construed as depriving the Employee of any indemnification rights to which she
is entitled under the Amended and Restated By-laws of the Employer on or prior
to the Termination Date or of any protection to which she may be entitled, on,
prior to or after the Termination Date, under the Employer’s directors’ and
officers’ liability insurance policy from time to time.
6.2 Section
12 of the Employment Agreement (Non-Competition) is hereby amended by replacing,
in the first paragraph thereof, the words “the business carried on during the
Employment Period or at the end thereof, as the case may be, by the Corporation
or any of its Subsidiaries.” with the words “(i) the Corporation’s RHEO business
and/or (ii) the business of OcuSense, Inc., as each of them was carried on
during the Employment Period.”.
6.3 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, including, without limitation, Section 12
(Non-Competition), as amended by Section 6.2 of this Agreement, and Sections 13
(No Solicitation of Patients), 14 (No Solicitation of Employees) 15
(Confidentiality) and 16 (Remedies). The Employee hereby agrees to
abide by such provisions, including, for greater certainty, Section 12 of the
Employment Agreement (Non-Competition), as amended by Section 6.2 of this
Agreement.
7.1 The
mitigation by the Employee of any damages or losses arising from the termination
hereunder of her employment with the Employer and the termination of the
Employment Agreement hereunder (including, without limitation, by obtaining
other employment) shall not, in any way, derogate from, or otherwise affect, the
Employee’s rights or the Employer’s obligations under this
Agreement. For greater certainty, and without derogating from the
generality of the foregoing statement, no amount to be paid by the Employer
under this Agreement shall be reduced by any compensation earned by the Employee
as a result of employment by another employer or otherwise after the Termination
Date.
8.
|
THIRD
PARTY COMMUNICATIONS
|
8.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that she and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 8.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
9.1
|
The
Employee hereby acknowledges that:
|
(a)
|
She
has had sufficient time to review and consider this Agreement
thoroughly;
|
(b)
|
She
has read and understands the terms of this Agreement and her obligations
hereunder;
|
(c)
|
She
has been given an opportunity to obtain independent legal advice, or such
other advice as she may desire, concerning the interpretation and effect
of this Agreement; and
|
(d)
|
She
is entering this Agreement voluntarily and without any pressure from the
Employer.
|
10.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
10.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
10.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, trustees, administrators, successors and
assigns.
10.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
10.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
10.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the Province of Ontario and the federal laws of Canada applicable
therein.
10.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Agreement.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“Julie
A. Fotheringham”
|
Signature
of Witness
|
|
Julie
A. Fotheringham
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
8
Exhibit
10.46
Execution
Copy Version #3
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 4th day of January, 2008 by and between Stephen Parks (the
“Employee”
), a resident of the
State of Mississippi, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of October 4, 2005 (the
“Employment Agreement”
)
pursuant to which the Employee has been serving the Employer as its Vice
President, Sales;
AND WHEREAS,
capitalized terms
used in this Agreement, but not otherwise defined, shall have the respective
meanings attributed to such terms in the Employment Agreement;
AND WHEREAS,
the Employment
Agreement entitles the Employee to receive from the Employer, in addition to
accrued but unpaid Salary, if any, a lump sum payment equal to 12 months’ of his
Basic Salary and 2.5% of his Basic Salary in respect of his entitlement to
Benefits (the
“Employee’s
Severance”
), less any amounts owing by the Employee to the Employer for
any reason, when the Employee’s employment under the Employment Agreement has
been terminated by the Employer for any reason other than Just Cause (including
the occurrence of Disability) pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
the Employee and
the Employer mutually have agreed that the services of the Employee no longer
are required and, accordingly, have agreed to the termination of the Employee’s
employment with the Employer pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
each of the
Employee and the Employer agrees that it would not be in the bests interests of
either of them to obligate the Employer to pay all of the Employee’s Severance
upon the termination of the Employee’s employment with the Employer pursuant to
Section 8.1.2 of the Employment Agreement;
AND WHEREAS,
the Employment
Agreement is further amended by this Agreement;
AND WHEREAS,
the Employee has
been granted an aggregate of 230,000 time-based stock options (the
“Stock Options”
), 200,000 of
which were granted pursuant to the Option Agreement, dated as of October 4,
2005, between the Employer and the Employee (the
“Option Agreement”
) and 30,000
of which were granted pursuant to the Employer’s 2002 Stock Option Plan, as
amended (the
“Stock Option
Plan”
);
AND WHEREAS,
notwithstanding
the proposed termination of the Employee’s employment with the Employer and
subject to the Employer obtaining the requisite approval of its stockholders
therefor, the Compensation Committee of the Employer’s board of directors and
the Employer’s board of directors have approved the extension of the term of the
Stock Options to the tenth anniversaries of their respective dates of
grant;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee and the Employer hereby agree that the Employee’s employment with the
Employer is terminated pursuant to Section 8.1.2 of the Employment Agreement,
effective at the close of business on the date hereof (the
“Termination
Date”
).
2.1 The
Employee hereby certifies that he has returned to the Employer all property of
the Employer in the Employee’s possession, including, without limitation, all
keys, business cards, computer hardware, including, without limitation,
Blackberry units, printers, mice and other hardware accessories, and computer
software. The Employee hereby further certifies that he has returned
to the Employer, or destroyed, all tangible material embodying Confidential
Information in any form whatsoever, including, without limitation, all paper
copy copies, summaries and excerpts of Confidential Information and all
electronic media or records containing or derived from Confidential
Information.
3.1 The
Employee and the Employer hereby agree that, notwithstanding Section 9 of the
Employment Agreement, the Employee’s Severance shall not be paid to him in a
lump sum on the Termination Date. In lieu thereof, during the period
from the Termination Date to March 31, 2008 inclusive (the
“Salary Continuance Period”
),
the Employer shall pay the Employee, on a semi-monthly basis according to the
Employer’s regular payroll practices, amounts equal to the basic wages that the
Employee was earning from the Employer immediately prior to the Termination Date
(less applicable deductions and withholdings). The aggregate net
amount paid by the Employer to the Employee during (i) the period between
December 31, 2007 and the date immediately preceding the Termination Date
inclusive and (ii) the Salary Continuance Period, together with the aggregate
amount of deductions and withholdings withheld by the Employer, in accordance
with its regular payroll practices and pursuant to this Section 3.1, are
hereinafter referred to, collectively, as the
“Salary Continuance
Amount”
.
3.2 Subject
to Section 3.3, on the earliest to occur of (i) June 30, 2008, (ii) the date on
which the Employer closes a financing for total gross proceeds in an aggregate
amount of at least U.S.$10,000,000, whether by way of debt, equity or otherwise,
and whether such financing is effected in a single transaction or a series of
related or unrelated transactions, and (iii) a Change of Control (defined
below), the Employer shall pay the Employee, in a lump sum, an amount equal to
(A) the Employee’s Severance
minus
(B) the Salary
Continuance Amount, less applicable deductions and withholdings (the
“Severance
Balance”
).
“Change of Control”
shall be
deemed to have occurred when: (a) any Person, other than a Person or
a combination of Persons presently owning, directly or indirectly, more than 20%
of the issued and outstanding voting securities of the Employer, acquires or
becomes the beneficial owner of, or a combination of Persons acting jointly and
in concert acquires or becomes the beneficial owner of, directly or indirectly,
more than 50% of the voting securities of the Employer, whether through the
acquisition of previously issued and outstanding voting securities or of voting
securities that have not been previously issued, or any combination thereof, or
any other transaction having a similar effect; (b) the Employer merges with one
or more corporations, including, without limitation, any Subsidiary or Affiliate
of the Employer; (c) the Employer sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether pursuant to one or more
transactions; (d) any Person not part of existing management of the Employer or
any Person not controlled by existing management of the Employer enters into any
arrangement to provide management services to the Employer which results in
either (Y) the termination by the Employer, for any reason other than Just
Cause, of the employment of any two of the Chairman and Chief Executive Officer,
President and Chief Operating Officer, Chief Financial Officer and General
Counsel within three months of the date such arrangement is entered into or (Z)
the termination by the Employer, for any reason other than Just Cause, of the
employment of all such senior executive personnel within six months of the date
that such arrangement is entered into; or (e) the Employer enters into any
transaction or arrangement which would have the same, or similar, effect as the
transactions referred to in (a), (b), (c) or (d) of this sentence.
3.3 If,
prior to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should the
Employer become insolvent or make an assignment for the benefit of any creditor
or creditors, or should a receiver or trustee be appointed for all or any
significant part of the Employer’s assets, or should the Employer consent to the
winding-up, liquidation or dissolution of itself or its affairs (each, a
“Bankruptcy Event”
), then an
amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of the
Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall become due
and payable immediately to the Employee. If a Bankruptcy Event occurs
on or after March 31, 2008, then the Severance Balance shall become due and
payable immediately to the Employee.
3.4 The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, David Eldridge, Julie
Fotheringham, Stephen Kilmer, Suh Kim or Stephen Westing (each, an
“OLT Member”
) should become
entitled to receive severance pursuant to his or her executive employment
agreement at any time before the Employer has paid, in full, the amount due and
payable to him pursuant to Sections 3.2 or 3.3, as the case may be, the Employer
shall not pay any OLT Member a percentage of his or her severance entitlement
(without regard to applicable deductions and withholdings) that exceeds the
percentage that (i) the Salary Continuance Amount
plus
the aggregate
amount paid to the Employee pursuant to Sections 3.2 and 3.3, together with the
aggregate amount of deductions and withholdings withheld by the Employer,
represents of (ii) the amount of the Employee’s Severance.
4.1 On
or prior to January 15, 2008, the Employer shall pay the Employee U.S.$2,172.33,
in a lump sum, being the amount equal to the aggregate amount that the Employer
would have disbursed in respect of the Benefits to which the Employee would have
been entitled during the Salary Continuance Period, had the Employee’s
employment with the Employer not terminated on the Termination Date and instead
continued throughout the Salary Continuance Period. The Employer
shall have no other obligation to the Employee with respect to Benefits during
the Salary Continuance Period.
4.2 For
greater certainty, all amounts due and payable by the Employer to the Employee
pursuant to Article 3 and this Article 4 shall be paid, net of applicable
deductions and withholdings.
5.
|
TRANSITION
MATTERS AND E-MAIL ACCOUNT
|
5.1 The
Employee hereby agrees to make himself available to the Employer during the
Salary Continuance Period, whenever reasonably requested by the Employer, in
order to assist the Employer with respect to transition matters falling within
the scope of the Employee’s duties and responsibilities prior to the Termination
Date.
5.2 The
Employee shall be entitled to continued access to his Occulogix.com e-mail
account during the Salary Continuance Period. However, such access
may be denied by the Employer at any time for reason of Just Cause or if the
Employer determines, in good faith and acting reasonably, that such access could
give rise to or result in, or lead to, any harm of legal liability to or for the
Employer.
6.1 Notwithstanding
the termination hereunder of the Employee’s employment with the Employer but
subject to the Employer obtaining the requisite approval of its stockholders
therefor in accordance with the provisions of the Stock Option Plan and all
applicable laws, regulations and rules (including, without limitation, the rules
of the Toronto Stock Exchange) (the
“Requisite Stockholder
Approval”
), the term of the Stock Options shall be extended to, and the
Stock Options shall remain exercisable until, the tenth anniversaries of their
respective dates of grant, being (i) October 4, 2015 for 200,000 of the Stock
Options and (ii) July 3, 2017 for 30,000 of the Stock Options. Such
term extension shall become effective on the date on which the Requisite
Stockholder Approval is obtained, if ever, and all of the agreements pursuant to
which the Stock Options were granted (including, without limitation, the Option
Agreement) shall be deemed to be amended accordingly on the date on which the
Requisite Stockholder Approval is obtained, if ever.
6.2 The
Employer shall use commercially reasonable efforts to obtain the Requisite
Stockholder Approval, which covenant shall terminate and become null and void,
and be of no more force or effect, upon the earlier to occur of (i) the date on
which a meeting of the Employer’s stockholders may be convened to obtain the
Requisite Stockholder Approval and (ii) June 30, 2008.
7.
|
RELEASE
AND TERMINATION
|
7.1 The
Employee hereby agrees, on behalf of himself and his administrators, heirs,
assigns and anyone claiming through him, to release completely and forever
discharge the Employer and its affiliates and subsidiaries, and their respective
officers, directors, shareholders, agents, servants, representatives,
underwriters, successors, heirs and assigns, from any and all claims, demands,
obligations and causes of action, of any nature whatsoever, whether known or
unknown, which the Employee ever had, now has or might have in the future as a
result of the Employee’s employment with the Employer or the termination thereof
hereunder, including, without limitation, any claim relating to the Employment
Agreement or the termination thereof hereunder or any claim relating to any
violation of any U.S. federal or state statute or regulation, any claim for
wrongful discharge or breach of contract or any claim relating to U.S. state or
federal laws (including, without limitation, Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1968, the Employment
Retirement Income and Security Act, the Fair Labor Standards Act, the Americans
with Disabilities Act and the Rehabilitation Act),
provided
, however,
that such release and discharge shall be effective only upon the payment in full
by the Employer of the Severance Balance pursuant to Article 3. For
greater certainty, the release and discharge by the Employee pursuant to this
Section 7.1 shall have no force or effect whatsoever until such time, if ever,
that the Severance Balance is paid in full by the Employer to the
Employee. Notwithstanding the foregoing, nothing herein shall be
construed as depriving the Employee of any indemnification rights to which he is
entitled under the Amended and Restated By-laws of the Employer on or prior to
the Termination Date or of any protection to which he may be entitled, on, prior
to or after the Termination Date, under the Employer’s directors’ and officers’
liability insurance policy from time to time.
7.2 Section
12 of the Employment Agreement (Non-Competition) is hereby amended by replacing,
in the first paragraph thereof, the words “the business carried on during the
Employment Period or at the end thereof, as the case may be, by the Corporation
or any of its Subsidiaries.” with the words “(i) the Corporation’s RHEO business
and/or (ii) the business of OcuSense, Inc., as each of them was carried on
during the Employment Period.”.
7.3 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, including, without limitation, Section 12
(Non-Competition), as amended by Section 7.2 of this Agreement, and Sections 13
(No Solicitation of Customers), 14 (No Solicitation of Employees) 15
(Confidentiality) and 16 (Remedies). The Employee hereby agrees to
abide by such provisions, including, for greater certainty, Section 12 of the
Employment Agreement (Non-Competition), as amended by Section 7.2 of this
Agreement.
8.1 The
mitigation by the Employee of any damages or losses arising from the termination
hereunder of his employment with the Employer and the termination of the
Employment Agreement hereunder (including, without limitation, by obtaining
other employment) shall not, in any way, derogate from, or otherwise affect, the
Employee’s rights or the Employer’s obligations under this
Agreement. For greater certainty, and without derogating from the
generality of the foregoing statement, no amount to be paid by the Employer
under this Agreement shall be reduced by any compensation earned by the Employee
as a result of employment by another employer or otherwise after the Termination
Date.
9.
|
THIRD
PARTY COMMUNICATIONS
|
9.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that he and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 9.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
10.1
|
The
Employee hereby acknowledges that:
|
(a)
|
He
has had sufficient time to review and consider this Agreement
thoroughly;
|
(b)
|
He
has read and understands the terms of this Agreement and his obligations
hereunder;
|
(c)
|
He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Agreement; and
|
(d)
|
He
is entering this Agreement voluntarily and without any pressure from the
Employer.
|
11.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
11.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
11.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, trustees, administrators, successors and
assigns.
11.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
11.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
11.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Mississippi, without regard to its conflicts of laws rules which
shall be deemed inapplicable to this Agreement.
11.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Agreement.
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OCCULOGIX,
INC.
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By:
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“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
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“Stephen
Parks”
|
Signature
of Witness
|
|
Stephen
Parks
|
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|
|
|
|
|
Name
of Witness (
please
print
)
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|
8
Exhibit
10.47
Execution
Copy
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 8th day of January, 2008 by and between David C. Eldridge (the
“Employee”
), a resident of the
State of Oklahoma, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of November 9, 2004 (the
“Employment Agreement”
)
pursuant to which the Employee has been serving the Employer as its Vice
President, Science and Technology;
AND WHEREAS,
capitalized terms
used in this Agreement, but not otherwise defined, shall have the respective
meanings attributed to such terms in the Employment Agreement;
AND WHEREAS,
the Employment
Agreement entitles the Employee to receive from the Employer, in addition to
accrued but unpaid Salary, if any, a lump sum payment equal to 12 months’ of his
Basic Salary and 2.5% of his Basic Salary in respect of his entitlement to
Benefits (the
“Employee’s
Severance”
), less any amounts owing by the Employee to the Employer for
any reason, when the Employee’s employment under the Employment Agreement has
been terminated by the Employer for any reason other than Just Cause (including
the occurrence of Disability) pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
the Employee and
the Employer mutually have agreed that the services of the Employee no longer
are required and, accordingly, have agreed to the termination of the Employee’s
employment with the Employer pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
each of the
Employee and the Employer agrees that it would not be in the bests interests of
either of them to obligate the Employer to pay all of the Employee’s Severance
upon the termination of the Employee’s employment with the Employer pursuant to
Section 8.1.2 of the Employment Agreement;
AND WHEREAS,
the Employment
Agreement is further amended by this Agreement;
AND WHEREAS,
the Employee has
an aggregate of 126,722 time-based stock options that remain unexercised (the
“Stock
Options”
);
AND WHEREAS,
the Stock Options
were granted pursuant to the Employer’s 2002 Stock Option Plan, as amended (the
“Stock Option
Plan”
);
AND WHEREAS,
notwithstanding
the proposed termination of the Employee’s employment with the Employer and
subject to the Employer obtaining the requisite approval of its stockholders
therefor, the Compensation Committee of the Employer’s board of directors and
the Employer’s board of directors have approved the extension of the term of the
Stock Options to the tenth anniversaries of their respective dates of
grant;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee and the Employer hereby agree that the Employee’s employment with the
Employer is terminated pursuant to Section 8.1.2 of the Employment Agreement,
effective at the close of business on the date hereof (the
“Termination
Date”
).
2.1 Subject
to Section 2.2, the Employee hereby agrees that, by no later than the end of the
Salary Continuance Period (defined below), he will certify, in writing, that he
has returned to the Employer, and he will have returned to the Employer, all
property of the Employer in the Employee’s possession, including, without
limitation, all keys, business cards, computer hardware, including, without
limitation, Blackberry units, printers, mice and other hardware accessories, and
computer software. The Employee hereby further agrees that, by no
later than the end of the Salary Continuance Period (defined below), he will
certify, in writing, that he has returned to the Employer or destroyed, and he
will have returned to the Employer or destroyed, all tangible material embodying
Confidential Information in any form whatsoever, including, without limitation,
all paper copy copies, summaries and excerpts of Confidential Information and
all electronic media or records containing or derived from Confidential
Information.
2.2 Notwithstanding
Section 2.1, on or prior to the last day of the Salary Continuance Period
(defined below), the Employee may purchase from the Employer, at their then
present net book value, as determined by the Employer acting in good faith, the
Employer’s laptop computer and Blackberry unit that are in the Employee’s
possession on the Termination Date (collectively, the
“Computer
Equipment”
).
3.1 The
Employee and the Employer hereby agree that, notwithstanding Section 9 of the
Employment Agreement, the Employee’s Severance shall not be paid to him in a
lump sum on the Termination Date. In lieu thereof, during the period
from the Termination Date to March 31, 2008 inclusive (the
“Salary Continuance Period”
),
the Employer shall pay the Employee, on a semi-monthly basis according to the
Employer’s regular payroll practices, amounts equal to the basic wages that the
Employee was earning from the Employer immediately prior to the Termination Date
(less applicable deductions and withholdings). The aggregate net
amount paid by the Employer to the Employee during (i) the period between
December 31, 2007 and the date immediately preceding the Termination Date
inclusive and (ii) the Salary Continuance Period, together with the aggregate
amount of deductions and withholdings withheld by the Employer, in accordance
with its regular payroll practices and pursuant to this Section 3.1, are
hereinafter referred to, collectively, as the
“Salary Continuance
Amount”
.
3.2 Subject
to Section 3.3, on the earliest to occur of (i) June 30, 2008, (ii) the date on
which the Employer closes a financing for total gross proceeds in an aggregate
amount of at least U.S.$10,000,000, whether by way of debt, equity or otherwise,
and whether such financing is effected in a single transaction or a series of
related or unrelated transactions, and (iii) a Change of Control (defined
below), the Employer shall pay the Employee, in a lump sum, an amount equal to
(A) the Employee’s Severance
minus
(B) the Salary
Continuance Amount
minus
(C)
U.S.$1,225.41, less applicable deductions and withholdings (the
“Severance
Balance”
). If the Employee advises the Employer that he
wishes to exercise his right to purchase the Computer Equipment pursuant to
Section 2.2, the Employer may set off against, or deduct from, the Severance
Balance the purchase price of the Computer Equipment.
“Change of Control”
shall be
deemed to have occurred when: (a) any Person, other than a Person or
a combination of Persons presently owning, directly or indirectly, more than 20%
of the issued and outstanding voting securities of the Employer, acquires or
becomes the beneficial owner of, or a combination of Persons acting jointly and
in concert acquires or becomes the beneficial owner of, directly or indirectly,
more than 50% of the voting securities of the Employer, whether through the
acquisition of previously issued and outstanding voting securities or of voting
securities that have not been previously issued, or any combination thereof, or
any other transaction having a similar effect; (b) the Employer merges with one
or more corporations, including, without limitation, any Subsidiary or Affiliate
of the Employer; (c) the Employer sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether pursuant to one or more
transactions; (d) any Person not part of existing management of the Employer or
any Person not controlled by existing management of the Employer enters into any
arrangement to provide management services to the Employer which results in
either (Y) the termination by the Employer, for any reason other than Just
Cause, of the employment of any two of the Chairman and Chief Executive Officer,
President and Chief Operating Officer, Chief Financial Officer and General
Counsel within three months of the date such arrangement is entered into or (Z)
the termination by the Employer, for any reason other than Just Cause, of the
employment of all such senior executive personnel within six months of the date
that such arrangement is entered into; or (e) the Employer enters into any
transaction or arrangement which would have the same, or similar, effect as the
transactions referred to in (a), (b), (c) or (d) of this sentence.
3.3 If,
prior to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should the
Employer become insolvent or make an assignment for the benefit of any creditor
or creditors, or should a receiver or trustee be appointed for all or any
significant part of the Employer’s assets, or should the Employer consent to the
winding-up, liquidation or dissolution of itself or its affairs (each, a
“Bankruptcy Event”
), then an
amount equal to (i) the Employee’s Severance
minus
(ii)
U.S.$1,225.41
minus
(iii) the
aggregate net amount paid by the Employer to the Employee to the date of the
Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall become due
and payable immediately to the Employee. If a Bankruptcy Event occurs
on or after March 31, 2008, then the Severance Balance shall become due and
payable immediately to the Employee.
3.4 The
Employee may direct, in a written direction in form and substance satisfactory
to the Employer, the Employer to pay all amounts due and payable pursuant to
Sections 3.1, 3.2 or 3.3 to the Employee’s professional corporation, David C.
Eldridge, O.D., P.C. Nothing herein shall be construed in such a
manner so as to prevent or prohibit the Employer from making the required or
advisable deductions and withholdings, if any, from such amounts or from
reporting such amounts on the appropriate Internal Revenue Service
forms.
3.5 The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, Julie Fotheringham, Stephen
Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should become
entitled to receive severance pursuant to his or her executive employment
agreement at any time before the Employer has paid, in full, the amount due and
payable to him pursuant to Section 3.2 or 3.3, as the case may be, the Employer
shall not pay any OLT Member a percentage of his or her severance entitlement
(without regard to applicable deductions and withholdings) that exceeds the
percentage that (i) the Salary Continuance Amount
plus
the aggregate
amount paid to the Employee pursuant to Sections 3.2 and 3.3, together with the
aggregate amount of deductions and withholdings withheld by the Employer,
represents of (ii) the amount of the Employee’s Severance.
4.1 On
or prior to January 15, 2008, the Employer shall pay the Employee U.S.$4,901.64,
in a lump sum, being the amount equal to the aggregate amount that the Employer
would have disbursed in respect of the Benefits to which the Employee would have
been entitled during the Salary Continuance Period, had the Employee’s
employment with the Employer not terminated on the Termination Date and instead
continued throughout the Salary Continuance Period, or U.S.$3,676.23 (the
“Employer’s Benefits
Contribution”
),
grossed up
by
U.S.$1,225.41, which represents an additional amount that, after deduction by
the Employer of applicable withholding tax on the Employer’s Benefits
Contribution, will result in the Employee receiving a net amount equal to the
Employer’s Benefits Contribution pursuant to this Section 4.1 . The
Employer shall have no other obligation to the Employee with respect to Benefits
during the Salary Continuance Period.
4.2 For
greater certainty, all amounts due and payable by the Employer to the Employee
pursuant to Article 3 and this Article 4 shall be paid, net of applicable
deductions and withholdings.
5.
|
TRANSITION
MATTERS AND E-MAIL ACCOUNT
|
5.1 The
Employee hereby agrees to make himself available to the Employer during the
Salary Continuance Period, whenever reasonably requested by the Employer, in
order to assist the Employer with respect to transition matters falling within
the scope of the Employee’s duties and responsibilities prior to the Termination
Date.
5.2 The
Employee shall be entitled to continued access to his Occulogix.com e-mail
account during the Salary Continuance Period. However, such access
may be denied by the Employer at any time for reason of Just Cause or if the
Employer determines, in good faith and acting reasonably, that such access could
give rise to or result in, or lead to, any harm or legal liability to or for the
Employer.
6.1 Notwithstanding
the termination hereunder of the Employee’s employment with the Employer but
subject to the Employer obtaining the requisite approval of its stockholders
therefor in accordance with the provisions of the Stock Option Plan and all
applicable laws, regulations and rules (including, without limitation, the rules
of the Toronto Stock Exchange) (the
“Requisite Stockholder
Approval”
), the term of the Stock Options shall be extended to, and the
Stock Options shall remain exercisable until, the tenth anniversaries of their
respective dates of grant, being (i) October 1, 2012 for 36,924 of the Stock
Options, (ii) July 1, 2013 for 59,798 of the Stock Options and (iii) July 3,
2017 for 30,000 of the Stock Options. Such term extension shall
become effective on the date on which the Requisite Stockholder Approval is
obtained, if ever, and all of the agreements pursuant to which the Stock Options
were granted shall be deemed to be amended accordingly on the date on which the
Requisite Stockholder Approval is obtained, if ever.
6.2 The
Employer shall use commercially reasonable efforts to obtain the Requisite
Stockholder Approval, which covenant shall terminate and become null and void,
and be of no more force or effect, upon the earlier to occur of (i) the date on
which a meeting of the Employer’s stockholders may be convened to obtain the
Requisite Stockholder Approval and (ii) June 30, 2008.
7.
|
RELEASE
AND TERMINATION
|
7.1 The
Employee hereby agrees, on behalf of himself and his administrators, heirs,
assigns and anyone claiming through him, to release completely and forever
discharge the Employer and its affiliates and subsidiaries, and their respective
officers, directors, shareholders, agents, servants, representatives,
underwriters, successors, heirs and assigns, from any and all claims, demands,
obligations and causes of action, of any nature whatsoever, whether known or
unknown, which the Employee ever had, now has or might have in the future as a
result of the Employee’s employment with the Employer or the termination thereof
hereunder, including, without limitation, any claim relating to the Employment
Agreement or the termination thereof hereunder or any claim relating to any
violation of any U.S. federal or state statute or regulation, any claim for
wrongful discharge or breach of contract or any claim relating to U.S. state or
federal laws (including, without limitation, Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1968, the Employment
Retirement Income and Security Act, the Fair Labor Standards Act, the Americans
with Disabilities Act and the Rehabilitation Act),
provided
, however,
that such release and discharge shall be effective only upon the payment in full
by the Employer of the Severance Balance pursuant to Article 3. For
greater certainty, the release and discharge by the Employee pursuant to this
Section 7.1 shall have no force or effect whatsoever until such time, if ever,
that the Severance Balance is paid in full by the Employer to the
Employee. Notwithstanding the foregoing, nothing herein shall be
construed as depriving the Employee of any indemnification rights to which he is
entitled under the Amended and Restated By-laws of the Employer on or prior to
the Termination Date or of any protection to which he may be entitled, on, prior
to or after the Termination Date, under the Employer’s directors’ and officers’
liability insurance policy from time to time.
7.2 Section
12 of the Employment Agreement (Non-Competition) is hereby amended by replacing,
in the first paragraph thereof, the words “the business carried on during the
Employment Period or at the end thereof, as the case may be, by the Corporation
or any of its Subsidiaries.” with the words “(i) the Corporation’s RHEO business
and/or (ii) the business of OcuSense, Inc., as each of them was carried on
during the Employment Period.”.
7.3 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, including, without limitation, Section 12 (Non-Competition)
and Sections 13 (No Solicitation of Patients), 14 (No Solicitation of Employees)
15 (Confidentiality) and 16 (Remedies). The Employee hereby agrees to
abide by such provisions, including, for greater certainty, Section 12 of the
Employment Agreement (Non-Competition), as amended by Section 7.2 of this
Agreement.
8.1 The
mitigation by the Employee of any damages or losses arising from the termination
hereunder of his employment with the Employer and the termination of the
Employment Agreement hereunder (including, without limitation, by obtaining
other employment) shall not, in any way, derogate from, or otherwise affect, the
Employee’s rights or the Employer’s obligations under this
Agreement. For greater certainty, and without derogating from the
generality of the foregoing statement, no amount to be paid by the Employer
under this Agreement shall be reduced by any compensation earned by the Employee
as a result of employment by another employer or otherwise after the Termination
Date.
9.
|
THIRD
PARTY COMMUNICATIONS
|
9.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that he and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 9.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
10.1
|
The
Employee hereby acknowledges that:
|
(a)
|
He
has had sufficient time to review and consider this Agreement
thoroughly;
|
(b)
|
He
has read and understands the terms of this Agreement and his obligations
hereunder;
|
(c)
|
He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Agreement; and
|
(d)
|
He
is entering this Agreement voluntarily and without any pressure from the
Employer.
|
11.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
11.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
11.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, trustees, administrators, successors and
assigns.
11.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
11.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
11.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Oklahoma, without regard to its conflicts of laws rules which shall
be deemed inapplicable to this Agreement.
11.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“David
C. Eldridge”
|
Signature
of Witness
|
|
David
C. Eldridge
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
8
Exhibit
10.48
Execution
Copy
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 31st day of January, 2008 by and between Nozhat Choudry (the
“Employee”
), a resident of the
Province of Ontario, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of February 10, 2006,
pursuant to which the Employee has been serving the Employer as its Vice
President, Clinical Research, which employment agreement was amended as of April
1, 2006 (as so amended, the
“Employment
Agreement”
);
AND WHEREAS,
capitalized terms
used in this Agreement, but not otherwise defined, shall have the respective
meanings attributed to such terms in the Employment Agreement;
AND WHEREAS,
the Employee and
the Employer mutually have agreed that the services of the Employee no longer
are required and, accordingly, have agreed to the termination of the Employee’s
employment with the Employer pursuant to Section 8.1.3 of the Employment
Agreement;
AND WHEREAS,
the Employee and
the Employer hereby acknowledge and agree that the reference to Section 8.1.2,
contained in Section 9 of the Employment Agreement, is the result of a
typographical error and instead should have been a reference to Section
8.1.3;
AND WHEREAS,
the Employee and
the Employer hereby further acknowledge and agree that, when the Employee’s
employment under the Employment Agreement has been terminated by the Employer
for any reason other than Just Cause pursuant to Section 8.1.3 of the Employment
Agreement, the Employee is entitled to receive from the Employer, in addition to
accrued but unpaid Salary, if any, a lump sum payment equal to 12 months’ of her
Basic Salary and 2.5% of her Basic Salary in respect of her entitlement to
Benefits (the
“Employee’s
Severance”
), less any amounts payable to the Employee in lieu of notice
where a Stop Work Notice has been given pursuant to Section 8.2 of the
Employment Agreement and any amounts owing by the Employee to the Employer for
any reason;
AND WHEREAS,
the Employee has
not been given a Stop Work Notice pursuant to Section 8.2 of the Employment
Agreement;
AND WHEREAS,
each of the
Employee and the Employer agrees that it would not be in the bests interests of
either of them to obligate the Employer to pay all of the Employee’s Severance
upon the termination of the Employee’s employment with the Employer pursuant to
Section 8.1.3 of the Employment Agreement;
AND WHEREAS,
the Employment
Agreement is further amended by this Agreement;
AND WHEREAS,
the Employee has
been granted an aggregate of 110,000 time-based stock options (the
“Stock Options”
) pursuant to
the Employer’s 2002 Stock Option Plan, as amended (the
“Stock Option
Plan”
);
AND WHEREAS,
notwithstanding
the proposed termination of the Employee’s employment with the Employer and
subject to the Employer obtaining the requisite approval of its stockholders
therefor, the Compensation Committee of the Employer’s board of directors and
the Employer’s board of directors have approved the extension of the term of the
Stock Options to the tenth anniversaries of their respective dates of
grant;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee and the Employer hereby agree that the Employee’s employment with the
Employer is terminated pursuant to Section 8.1.3 of the Employment Agreement,
effective at the close of business on the date hereof (the
“Termination
Date”
). For greater certainty, the Employee hereby waives the
requirement, under Section 8.1.3 of the Employment Agreement, to provide 12
months’ prior written notice to the Employee of the Employer’s intention to
terminate her employment with the Employer.
2.1 Subject
to Section 2.2, the Employee hereby agrees that, by no later than the end of the
Salary Continuance Period (defined below), she will certify, in writing, that
she has returned to the Employer, and she will have returned to the Employer,
all property of the Employer in the Employee’s possession, including, without
limitation, all keys, business cards, computer hardware, including, without
limitation, Blackberry units, printers, mice and other hardware accessories, and
computer software. The Employee hereby further agrees that, by no
later than the end of the Salary Continuance Period (defined below), she will
certify, in writing, that she has returned to the Employer or destroyed, and she
will have returned to the Employer or destroyed, all tangible material embodying
Confidential Information in any form whatsoever, including, without limitation,
all paper copy copies, summaries and excerpts of Confidential Information and
all electronic media or records containing or derived from Confidential
Information.
2.2 Notwithstanding
Section 2.1, on or prior to the last day of the Salary Continuance Period
(defined below), the Employee may purchase from the Employer at their then
present net book value, as determined by the Employer acting in good faith, the
Employer’s laptop computer and Blackberry unit that are in the Employee’s
possession on the Termination Date (collectively, the
“Computer
Equipment”
).
3.1 The
Employee and the Employer hereby agree that, notwithstanding Section 9 of the
Employment Agreement, the Employee’s Severance shall not be paid to her in a
lump sum on the Termination Date. In lieu thereof, during the period
from the Termination Date to March 31, 2008 inclusive (the
“Salary Continuance Period”
),
the Employer shall pay the Employee, on a semi-monthly basis according to the
Employer’s regular payroll practices, amounts equal to the basic wages that the
Employee was earning from the Employer immediately prior to the Termination Date
(less applicable deductions and withholdings). The aggregate net
amount paid by the Employer to the Employee during the Salary Continuance
Period, together with the aggregate amount of deductions and withholdings
withheld by the Employer, in accordance with its regular payroll practices and
pursuant to this Section 3.1, are hereinafter referred to, collectively, as the
“Salary Continuance
Amount”
.
3.2 Subject
to Section 3.3, on the earliest to occur of (i) June 30, 2008, (ii) the date on
which the Employer closes a financing for total gross proceeds in an aggregate
amount of at least U.S.$10,000,000, whether by way of debt, equity or otherwise,
and whether such financing is effected in a single transaction or a series of
related or unrelated transactions, and (iii) a Change of Control (defined
below), the Employer shall pay the Employee, in a lump sum, an amount equal to
(A) the Employee’s Severance
minus
(B) the Salary
Continuance Amount, less applicable deductions and withholdings (the
“Severance
Balance”
). If the Employee advises the Employer that she
wishes to exercise her right to purchase the Computer Equipment pursuant to
Section 2.2, the Employer may set off against, or deduct from, the Severance
Balance the purchase price of the Computer Equipment.
“Change of Control”
shall be
deemed to have occurred when: (a) any Person, other than a Person or
a combination of Persons presently owning, directly or indirectly, more than 20%
of the issued and outstanding voting securities of the Employer, acquires or
becomes the beneficial owner of, or a combination of Persons acting jointly and
in concert acquires or becomes the beneficial owner of, directly or indirectly,
more than 50% of the voting securities of the Employer, whether through the
acquisition of previously issued and outstanding voting securities or of voting
securities that have not been previously issued, or any combination thereof, or
any other transaction having a similar effect; (b) the Employer merges with one
or more corporations, including, without limitation, any Subsidiary or Affiliate
of the Employer; (c) the Employer sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether pursuant to one or more
transactions; (d) any Person not part of existing management of the Employer or
any Person not controlled by existing management of the Employer enters into any
arrangement to provide management services to the Employer which results in
either (Y) the termination by the Employer, for any reason other than Just
Cause, of the employment of any two of the Chairman and Chief Executive Officer,
President and Chief Operating Officer, Chief Financial Officer and General
Counsel within three months of the date such arrangement is entered into or (Z)
the termination by the Employer, for any reason other than Just Cause, of the
employment of all such senior executive personnel within six months of the date
that such arrangement is entered into; or (e) the Employer enters into any
transaction or arrangement which would have the same, or similar, effect as the
transactions referred to in (a), (b), (c) or (d) of this sentence.
3.3 If,
prior to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should the
Employer become insolvent or make an assignment for the benefit of any creditor
or creditors, or should a receiver or trustee be appointed for all or any
significant part of the Employer’s assets, or should the Employer consent to the
winding-up, liquidation or dissolution of itself or its affairs (each, a
“Bankruptcy Event”
), then an
amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of the
Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall become due
and payable immediately to the Employee. If a Bankruptcy Event occurs
on or after March 31, 2008, then the Severance Balance shall become due and
payable immediately to the Employee.
3.4 The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, John Cornish, Bill Dumencu, David Eldridge, Julie Fotheringham, Stephen
Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should become
entitled to receive severance pursuant to his or her executive employment
agreement at any time before the Employer has paid, in full, the amount due and
payable to her pursuant to Section 3.2 or 3.3, as the case may be, the Employer
shall not pay any OLT Member a percentage of his or her severance entitlement
(without regard to applicable deductions and withholdings) that exceeds the
percentage that (i) the Salary Continuance Amount
plus
the aggregate
amount paid to the Employee pursuant to Sections 3.2 and 3.3, together with the
aggregate amount of deductions and withholdings withheld by the Employer,
represents of (ii) the amount of the Employee’s Severance.
3.5 For
greater certainty, all amounts due and payable by the Employer to the Employee
pursuant to this Article 3 shall be paid, net of applicable deductions and
withholdings.
4.
|
TRANSITION
MATTERS AND E-MAIL ACCOUNT
|
4.1 The
Employee hereby agrees to make herself available to the Employer during the
Salary Continuance Period, whenever reasonably requested by the Employer, in
order to assist the Employer with respect to transition matters falling within
the scope of the Employee’s duties and responsibilities prior to the Termination
Date.
4.2 The
Employee shall be entitled to continued access to her Occulogix.com e-mail
account during the Salary Continuance Period. However, such access
may be denied by the Employer at any time for reason of Just Cause or if the
Employer determines, in good faith and acting reasonably, that such access could
give rise to or result in, or lead to, any harm or legal liability to or for the
Employer.
5.1 Notwithstanding
the termination hereunder of the Employee’s employment with the Employer but
subject to the Employer obtaining the requisite approval of its stockholders
therefor in accordance with the provisions of the Stock Option Plan and all
applicable laws, regulations and rules (including, without limitation, the rules
of the Toronto Stock Exchange) (the
“Requisite Stockholder
Approval”
), the term of the Stock Options shall be extended to, and the
Stock Options shall remain exercisable until, the tenth anniversaries of their
respective dates of grant, being (i) February 10, 2016 for 80,000 of the Stock
Options and (ii) July 3, 2017 for 30,000 of the Stock Options. Such
term extension shall become effective on the date on which the Requisite
Stockholder Approval is obtained, if ever, and all of the agreements pursuant to
which the Stock Options were granted shall be deemed to be amended accordingly
on the date on which the Requisite Stockholder Approval is obtained, if
ever.
5.2 The
Employer shall use commercially reasonable efforts to obtain the Requisite
Stockholder Approval, which covenant shall terminate and become null and void,
and be of no more force or effect, upon the earlier to occur of (i) the date on
which a meeting of the Employer’s stockholders may be convened to obtain the
Requisite Stockholder Approval and (ii) June 30, 2008.
6.
|
RELEASE
AND TERMINATION
|
6.1 The
Employee hereby agrees, on behalf of herself and her administrators, heirs,
assigns and anyone claiming through her, to release completely and forever
discharge the Employer and its affiliates and subsidiaries, and their respective
officers, directors, shareholders, agents, servants, representatives,
underwriters, successors, heirs and assigns, from any and all claims, demands,
obligations and causes of action, of any nature whatsoever, whether known or
unknown, which the Employee ever had, now has or might have in the future as a
result of the Employee’s employment with the Employer or the termination thereof
hereunder, including, without limitation, any claim relating to the Employment
Agreement or the termination thereof hereunder or any claim relating to any
violation of any Canadian federal or provincial statute or regulation, any claim
for wrongful discharge or breach of contract or any claim relating to Canadian
federal or provincial laws (including, without limitation, the
Employment Standards Act
(Ontario) and the Ontario
Human Rights Code
),
provided
, however,
that such release and discharge shall be effective only upon the payment in full
by the Employer of the Severance Balance pursuant to Article 3. For
greater certainty, the release and discharge by the Employee pursuant to this
Section 6.1 shall have no force or effect whatsoever until such time, if ever,
that the Severance Balance is paid in full by the Employer to the
Employee. Notwithstanding the foregoing, nothing herein shall be
construed as depriving the Employee of any indemnification rights to which she
is entitled under the Amended and Restated By-laws of the Employer on or prior
to the Termination Date or of any protection to which she may be entitled, on,
prior to or after the Termination Date, under the Employer’s directors’ and
officers’ liability insurance policy from time to time.
6.2 Section
12 of the Employment Agreement (Non-Competition) is hereby amended by replacing,
in the first paragraph thereof, the words “which involves the development,
manufacturing, sales and/or distribution of products, equipment, services and/or
technology relating to the apheresis treatment of ophthalmic diseases or which
is otherwise the same as, or substantially similar to, or which competes with or
would compete with, the business carried on by the Corporation or any of its
Subsidiaries during the Employment Period or at the end thereof.” with the words
“(i) the Corporation’s RHEO business and/or (ii) the business of OcuSense, Inc.,
as each of them was carried on during the Employment Period.”.
6.3 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, including, without limitation, Section 12
(Non-Competition), as amended by Section 6.2 of this Agreement, and Sections 13
(No Solicitation of Customers or Patients), 14 (No Solicitation of Employees) 15
(Confidentiality) and 16 (Remedies). The Employee hereby agrees to
abide by such provisions, including, for greater certainty, Section 12 of the
Employment Agreement (Non-Competition), as amended by Section 6.2 of this
Agreement.
7.1 The
mitigation by the Employee of any damages or losses arising from the termination
hereunder of her employment with the Employer and the termination of the
Employment Agreement hereunder (including, without limitation, by obtaining
other employment) shall not, in any way, derogate from, or otherwise affect, the
Employee’s rights or the Employer’s obligations under this
Agreement. For greater certainty, and without derogating from the
generality of the foregoing statement, no amount to be paid by the Employer
under this Agreement shall be reduced by any compensation earned by the Employee
as a result of employment by another employer or otherwise after the Termination
Date.
8.
|
THIRD
PARTY COMMUNICATIONS
|
8.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that she and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 8.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
9.1
|
The
Employee hereby acknowledges that:
|
(a)
|
She
has had sufficient time to review and consider this Agreement
thoroughly;
|
(b)
|
She
has read and understands the terms of this Agreement and her obligations
hereunder;
|
(c)
|
She
has been given an opportunity to obtain independent legal advice, or such
other advice as she may desire, concerning the interpretation and effect
of this Agreement; and
|
(d)
|
She
is entering this Agreement voluntarily and without any pressure from the
Employer.
|
10.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
10.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
10.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, trustees, administrators, successors and
assigns.
10.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
10.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
10.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the Province of Ontario and the federal laws of Canada applicable
therein.
10.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Agreement.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“Nozhat
Choudry”
|
Signature
of Witness
|
|
Nozhat
Choudry
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
Exhibit
10.49
Execution
Copy
TERMINATION
AGREEMENT
THIS AGREEMENT
is made as of
the 31st day of January, 2008 by and between Stephen Kilmer (the
“Employee”
), a resident of the
Province of Ontario, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into an employment agreement dated as of July 30, 2004 (the
“Employment Agreement”
)
pursuant to which the Employee has been serving the Employer as its Vice
President, Investor & Public Affairs;
AND WHEREAS,
capitalized terms
used in this Agreement, but not otherwise defined, shall have the respective
meanings attributed to such terms in the Employment Agreement;
AND WHEREAS,
the Employee and
the Employer mutually have agreed that the services of the Employee no longer
are required and, accordingly, have agreed to the termination of the Employee’s
employment with the Employer pursuant to Section 8.1.2 of the Employment
Agreement;
AND WHEREAS,
when the
Employee’s employment under the Employment Agreement has been terminated by the
Employer for any reason other than Just Cause pursuant to Section 8.1.2 of the
Employment Agreement, the Employee is entitled to receive from the Employer, in
addition to accrued but unpaid Salary, if any, a lump sum payment equal to 12
months’ of his Basic Salary and 2.5% of his Basic Salary in respect of his
entitlement to Benefits (the
“Employee’s Severance”
), less
any amounts payable to the Employee in lieu of notice where a Stop Work Notice
has been given pursuant to Section 8 of the Employment Agreement and any amounts
owing by the Employee to the Employer for any reason;
AND WHEREAS,
the Employee has
not been given a Stop Work Notice pursuant to Section 8 of the Employment
Agreement;
AND WHEREAS,
each of the
Employee and the Employer agrees that it would not be in the bests interests of
either of them to obligate the Employer to pay all of the Employee’s Severance
upon the termination of the Employee’s employment with the Employer pursuant to
Section 8.1.2 of the Employment Agreement;
AND WHEREAS,
the Employment
Agreement is further amended by this Agreement;
AND WHEREAS,
the Employee has
been granted an aggregate of 110,000 time-based stock options (the
“Stock Options”
) pursuant to
the Employer’s 2002 Stock Option Plan, as amended (the
“Stock Option
Plan”
);
AND WHEREAS,
notwithstanding
the proposed termination of the Employee’s employment with the Employer and
subject to the Employer obtaining the requisite approval of its stockholders
therefor, the Compensation Committee of the Employer’s board of directors and
the Employer’s board of directors have approved the extension of the term of the
Stock Options to the tenth anniversaries of their respective dates of
grant;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement
(the receipt and sufficiency of which are hereby acknowledged by the parties
hereto), the parties hereto agree as follows:
1.1 The
Employee and the Employer hereby agree that the Employee’s employment with the
Employer is terminated pursuant to Section 8.1.2 of the Employment Agreement,
effective at the close of business on the date hereof (the
“Termination
Date”
). For greater certainty, the Employee hereby waives the
requirement, under Section 8.1.2 of the Employment Agreement, to provide 12
months’ prior written notice to the Employee of the Employer’s intention to
terminate his employment with the Employer.
2.1 The
Employee hereby certifies that he has returned to the Employer all property of
the Employer in the Employee’s possession, including, without limitation, all
keys, business cards, computer hardware, including, without limitation,
Blackberry units, printers, mice and other hardware accessories, and computer
software.
2.2 The
Employee hereby further agrees that, by no later than the end of the Salary
Continuance Period (defined below), he will certify, in writing, that he has
returned to the Employer or destroyed, and he will have returned to the Employer
or destroyed, all tangible material embodying Confidential Information in any
form whatsoever, including, without limitation, all paper copy copies, summaries
and excerpts of Confidential Information and all electronic media or records
containing or derived from Confidential Information.
3.1 The
Employee and the Employer hereby agree that, notwithstanding Section 9 of the
Employment Agreement, the Employee’s Severance shall not be paid to him in a
lump sum on the Termination Date. In lieu thereof, during the period
from the Termination Date to March 31, 2008 inclusive (the
“Salary Continuance Period”
),
the Employer shall pay the Employee, on a semi-monthly basis according to the
Employer’s regular payroll practices, amounts equal to the basic wages that the
Employee was earning from the Employer immediately prior to the Termination Date
(less applicable deductions and withholdings). The aggregate net
amount paid by the Employer to the Employee during the Salary Continuance
Period, together with the aggregate amount of deductions and withholdings
withheld by the Employer, in accordance with its regular payroll practices and
pursuant to this Section 3.1, are hereinafter referred to, collectively, as the
“Salary Continuance
Amount”
.
3.2 Subject
to Section 3.3, on the earliest to occur of (i) June 30, 2008, (ii) the date on
which the Employer closes a financing for total gross proceeds in an aggregate
amount of at least U.S.$10,000,000, whether by way of debt, equity or otherwise,
and whether such financing is effected in a single transaction or a series of
related or unrelated transactions, and (iii) a Change of Control (defined
below), the Employer shall pay the Employee, in a lump sum, an amount equal to
(A) the Employee’s Severance
minus
(B) the Salary
Continuance Amount, less applicable deductions and withholdings (the
“Severance
Balance”
).
“Change of Control”
shall be
deemed to have occurred when: (a) any Person, other than a Person or
a combination of Persons presently owning, directly or indirectly, more than 20%
of the issued and outstanding voting securities of the Employer, acquires or
becomes the beneficial owner of, or a combination of Persons acting jointly and
in concert acquires or becomes the beneficial owner of, directly or indirectly,
more than 50% of the voting securities of the Employer, whether through the
acquisition of previously issued and outstanding voting securities or of voting
securities that have not been previously issued, or any combination thereof, or
any other transaction having a similar effect; (b) the Employer merges with one
or more corporations, including, without limitation, any Subsidiary or Affiliate
of the Employer; (c) the Employer sells, leases or otherwise disposes of all or
substantially all of its assets and undertaking, whether pursuant to one or more
transactions; (d) any Person not part of existing management of the Employer or
any Person not controlled by existing management of the Employer enters into any
arrangement to provide management services to the Employer which results in
either (Y) the termination by the Employer, for any reason other than Just
Cause, of the employment of any two of the Chairman and Chief Executive Officer,
President and Chief Operating Officer, Chief Financial Officer and General
Counsel within three months of the date such arrangement is entered into or (Z)
the termination by the Employer, for any reason other than Just Cause, of the
employment of all such senior executive personnel within six months of the date
that such arrangement is entered into; or (e) the Employer enters into any
transaction or arrangement which would have the same, or similar, effect as the
transactions referred to in (a), (b), (c) or (d) of this sentence.
3.3 If,
prior to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should the
Employer become insolvent or make an assignment for the benefit of any creditor
or creditors, or should a receiver or trustee be appointed for all or any
significant part of the Employer’s assets, or should the Employer consent to the
winding-up, liquidation or dissolution of itself or its affairs (each, a
“Bankruptcy Event”
), then an
amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of the
Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall become due
and payable immediately to the Employee. If a Bankruptcy Event occurs
on or after March 31, 2008, then the Severance Balance shall become due and
payable immediately to the Employee.
3.4 The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, David Eldridge, Julie
Fotheringham, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should become
entitled to receive severance pursuant to his or her executive employment
agreement at any time before the Employer has paid, in full, the amount due and
payable to him pursuant to Section 3.2 or 3.3, as the case may be, the Employer
shall not pay any OLT Member a percentage of his or her severance entitlement
(without regard to applicable deductions and withholdings) that exceeds the
percentage that (i) the Salary Continuance Amount
plus
the aggregate
amount paid to the Employee pursuant to Sections 3.2 and 3.3, together with the
aggregate amount of deductions and withholdings withheld by the Employer,
represents of (ii) the amount of the Employee’s Severance.
3.5 For
greater certainty, all amounts due and payable by the Employer to the Employee
pursuant to this Article 3 shall be paid, net of applicable deductions and
withholdings.
4.1 Notwithstanding
the termination hereunder of the Employee’s employment with the Employer but
subject to the Employer obtaining the requisite approval of its stockholders
therefor in accordance with the provisions of the Stock Option Plan and all
applicable laws, regulations and rules (including, without limitation, the rules
of the Toronto Stock Exchange) (the
“Requisite Stockholder
Approval”
), the term of the Stock Options shall be extended to, and the
Stock Options shall remain exercisable until, the tenth anniversaries of their
respective dates of grant, being (i) December 16, 2014 for 80,000 of the Stock
Options and (ii) July 3, 2017 for 30,000 of the Stock Options. Such
term extension shall become effective on the date on which the Requisite
Stockholder Approval is obtained, if ever, and all of the agreements pursuant to
which the Stock Options were granted shall be deemed to be amended accordingly
on the date on which the Requisite Stockholder Approval is obtained, if
ever.
4.2 The
Employer shall use commercially reasonable efforts to obtain the Requisite
Stockholder Approval, which covenant shall terminate and become null and void,
and be of no more force or effect, upon the earlier to occur of (i) the date on
which a meeting of the Employer’s stockholders may be convened to obtain the
Requisite Stockholder Approval and (ii) June 30, 2008.
5.
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RELEASE
AND TERMINATION
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5.1 The
Employee hereby agrees, on behalf of himself and his administrators, heirs,
assigns and anyone claiming through him, to release completely and forever
discharge the Employer and its affiliates and subsidiaries, and their respective
officers, directors, shareholders, agents, servants, representatives,
underwriters, successors, heirs and assigns, from any and all claims, demands,
obligations and causes of action, of any nature whatsoever, whether known or
unknown, which the Employee ever had, now has or might have in the future as a
result of the Employee’s employment with the Employer or the termination thereof
hereunder, including, without limitation, any claim relating to the Employment
Agreement or the termination thereof hereunder or any claim relating to any
violation of any Canadian federal or provincial statute or regulation, any claim
for wrongful discharge or breach of contract or any claim relating to Canadian
federal or provincial laws (including, without limitation, the
Employment Standards Act
(Ontario) and the Ontario
Human Rights Code
),
provided
, however,
that such release and discharge shall be effective only upon the payment in full
by the Employer of the Severance Balance pursuant to Article 3. For
greater certainty, the release and discharge by the Employee pursuant to this
Section 5.1 shall have no force or effect whatsoever until such time, if ever,
that the Severance Balance is paid in full by the Employer to the
Employee. Notwithstanding the foregoing, nothing herein shall be
construed as depriving the Employee of any indemnification rights to which he is
entitled under the Amended and Restated By-laws of the Employer on or prior to
the Termination Date or of any protection to which he may be entitled, on, prior
to or after the Termination Date, under the Employer’s directors’ and officers’
liability insurance policy from time to time.
5.2 Section
12 of the Employment Agreement (Non-Competition) is hereby amended by replacing,
in the first paragraph thereof, the words “the business carried on during the
Employment Period or at the end thereof, as the case may be, by the Corporation
or any of its Subsidiaries.” with the words “(i) the Corporation’s RHEO business
and/or (ii) the business of OcuSense, Inc., as each of them was carried on
during the Employment Period.”.
5.3 The
Employment Agreement is hereby terminated and rendered null and void, save and
except for those provisions thereof that are expressly stated to survive the
termination thereof, including, without limitation, Section 12
(Non-Competition), as amended by Section 5.2 of this Agreement, and Sections 13
(No Solicitation of Patients), 14 (No Solicitation of Employees) 15
(Confidentiality) and 16 (Remedies). The Employee hereby agrees to
abide by such provisions, including, for greater certainty, Section 12 of the
Employment Agreement (Non-Competition), as amended by Section 5.2 of this
Agreement.
6.1 The
mitigation by the Employee of any damages or losses arising from the termination
hereunder of his employment with the Employer and the termination of the
Employment Agreement hereunder (including, without limitation, by obtaining
other employment) shall not, in any way, derogate from, or otherwise affect, the
Employee’s rights or the Employer’s obligations under this
Agreement. For greater certainty, and without derogating from the
generality of the foregoing statement, no amount to be paid by the Employer
under this Agreement shall be reduced by any compensation earned by the Employee
as a result of employment by another employer or otherwise after the Termination
Date.
7.
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THIRD
PARTY COMMUNICATIONS
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7.1 In
consideration of the mutual promises and covenants contained herein, each of the
parties hereto hereby agrees that he and it will not make any statements to, or
initiate or participate in any discussions with, any other person, including,
without limitation, the Employer’s customers, which are derogatory, disparaging
or injurious to the reputation of the Employee or the Employer. This
Section 7.1, in no way, shall be construed as prohibiting either party hereto
from responding truthfully to any question or interrogatory to which such party
is requested to respond.
8.1
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The
Employee hereby acknowledges that:
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(a)
|
He
has had sufficient time to review and consider this Agreement
thoroughly;
|
(b)
|
He
has read and understands the terms of this Agreement and his obligations
hereunder;
|
(c)
|
He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Agreement; and
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(d)
|
He
is entering this Agreement voluntarily and without any pressure from the
Employer.
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9.1 The
headings in this Agreement are included solely for convenience of reference and
shall not affect the construction or interpretation hereof.
9.2 The
parties hereto expressly agree that nothing in this Agreement shall be construed
as an admission of liability.
9.3 This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, trustees, administrators, successors and
assigns.
9.4 This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter of the termination of the Employee’s employment with the
Employer. This Agreement supersedes and replaces all prior
agreements, if any, written or oral, with respect to such subject matter and any
rights which the Employee may have by reason of any such prior agreements or by
reason of the Employee’s employment with the Corporation. There are
no representations, warranties or agreements between the parties hereto in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. No reliance is placed on any representation,
opinion, advice or assertion of fact made by the Employer or any of its
officers, directors, agents or employees to the Employee, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
9.5 Each
of the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any provision or part thereof
by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
9.6 This
Agreement shall be governed by, and construed in accordance with, the laws of
the Province of Ontario and the federal laws of Canada applicable
therein.
9.7 This
Agreement may be signed in counterparts and delivered by facsimile transmission
or other electronic means, and each of such counterparts shall constitute an
original document, and such counterparts, taken together, shall constitute one
and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Agreement.
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OCCULOGIX,
INC.
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By:
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“Suh
Kim”
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Suh
Kim
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General
Counsel
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“Stephen
Kilmer”
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Signature
of Witness
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Stephen
Kilmer
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Name
of Witness (
please
print
)
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Exhibit
10.50
Execution
Copy
LOAN
AGREEMENT
THIS
LOAN
AGREEMENT
(this “
Agreement
”), dated as of
February 19, 2008, is made by and among OccuLogix, Inc. (the “
Company
”), a Delaware
corporation with executive offices located at 2600 Skymark Avenue, Building 9,
Suite 201, Mississauga, Ontario, L4W 5B2, Canada, the lenders listed on the
Schedule of Lenders attached hereto as
Exhibit A
(individually, a
“Lender”
and, collectively,
the
“Lenders”
) and
Marchant Securities Inc. (the
“Collateral Agent”
), an
Ontario corporation with offices located at 100 York Boulevard, Suite 404,
Richmond Hill, Ontario, L4B 1J8, Canada.
BACKGROUND
A. The
Lenders have agreed to make available to the Company a loan in an aggregate
principal amount of U.S.$3,000,000 (the
“Loan”
) on the terms and
conditions of this Agreement. Each of the Lenders has agreed to
advance the amount set forth opposite his, her or its name on
Exhibit
A
, representing his,
her or its portion of the Loan (the
“Individual Lender’s
Advance”
).
B. The
Company is attempting to raise additional capital by way of a private placement
of shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”
).
C. The
Company’s obligations under this Agreement will be secured by a pledge of
1,754,589 shares of the Series A Preferred Stock of OcuSense, Inc. (
“OcuSense”
), representing
50.1% of the issued and outstanding shares of the capital stock of OcuSense, of
which the Company is the legal and beneficial owner.
D. The
proceeds of the Loan will be used (i) to fulfill the Company’s obligation, when
such obligation becomes due and owing, to pay the last U.S.$2,000,000
installment of the purchase price payable to OcuSense pursuant to the Series A
Preferred Stock Purchase Agreement, dated as of November 30, 2006, by and among
OcuSense and the Company, as amended on October 29, 2007, and (ii) for general
corporate purposes.
E. Each
of the Lenders is an
“accredited investor”
pursuant
to Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as
amended (the
“Securities
Act”
) and an
“accredited
investor”
pursuant to National Instrument 45-106—Prospectus and
Registration Exemptions (
“NI
45-106”
).
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and the Lenders hereby agree as
follows:
ARTICLE
I
LOAN
1.1
Advance
. Concurrently
with his, her or its execution and delivery of this Agreement, and subject to
the satisfaction or waiver of the closing conditions set forth in Article V in
favor of the Lenders, each Lender shall advance to the Company his, her or its
Individual Lender’s Advance by wire transfer in accordance with the Company’s
instructions or by personal check.
1.2
Maturity
Date
. The maturity date of the Loan (the
“Maturity Date”
) shall be the
180
th
day
following the date hereof, if the Company’s management proxy statement prepared
and filed in connection with the Private Placement (defined below) does not
become subject to “review” by the U.S. Securities and Exchange Commission or any
Canadian securities regulatory authority having jurisdiction (either, a
“Securities
Regulator”
). If such management proxy statement becomes
subject to “review” by a Securities Regulator, then the Maturity Date shall be
the 270
th
day
following the date hereof. The Company shall notify the Lenders as
promptly as reasonably possible of whether or not such management proxy
statement has become subject to “review” by a Securities Regulator.
1.3
Interest
. From
the date hereof until maturity (whether by acceleration or otherwise and both
before and after default), interest shall accrue on the unpaid principal amounts
outstanding hereunder on a quarterly basis, without allowance or deduction, at a
rate of 12% per annum, and shall be payable on the earliest to occur of (i) the
Maturity Date, (ii) the Pre-payment Date (defined below) and (iii) an Event of
Default (defined below). For illustrative purposes, the Schedule of
Interest attached hereto as
Exhibit B
sets forth
the amount of interest that will be payable to each of the Lenders if the Loan
remains outstanding until the Maturity Date.
1.4
Repayment
. In
the absence of any pre-payment of the Loan pursuant to Section 1.5 or any Event
of Default (defined below), on the Maturity Date, the Company shall pay the
Lenders, in cash, the outstanding principal amount of the Loan
plus
accrued and
unpaid interest thereon, calculated in accordance with Section
1.3. For greater certainty, the cash paid by the Company pursuant to
this Section 1.4 shall be allocated among the Lenders on a
pro rata
basis, in accordance
with each Lender’s Individual Lender’s Advance.
1.5
Pre-payment
. At
its option, and within its sole discretion, the Company may pre-pay the Loan in
full at any time prior to the Maturity Date (the
“Pre-Payment Date”
)
by:
(a) (i)
paying to the Lenders, in cash, the outstanding principal amount of the Loan
plus
accrued
and unpaid interest thereon, calculated in accordance with Section 1.3, and (ii)
issuing to the Lenders warrants (the
“Warrants”
), substantially in
the form of the Warrant attached hereto as
Exhibit C
,
exercisable into shares of the Common Stock, at an exercise price of U.S.$0.10
per share, and exercisable into shares of the Common Stock in an aggregate
number equal to approximately 19.9% of the issued and outstanding shares of the
Common Stock on the Pre-payment Date but which, in no event, shall exceed 20% of
the issued and outstanding shares of the Common Stock on the Pre-payment Date
(the
“Warrant Shares”
);
or
(b) by
no later than the tenth day following the date of closing of a private placement
by the Company of shares of the Common Stock for aggregate gross proceeds of no
less than U.S.$4,000,000 (the
“Private Placement”
), issuing
to the Lenders shares of the Common Stock in an aggregate amount equal to the
outstanding principal amount of the Loan
plus
accrued and
unpaid interest thereon, calculated in accordance with Section 1.3, at a per
share price that is 15% less than the per share price paid by the investors in
the Private Placement but on other terms and conditions substantially similar to
those accepted by the investors in the Private Placement,
provided
that the
Company shall have obtained all of the corporate and regulatory approvals
reasonably necessary for the issuance to the Lenders of shares of the Common
Stock pursuant to this Section 1.5(b).
In the
event of any pre-payment of the Loan pursuant to Section 1.5(a), the Warrants
shall be allocated among the Lenders on a
pro rata
basis, in accordance
with each Lender’s Individual Lender’s Advance. Each of the Warrants
shall be exercisable into a whole number of Warrant Shares, and, under no
circumstance, shall the Company be obligated to issue a Warrant which, when
exercised, will be exercisable into, or otherwise give rise to any obligation on
the part of the Company to issue, a fractional Warrant Share. For
greater certainty, the cash portion of any pre-payment of the Loan pursuant to
Section 1.5(a) shall be allocated among the Lenders on a
pro rata
basis, in accordance
with each Lender’s Individual Lender’s Advance.
In the
event of any pre-payment of the Loan pursuant to Section 1.5(b), the shares of
the Common Stock to be issued to the Lenders shall be allocated among the
Lenders on a
pro rata
basis, in accordance with each Lender’s Individual Lender’s
Advance. Under no circumstance, shall the Company be obligated to
issue a fractional share of the Common Stock, and, if any fraction of a share of
the Common Stock would be issuable to a Lender but for the application of this
provision of this Section 1.5, then the number of shares of the Common Stock
issuable to such Lender shall be rounded down to the nearest whole
number.
The
Warrants, the Warrant Shares and the shares of the Common Stock issued pursuant
to Section 1.5(b) are referred to hereinafter, collectively, as the
“Securities”
.
1.6
Use of
Proceeds
. The Lenders hereby acknowledge, and agree to, the
use of proceeds of the Loan described in Recital D hereof.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
2.1
Representations and
Warranties of the Company
. The Company hereby represents and
warrants to the Lenders as follows:
(a)
Organization and
Qualification
. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite legal authority to own and use its properties and assets
and to carry on its business as currently conducted. The Company is
not in violation of any of the provisions of its certificate of incorporation,
bylaws or other organizational or charter documents. The Company is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by the Company makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not, individually or in the aggregate, have, or reasonably be expected
to result in, a Material Adverse Effect (defined below). For purposes
of this Agreement,
“Material
Adverse Effect”
means (i) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and its
subsidiaries, taken as a whole on a consolidated basis, or (ii) material and
adverse impairment of the Company’s ability to perform its obligations under
this Agreement,
provided
that none of
the following alone shall be deemed, in and of itself, to constitute a Material
Adverse Effect: (A) a change in the market price or trading volume of
the Common Stock or (B) changes in general economic conditions or changes
affecting the industry in which the Company operates generally (as opposed to
Company-specific changes) so long as such changes do not have a disproportionate
effect on the Company and its subsidiaries, taken as a whole.
(b)
Authorization;
Enforcement
. The Company has the requisite corporate authority
to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the Share
Pledge Agreement (defined below) have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes, and the Share Pledge
Agreement (defined below), when executed and delivered in accordance with the
terms hereof, will constitute, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of creditors’
rights generally and (ii) the effect of rules of law governing the availability
of specific performance and other equitable remedies.
(c)
No
Conflicts
. The execution and delivery by the Company of this
Agreement and the Share Pledge Agreement (defined below), and the performance by
the Company of its obligations hereunder and thereunder, do not and will not (i)
conflict with or violate any provision of the Company’s certificate of
incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default under (or an event that, with notice or
lapse of time or both, would become a default under), or give to others any
rights of termination, amendment, acceleration or cancellation under (with or
without notice, lapse of time or both), any agreement, credit facility, debt or
other instrument evidencing a debt of the Company or other understanding to
which the Company is a party, or by which any of its properties or assets is
bound, except to the extent that such conflict or default or termination,
amendment, acceleration or cancellation right would not reasonably be expected
to have a Material Adverse Effect, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject, or by which
any of its properties or assets is bound, except to the extent that such
violation would not reasonably be expected to have a Material Adverse
Effect.
(d)
The
Securities
. On the Pre-payment Date, if any, the Securities to
be issued pursuant to Section 1.5(a) or 1.5(b), as the case may be, will be duly
authorized and, when issued and paid for in accordance with this Agreement, will
be duly and validly issued and outstanding, fully paid and non-assessable, free
and clear of all liens and will not be subject to pre-emptive or similar rights
of stockholders of the Company (other than any that may be imposed by the
Lenders).
(e)
Litigation
. There
is no action, suit, claim or proceeding or, to the knowledge of the Company,
inquiry or investigation, before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company that would be reasonably
expected, individually or in the aggregate, to have a Material Adverse
Effect.
(f)
Share Pledge
Agreement
. The Share Pledge Agreement (defined below) creates
a valid first priority security interest in the Collateral (defined
below).
2.2
Representations and
Warranties of the Lenders
.
(a)
Organization;
Authority
. In
the case of a Lender that is not a natural person, (i) such Lender is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate, partnership or
other power and authority to enter into this Agreement and to carry out its
obligations hereunder, and (ii) the execution and delivery of this Agreement
have been duly authorized by all necessary corporate, partnership or other
action on the part of such Lender. In the case of all Lenders,
whether or not a natural person, this Agreement has been duly executed and
delivered by such Lender and constitutes a valid and binding obligation of such
Lender, enforceable against him, her or it in accordance with its terms, except
as may be limited by (A) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors’ rights generally and (B) the effect of rules of law governing the
availability of specific performance and other equitable remedies.
(b)
No Public Sale or
Distribution
. On the Pre-payment Date, if any, such Lender
will be acquiring the Warrants or shares of the Common Stock, as the case may
be, and, if applicable, upon exercise of the Warrants, will be acquiring the
Warrant Shares issuable upon the exercise thereof, in the ordinary course of
business for his, her or its account and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered under the Securities Act or under an exemption from such
registration and in compliance with applicable U.S. federal and state securities
laws, or except pursuant to a valid prospectus and registration under applicable
Canadian provincial and territorial securities laws and regulations or under an
exemption from the prospectus and registration requirements thereunder and in
compliance with applicable Canadian provincial and territorial securities laws
and regulations, and such Lender does not have a present arrangement to effect
any distribution of the Securities to or through any person or
entity.
(c)
Investor
Status
. On the date hereof and on the Pre-payment Date, if
any, such Lender is and will be, respectively, (i) an
“accredited investor”
as
defined in Rule 501(a) promulgated under Regulation D of the Securities Act, if
he, she or it is a resident of the U.S., and (ii) an
“accredited investor”
as
defined in NI 45-106, if he, she or it is a resident of Canada.
(d)
Experience of
Lender
. Such Lender, either alone or together with his, her or
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of entering into this Agreement and making his, her or its Individual
Lender’s Advance and the merits and risks of the prospective investment in the
Securities, and such Lender has so evaluated such merits and
risks. Such Lender understands that he, she or it must bear the
economic risk of an investment in the Securities, if any, indefinitely and is
able to bear such risk and to afford a complete loss of such
investment.
(e)
Access to
Information
. Such Lender acknowledges that he, she or it has
reviewed the SEC Reports (defined below) and has been afforded (i) the
opportunity to ask such questions as he, she or it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the terms and
conditions of this Agreement and the merits and risks of the prospective
investment in the Securities, (ii) access to information about the Company and
its subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
him, her or it to evaluate the terms and conditions of this Agreement and the
merits and risks of the prospective investment in the Securities and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed decision.
“SEC Reports”
means the
reports required to be filed by the Company under the Securities Exchange Act of
1934, as amended (the
“Exchange
Act”
), including pursuant to Section 13(a) or 15(d) thereof, together
with any materials filed or furnished by the Company under the Exchange Act,
whether or not any such reports were required to be filed or
furnished.
(f)
No Governmental
Review
. Such Lender understands that no United States federal
or state agency, Canadian provincial or territorial securities commission or any
other government or governmental agency has passed on or made, or will pass on
or make, any recommendation or endorsement of the Securities or the fairness or
suitability of the prospective investment in the Securities.
(g)
Securities
Transactions
. Such Lender has not engaged, directly or
indirectly, and no person or entity acting on behalf of or pursuant to any
understanding with such Lender has engaged, in any purchases or sales of any
securities of the Company since the time such Lender was first contacted by the
Company, or by any other person or entity, regarding an investment in the
Company, including this Agreement and the transactions contemplated
herein.
(h)
Restricted
Securities
. Such Lender understands that the Securities will
be characterized as
“restricted
securities”
under U.S. federal securities laws inasmuch as, if issued,
they will be acquired from the Company in a transaction not involving a public
offering and that, under U.S. federal securities laws and applicable
regulations, the Securities may be resold without registration under the
Securities Act only in certain limited circumstances. Such Lender
acknowledges that all certificates representing any of the Securities will bear
a restrictive legend to the foregoing effect and hereby consents to the transfer
agent for the Common Stock making a notation on its records to implement the
restrictions on transfer described herein. Such Lender acknowledges
that the Securities will not be qualified for distribution to the public in
Canada and that such Lender will not, directly or indirectly, offer or re-sell
the Securities in Canada or to any Canadian resident, or to any person or entity
who is acting on behalf of a Canadian resident or to any person or entity whom
he, she or it believes intends to re-offer, re-sell or deliver any of the
Securities in Canada, unless permitted under applicable Canadian provincial and
territorial securities laws and regulations.
(i)
No Legal, Tax or Investment
Advice
. Such Lender understands that nothing in this Agreement
or any other materials presented by or on behalf of the Company to him, her or
it in connection with this Agreement and the transactions contemplated herein,
including the prospective investment in the Securities, constitutes legal, tax
or investment advice. Such Lender has consulted such legal, tax and
investment advisors as he, she or it, in his, her or its sole discretion, has
deemed necessary or appropriate in the circumstances.
ARTICLE
III
SECURITY
3.1
Share Pledge
Agreement
. As continuing collateral security for all
indebtedness, obligations and liabilities, present or future, absolute or
contingent, matured or not, at any time owing by the Company to any of the
Lenders, or remaining unpaid to any of the Lenders, under or in connection with
this Agreement (collectively, the
“Secured Obligations”
), the
Company shall execute and deliver the share pledge agreement, in the form of the
Share Pledge Agreement attached hereto as
Exhibit D
(the
“Share Pledge
Agreement”
). The Share Pledge Agreement shall be entered into
in favor of the Collateral Agent for the rateable benefit of the
Lenders.
3.2
Appointment of Collateral
Agent
. Each of the Lenders hereby irrevocably designates and
appoints the Collateral Agent as the collateral agent of such Lender under the
Share Pledge Agreement, and each of the Lenders hereby irrevocably authorizes
the Collateral Agent, in such capacity, to take such action on such Lender’s
behalf under the Share Pledge Agreement, and to exercise such powers and perform
such duties, as are expressly delegated to the Collateral Agent by the
provisions of this Agreement and/or the Share Pledge Agreement, together with
such other powers as are reasonably incidental thereto, including the power to
execute documents on behalf of the Lenders. The Collateral Agent
hereby accepts such designation and appointment and agrees to perform its
obligations as collateral agent in accordance with the provisions of this
Agreement and the Share Pledge Agreement. Notwithstanding any
contrary provision in this Agreement or the Share Pledge Agreement, the
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth herein or therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the Share Pledge
Agreement or otherwise shall exist against the Collateral Agent. The
Collateral Agent hereby declares that it shall hold the collateral charged by
the Share Pledge Agreement (the
“Collateral”
) and the rights
granted to it under this Agreement and the Share Pledge Agreement solely in its
capacity as collateral agent for the rateable benefit of the
Lenders. Notwithstanding any other provision in this Agreement or the
Share Pledge Agreement, the Collateral Agent may refrain from doing anything
which would be, or might be in its reasonable opinion, contrary to any
applicable law.
3.3
Delegation of
Duties
. The Collateral Agent may perform any of its duties
under this Agreement and the Share Pledge Agreement by or through agents or
attorneys-in-fact and shall be entitled to rely upon the advice of counsel
concerning all matters pertaining to such duties. The Collateral
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact,
provided
that they
were selected by the Collateral Agent with reasonable care.
3.4
Exculpatory
Provisions
. None of the Collateral Agent or any of its
officers, directors, employees, agents or attorneys-in-fact shall be liable for
any action lawfully taken or omitted to be taken by it or such person under, or
in connection with, this Agreement or the Share Pledge Agreement (except for its
or such person’s gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction). The Collateral Agent
shall have no obligation to any of the Lenders to ascertain, or to inquire as
to, the observance or performance by the Company of any of its agreements or
covenants contained herein or the Share Pledge Agreement or to inspect the
properties, books or records of the Company.
3.5
Reliance by Collateral
Agent
. The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, fax, statement, e-mail message, order
or other document or conversation believed by the Collateral Agent to be genuine
and correct and to have been signed, sent or made by the proper person or
persons and upon the advice of legal counsel, accountants or other
experts. The Collateral Agent shall be entitled to refuse to take, or
continue to take, any action under this Agreement or the Share Pledge Agreement
unless it first receives such advice or concurrence of Required Lenders (defined
below) as the Collateral Agent deems appropriate or unless it shall be
indemnified to its satisfaction by the Lenders against any and all liability
that may be incurred by it by reason of taking, or continuing to take, such
action. For purposes of this Agreement,
“Required Lenders”
means
Lenders whose Individual Lender’s Advances, in aggregate, total 50% or more of
the principal amount of the Loan. In all cases, the Collateral Agent
shall be fully protected in acting, or in refraining from acting, under this
Agreement or the Share Pledge Agreement in accordance with any written request
of Required Lenders, and such request, together with any action or omission
pursuant thereto, shall be binding upon all of the Lenders.
3.6
Indemnification
. Each
of the Lenders hereby agrees to indemnify the Collateral Agent in its capacity
as collateral agent, ratably in accordance with his, her or its Individual
Lender’s Advance, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever that may be imposed on, incurred by or asserted against
the Collateral Agent, at any time (including at any time following the payment
in full of the Secured Obligations), in any way relating to, or arising from,
this Agreement or the Share Pledge Agreement, or the transactions contemplated
herein or therein, or any action or omission in connection with any of the
foregoing (the
“Collateral
Agent’s Claims”
),
provided
, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Collateral Agent’s gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. This Section 3.6 shall survive until the
first anniversary of the date of payment in full of the Secured
Obligations.
3.7
Successor Collateral
Agent
. The Collateral Agent may resign as collateral agent
upon 20 days’ prior written notice to the Lenders and the Company. If
Required Lenders deem it advisable, they may terminate the Collateral Agent’s
authority to act on behalf of the Lenders pursuant to this Article III upon 20
days’ prior written notice to the other Lenders and the Company. If
the Collateral Agent resigns, or if its authority to act on behalf of the
Lenders is terminated, pursuant to this Section 3.7, then Required Lenders shall
appoint, from among the Lenders, a successor collateral agent, which successor
collateral agent shall be approved by the Company (which approval shall not be
withheld unreasonably), whereupon such successor collateral agent shall succeed
to the rights, powers and duties of the Collateral Agent, and the term
“Collateral Agent”
shall mean
such successor collateral agent effective upon such appointment and approval,
and whereupon the former Collateral Agent’s rights, powers and duties as
collateral agent shall be terminated, without any other further act or deed on
the part of any of the former Collateral Agent, the Lenders or the
Company. After its resignation or termination as collateral agent,
the provisions of this Article III shall inure to the benefit of any former
Collateral Agent with respect to any and all of its actions or omissions while
it acted as collateral agent under this Agreement and the Share Pledge
Agreement.
3.8
Enforcement of
Security
. Upon an Event of Default (defined below), the
security constituted by the Share Pledge Agreement (the
“Security”
) shall become
enforceable, and Required Lenders thereafter may provide the Collateral Agent
with a written request to enforce the Security.
3.9
Application of Proceeds of
Realization
. Subject to the claims, if any, of the Company’s
creditors whose claims rank in priority to the Security, all cash Proceeds of
Realization (defined below) shall be applied and distributed as
follows:
(a) first,
to the payment of all reasonable costs and expenses incurred by the Collateral
Agent (including legal fees and disbursements) in the exercise of any or all of
the powers granted to it under this Agreement and/or the Share Pledge Agreement
and to the payment of the remuneration of any receiver appointed by the
Collateral Agent or by a court at the instance of the Collateral Agent in
respect of the Collateral or any part thereof (a
“Receiver”
) and all costs and
expenses properly incurred by such Receiver (including legal fees and
disbursements) in the exercise of any or all of the powers granted to
it;
(b) second,
to the payment of all amounts of money borrowed or advanced, if any, by the
Collateral Agent or a Receiver and any interest thereon;
(c) third,
to the payment of the Secured Obligations to the Lenders,
pro rata
in accordance with
their respective Individual Lender’s Advances; and
(d) the
balance, if any, in accordance with applicable law.
“Proceeds of Realization”
means proceeds derived by, or on behalf of, the Collateral Agent from any sale,
disposition or other realization of the Collateral.
3.10
Discharge of
Security
. In the event of a permitted sale or other
disposition of any of the Collateral, the Security therein shall terminate
automatically and be deemed discharged and released. Each of the
Lenders hereby authorizes the Collateral Agent, at the expense of the Company,
to execute and deliver such discharges and other instruments necessary or
advisable for the purposes of releasing and discharging the Security therein, of
recording the provision or effect thereof in any public office where the
Security may be registered or recorded and of more fully and effectively
carrying out the intent of this Section 3.10.
3.11
Further
Assurances
. From time to time, upon the reasonable request of
the Collateral Agent, the Company shall make, do and execute and deliver, or
cause to be made, done and executed and delivered, all such further acts, deeds,
assurances, documents and things as may be necessary or advisable, in the
reasonable opinion of the Collateral Agent, to perfect the Security or to carry
out more fully and effectively the intent of this Agreement and the Share Pledge
Agreement.
ARTICLE
IV
COVENANTS
4.1
Covenants of the
Company
. Until the Secured Obligations are paid in full, the
Company hereby agrees:
(a) to
pay, whenever due, all principal, interest and other amounts outstanding under
this Agreement;
(b) to
comply with all of its obligations under this Agreement and the Share Pledge
Agreement;
(c) to
notify the Lenders and the Collateral Agent promptly of (i) any material breach
by the Company of its representations and warranties or covenants herein or in
the Share Pledge Agreement and (ii) any Event of Default (defined
below);
(d) not
to create, assume or suffer to exist any lien upon the Collateral ranking ahead
of, or in priority to, the Security;
(e) not
to sell, or otherwise dispose of, the Collateral unless the proceeds of such
sale or disposition shall be sufficient to pay the Secured Obligations in full
and shall be so used,
provided
that nothing
in this Section 4.1(e) shall be read or construed as prohibiting the Company
from selling, or otherwise disposing of, the Collateral if the proceeds of such
sale or disposition shall be sufficient to pay the Secured Obligations in full
and shall be so used; and
(f) to
do, or cause to be done, all things necessary or desirable to maintain the
Company’s existence and good standing under the laws of the State of Delaware
and the Company’s legal authority to own and use its properties and assets and
to carry on its business as currently conducted.
4.2
Covenants of the
Lenders
. Each of the Lenders hereby, as to himself, herself or
itself and for no other Lender, agrees:
(a) to
notify the Company promptly of any material breach by him, her or it of his, her
or its representations and warranties or covenants herein;
(b) at
the Closing (defined below), to complete and execute and deliver the Accredited
Investor Certificate attached hereto as
Exhibit E
, if such
Lender is a resident of the U.S., and the Accredited Investor Certificate
attached hereto as
Exhibit F
, if such
Lender is a resident of Canada (either, the
“Accredited Investor
Certificate”
);
(c) at
all times until the Maturity Date, to remain (i) an
“accredited investor”
as
defined in Rule 501(a) promulgated under Regulation D of the Securities Act, if
he, she or it is a resident of the U.S., and (ii) an
“accredited investor”
as
defined in NI 45-106, if he, she or it is a resident of Canada; and
(d) upon
a breach of the covenant contained in Section 4.2(c), to assign his, her or its
rights and obligations under, and his, her or its right, title and interest in
and to, this Agreement and the Share Pledge Agreement, to a U.S. or Canadian
resident third party approved by the Company in writing (which approval shall
not be withheld unreasonably) that qualifies as an
“accredited investor”
as
defined in Rule 501(a) promulgated under Regulation D of the Securities Act, if
such third party is a resident of the U.S., and an
“accredited investor”
as
defined in NI 45-106, if such third party is a resident of Canada, and that
certifies in writing its
“accredited investor”
status
and agrees, in writing, to assume such Lender’s obligations under this
Agreement.
ARTICLE
V
CONDITIONS
5.1
C
losing C
onditions
in Favor of the
Lenders
. The obligation of each of the Lenders to advance its
Individual Lender’s Advance is subject to the satisfaction, or the waiver by
such Lender, on or prior to such advance (the
“Closing”
), of each of the
following conditions:
(a)
Representations and
Warranties
. The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the
date hereof and as of the Closing as though made on and as of such
date;
(b)
Share Pledge
Agreement
. The Company shall have executed and delivered the
Share Pledge Agreement; and
(c)
Performance
. The
Company shall have performed, satisfied and complied with, in all material
respects, all covenants, agreements and conditions required by this Agreement or
the Share Pledge Agreement to be performed, satisfied or complied with by it at
or prior to the Closing.
5.2
C
losing Conditions in Favor
of the Company
. The entering into of this Agreement by the
Company with each of the Lenders, and the acceptance by the Company of such
Lender’s Individual Lender’s Advance, is subject to the satisfaction, or the
waiver by the Company, at or prior to the Closing, of each of the following
conditions:
(a)
Representations and
Warranties
. The representations and warranties of such Lender
contained herein shall be true and correct in all material respects as of the
date hereof and as of the Closing as though made on and as of such
date;
(b)
Accredited Investor
Certificate
. Such Lender shall have completed and executed and
delivered the Accredited Investor Certificate in accordance with Section 4.2(b);
and
(c)
Performance
. Such
Lender shall have performed, satisfied and complied with, in all material
respects, all other covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by him, her or it at or
prior to the Closing.
ARTICLE
VI
EVENTS OF
DEFAULT
6.1
Events of
Default
. The occurrence of any of the following events shall
constitute an
“Event of
Default”
:
(a)
Failure to
Pay
. The Company defaults in the payment, when due and
payable, of the outstanding principal amount of the Loan
plus
accrued and
unpaid interest thereon, calculated in accordance with Section 1.3, and such
default continues for seven days or longer;
(b)
Breach of Representation and
Warranty or Covenant
. Without duplication of Section 6.1(a),
the Company breaches, in a material respect, any representation and warranty or
covenant contained herein or in the Share Pledge Agreement and fails to remedy
such material breach, to the satisfaction of Required Lenders, on or prior to
the tenth day following the earlier to occur of (i) the date on which Required
Lenders notify the Company, in writing, of such material breach and (ii) the
date on which the Company becomes aware of such material breach;
or
(c)
Bankruptcy
. The
Company (i) commences a voluntary case or proceeding, (ii) consents to the entry
of an order for relief against it in an involuntary case or proceeding, (iii)
consents to the appointment of a trustee, receiver, receiver and manager,
liquidator, administrator or other similar official of it or for all or
substantially all of its properties and assets, (iv) makes a general assignment
for the benefit of its creditors, (v) consents to the filing of a petition in
bankruptcy against it or (vi) takes any comparable action, under the
Bankruptcy and Insolvency Act
(Canada), the
Companies
Creditors Arrangement Act
(Canada) or Title 11 of the United States Code,
as such laws may be supplemented or amended from time to time, together with all
rules, regulations and instruments made thereunder, or any other similar
Canadian law, U.S. federal or state law or foreign law relating to bankruptcy,
insolvency, winding up, administration, receivership or other similar
matters.
Upon an
Event of Default, Required Lenders may declare the outstanding principal amount
of the Loan
plus
accrued and
unpaid interest thereon, calculated in accordance with Section 1.3, to be due
and payable immediately.
ARTICLE
VII
GENERAL
7.1
Amendments;
Waivers
. No provision of this Agreement or the Share Pledge
Agreement may be amended or waived except in a written instrument signed, (i) in
the case of an amendment, by the Company, Required Lenders and the Collateral
Agent or (ii) in the case of a waiver, by the party against whom enforcement of
any such waiver is sought,
provided
that, in the
case of waiver by or on behalf of all of the Lenders, such written instrument
shall be signed by Required Lenders. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right. The Collateral Agent
may enter into technical, minor or administrative amendments to the Share Pledge
Agreement without the consent of the Lenders.
7.2
Notices
. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice
or communication is delivered via facsimile or e-mail at the facsimile number or
e-mail address referred to in this Section 7.2 prior to 6:30 p.m. (Eastern
time) on a business day in the Province of Ontario (
“Business Day”
), (b) the
next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile or e-mail at the facsimile number or
e-mail address referred to in this Section 7.2 on a day that is not a Business
Day or later than 6:30 p.m. (Eastern time) on any Business Day, (c) the
Business Day following the date of deposit with a nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom
such notice is required to be given. The addresses, facsimile numbers
and e-mail addresses for such notices and communications are those set forth on
the signature pages hereof, or such other address, facsimile number or e-mail
address as may be designated in writing hereafter, in the same manner, by the
relevant party hereto.
7.3
Survival
. All
representations and warranties and covenants herein shall survive the execution
and delivery of this Agreement and the advance by each of the Lenders of his,
her or its Individual Lender’s Advance.
7.4
Headings
. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
7.5
Meaning of
“Including”
. The
word
“including”
,
whenever used in this Agreement, shall be deemed to be followed by the phrase
“without
limitation”
.
7.6
Entire
Agreement
. This Agreement, together with the Exhibits hereto,
and the Share Pledge Agreement contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such agreements and exhibits. At or
after the Closing, and without further consideration, the parties hereto will
make, do and execute and deliver, or cause to be made, done and executed and
delivered, such further acts, deeds, assurances, documents and things as may be
reasonably requested by any of the other parties hereto in order to give
practical effect to the intention of the parties hereunder.
7.7
Successors and
Assigns
. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of Required
Lenders. Without derogating from the obligation contained in Section
4.2(d), each of the Lenders may assign its rights and obligations under, and
his, her or its right, title and interest in and to, this Agreement to a U.S. or
Canadian resident third party approved by the Company in writing (which approval
shall not be withheld unreasonably) that qualifies as an
“accredited investor”
as
defined in Rule 501(a) promulgated under Regulation D of the Securities Act, if
such third party is a resident of the U.S., and an
“accredited investor”
as
defined in NI 45-106, if such third party is a resident of Canada, and that
certifies in writing its
“accredited investor”
status
and agrees, in writing, to assume such Lender’s obligations under this
Agreement.
7.8
No Third
Party
Beneficiaries
. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person or entity.
7.9
Governing Law
;
Venue
. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE
FEDERAL LAWS OF CANADA APPLICABLE THEREIN. THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
PROVINCE OF ONTARIO FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY ANY OF THE
PARTIES HERETO, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED
HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF THE
SHARE PLEDGE AGREEMENT), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY OF THE OTHER PARTIES HERETO,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER.
7.10
Execution
. This
Agreement may be executed by one or more of the parties hereto on any number of
separate counterparts (including by facsimile or e-mail transmission), all of
which when taken together shall be considered one and the same
agreement. In the event that any signature is delivered by facsimile
transmission or e-mail attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or e-mail-attached
signature page were an original thereof.
7.11
Severability
. If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
[SIGNATURE
PAGES TO FOLLOW]
IN WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“William G.
Dumencu”
|
|
|
Name:
|
William
G. Dumencu
|
|
|
Title:
|
Chief
Financial Officer and Treasurer
|
|
|
|
|
|
Address for
Notices
:
|
|
2600
Skymark Avenue
|
|
Building
9, Suite 201
|
|
Mississauga,
Ontario
|
|
L4W
5B2
|
|
|
|
Fax
No.: 905-602-7623
|
|
Telephone
No.: 905-602-0887
|
|
E-mail:
elias.vamvakas@occulogix.com
;
or
bill.dumencu@occulogix.com
|
|
|
|
Attention: Elias
Vamvakas and William G. Dumencu
|
|
|
|
|
|
|
|
|
|
MARCHANT SECURITIES INC.,
as the Collateral Agent
|
|
|
|
|
|
By:
|
“Gregory L. Marchant”
|
|
|
Name:
|
Gregory
L. Marchant
|
|
|
Title:
|
President
and CEO
|
|
|
|
|
|
Address for
Notices
:
|
|
100
York Boulevard, Suite 404
|
|
Richmond
Hill, Ontario
|
|
L4B
1J8
|
|
|
|
|
|
Fax
No.: 416-322-7527
|
|
Telephone
No.: 416-322-9700, ext. 5000
|
|
E-mail: gmarchant@marchantsecurities.com
|
|
|
|
|
|
Attention: Gregory
L. Marchant
|
Lender Signature
Page
By his,
her or its execution and delivery of this signature page, the undersigned hereby
joins in and agrees to be bound by the terms and conditions of the Loan
Agreement, dated as of, 2008 (the
“Loan Agreement”
), by and
among OccuLogix, Inc., the Lenders (as defined therein) and Marchant Securities
Inc. and authorizes this signature page to be attached to the Loan Agreement or
counterparts thereof.
|
Name
of Lender:
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
|
Telephone
No.:
|
|
|
Facsimile
No.:
|
|
|
E-mail
Address:
|
|
|
|
Exhibit
A
SCHEDULE
OF LENDERS
Lender
|
Individual Lender’s
Advance (U.S.$)
|
1243690
Ontario Inc.
|
$90,000
|
|
|
1317179
Ontario Inc.
|
$25,000
|
|
|
2144304
Ontario Inc.
|
$35,000
|
|
|
6319335
Canada Inc.
|
$30,000
|
|
|
Nikolai
Antropov
|
$50,000
|
|
|
Simon
Benstead
|
$150,000
|
|
|
Botch
Inc.
|
$100,000
|
|
|
Jennifer
Colton
|
$10,000
|
|
|
Michael
Colton
|
$10,000
|
|
|
Prakesh
Dhadphale
|
$25,000
|
|
|
Julia
Della Maestra
|
$200,000
|
|
|
Discovery
Place Child Care Centre Ltd.
|
$50,000
|
|
|
DME
Holdings Inc.
|
$50,000
|
|
|
Excite
Holdings Corporation
|
$25,000
|
|
|
Robert
I. Gans, M.D., Trustee
|
$15,000
|
|
|
Stephanie
Gowing
|
$75,000
|
|
|
Gail
M. Horwitz
|
$15,000
|
|
|
JimJan
Consultants Inc.
|
$150,000
|
|
|
Kaleo
Financial Inc.
|
$75,000
|
|
|
Deborah
A. Karp, as Trustee under the Deborah A. Karp Revocable Trust Agreement
dated May 6, 2004
|
$20,000
|
|
|
Peter
McCague
|
$25,000
|
|
|
MSW
Investments Limited
|
$100,000
|
|
|
Chris
Nianiaris
|
$125,000
|
|
|
Terry
O’Neal
|
$50,000
|
|
|
Sharon
Padzensky
|
$50,000
|
|
|
Mary
Pejic
|
$65,000
|
|
|
Peoples
International Co. Inc.
|
$50,000
|
|
|
Etienne
Puckett and Tracy Puckett
|
$50,000
|
|
|
Carol
Ann Rees
|
$75,000
|
|
|
Vladimir
Riajskikh
|
$25,000
|
|
|
Daniel
Veal and Elizabeth Veal
|
$75,000
|
|
|
Jimmy
Veal and Linda Veal
|
$50,000
|
|
|
Zachry
Veal and Leigh Veal
|
$75,000
|
|
|
Peter
Volpe
|
$50,000
|
|
|
Glenn
Warheit and Dayna Warheit, Joint Tenants
|
$10,000
|
|
|
Glenn
Warheit, Trustee FBO Glenn A. Warheit Living Trust
|
$25,000
|
|
|
Lynne
Warheit and Phil Warheit, Joint Tenants
|
$50,000
|
|
|
Dr.
Brock Wright
|
$550,000
|
|
|
Dr.
Brock Wright in trust
|
$100,000
|
|
|
Janet
E. Wright
|
$200,000
|
Exhibit
B
Lender
|
Individual
Lender’s Advance
(U.S.$)
|
Interest
earned
for 180 days
|
Interest
earned
for 270
days
|
1243690
Ontario Inc.
|
$90,000
|
$ 5,326.03
|
$ 7,989.04
|
1317179
Ontario Inc.
|
$25,000
|
$ 1,479.45
|
$ 2,219.18
|
2144304
Ontario Inc.
|
$35,000
|
$ 2,071.23
|
$ 3,106.85
|
6319335
Canada Inc.
|
$30,000
|
$ 1,775.34
|
$ 2,663.01
|
Nikolai
Antropov
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Simon
Benstead
|
$150,000
|
$ 8,876.71
|
$ 13,315.07
|
Botch
Inc.
|
$100,000
|
$ 5,917.81
|
$ 8,876.71
|
Jennifer
Colton
|
$10,000
|
$ 591.78
|
$ 887.67
|
Michael
Colton
|
$10,000
|
$ 591.78
|
$ 887.67
|
Prakesh
Dhadphale
|
$25,000
|
$ 1,479.45
|
$ 2,219.18
|
Julia
Della Maestra
|
$200,000
|
$ 11,835.62
|
$ 17,753.42
|
Discovery
Place Child Care Centre Ltd.
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
DME
Holdings Inc.
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Excite
Holdings Corporation
|
$25,000
|
$ 1,479.45
|
$ 2,219.18
|
Robert
I. Gans, M.D., Trustee
|
$15,000
|
$ 887.67
|
$ 1,331.51
|
Stephanie
Gowing
|
$75,000
|
$ 4,438.36
|
$ 6,657.53
|
Gail
M. Horwitz
|
$15,000
|
$ 887.67
|
$ 1,331.51
|
JimJan
Consultants Inc.
|
$150,000
|
$ 8,876.71
|
$ 13,315.07
|
Kaleo
Financial Inc.
|
$75,000
|
$ 4,438.36
|
$ 6,657.53
|
Deborah
A. Karp, as Trustee under the Deborah A. Karp Revocable Trust Agreement
dated May 6, 2004
|
$20,000
|
$ 1,183.56
|
$ 1,775.34
|
Peter
McCague
|
$25,000
|
$ 1,479.45
|
$ 2,219.18
|
MSW
Investments Limited
|
$100,000
|
$ 5,917.81
|
$ 8,876.71
|
Chris
Nianiaris
|
$125,000
|
$ 7,397.26
|
$ 11,095.89
|
Terry
O’Neal
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Sharon
Padzensky
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Mary
Pejic
|
$65,000
|
$ 3,846.58
|
$ 5,769.86
|
Peoples
International Co. Inc.
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Etienne
Puckett and Tracy Puckett
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Carol
Ann Rees
|
$75,000
|
$ 4,438.36
|
$ 6,657.53
|
Vladimir
Riajskikh
|
$25,000
|
$ 1,479.45
|
$ 2,219.18
|
Daniel
Veal and Elizabeth Veal
|
$75,000
|
$ 4,438.36
|
$ 6,657.53
|
Jimmy
Veal and Linda Veal
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Zachry
Veal and Leigh Veal
|
$75,000
|
$ 4,438.36
|
$ 6,657.53
|
Peter
Volpe
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Glenn
Warheit and Dayna Warheit, Joint Tenants
|
$10,000
|
$ 591.78
|
$ 887.67
|
Glenn
Warheit, Trustee FBO Glenn A. Warheit Living Trust
|
$25,000
|
$ 1,479.45
|
$ 2,219.18
|
Lynne
Warheit and Phil Warheit, Joint Tenants
|
$50,000
|
$ 2,958.90
|
$ 4,438.36
|
Dr.
Brock Wright
|
$550,000
|
$ 32,547.95
|
$ 48,821.92
|
Dr.
Brock Wright in trust
|
$100,000
|
$ 5,917.81
|
$ 8,876.71
|
Janet
E. Wright
|
$200,000
|
$ 11,835.62
|
$ 17,753.42
|
Totals
|
$3,000,000
|
$ 177,534.25
|
$ 266,301.37
|
Exhibit
C
WARRANT
NEITHER
THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
NEITHER
THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
ARE QUALIFIED FOR DISTRIBUTION IN ANY OF THE PROVINCES OR TERRITORIES OF CANADA
AND MAY NOT BE OFFERED OR SOLD IN ANY PROVINCE OR TERRITORY OF CANADA EXCEPT
PURSUANT TO A VALID PROSPECTUS AND REGISTRATION UNDER APPLICABLE CANADIAN
PROVINCIAL AND TERRITORIAL SECURITIES LAWS AND REGULATIONS (COLLECTIVELY,
“CANADIAN SECURITIES LAWS”) OR UNDER AN EXEMPTION FROM THE PROSPECTUS AND
REGISTRATION REQUIREMENTS THEREUNDER AND IN ACCORDANCE WITH CANADIAN SECURITIES
LAWS.
THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
OCCULOGIX,
INC.
WARRANT
Warrant
No. _______
|
Dated: ■,
2008
|
OCCULOGIX,
INC., a Delaware corporation (the “
Company
”), hereby certifies
that, for value received, or its registered assigns (the “
Holder
”) is entitled to
purchase from the Company up to a total of shares of common stock,
$0.001 par value per share (the “
Common Stock
”), of the Company
(each such share, a “
Warrant
Share
” and all such shares, the “
Warrant Shares
”) at an
exercise price equal to U.S.$0.10 per share (as adjusted from time to time as
provided in Section 9, the “
Exercise Price
”), at any time
on or after the 180
th
day
following the Pre-Payment Date (as defined in the Loan Agreement (defined
below)) (the “
Initial Exercise
Date
”) and through and including the date that is five years from the
date of issuance hereof (the “
Expiration Date
”), and subject
to the following terms and conditions. This Warrant (this “
Warrant
”) is one of a series
of similar warrants issued pursuant to Section 1.5(a) of that certain Loan
Agreement, dated as of ■, 2008 by and among the Company, the Lenders identified
therein and Marchant Securities Inc. (the “
Loan
Agreement
”). All such warrants are referred to herein,
collectively, as the “
Warrants
.”
1.
Definitions
. In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein have the meanings given to such terms in the
Loan Agreement.
2.
Registration of
Warrant
. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “
Warrant Register
”), in the
name of the Holder of record hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder
and for all other purposes, absent actual notice to the contrary.
3.
Registration of
Transfers
. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
transfer agent for the Common Stock (the
“Transfer Agent”
) or to the
Company at its address specified herein. Upon any such registration
of transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a “
New Warrant
”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of
the New Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.
4.
Exercise
and Duration of Warrants
.
(a) This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the Initial Exercise Date to and including the Expiration
Date. At 6:30 p.m. (Eastern time) on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value; provided that, if the average of the Closing Prices (defined below)
for the five Trading Days (defined below) immediately prior to (but not
including) the Expiration Date exceeds the Exercise Price on the Expiration
Date, then this Warrant shall be deemed to have been exercised in full (to the
extent not previously exercised) on a “cashless exercise” basis at
6:30 p.m. (Eastern time) on the Expiration Date. For purposes of
this Warrant,
“Closing
Price”
means, for any date, the closing price per share of the Common
Stock for such date (or the nearest preceding date) on the primary stock market
or exchange or quotation system on which the Common Stock is then listed or
quoted (the
“Primary Trading
Market”
). For purposes of this Warrant,
“Trading Day”
means (i) any
day on which the Common Stock is listed or quoted and traded on the Primary
Trading Market, or (ii) if trading ceases to occur on the Primary Trading
Market, any business day in the State of New York.
(b) A
Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the “
Exercise Notice
”),
appropriately completed and duly signed, and (ii) payment of the Exercise
Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise” if so indicated in
the Exercise Notice), and the date such items are delivered to the Company (as
determined in accordance with the notices provision hereof) is an “
Exercise Date”
. The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.
5.
Delivery of Warrant
Shares
.
(a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later than
five Trading Days after the Exercise Date) issue or cause to be issued and cause
to be delivered to or upon the written order of the Holder, and in such name or
names as the Holder may designate, a certificate for the Warrant Shares issuable
upon such exercise, free of restrictive legends unless the Warrant Shares are
not freely transferable without volume restrictions pursuant to Rule 144
under the Securities Act. The Holder, or any person or entity so
designated by the Holder to receive Warrant Shares, shall be deemed to have
become the holder of record of such Warrant Shares as of the Exercise
Date. The Company shall, upon request of the Holder, use its best
efforts to deliver Warrant Shares hereunder electronically through The
Depository Trust Company or another established clearing corporation performing
similar functions.
(b) This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
(c) In
addition to any other rights available to a Holder, if the Company fails to
deliver to the Holder a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such third Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of the Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a “
Buy-In
”), then the Company
shall, within three Trading Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of the Common Stock so purchased (the “
Buy-In Price
”), at which point
the Company’s obligation to deliver such certificate (and to issue such shares
of the Common Stock) shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate representing such shares of the Common
Stock and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) the number of such shares of the Common
Stock, times (B) the Closing Price on the date of the event giving rise to the
Company’s obligation to deliver such certificate.
(d) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any person or
entity or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other person or entity of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person or
entity, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity, including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company’s failure to timely deliver certificates
representing shares of the Common Stock upon exercise of this Warrant as
required pursuant to the terms hereof.
6.
Charges, Taxes and
Expenses
. Issuance and delivery of certificates for shares of
the Common Stock upon exercise of this Warrant shall be made without charge to
the Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
7.
Replacement of
Warrant
. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a customary
and reasonable bond or indemnity, if requested. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third party costs as
the Company may prescribe.
8.
Reservation of Warrant
Shares
. The Company covenants that it will, at all times,
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from pre-emptive rights or any other
contingent purchase rights of persons other than the Holder (after giving effect
to the adjustments and restrictions of Section 9, if any). The
Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and
non-assessable. The Company will take all such action as may be
necessary to assure that such shares of the Common Stock may be issued as
provided herein without violation of any applicable law or regulation or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.
9.
Certain
Adjustments
. The Exercise Price and the number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9.
(a)
Stock Dividends and
Splits
. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on the Common Stock or otherwise
makes a distribution on any class of capital stock that is payable in shares of
the Common Stock, (ii) subdivides outstanding shares of the Common Stock
into a larger number of shares or (iii) combines outstanding shares of the
Common Stock into a smaller number of shares, then in each such case, the
Exercise Price shall be multiplied by a fraction, of which the numerator shall
be the number of shares of the Common Stock outstanding immediately before such
event and of which the denominator shall be the number of shares of the Common
Stock outstanding immediately after such event. Any adjustment made
pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause (ii)
or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.
(b)
Pro
Rata
Distributions
. If the Company, at any time while this Warrant
is outstanding, distributes to holders of the Common Stock (i) evidences of
its indebtedness, (ii) any security (other than a distribution of the
Common Stock covered by the preceding paragraph), (iii) rights or warrants
to subscribe for or purchase any security or (iv) any other asset other
than cash dividends out of earnings (in each case, “
Distributed Property
”), then
in each such case, the Holder shall be entitled, upon exercise of this Warrant
for the purchase of any or all of the Warrant Shares issuable upon the exercise
of this Warrant, to receive the amount of Distributed Property which would have
been payable to the Holder, had the Holder been the holder of such Warrant
Shares on the record date for the determination of stockholders entitled to such
Distributed Property. The Company will, at all times, set aside in
escrow and keep available for distribution to the Holder, upon exercise of this
Warrant, a portion of the Distributed Property to satisfy the distribution to
which the Holder is entitled pursuant to the preceding sentence.
(c)
Fundamental
Transactions
. If any capital reorganization, reclassification
of the capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer
or other disposition of all or substantially all of the Company’s assets to
another corporation shall be effected (all such transactions being hereinafter
referred to as a “
Fundamental
Transaction
”), then the Company shall use its best efforts to ensure that
lawful and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions herein specified and in lieu of the Warrant Shares immediately
theretofore issuable upon exercise of this Warrant, such shares of stock,
securities or assets as would have been issuable or payable with respect to or
in exchange for a number of Warrant Shares equal to the number of Warrant Shares
immediately theretofore issuable upon exercise of this Warrant, had such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and, in any such case, appropriate provision shall
be made with respect to the rights and interests of the Holder to the end that
the provisions hereof (including, without limitation, provision for adjustment
of the Exercise Price) shall thereafter be applicable, as nearly equivalent as
may be practicable in relation to any share of stock, securities or assets
thereafter deliverable upon the exercise thereof. The Company shall
not effect any such consolidation, merger, sale, transfer or other disposition
unless, prior to or simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver
to the Holder, at the last address of the Holder appearing on the books of the
Company, such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase and the other
obligations under this Warrant. The provisions of this
Section 9(c) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions, each of which transactions shall also constitute a Fundamental
Transaction.
(d)
Number of Warrant
Shares
. Simultaneously with any adjustment to the Exercise
Price pursuant to paragraph (a) of this Section 9, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased (as the case may be) proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the decreased or increased
(as the case may be) number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment.
(e)
Calculations
. All
calculations under this Section 9 shall be made to the nearest cent or the
nearest 1/100th of a share, as applicable. The number of shares of
the Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of the Common Stock.
(f)
Notice of
Adjustments
. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the Transfer Agent.
(g)
Notice of Corporate
Events
. If the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of the
Common Stock, including, without limitation, any granting of rights or warrants
to subscribe for or purchase any capital stock of the Company,
(ii) authorizes or approves, enters into any agreement contemplating, or
solicits stockholder approval for, any Fundamental Transaction or
(iii) authorizes the voluntary dissolution, liquidation or winding up of
the affairs of the Company, then the Company shall deliver to the Holder a
notice describing the material terms and conditions of such transaction, at
least ten calendar days prior to the applicable record or effective date on
which a Person would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the practical
opportunity to exercise this Warrant prior to such time so as to participate in
or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.
10.
Payment of Exercise
Price
. The Holder shall pay the Exercise Price in immediately
available funds; provided, however, that the Holder may satisfy its obligation
to pay the Exercise Price through a “cashless exercise”, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y
[(A-B)/A]
where:
X = the
number of Warrant Shares to be issued to the Holder.
Y = the
number of Warrant Shares with respect to which this Warrant is being
exercised.
A = the
average of the Closing Prices for the five Trading Days immediately prior to
(but not including) the Exercise Date.
B = the
Exercise Price.
For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued pursuant to the Loan
Agreement.
11.
Fractional
Shares
. The Company shall not be required to issue, or cause
to be issued, fractional Warrant Shares on the exercise of this
Warrant. If any fraction of a Warrant Share would, except for the
provisions of this Section 11, be issuable upon exercise of this Warrant, the
number of Warrant Shares to be issued will be rounded down to the nearest whole
share.
12.
Notices
. Any
and all notices or other communications or deliveries hereunder (including,
without limitation, any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in the Loan Agreement prior to 6:30 p.m. (Eastern time) on a
Trading Day, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in the Loan Agreement on a day that is not a Trading Day or later than
6:30 p.m. (Eastern time) on any Trading Day, (iii) the Trading Day
following the date of delivery to the courier service, if sent by a nationally
recognized overnight courier service or (iv) upon actual receipt by the
party to whom such notice is required to be given. The address for
such notices or communications shall be as set forth in the Loan
Agreement.
13.
Warrant
Agent
. The Company shall serve as warrant agent under this
Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new
warrant agent may be merged, or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party, or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or stockholder services business, shall
be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.
(a) Subject
to the restrictions on transfer set forth on the first page hereof, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by
the Company except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any person or entity other than the Company and the Holder any legal or
equitable right, remedy or cause of action under this Warrant. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will, at all
times and in good faith, assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par
value of any Warrant Shares above the amount payable therefor on such exercise,
(ii) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable Warrant Shares on the exercise of this Warrant and
(iii) will not close its stockholder books or records in any manner which
interferes with the timely exercise of this Warrant.
(c)
GOVERNING LAW; VENUE; WAIVER
OF JURY TRIAL
. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT AND THAT
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA
REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY)
TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT
AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY
JURY.
(d) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not, in any way, be affected or
impaired thereby, and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.
|
OCCULOGIX,
INC.
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By:
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Name:
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William
G. Dumencu
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Title:
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Chief
Financial Officer and Treasurer
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FORM OF
EXERCISE NOTICE
(To be
executed by the Holder to exercise the right to purchase shares of the Common
Stock under the foregoing Warrant)
To: OCCULOGIX,
INC.
The
undersigned is the Holder of Warrant No. _______ (the “
Warrant
”) issued by OCCULOGIX,
INC., a Delaware corporation (the “
Company
”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
1.
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The
Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
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2.
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The
undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the
Warrant.
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3.
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The
Holder intends that payment of the Exercise Price shall be made as (check
one):
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____
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“Cash
Exercise” under Section 10
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____
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“Cashless
Exercise” under Section 10
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4.
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If
the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$____________ to the Company in accordance with the terms of the
Warrant.
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5.
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Pursuant
to this exercise, the Company shall deliver to the Holder _______________
Warrant Shares in accordance with the terms of the
Warrant.
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6.
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Following
this exercise, the Warrant shall be exercisable to purchase a total of
______________ Warrant Shares.
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7.
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The
Holder hereby represents and warrants to the Company that the Holder is
(i) an “accredited investor” as defined in Rule 501(a) promulgated under
Regulation D of the Securities Act of 1933, as amended, if the Holder is a
resident of the U.S. and (ii) an “accredited investor” as defined in
National Instrument 45-106—Prospectus and Registration Exemptions, if the
Holder is a resident of Canada.
|
Dated: ____________________,
______
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Name
of Holder:
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(Print)
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By:
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Name:
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Title:
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(Signature
must conform in all respects to name of the Holder as specified on the
face of the Warrant)
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FORM OF
ASSIGNMENT
[To be
completed and signed only upon transfer of Warrant]
FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of OCCULOGIX, INC. to which the
within Warrant relates and appoints ________________ attorney to transfer said
right on the books of OCCULOGIX, INC. with full power of substitution in the
premises.
Dated: ____________________,
______
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(Signature
must conform in all respects to name of the Holder as specified on the
face of the Warrant)
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Address
of Transferee
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In
the presence of:
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Exhibit
D
SHARE
PLEDGE AGREEMENT
THIS SHARE PLEDGE AGREEMENT
(this “
Share Pledge
Agreement
”), dated as of ■, 2008, is made by OccuLogix,
Inc. (the “
Pledgor
”), a Delaware
corporation with executive offices located at 2600 Skymark Avenue, Building 9,
Suite 201, Mississauga, Ontario, L4W 5B2, Canada, in favor of Marchant
Securities Inc. (the
“Pledgee”
), in its capacity as
the Collateral Agent under that certain Loan Agreement, dated as of the date
hereof, by and among the Pledgor, the Lenders identified therein and the Pledgee
(the
“Loan Agreement”
),
an Ontario corporation with offices located at 100 York Boulevard, Suite 404,
Richmond Hill, Ontario, L4B 1J8, Canada.
BACKGROUND
A. Pursuant
to the Loan Agreement, the Lenders identified therein have agreed to make
available to the Pledgor a loan in an aggregate principal amount of
U.S.$3,000,000.
B. The
Pledgor agreed to secure its obligations under the Loan Agreement by a pledge of
1,754,589 shares of the Series A Preferred Stock of OcuSense, Inc. (the
“
Pledged Shares”
), representing
50.1% of the issued and outstanding shares of the capital stock of OcuSense,
Inc., of which the Pledgor is the legal and beneficial owner, pursuant to this
Share Pledge Agreement.
C. Pursuant
to the Loan Agreement, each of the Lenders irrevocably designated and appointed
the Pledgee as the collateral agent of such Lender under this Share Pledge
Agreement, for the rateable benefit of the Lenders.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Share
Pledge Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Pledgor and the Pledgee hereby
agree as follows:
1.
Definitions
. In
addition to the terms defined elsewhere in this Share Pledge Agreement,
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Loan Agreement.
2.
Collateral
. The
Pledged Shares, together with all proceeds thereof, including any securities or
monies received on account thereof and at the time held by the Pledgee
hereunder, are referred to herein as the
“Collateral”
.
3.
Secured
Obligations
. This Share Pledge Agreement is made by the
Pledgor for the benefit of the Pledgee in order to secure all indebtedness,
obligations and liabilities, present or future, absolute or contingent, matured
or not, at any time owing by the Pledgor to any of the Lenders, or remaining
unpaid to any of the Lenders, under or in connection with the Loan Agreement,
including:
(a) the
full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise, including upon the occurrence of an Event of Default)
of all obligations and liabilities of the Pledgor, now existing or hereafter
incurred under, or arising out of or in connection with, the Loan Agreement;
and
(b) in
the event of any proceeding for the collection of the Secured Obligations
(defined below) or the enforcement of this Share Pledge Agreement after the
failure to repay the Loan in full when due (whether at the stated maturity, by
acceleration or otherwise, including upon the occurrence of an Event of
Default), the reasonable expenses of retaking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Pledgee of its rights hereunder, together with reasonable
legal fees and disbursements actually incurred;
all such
indebtedness, obligations and liabilities being referred to herein as the
“Secured
Obligations”
.
4.
Pledge
. In
order to secure the full and prompt payment when due of the Secured Obligations
and for the purposes set forth in Section 3, the Pledgor hereby: (i)
grants to the Pledgee a continuing first priority security interest in the
Collateral; (ii) pledges the Pledged Shares to, and deposits them with, the
Pledgee and agrees to deliver to the Pledgee all certificates representing the
Pledged Shares, accompanied by undated stock transfer powers duly executed in
blank on behalf of the Pledgor, or such other instruments of transfer as are
reasonably acceptable to the Pledgee, which certificates, stock transfer powers
and other instruments of transfer, if any, at the Pledgee’s option, may be
registered in the name of the Pledgee or its nominee on and after the occurrence
of an Event of Default that is continuing; and (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of the
Pledgor’s right, title and interest in and to the Pledged Shares;
provided
, however,
that the Pledgor shall be permitted to sell, or otherwise dispose of, the
Collateral if the proceeds of such sale or disposition shall be sufficient to
pay the Secured Obligations in full and shall be so used. The Pledgee
hereby agrees, in connection with such sale or disposition, to make, do and
execute and deliver, or cause to be made, done and executed and delivered, such
further acts, deeds, assurances, documents and things as the Pledgor reasonably
requests, including, without limitation, to return to the Pledgor the
certificate representing the Pledged Shares.
5.
Attachment
. The
Pledgor hereby acknowledges that the security interest hereby created attaches
upon the execution of this Share Pledge Agreement (or, in the case of any
after-acquired property, upon the date of acquisition by the Pledgor of any
rights therein), that value has been given by the Pledgee and that the Pledgor
has (or, in the case of any after-acquired property, will have) rights in the
Collateral or the power to transfer rights in the Collateral to the
Pledgee.
6.
Representations and
Warranties
. The Pledgor hereby represents and warrants to the
Pledgee as follows:
(a) The
Pledgor has the requisite corporate authority and the legal right to pledge the
Pledged Shares pursuant to this Share Pledge Agreement.
(b) The
Pledgor is the legal and beneficial owner of, and has good and valid title to,
the Pledged Shares, free from any liens, charges, security interests,
encumbrances or any rights of others that rank prior to, or
pari passu
with, the security
interested created hereby, other than such liens, charges, security interests,
encumbrances or rights as may be permitted under the Loan
Agreement.
(c) The
Pledged Shares have been duly and validly issued, are fully paid and
non-assessable and are not subject to any liens or any pre-emptive or similar
rights.
7.
Voting,
etc.
in Absence of
Event of Default
. Unless and until an Event of Default shall
have occurred and be continuing, the Pledgor shall be entitled to exercise any
and all voting rights attaching to the Pledged Shares and to give consents,
waivers and ratifications in respect thereof. The Pledgor’s
entitlement to exercise such voting rights and to give such consents, waivers
and ratifications shall cease for so long as an Event of Default shall have
occurred and be continuing, in which case Section 9 shall become
applicable.
8.
Dividends and Other
Distributions
. Until the Secured Obligations are paid in full,
all non-cash dividends and other non-cash amounts paid or payable in respect of
the Pledged Shares (including, without limitation, the below-listed items) shall
form part of the Collateral and shall be held by the Pledgee as part of the
Collateral:
(a) all
other or additional stock, or other securities or property (other than cash),
paid or distributed by way of dividend or otherwise in respect of the Pledged
Shares;
(b) all
other or additional stock, or other securities or property (other than cash),
paid or distributed in respect of the Pledged Shares by reason of a stock split,
spin-off, split-up, reclassification, combination of shares or other similar
transaction; and
(c) all
other or additional stock, or other securities or property (other than cash),
paid or distributed in respect of the Pledged Shares by reason of a
consolidation, merger, exchange of stock, conveyance of assets, liquidation or
other similar transaction.
Unless
and until an Event of Default shall have occurred and be continuing, all cash
dividends and other cash amounts paid or payable in respect of the Pledged
Shares shall not form part of the Collateral and shall not be held by the
Pledgee as part of the Collateral but, rather, shall be paid directly to the
Pledgor.
9.
Remedies
. Upon
the occurrence of an Event of Default that is continuing, the Pledgee shall be
entitled to exercise all of its rights, powers and remedies (whether vested in
the Pledgee by this Share Pledge Agreement or the Loan Agreement or by law) for
the protection and enforcement of its rights with respect to the Collateral,
and, without derogating from the generality of the foregoing, the Pledgee shall
be entitled to take any or all of the following actions, all of which the
Pledgor hereby agrees to be commercially reasonable:
(a) to
receive all amounts payable in respect of the Collateral;
(b) to
transfer all or any part of the Collateral into the Pledgee’s name or the name
or names of its nominee or nominees;
(c) to
vote all or any part of the Collateral and to give consents, waivers or
ratifications in respect thereof, and otherwise to act as though it were the
outright owner thereof, with the Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of the Pledgor, with full
power of substitution to do so; and
(d) to
sell, assign and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale, without
demand of performance, for cash, on credit or for other property, for immediate
or future delivery without any assumption of credit risk, and for such price and
on such other terms as the Pledgee may determine in its reasonable discretion,
provided
that
at least ten days’ prior written notice of such sale shall be given to the
Pledgor, with each purchaser at any such sale holding the Collateral so sold
absolutely free from any claim or right on the part of the Pledgor, and the
Pledgor hereby waiving and releasing, to the fullest extent permitted by law,
any right or equity of redemption with respect to the Collateral, whether before
or after sale hereunder, and any right of marshalling the Collateral and any
other security for the Secured Obligations or otherwise.
10.
Remedies
Cumulative
. Each right, power and remedy of the Pledgee
provided for in this Share Pledge Agreement or the Loan Agreement or now or
hereafter existing at law or in equity shall be cumulative and concurrent and
shall be in addition to, and not in lieu of, every other such right, power or
remedy. The exercise, or the commencement of the exercise, by the
Pledgee of any right, power or remedy provided for in this Share Pledge
Agreement or the Loan Agreement or now or hereafter existing at law or in equity
shall not preclude the simultaneous or subsequent exercise by the Pledgee of any
or all such other rights, powers and remedies, and no failure or delay on the
part of the Pledgee to exercise any such right, power or remedy shall operate as
a waiver thereof. Unless otherwise required by this Share Pledge
Agreement or the Loan Agreement, no notice to, or demand on, the Pledgor in any
case shall entitle it to any other or further notice or demand in similar or
other circumstances or shall constitute a waiver of any right of the Pledgee to
take any other or further action in any circumstances without notice or
demand.
11.
Further
Assurances
. The Pledgor hereby agrees that it will join with
the Pledgee in executing and, at the Pledgor’s expense, filing and re-filing
under the Uniform Commercial Code and similar legislation in Canada such
financing statements, continuation statements and other documents and in such
public offices as the Pledgee, acting reasonably, may deem necessary or
advisable to perfect and preserve the Pledgee’s security interest in the
Collateral, and the Pledgor hereby authorizes the Pledgee to file financing
statements and amendments thereto relating to any or all of the Collateral
without the Pledgor’s signature, where permitted by law, and agrees to make, do
and execute and deliver, or cause to be made, done and executed and delivered,
such further acts, deeds, assurances, documents and things as the Pledgee,
acting reasonably, may require or deem advisable to carry out the purposes and
intent of this Share Pledge Agreement and the Loan Agreement.
12.
Rights and Duties of the
Pledgee
.
(a) The
Pledgee may perform any of its duties under this Share Pledge Agreement by or
through agents or attorneys-in-fact and shall be entitled to rely upon the
advice of counsel concerning all matters pertaining to such
duties. The Pledgee shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact,
provided
that they
were selected by the Pledgee with reasonable care.
(b) In
holding the Collateral, the Pledgee and any nominee on its behalf shall be bound
to exercise only the same degree of care as it would exercise with respect to
similar property of its own, of similar value held in the same
place. The Pledgee and any nominee on its behalf will be deemed to
have exercised reasonable care with respect to the custody and preservation of
the Collateral if it takes such action for that purpose as the Pledgor
reasonably requests in writing. However, failure of the Pledgee or
its nominee to comply with any such request will not, in and of itself, be
deemed a failure to exercise reasonable care.
13.
Discharge of
Security
. In the event of a permitted sale or other
disposition by the Pledgor of any of the Collateral, the security interest
therein shall terminate automatically and be deemed discharged and
released. The Pledgee, at the Pledgor’s expense, shall execute and
deliver such discharges and other instruments necessary or advisable for the
purposes of releasing and discharging such security interest, of recording the
provision or effect thereof in any public office where it may be registered or
recorded and of more fully and effectively carrying out the intent of this
Section 13.
14.
Termination and
Release
. Upon the payment in full of the Secured Obligations,
this Share Pledge Agreement shall terminate and, other than as explicitly
provided herein, be of no further force or effect and the security interest in
the Collateral shall be deemed discharged and released. The Pledgee,
at the Pledgor’s expense, shall execute and deliver such discharges and other
instruments necessary or advisable for the purposes of releasing and discharging
such security interest, of recording the provision or effect thereof in any
public office where it may be registered or recorded and of more fully and
effectively carrying out the intent of this Section 14. The
obligations under this Section 14 shall survive the termination of this Share
Pledge Agreement.
15.
Amendments;
Waivers
. No provision of this Share Pledge Agreement may be
amended or waived except in a written instrument signed, (i) in the case of an
amendment, by the Pledgor, Required Lenders and the Pledgee or (ii) in the case
of a waiver, by the party against whom enforcement of any such waiver is sought,
provided
that,
in the case of waiver by the Pledgee, on behalf of all of the Lenders, such
written instrument shall be signed by Required Lenders. No waiver of
any default with respect to any provision, condition or requirement of this
Share Pledge Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right. The Pledgee may enter into technical, minor or administrative
amendments to this Share Pledge Agreement without the consent of the
Lenders.
16.
Notices
. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective in accordance with the notices provision of the Loan
Agreement.
17.
Conflict
. To
the extent of any conflict or inconsistency between the provisions of the Loan
Agreement, on the one hand, and the provisions of this Share Pledge Agreement,
on the other hand, the former shall prevail.
18.
Headings
. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
19.
Successors and
Assigns
. This Share Pledge Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
20.
Governing Law;
Venue
. ALL QUESTIONS CONCERING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS SHARE PLEDGE AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND
THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN. THE PARTIES HERETO
HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
PROVINCE OF ONTARIO FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY ANY OF THE
PARTIES HERETO, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED
HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO
ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY OF THE OTHER PARTIES
HERETO, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY
SUCH COURT OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER.
21.
Execution
. This
Share Pledge Agreement may be executed and delivered in one or more counterparts
(including by facsimile or e-mail transmission), all of which when taken
together shall be considered one and the same agreement. In the event
that any signature is delivered by facsimile transmission or e-mail attachment,
such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or e-mail-attached signature page were an
original thereof.
22.
Severability
. If
any provision of this Share Pledge Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Share Pledge Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Share Pledge
Agreement.
23.
Executed
Copy
. The Pledgor acknowledges receipt of a fully executed
copy of this Share Pledge Agreement.
IN WITNESS WHEREOF,
the
Pledgor and the Pledgee have caused this Share Pledge Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
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OCCULOGIX,
INC.
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By:
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Name:
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Title:
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MARCHANT SECURITIES INC.,
as the Collateral Agent
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By:
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Name:
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Title:
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Exhibit
E
U.S.
ACCREDITED INVESTOR CERTIFICATE
TO:
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OccuLogix,
Inc. (the
“Company”
)
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RE:
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Loan
Agreement, dated as of __________________________ , 2008,
by and among the Company, the Lenders identified therein and Marchant
Securities Inc. (the
“Loan
Agreement”
)
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This
Accredited Investor Certificate is being delivered to the Company pursuant to
Section 4.2(b) of the Loan Agreement. Capitalized terms used in this
Accredited Investor Certificate, but not defined herein, have the respective
meanings attributed to such terms in the Loan Agreement.
(A)
The undersigned hereby certifies that, as of the Closing, the
undersigned:
1. is
experienced in evaluating and investing in securities;
2. is
able to fend for the undersigned;
3. can
bear the economic risk of the undersigned’s investment in the Loan and
investment, if any, in the Securities pursuant to the Loan Agreement
(collectively, the
“Investment”
);
4. has
such knowledge and experience in financial or business matters that the
undersigned is capable of evaluating the merits and risks of the
Investment;
5. understands
and acknowledges that the opportunity for the Investment is available only to
“accredited investors” (
“Accredited Investors”
) who
satisfy one or more of the criteria set forth in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the
“Securities
Act”
);
6. understands
and acknowledges that the Securities may not be registered under the Securities
Act or the securities laws of any state of the United States and may not be
offered or sold within the United States, constitute “restricted securities” (as
defined in Rule 144 promulgated under the Securities Act) and may not be resold
unless they are registered under the Securities Act or an applicable exemption
from such registration requirement is available;
7. is
an Accredited Investor and falls within one or more of the categories set forth
below, as indicated by an “X” or “
ü
” mark placed in the
space(s) designated therefor:
{MARK ONE
OR MORE OF THE FOLLOWING CATEGORIES, AS APPLICABLE}
□
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a
bank as defined in Section 3(a)(2) of the Securities Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act, whether acting in an individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended; an insurance company as
defined in Section 2(a)(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 (the
“Investment Company
Act”
) or a business development company as defined in Section
2(a)(48) of the Investment Company Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act of 1958; a plan
established and maintained by a state, its political subdivisions or any
agency or instrumentality of a state or its political subdivisions, for
the benefit of its employees, if such plan has total assets in excess of
U.S.$5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 (
“ERISA”
) if the
investment decision is made by a plan fiduciary, as defined in Section
3(21) of ERISA, which is either a bank, savings and loan association,
insurance company or registered investment adviser, or if the employee
benefit plan has total assets in excess of U.S.$5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are Accredited Investors
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□
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a
private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940
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an
organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the Shares, with total assets
in excess of U.S.$5,000,000
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□
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a
director or an executive officer of the
Company
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a
natural person whose individual net worth, or joint net worth with that
person’s spouse, at the Closing, exceeds
U.S.$1,000,000
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a
natural person who had an individual income in excess of U.S.$200,000 in
each of the two most recent years or joint income with that person’s
spouse in excess of U.S.$300,000 in each of those years and who has a
reasonable expectation of reaching the same income level in the current
year
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a
trust, with total assets in excess of U.S.$5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) promulgated under
the Securities Act
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□
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an
entity in which all of the equity owners are Accredited
Investors;
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8.
understands and acknowledges that the Securities will not be qualified by
prospectus for distribution in any of the provinces or territories of
Canada.
(B) The
undersigned hereby agrees to re-certify, in writing, the undersigned’s status as
an Accredited Investor on the Pre-payment Date, if any, and that such
re-certification shall be a condition to any issuance to the undersigned of any
of the Securities.
IN
WITNESS WHEREOF, the undersigned has duly executed this Accredited Investor
Certificate as of the Closing.
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Name
of Lender
(please
print)
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Signature
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Name
of Person Signing
(and
indicate capacity of person signing if signing as custodian, trustee or on
behalf of an entity)
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Exhibit
F
CANADIAN
ACCREDITED INVESTOR CERTIFICATE
TO:
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OccuLogix,
Inc. (the
“Company”
)
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RE:
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Loan
Agreement, dated as of ____________________, 2008, by and among the
Company, the Lenders identified therein and Marchant Securities Inc. (the
“Loan
Agreement”
)
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This
Accredited Investor Certificate is being delivered to the Company pursuant to
Section 4.2(b) of the Loan Agreement. Capitalized terms used in this
Accredited Investor Certificate, but not defined herein, have the respective
meanings attributed to such terms in the Loan Agreement.
(A)
The undersigned hereby acknowledges that the Company is relying on this
Accredited Investor Certificate to determine the undersigned’s suitability for
investment in the Loan and investment, if any, in the Securities pursuant to the
Loan Agreement (collectively, the
“Investment”
) and hereby
represents and warrants and certifies that, as of the Closing, the
undersigned:
1. is
acting as principal and not as agent in connection with the Investment and, if
acquiring the Securities, would be doing so for investment only and not with a
view to resale or distribution;
2. is
a resident of the Province of ___________________________________________
and is an
“accredited investor”
as defined in NI 45-106 by virtue of being one of the following, as
indicated by an “X” or “
ü
” mark placed in the
space designated therefor:
{MARK ONE
OF THE FOLLOWING CATEGORIES}
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(a)
a Canadian financial institution, or a Schedule III
bank
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□
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(b)
the Business Development Bank of Canada incorporated under the
Business Development Bank of
Canada Act
(Canada)
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□
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(c)
a subsidiary of any person referred to in paragraphs (a) or (b), if the
person owns all of the voting securities of the subsidiary, except the
voting securities required by law to be owned by directors of that
subsidiary
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□
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(d)
a person registered under the securities legislation of a jurisdiction of
Canada as an adviser or dealer, other than a person registered solely as a
limited market dealer registered under one or both of the
Securities Act
(Ontario) or the
Securities Act
(Newfoundland and Labrador)
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□
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(e)
an individual registered or formerly registered under the securities
legislation of a jurisdiction of Canada as a representative of a person
referred to in paragraph (d)
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(f)
the Government of Canada or a jurisdiction of Canada, or any crown
corporation, agency or wholly owned entity of the Government of Canada or
a jurisdiction of Canada
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(g)
a municipality, public board or commission in Canada and a metropolitan
community, school board, the Comité de gestion de la taxe scolaire de
l’île de Montréal or an intermunicipal management board in
Québec
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□
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(h)
any national, federal, state, provincial, territorial or municipal
government of or in any foreign jurisdiction, or any agency of that
government
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(i)
a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a pension commission
or similar regulatory authority of a jurisdiction of
Canada
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(j)
an individual who, either alone or with a spouse,
beneficially owns, directly or indirectly, financial assets
1
having an aggregate realizable value
that before taxes, but net of any related liabilities
2
, exceeds
$1,000,000
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(k)
an individual whose net income before taxes exceeded $200,000 in each of
the two most recent calendar years or whose net income before taxes
combined with that of a spouse exceeded $300,000 in each of the two most
recent calendar years and who, in either case, reasonably expects to
exceed that net income level in the current calendar
year
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(l)
an individual who, either alone or with a spouse, has net assets of at
least $5,000,000
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(m)
a person, other than an individual or investment fund, that has net assets
of at least $5,000,000 as shown on its most recently prepared financial
statements
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(n)
an investment fund that distributes or has distributed its securities only
to (i) a person that is or was an accredited investor at the time of the
distribution, (ii) a person that acquires or acquired securities in the
circumstances referred to in sections 2.10 [
Minimum investment
amount
] and 2.19 [
Additional investment in
investment funds
] of NI 45-106, or (iii) a person described in
paragraph (i) or (ii) that acquires or acquired securities under section
2.18 [
Investment fund
reinvestment
] of NI 45-106
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___________________________
1
Financial assets means (a) cash, (b) securities, and (c) a contract of
insurance, a deposit or an evidence of a deposit that is not a security for
securities laws purposes.
2
Related
liabilities means (a) liabilities incurred or assumed for the purposes of
financing the acquisition or ownership of financial assets, and (b) liabilities
that are secured by financial assets.
□
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(o)
an investment fund that distributes or has distributed securities under a
prospectus in a jurisdiction of Canada for which the securities regulator
has issued a receipt
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(p)
a trust company or trust corporation registered or authorized to carry on
business under the
Trust
and Loan Companies Act
(Canada) or under comparable legislation in
a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a
fully managed account managed by the trust company or trust corporation,
as the case may be
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(q)
a person acting on behalf of a fully managed account managed by that
person, if that person is registered or authorized to carry on business as
an adviser or the equivalent under the securities legislation of a
jurisdiction of Canada or a foreign
jurisdiction
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(r)
a registered charity under the
Income Tax Act
(Canada)
that, in regard to the trade, has obtained advice from an eligibility
adviser or an adviser registered under the securities legislation of the
jurisdiction of the registered charity to give advice on the securities
being traded
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(s)
an entity organized in a foreign jurisdiction that is analogous to any of
the entities referred to in paragraphs (a) through (d) or paragraph (i) in
form and function
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(t)
a person in respect of which all of the owners of interests, direct,
indirect or beneficial, except the voting securities required by law to be
owned by directors, are persons that are accredited
investors
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(u)
an investment fund that is advised by a person registered as an adviser or
a person that is exempt from registration as an
adviser
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(v)
a person that is recognized or designated by the securities regulator as
(i) an accredited investor or (ii) an exempt purchaser in Alberta or
British Columbia
{IF MARKING THIS CATEGORY, PLEASE
ATTACH A COPY OF SUCH ORDER}
;
and
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3.
has received and reviewed a copy of the revised PowerPoint presentation of
the Company dated January 29, 2008.
(B) The
undersigned hereby agrees to represent and warrant and certify again, in
writing, the undersigned’s status as an Accredited Investor on the Pre-payment
Date, if any, and that such representation and warranty and certification on the
Pre-payment Date, if any, shall be a condition to any issuance to the
undersigned of any of the Securities.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the undersigned has duly executed this Accredited Investor
Certificate as of the Closing.
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Name
of Lender
(please
print)
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Signature
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Name
of Person Signing
(and
indicate capacity of person signing if signing as custodian, trustee or on
behalf of an entity)
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Exhibit
10.51
Execution
Copy
SHARE
PLEDGE AGREEMENT
THIS
SHARE PLEDGE
AGREEMENT
(this “
Share Pledge A
greement
”), dated as
of _______________, 2008, is made by OccuLogix, Inc. (the “
Pledgor
”), a Delaware
corporation with executive offices located at 2600 Skymark Avenue, Building 9,
Suite 201, Mississauga, Ontario, L4W 5B2, Canada, in favor of Marchant
Securities Inc. (the
“Pledgee”
), in its capacity as
the Collateral Agent under that certain Loan Agreement, dated as of the date
hereof, by and among the Pledgor, the Lenders identified therein and the Pledgee
(the
“Loan Agreement”
),
an Ontario corporation with offices located at 100 York Boulevard, Suite 404,
Richmond Hill, Ontario, L4B 1J8, Canada.
BACKGROUND
A.
Pursuant to the Loan Agreement, the Lenders identified
therein have agreed to make available to the Pledgor a loan in an aggregate
principal amount of U.S.$3,000,000.
B.
The Pledgor agreed to secure its obligations
under the Loan Agreement by a pledge of 1,754,589 shares of the Series A
Preferred Stock of OcuSense, Inc. (the
“Pledged Shares”
),
representing 50.1% of the issued and outstanding shares of the capital stock of
OcuSense, Inc., of which the Pledgor is the legal and beneficial owner, pursuant
to this Share Pledge Agreement.
C.
Pursuant to the Loan Agreement, each of the
Lenders irrevocably designated and appointed the Pledgee as the collateral agent
of such Lender under this Share Pledge Agreement, for the rateable benefit of
the Lenders.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Share
Pledge Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Pledgor and the Pledgee hereby
agree as follows:
1.
Definitions
. In
addition to the terms defined elsewhere in this Share Pledge Agreement,
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Loan Agreement.
2.
Collateral
. The
Pledged Shares, together with all proceeds thereof, including any securities or
monies received on account thereof and at the time held by the Pledgee
hereunder, are referred to herein as the
“Collateral”
.
3.
Secured
Obligations
. This Share Pledge Agreement is made by the
Pledgor for the benefit of the Pledgee in order to secure all indebtedness,
obligations and liabilities, present or future, absolute or contingent, matured
or not, at any time owing by the Pledgor to any of the Lenders, or remaining
unpaid to any of the Lenders, under or in connection with the Loan Agreement,
including:
(a) the
full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise, including upon the occurrence of an Event of Default)
of all obligations and liabilities of the Pledgor, now existing or hereafter
incurred under, or arising out of or in connection with, the Loan Agreement;
and
(b) in
the event of any proceeding for the collection of the Secured Obligations
(defined below) or the enforcement of this Share Pledge Agreement after the
failure to repay the Loan in full when due (whether at the stated maturity, by
acceleration or otherwise, including upon the occurrence of an Event of
Default), the reasonable expenses of retaking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Pledgee of its rights hereunder, together with reasonable
legal fees and disbursements actually incurred;
all such
indebtedness, obligations and liabilities being referred to herein as the
“Secured
Obligations”
.
4.
Pledge
. In
order to secure the full and prompt payment when due of the Secured Obligations
and for the purposes set forth in Section 3, the Pledgor hereby: (i)
grants to the Pledgee a continuing first priority security interest in the
Collateral; (ii) pledges the Pledged Shares to, and deposits them with, the
Pledgee and agrees to deliver to the Pledgee all certificates representing the
Pledged Shares, accompanied by undated stock transfer powers duly executed in
blank on behalf of the Pledgor, or such other instruments of transfer as are
reasonably acceptable to the Pledgee, which certificates, stock transfer powers
and other instruments of transfer, if any, at the Pledgee’s option, may be
registered in the name of the Pledgee or its nominee on and after the occurrence
of an Event of Default that is continuing; and (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of the
Pledgor’s right, title and interest in and to the Pledged Shares;
provided
, however,
that the Pledgor shall be permitted to sell, or otherwise dispose of, the
Collateral if the proceeds of such sale or disposition shall be sufficient to
pay the Secured Obligations in full and shall be so used. The Pledgee
hereby agrees, in connection with such sale or disposition, to make, do and
execute and deliver, or cause to be made, done and executed and delivered, such
further acts, deeds, assurances, documents and things as the Pledgor reasonably
requests, including, without limitation, to return to the Pledgor the
certificate representing the Pledged Shares.
5.
Attachment
. The
Pledgor hereby acknowledges that the security interest hereby created attaches
upon the execution of this Share Pledge Agreement (or, in the case of any
after-acquired property, upon the date of acquisition by the Pledgor of any
rights therein), that value has been given by the Pledgee and that the Pledgor
has (or, in the case of any after-acquired property, will have) rights in the
Collateral or the power to transfer rights in the Collateral to the
Pledgee.
6.
Representations and
Warranties
. The Pledgor hereby represents and warrants to the
Pledgee as follows:
(a) The
Pledgor has the requisite corporate authority and the legal right to pledge the
Pledged Shares pursuant to this Share Pledge Agreement.
(b) The
Pledgor is the legal and beneficial owner of, and has good and valid title to,
the Pledged Shares, free from any liens, charges, security interests,
encumbrances or any rights of others that rank prior to, or
pari passu
with, the security
interested created hereby, other than such liens, charges, security interests,
encumbrances or rights as may be permitted under the Loan
Agreement.
(c) The
Pledged Shares have been duly and validly issued, are fully paid and
non-assessable and are not subject to any liens or any pre-emptive or similar
rights.
7.
Voting,
etc.
in Absence of
Event of Default
. Unless and until an Event of Default shall
have occurred and be continuing, the Pledgor shall be entitled to exercise any
and all voting rights attaching to the Pledged Shares and to give consents,
waivers and ratifications in respect thereof. The Pledgor’s
entitlement to exercise such voting rights and to give such consents, waivers
and ratifications shall cease for so long as an Event of Default shall have
occurred and be continuing, in which case Section 9 shall become
applicable.
8.
Dividends and Other
Distributions
. Until the Secured Obligations are paid in full,
all non-cash dividends and other non-cash amounts paid or payable in respect of
the Pledged Shares (including, without limitation, the below-listed items) shall
form part of the Collateral and shall be held by the Pledgee as part of the
Collateral:
(a) all
other or additional stock, or other securities or property (other than cash),
paid or distributed by way of dividend or otherwise in respect of the Pledged
Shares;
(b) all
other or additional stock, or other securities or property (other than cash),
paid or distributed in respect of the Pledged Shares by reason of a stock split,
spin-off, split-up, reclassification, combination of shares or other similar
transaction; and
(c) all
other or additional stock, or other securities or property (other than cash),
paid or distributed in respect of the Pledged Shares by reason of a
consolidation, merger, exchange of stock, conveyance of assets, liquidation or
other similar transaction.
Unless
and until an Event of Default shall have occurred and be continuing, all cash
dividends and other cash amounts paid or payable in respect of the Pledged
Shares shall not form part of the Collateral and shall not be held by the
Pledgee as part of the Collateral but, rather, shall be paid directly to the
Pledgor.
9.
Remedies
. Upon
the occurrence of an Event of Default that is continuing, the Pledgee shall be
entitled to exercise all of its rights, powers and remedies (whether vested in
the Pledgee by this Share Pledge Agreement or the Loan Agreement or by law) for
the protection and enforcement of its rights with respect to the Collateral,
and, without derogating from the generality of the foregoing, the Pledgee shall
be entitled to take any or all of the following actions, all of which the
Pledgor hereby agrees to be commercially reasonable:
(a) to
receive all amounts payable in respect of the Collateral;
(b) to
transfer all or any part of the Collateral into the Pledgee’s name or the name
or names of its nominee or nominees;
(c) to
vote all or any part of the Collateral and to give consents, waivers or
ratifications in respect thereof, and otherwise to act as though it were the
outright owner thereof, with the Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of the Pledgor, with full
power of substitution to do so; and
(d) to
sell, assign and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale, without
demand of performance, for cash, on credit or for other property, for immediate
or future delivery without any assumption of credit risk, and for such price and
on such other terms as the Pledgee may determine in its reasonable discretion,
provided
that
at least ten days’ prior written notice of such sale shall be given to the
Pledgor, with each purchaser at any such sale holding the Collateral so sold
absolutely free from any claim or right on the part of the Pledgor, and the
Pledgor hereby waiving and releasing, to the fullest extent permitted by law,
any right or equity of redemption with respect to the Collateral, whether before
or after sale hereunder, and any right of marshalling the Collateral and any
other security for the Secured Obligations or otherwise.
10.
Remedies
Cumulative
. Each right, power and remedy of the Pledgee
provided for in this Share Pledge Agreement or the Loan Agreement or now or
hereafter existing at law or in equity shall be cumulative and concurrent and
shall be in addition to, and not in lieu of, every other such right, power or
remedy. The exercise, or the commencement of the exercise, by the
Pledgee of any right, power or remedy provided for in this Share Pledge
Agreement or the Loan Agreement or now or hereafter existing at law or in equity
shall not preclude the simultaneous or subsequent exercise by the Pledgee of any
or all such other rights, powers and remedies, and no failure or delay on the
part of the Pledgee to exercise any such right, power or remedy shall operate as
a waiver thereof. Unless otherwise required by this Share Pledge
Agreement or the Loan Agreement, no notice to, or demand on, the Pledgor in any
case shall entitle it to any other or further notice or demand in similar or
other circumstances or shall constitute a waiver of any right of the Pledgee to
take any other or further action in any circumstances without notice or
demand.
11.
Further
Assurances
. The Pledgor hereby agrees that it will join with
the Pledgee in executing and, at the Pledgor’s expense, filing and re-filing
under the Uniform Commercial Code and similar legislation in Canada such
financing statements, continuation statements and other documents and in such
public offices as the Pledgee, acting reasonably, may deem necessary or
advisable to perfect and preserve the Pledgee’s security interest in the
Collateral, and the Pledgor hereby authorizes the Pledgee to file financing
statements and amendments thereto relating to any or all of the Collateral
without the Pledgor’s signature, where permitted by law, and agrees to make, do
and execute and deliver, or cause to be made, done and executed and delivered,
such further acts, deeds, assurances, documents and things as the Pledgee,
acting reasonably, may require or deem advisable to carry out the purposes and
intent of this Share Pledge Agreement and the Loan Agreement.
12.
Rights and Duties of the
Pledgee
.
(a) The
Pledgee may perform any of its duties under this Share Pledge Agreement by or
through agents or attorneys-in-fact and shall be entitled to rely upon the
advice of counsel concerning all matters pertaining to such
duties. The Pledgee shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact,
provided
that they
were selected by the Pledgee with reasonable care.
(b) In
holding the Collateral, the Pledgee and any nominee on its behalf shall be bound
to exercise only the same degree of care as it would exercise with respect to
similar property of its own, of similar value held in the same
place. The Pledgee and any nominee on its behalf will be deemed to
have exercised reasonable care with respect to the custody and preservation of
the Collateral if it takes such action for that purpose as the Pledgor
reasonably requests in writing. However, failure of the Pledgee or
its nominee to comply with any such request will not, in and of itself, be
deemed a failure to exercise reasonable care.
13.
Discharge of
Security
. In the event of a permitted sale or other
disposition by the Pledgor of any of the Collateral, the security interest
therein shall terminate automatically and be deemed discharged and
released. The Pledgee, at the Pledgor’s expense, shall execute and
deliver such discharges and other instruments necessary or advisable for the
purposes of releasing and discharging such security interest, of recording the
provision or effect thereof in any public office where it may be registered or
recorded and of more fully and effectively carrying out the intent of this
Section 13.
14.
Termination and
Release
. Upon the payment in full of the Secured Obligations,
this Share Pledge Agreement shall terminate and, other than as explicitly
provided herein, be of no further force or effect and the security interest in
the Collateral shall be deemed discharged and released. The Pledgee,
at the Pledgor’s expense, shall execute and deliver such discharges and other
instruments necessary or advisable for the purposes of releasing and discharging
such security interest, of recording the provision or effect thereof in any
public office where it may be registered or recorded and of more fully and
effectively carrying out the intent of this Section 14. The
obligations under this Section 14 shall survive the termination of this Share
Pledge Agreement.
15.
Amendments;
Waivers
. No provision of this Share Pledge Agreement may be
amended or waived except in a written instrument signed, (i) in the case of an
amendment, by the Pledgor, Required Lenders and the Pledgee or (ii) in the case
of a waiver, by the party against whom enforcement of any such waiver is sought,
provided
that,
in the case of waiver by the Pledgee, on behalf of all of the Lenders, such
written instrument shall be signed by Required Lenders. No waiver of
any default with respect to any provision, condition or requirement of this
Share Pledge Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right. The Pledgee may enter into technical, minor or administrative
amendments to this Share Pledge Agreement without the consent of the
Lenders.
16.
Notices
. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective in accordance with the notices provision of the Loan
Agreement.
17.
Conflict
. To
the extent of any conflict or inconsistency between the provisions of the Loan
Agreement, on the one hand, and the provisions of this Share Pledge Agreement,
on the other hand, the former shall prevail.
18.
Headings
. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
19.
Successors and
Assigns
. This Share Pledge Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
20.
Governing Law;
Venue
. ALL QUESTIONS CONCERING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS SHARE PLEDGE AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND
THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN. THE PARTIES HERETO
HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
PROVINCE OF ONTARIO FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY ANY OF THE
PARTIES HERETO, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED
HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO
ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY OF THE OTHER PARTIES
HERETO, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY
SUCH COURT OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER.
21.
Execution
. This
Share Pledge Agreement may be executed and delivered in one or more counterparts
(including by facsimile or e-mail transmission), all of which when taken
together shall be considered one and the same agreement. In the event
that any signature is delivered by facsimile transmission or e-mail attachment,
such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or e-mail-attached signature page were an
original thereof.
22.
Severability
. If
any provision of this Share Pledge Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Share Pledge Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Share Pledge
Agreement.
23.
Executed
Copy
. The Pledgor acknowledges receipt of a fully executed
copy of this Share Pledge Agreement.
IN WITNESS WHEREOF,
the
Pledgor and the Pledgee have caused this Share Pledge Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
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OCCULOGIX,
INC.
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By:
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“William G. Dumencu”
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Name:
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William
G. Dumencu
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Title:
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Chief
Financial Officer and Treasurer
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MARCHANT SECURITIES INC.,
as the Collateral Agent
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By:
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“Gregory L. Marchant”
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Name:
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Gregory
L. Marchant
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Title:
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President
and CEO
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Exhibit
10.52
EMPLOYMENT
AGREEMENT
B
E T W E E N:
OccuLogix, Inc.
, a corporation
incorporated under the laws of the State of Delaware
(the
“Corporation”)
- and
-
William G. Dumencu,
of the
Town of Milton, in the Province of Ontario
(the
“Employee”)
RECITALS:
WHEREAS,
the Employee has been
employed by the Corporation since August 1, 2003 pursuant to the Employment
Agreement, dated as of August 1, 2003, between Vascular Sciences Corporation
(now the Corporation) and the Employee, as amended by the Amending Agreement,
dated as of April 14, 2006, between the Corporation and the Employee (as
amended, the “Old Employment Agreement”);
AND WHEREAS,
the other members
of the Corporation’s executive management team are parties to employment
agreements that differ in form from the Old Employment Agreement;
AND WHEREAS,
the Employee has
requested that his employment agreement resemble more closely the employment
agreements of the other members of the Corporation’s executive management
team;
AND WHEREAS,
the Employee has
requested that the Old Employment Agreement be terminated and superseded and
replaced by this Agreement;
AND WHEREAS,
the Corporation
wishes to retain the Employee;
AND WHEREAS,
the Corporation
and the Employee wish to enter into this Agreement to set forth the rights and
obligations of each of them, from and following the date hereof, as regards the
Employee’s employment with the Corporation;
NOW THEREFORE
in consideration
of the mutual covenants and agreements contained in this Agreement and other
good and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the Corporation and the Employee agree as follows:
1.1. In
this Agreement,
1.1.1. “
Affiliate
” has the meaning
attributed to such term in the
Business Corporations Act
(Ontario), as the same may be amended from time to time, and any successor
legislation thereto;
1.1.2.
“Agreement”
means this
agreement and all schedules attached to this agreement, in each case, as they
may be amended or supplemented from time to time, and the expressions “hereof”,
“herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this
Agreement and unless otherwise indicated, references to sections are to sections
in this Agreement;
1.1.3.
“Basic Salary”
has the meaning
attributed to such term in section 5.1;
1.1.4.
“Benefits”
has the meaning
attributed to such term in section 5.4;
1.1.5.
“Board”
means the board of
directors of the Corporation;
1.1.6.
“Business Day”
means any day,
other than Saturday, Sunday or any statutory holiday in the Province of
Ontario;
1.1.7.
“Change of Control”
for the
purposes of this Agreement, shall be deemed to have occurred when:
1.1.7.1. any
Person, other than a Person or a combination of Persons presently owning,
directly or indirectly, more than 20% of existing voting securities of the
Corporation, acquires or becomes the beneficial owner of, or a combination of
Persons acting jointly and in concert, acquires or becomes the beneficial owner
of, directly or indirectly, more than 50% of the voting securities of the
Corporation, whether through the acquisition of previously issued and
outstanding voting securities or of voting securities that have not been
previously issued, or any combination thereof, or any other transaction having a
similar effect;
1.1.7.2. the
Corporation merges or amalgamates with one or more corporations other than a
Subsidiary of the Corporation;
1.1.7.3. the
Corporation sells, leases or otherwise disposes of all or substantially all of
its assets and undertaking, whether pursuant to one or more
transactions;
1.1.7.4. any
Person not part of existing management of the Corporation or any Person not
controlled by the Corporation or by any Affiliate of the Corporation enters into
any arrangement to provide management services to the Corporation which results
in either: (i) the termination by the Corporation of the employment of any two
of the Chairman and Chief Executive Officer, the President and Chief Operating
Officer, the Chief Financial Officer and the General Counsel within three months
of the date such arrangement is entered into for any reason other than Just
Cause; or (ii) the termination by the Corporation for any reason other than Just
Cause of the employment of all such senior executive personnel within six months
of the date that such arrangement is entered into; or
1.1.7.5. the
Corporation enters into any transaction or arrangement which would have the same
or similar effect as the transactions referred to in sections 1.1.7.1, 1.1.7.2,
1.1.7.3
or
1.1.7.4
above.
1.1.8.
“Confidential Information”
means all confidential or proprietary information, intellectual property
(including trade secrets) and confidential facts relating to the business or
affairs of the Corporation or any of its Subsidiaries which the Corporation
treats as confidential or proprietary;
1.1.9.
“Disability”
means the mental
or physical state of the Employee such that the Employee has been unable, as a
result of illness, disease, mental or physical disability or similar cause, to
fulfill his obligations under this Agreement either for any consecutive
six-month period or for any period of 12 months (whether or not consecutive) in
any consecutive 24-month period;
1.1.10.
“Employment Period”
has the
meaning attributed to such term in section 4;
1.1.11.
“ESA”
means the
Employment Standards Act
,
2000 (Ontario), as the same may be amended from time to time, and any successor
legislation thereto;
1.1.12.
“Good Reason”
means:
1.1.12.1. without
the consent of the Employee, any material change or series of material changes
in the responsibilities or status of the Employee with the Corporation, such
that, immediately after such change or series of changes, the responsibilities
and status of the Employee are materially diminished in comparison to his
responsibilities and status immediately prior to such change or series of
changes, except in connection with the termination of the Employee’s employment
by the Corporation for Just Cause or in connection with the Employee’s death,
Disability or Retirement or a voluntary resignation by the Employee other than a
resignation for Good Reason;
1.1.12.2. a
reduction by the Corporation of more than 10% in the Employee’s Basic Salary as
in effect on the date hereof or as the same may be increased from time to
time;
1.1.12.3. the
taking of any action by the Corporation which would materially adversely affect
the Employee’s participation in the Corporation’s employee benefits plans, or
otherwise materially reduce the Employee’s Benefits, and other similar plans in
which the Employee is participating at the date hereof (or such other plans as
may be implemented after the date hereof that provide the Employee with
substantially similar benefits), or the taking of any action by the Corporation
which would deprive the Employee of any material fringe benefit enjoyed by him
at the date hereof;
1.1.12.4. without
the Employee’s consent, the requirement that the Employee be based anywhere
other than the Corporation’s principal executive offices except for required
travel on the Corporation’s business; or
1.1.12.5. any
reason which would be considered to amount to constructive dismissal by a court
of competent jurisdiction.
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1.1.13.
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“Just Cause”
means:
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1.1.13.1. the
failure of the Employee to properly carry out his duties after notice by the
Corporation of the failure to do so and an opportunity for the Employee to
correct the same within a reasonable time from the date of receipt of such
notice; or
1.1.13.2. theft,
fraud, dishonesty or misconduct by the Employee involving the property, business
or affairs of the Corporation or its Subsidiaries or involving the carrying out
of the Employee’s duties;
1.1.14.
“Person”
means any individual,
partnership, limited partnership, joint venture, syndicate, sole proprietorship,
company or corporation with or without share capital, unincorporated
association, trust, trustee, executor, administrator or other legal personal
representative, regulatory body or agency, government or governmental agency,
authority or entity, however designated or constituted;
1.1.15.
“Restricted Period”
means the
one-year period immediately following the cessation of the Employee’s
employment;
1.1.16.
“Retirement”
means retirement
in accordance with the Corporation’s retirement policy from time to
time;
1.1.17.
“Subsidiaries”
has the meaning
attributed to such term in the
Business Corporations Act
(Ontario), as the same may be amended from time to time, and any successor
legislation thereto;
1.1.18.
“Stop Work Notice”
has the
meaning attributed to such term in section 8.2;
1.1.19.
“Year of Employment”
means any
12-month period commencing on January 1.
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Employment of the
Employee
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The
Corporation shall continue to employ the Employee, and the Employee shall
continue to serve the Corporation, in the position of Chief Financial Officer
and Treasurer on the conditions and for the remuneration hereinafter set
out. In such position, the Employee shall perform and fulfill such
duties and responsibilities as the Corporation may designate from time to
time. The Employee shall report to the Chairman and Chief Executive
Officer of the Corporation.
During
the Employment Period, the Employee shall faithfully, honestly and diligently
serve the Corporation and its Subsidiaries as contemplated above. The
Employee shall (except in the case of illness or accident) devote all of his
working time and attention to his employment hereunder, except where expressly
agreed by the Chairman and Chief Executive Officer, and shall use his best
efforts to promote the interests of the Corporation.
The
Employee’s employment under this Agreement shall, subject to section
8 and section 10
, be for an
indefinite term. Accordingly, the Corporation shall continue to
employ the Employee, and the Employee shall continue to serve the Corporation,
as an employee in accordance with this Agreement for the period ending on the
effective date the employment of the Employee under this Agreement is terminated
in accordance with section 8
.2
or section
10
(the “Employment
Period”).
5.3.
Stock
Options
.
The Employee
shall, during the Employment Period, receive such stock options, if any, as the
board of directors of the Corporation, in its sole discretion may, pursuant to
the terms of the Corporation’s stock option plan, authorize.
5.5.
Prorata
Entitlement in the Event of Termination
.
If the Employee’s
employment is terminated pursuant to section 8 or section
10
or if the Employee dies
during the Employment Period, the Employee shall be entitled to receive in
respect of his entitlement to Basic Salary, and the Corporation shall be
required to pay in respect thereof, only that proportion of the Basic Salary, in
respect of the Year of Employment in which the effective date of the termination
of employment or the date of death occurs, that (i) the number of days elapsed
from the commencement of such Year of Employment to the effective date of
termination or the date of death is to (ii) 365.
Subject
to the terms of the Corporation’s expense policy, the Corporation shall pay, or
reimburse the Employee for, all travel and out-of-pocket expenses reasonably
incurred or paid by the Employee in the performance of his duties and
responsibilities, upon presentation by the Employee of expense statements or
receipts or such other supporting documentation as the Corporation may
reasonably require.
The
Employee shall be entitled, during each full Year of Employment during the
Employment Period, to vacation with pay of four weeks. Vacation shall
be taken by the Employee at such time as may be acceptable to the Corporation
having regard to its operations. Except with the prior written
consent of the Chairman and Chief Executive Officer, (i) no more than two
weeks of vacation shall be taken consecutively and (ii) the vacation
entitlement earned in a Year of Employment is subject to any carryover
provisions as stated in the Company’s vacation
policy. Notwithstanding the foregoing, in the event that the
Employee’s employment is terminated pursuant to section 8
or section 10
, the
Employee shall not be entitled to receive any payment in lieu of any vacation to
which he was entitled and which had not already been taken by him except to the
extent, if any, of the payments in respect of vacation pay required by the
ESA.
8.1.
Notice
.
The Employee’s
employment may, subject to section
10,
be terminated at any
time:
8.1.1. by
the Corporation without prior notice and without further obligations to the
Employee for reasons of Just Cause;
8.1.2. by
the Corporation for any reason other than Just Cause, on twelve months’ prior
written notice to the Employee, provided that if the Employee is entitled under
the ESA to a longer period of notice than that prescribed above, the notice to
be given by the Corporation under this section 8.1.2 shall be that minimum
period of notice which is required under the ESA and no more; or
8.1.3. by
the Employee on one month’s prior written notice to the
Corporation.
The
Employee’s employment shall be automatically terminated, without further
obligation to the Employee, in the event of his death.
8.2.
Effective
Date
.
The effective
date on which the Employee’s employment shall be terminated shall
be:
8.2.1. in
the case of termination under section 8.1.1, the day the Employee is
deemed, under section
17
, to have received notice from
the Corporation of such termination;
8.2.2. in
the case of termination under section 8.1.2
or section
8.1.3, the last
day of the minimum period referred to therein; and
8.2.3. in
the event of the death of the Employee, on the date of his death.
Notwithstanding
the foregoing, where the Corporation is giving or has given notice pursuant to
section 8.1.2
above,
the Corporation shall have the right, at any time prior to the end of the
Employment Period and by giving notice to the Employee to that effect (a “Stop
Work Notice”), to require that the Employee cease to perform his duties and
responsibilities and cease attending the Corporation’s premises immediately upon
the giving of the Stop Work Notice. If a Stop Work Notice is given,
the Corporation shall continue to pay the Employee to the end of the Employment
Period. For that purpose, in calculating the Employee’s entitlement
to Basic Salary, the Employee shall be considered to have been actively employed
by the Corporation to the end of the Employment Period. For the
purpose of the Employee’s entitlement to Benefits, the Employee shall receive an
amount equal to 2.5% of his Basic Salary for the purpose of obtaining equivalent
coverage during the notice period.
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Rights of Employee on
Termination and Lump Sum
Payment
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Where the
Employee’s employment under this Agreement has been terminated by the
Corporation under section 8.1.2, the Employee shall be entitled, upon providing
to the Corporation appropriate releases, resignations and other similar
documentation, to receive from the Corporation, in addition to accrued but
unpaid Basic Salary, if any, and any entitlement in respect of vacation as
contemplated by section 7, a lump sum payment equal to 12 months of his
Basic Salary and 2.5% of his Basic Salary in respect of his entitlement to
Benefits, less any amounts payable to the Employee in lieu of notice where a
Stop Work Notice has been given pursuant to section 8
and less any amounts owing
by the Employee to the Corporation for any reason.
Except as
provided above in this section 9 and subject to sections
10
and 11, where the Employee’s
employment has been terminated by the Employee or by the Corporation for any
reason, the Employee shall not be entitled, except to the extent required under
any mandatory employment standard under the ESA, to receive any payment as
severance pay, in lieu of notice, or as damages. Except as to any
entitlement as provided above and subject to section
10
, the Employee hereby waives
any claims that the Employee may have against the Corporation for or in respect
of severance pay, or on account of loss of office or employment or notice in
lieu thereof or damages in lieu thereof (other than rights to accrued but unpaid
Basic Salary and vacation pay and to reimbursement for expenses pursuant to
section 6). The payments to the Employee where the Corporation
has given notice pursuant to section 8.1.2
above, whether or not a
Stop Work Notice is given, shall be deemed to include, and to satisfy
entitlement to, severance pay pursuant to the ESA to the extent of such
payments.
10.1.
Termination
of Employment by the Corporation for Just Cause
.
F
ollowing a Change of Control,
the Corporation may terminate the Employee’s employment at any time without
notice or further obligations to the Employee under this Agreement for reasons
of Just Cause. Following a Change of Control, the Employee shall not
be deemed to have been terminated for Just Cause unless and until there has been
delivered to the Employee a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board
(excluding the Employee if the Employee is, at the relevant time, a director of
the Corporation) at a meeting of the Board called and held for the purpose
(after reasonable notice to the Employee), finding that, in the good faith
opinion of the Board, the Employee’s conduct constituted Just Cause and
specifying the particulars thereof. The date on which the copy of
such resolution is given to the Employee shall be the effective date of any
termination pursuant to this section 10.1.
10.2.
Termination
of Employment Without Just Cause or for Good Reason
. If at any time
within 24 months following a Change of Control, the Employee’s employment is
terminated (i) by the Corporation other than for Just Cause or (ii) by
the Employee for Good Reason, the following provisions shall apply and the
provisions of section 8 and section 9 shall not apply:
10.2.1. the
Employee shall be entitled to receive, and the Corporation shall pay to the
Employee immediately following termination, a cash amount equal to 12 months of
the Basic Salary, less any required statutory deductions and
withholdings;
10.2.2. the
Employee shall be entitled to receive, and the Corporation shall pay to the
Employee, immediately following termination, a cash amount equal to 2.5% of his
annual Basic Salary in lieu of continued benefit coverage; and
10.2.3. if
at the date of termination of the Employee’s employment, the Employee holds
options for the purchase of shares under a share option plan or otherwise, all
options so held shall, notwithstanding the terms of the Corporation’s share
option plan or of the agreement governing the Employee’s options,
(i) immediately vest to the extent they have not already vested at such
date; and (ii) (A) for a period of two years following the Employee’s
date of termination continue to be held on the same terms and conditions as if
the Employee continued to be employed by the Corporation or (B) if the
Employee so elects in writing within 90 days after the date of termination, be
purchased by the Corporation at a cash purchase price equal to the amount by
which the aggregate “fair market value” of the shares subject to such options
exceeds the aggregate option price for such shares, provided that for this
purpose, “fair market value” means the higher of (i) the weighted average of the
closing prices for the shares of the same class of the Corporation on the
principal securities exchange (in terms of volume of trading) on which such
shares are listed at the time of termination for each of the last ten days prior
to such time on which such shares traded on such securities exchange and (ii) if
the Change of Control involved the purchase and sale of such shares, the average
value of the cash consideration paid to the shareholders of the Corporation in
connection with the transactions resulting in the Change of
Control.
For
purposes of this Agreement, the Employee’s employment shall be deemed to have
been terminated following a Change of Control by the Corporation without Just
Cause or by the Employee with Good Reason, if: (i) the Employee’s employment is
terminated by the Corporation without Just Cause prior to a Change of Control
and such termination was at the request or direction of a Person who has entered
into an agreement with the Corporation or any shareholder of the Corporation,
the consummation of which would constitute a Change of Control; (ii) the
Employee terminates his employment with Good Reason prior to a Change of Control
and the circumstance or event which constitutes Good Reason occurs at the
request or direction of a Person who has entered into an agreement with the
Corporation or any shareholder of the Corporation, the consummation of which
would constitute a Change of Control; or (iii) the Employee’s employment is
terminated by the Corporation without Just Cause prior to a Change of Control
and the Employee reasonably demonstrates that such termination is otherwise in
connection with, or in anticipation of, a Change of Control which actually
occurs.
For
greater certainty, this section 10.2
does not apply in the
event of the termination of the employment of the Employee: (i) as a result of
death, Disability or Retirement of the Employee, (ii) by the Corporation for
Just Cause or (iii) by the Employee without Good Reason. If the
Employee or the Corporation intends to terminate the Employee’s employment as
contemplated in this section
10
, the party having such
intention shall, in accordance with the provisions of section 1
7
hereof, give the other notice
thereof.
11.
|
No Obligation to
Mitigate
|
The
Employee shall not be required to mitigate any damages or losses arising from
any termination of this Agreement by seeking other employment or otherwise, nor
(except as specifically provided herein) shall the amount of any payment
provided for in this Agreement be reduced by any compensation earned by the
Employee as a result of employment by another employer after termination or
otherwise
.
The
Employee shall not, either during the Employment Period or the Restricted
Period, within Canada or the United States of America, directly or indirectly,
in any manner whatsoever, including, without limitation, individually, or in
partnership, jointly or in conjunction with any other Person, or as an employee,
principal, agent, director or shareholder:
|
(i)
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be
engaged in any undertaking;
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(ii)
|
have
any financial or other interest (including an interest by way of royalty
or other compensation arrangements) in, or in respect of, the business of
any Person which carries on a business;
or
|
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(iii)
|
advise,
lend money to or guarantee the debts or obligations of, or permit the use
of the Employee’s name or any parts thereof, by any Person which carries
on a business;
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which is
the same as, or substantially similar to, or which competes with or would
compete with, the business carried on by the Corporation or any of its
Subsidiaries during the Employment Period or at the end thereof.
Notwithstanding
the foregoing, nothing herein shall prevent the Employee from owning not more
than 5% of the issued and outstanding shares of a corporation, the shares of
which are listed on a recognized stock exchange or traded in the
over-the-counter market in Canada or the United States, which carries on a
business which is the same as, or substantially similar to, or which competes
with or would compete with, the business of the Corporation or any of its
Subsidiaries.
13.
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No Solicitation of
Customers or Patients
|
The
Employee shall not, either during the Employment Period or the Restricted
Period, directly or indirectly, solicit or attempt to solicit any patients or
customers of the Corporation or any of its Subsidiaries for the purpose of
selling to any patients or customers of the Corporation any products or services
which are the same as or substantially similar to, or in any way competitive
with, the products or services sold by the Corporation or any of its
Subsidiaries during the Employment Period or at the end thereof, as the case may
be.
14.
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No Solicitation of
Employees
|
The
Employee shall not, either during the Employment Period or the Restricted
Period, directly or indirectly, employ or retain as an independent contractor
any employee of the Corporation or any of its Subsidiaries or induce or solicit,
or attempt to induce or solicit, any such person to leave his/her
employment.
The
Employee shall not, either during the Employment Period or at any time
thereafter, directly or indirectly, use or disclose to any Person any
Confidential Information, provided, however, that nothing in this section 15
shall preclude the Employee from disclosing or using Confidential Information
if:
15.1. the
Confidential Information is available to the public or in the public domain at
the time of such disclosure or use, without breach of this Agreement;
or
15.2. disclosure
of the Confidential Information is required to be made by any law, regulation or
governmental body or authority or by court order.
The
Employee acknowledges and agrees that the obligations under this section 15 are
to remain in effect in perpetuity and shall exist and continue in full force and
effect, notwithstanding any breach or repudiation, or alleged breach or
repudiation, by the Corporation of this Agreement.
The
Employee acknowledges that a breach or threatened breach by the Employee of the
provisions of any of sections 12 to 15 inclusive will result in the
Corporation and its shareholders suffering irreparable harm which is not capable
of being calculated and which cannot be fully or adequately compensated by the
recovery of damages alone. Accordingly, the Employee agrees that the
Corporation shall be entitled to interim and permanent injunctive relief,
specific performance and other equitable remedies, in addition to any other
relief to which the Corporation may become entitled.
Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be given by prepaid first-class mail, by facsimile or
other means of electronic communication or by hand delivery as hereinafter
provided, except that any notice of termination by the Corporation under section
8 or section
10
shall be
hand delivered or given by registered mail. Any such notice or other
communication, if mailed by prepaid first-class mail at any time, other than
during a general discontinuance of postal service due to strike, lockout or
other reason, shall be deemed to have been received on the fourth Business Day
after the post-marked date thereof or, if mailed by registered mail, shall be
deemed to have been received on the day such mail is delivered by the post
office or, if sent by facsimile or other means of electronic communication,
shall be deemed to have been received on the Business Day following the sending
or, if delivered by hand shall be deemed to have been received at the time it is
delivered to the applicable address noted below, either to the individual
designated below or to an individual at such address having apparent authority
to accept deliveries on behalf of the addressee. Notice of change of
address shall also be governed by this section 17. In the event of a
general discontinuance of postal service due to strike, lock-out or other
reason, notices or other communications shall be delivered by hand or sent by
facsimile or other means of electronic communication and shall be deemed to have
been received in accordance with this section 17. Notices and
other communications shall be addressed as follows:
William
G. Dumencu
283 Coxe
Blvd.
Milton,
Ontario
L9T
4L4
|
b)
|
if
to the Corporation:
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OccuLogix,
Inc.
2600
Skymark Avenue, Bldg. 9, Suite 201
Mississauga,
Ontario
L4W
5B2
|
Attention:
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Chairman
and Chief Executive Officer
|
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Telecopier
number:
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(905)
602-7623
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The
inclusion of headings in this Agreement is for convenience of reference only and
shall not affect the construction or interpretation hereof.
19.
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Invalidity of
Provisions
|
Each of
the provisions contained in this Agreement is distinct and severable, and a
declaration of invalidity or unenforceability of any such provision by a court
of competent jurisdiction shall not affect the validity or enforceability of any
other provision hereof.
This
Agreement constitutes the entire agreement between the parties pertaining to the
subject matter of this Agreement. This Agreement supersedes and
replaces all prior agreements, written or oral, with respect to the Employee’s
employment by the Corporation (including, without limitation, the Old Employment
Agreement) and any rights which the Employee may have by reason of any such
prior agreement or by reason of the Employee’s prior employment, if any, by the
Corporation. There are no warranties, representations or agreements
between the parties in connection with the subject matter of this Agreement
except as specifically set forth or referred to in this Agreement. No
reliance is placed on any representation, opinion, advice or assertion of fact
made by the Corporation or its directors, officers and agents to the Employee,
except to the extent that the same has been reduced to writing and included as a
term of this Agreement. Accordingly, there shall be no liability,
either in tort or in contract, assessed in relation to any such representation,
opinion, advice or assertion of fact, except to the extent
aforesaid.
Except as
expressly provided in this Agreement, no amendment or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision, nor shall any waiver of any
provision of this Agreement constitute a continuing waiver unless otherwise
expressly provided.
All
amounts in this Agreement are stated and shall be paid in Canadian
currency.
23.
|
Employers
and Employees Act
Not to
Apply
|
The
Corporation and the Employee agree that section 2 of the
Employers and Employees Act
(Ontario) shall not apply to, or in respect of, this Agreement or the employment
of the Employee hereunder.
This
Agreement shall be governed by, and construed in accordance with, the laws of
the Province of Ontario and the laws of Canada applicable therein.
This
Agreement may be signed in counterparts and each of such counterparts shall
constitute an original document, and such counterparts, taken together, shall
constitute one and the same instrument.
The
Employee acknowledges that:
26.1. the
Employee has had sufficient time to review and consider this Agreement
thoroughly;
26.2. the
Employee has read and understands the terms of this Agreement and the Employee’s
obligations hereunder;
26.3. the
Employee has been given an opportunity to obtain independent legal advice, or
such other advice as the Employee may desire, concerning the interpretation and
effect of this Agreement; and
26.4. this
Agreement is entered into voluntarily and without any pressure, and the
Employee’s continued employment has not been made conditional upon execution of
this Agreement by the Employee.
IN WITNESS WHEREOF
the parties
have executed this Agreement as of the date first written above.
|
OCCULOGIX,
INC.
|
|
|
|
|
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By:
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“Elias
Vamvakas”
|
|
|
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Elias
Vamvakas
|
|
|
Chairman
and Chief Executive Officer
|
Witness
|
|
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
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)
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|
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)
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|
|
|
)
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|
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)
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|
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)
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“William G. Dumencu”
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)
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SCHEDULE
5.2
Bonus
Remuneration
In
respect of each Year of Employment during the Employment Period, the Employee
shall be entitled to receive a maximum of 25% of his Basic Salary as bonus
remuneration based upon performance criteria agreed upon by the Chairman and
Chief Executive Officer and approved by the Compensation Committee of the
Board.
Exhibit
10.53
Execution
Copy
THIS TERMINATION AGREEMENT
is
made as of February 25, 2008 (the
“Termination Effective
Date”
)
B E T W E E
N
:
|
|
|
|
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ASAHI KASEI KURARAY MEDICAL
CO., LTD.,
a corporation organized and existing under the laws of
Japan
|
|
|
|
|
|
|
|
|
|
|
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OCCULOGIX, INC.,
a
corporation incorporated under the laws of the State of
Delaware
|
|
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(
“OccuLogix”
)
|
WHEREAS,
on October 20, 2006,
Asahi Kasei Medical Co., Ltd. (now Asahi) and OccuLogix entered into the 2006
Distributorship Agreement pursuant to which OccuLogix was, upon certain
conditions, appointed Asahi’s exclusive distributor in certain jurisdictions,
and Asahi’s non-exclusive distributor in Italy, of the Rheofilter filter and the
Plasmoflo filter and pursuant to which OccuLogix had certain minimum purchase
and other obligations (the
“2006 Distribution
Agreement”
);
AND WHEREAS,
on November 1,
2007, OccuLogix announced an indefinite suspension of its RHEO System clinical
development program due to OccuLogix’s difficult financial position, thus making
it difficult for OccuLogix to fulfill its obligations under the 2006
Distribution Agreement;
AND WHEREAS,
a lifting of such
suspension will not be feasible in the near term for reason of OccuLogix’s
continuing difficult financial position;
AND WHEREAS,
following good
faith discussions between the parties hereto, they mutually agree that it would
be in their respective best interests to terminate the 2006 Distribution
Agreement;
NOW THEREFORE
in consideration
of the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Asahi and OccuLogix hereby agree as follows:
1.
|
On
and as of the Termination Effective Date, the 2006 Distribution Agreement
hereby shall be terminated and rendered null and void notwithstanding
Article 18.2 thereof, save and except for Articles 7.8, 15, 20, 21, 22, 23
and 24 thereof (the
“Surviving Provisions”
),
all of which shall survive the termination of the 2006 Distribution
Agreement.
|
2.
|
Each
of the parties hereto hereby acknowledges and agrees that the other party
hereto owes it no further obligations, liabilities or duties whatsoever
pursuant to, arising from or in connection with, or otherwise relating to,
the 2006 Distribution Agreement, whether of a financial nature or
otherwise,
save
and except for
any obligations, liabilities or duties pursuant to,
arising from or in connection with, or otherwise relating to, any of the
Surviving Provisions.
|
|
3.
|
Each
of the parties hereto, on behalf of itself, its successors and assigns and
any party claiming through it, hereby releases completely and forever
discharges the other party hereto and its affiliates and subsidiaries, and
their respective officers, directors, shareholders, agents, employees,
servants, representatives, successors and assigns, from any and all
claims, demands, obligations and causes of action, of any nature
whatsoever, arising under any jurisdiction’s laws, whether known or
unknown, which the releasing party ever had, now has or might have in the
future as a result of, pursuant to, arising from or in connection with, or
otherwise relating to, the 2006 Distribution Agreement or any of the
transactions and dealings engaged in or consummated thereunder or pursuant
thereto, or otherwise relating thereto,
save and except
for
such claims, demands, obligations and causes of action relating
to any of the Surviving Provisions.
|
4.
|
Each
of the parties hereto hereby represents and warrants to the other party
that:
|
|
(a)
|
it
has the corporate power and capacity to enter into, and perform its
obligations under, this Termination Agreement;
and
|
|
(b)
|
it
has taken all necessary action on its part to authorize the execution and
delivery by it of this Termination Agreement and the performance of its
obligations hereunder.
|
5.
|
Each
of the parties hereto hereby agrees to do, execute, acknowledge and
deliver, or to cause to be done, executed, acknowledged and delivered, all
such further acts, documents and instruments as may be reasonably
necessary to accomplish the intent of this Termination
Agreement.
|
6.
|
This
Termination Agreement may be signed in separate counterparts (and
communicated by facsimile or e-mail transmission), and each such
counterpart will constitute an original document, and such counterparts,
taken together, will constitute one and the same
instrument.
|
7.
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This
Termination Agreement shall be governed by the substantive and procedural
laws of Japan. All disputes, controversies or differences which
may arise between the parties, out of or in relation to or in connection
with this Termination Agreement, or for the breach hereof, shall be
settled by mutual consultation between the parties hereto in good faith as
promptly as possible but, failing an amicable settlement, shall be finally
settled by arbitration to be held in Tokyo, Japan under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce, by
which each party hereto agrees to be
bound.
|
IN WITNESS WHEREOF,
the
parties hereto have executed this Termination Agreement as of the date first
written above.
|
ASAHI
KASEI KURARAY MEDICAL CO., LTD.
|
|
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|
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By:
|
/s/
Yasuyuki Yoshida
|
|
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Name:
|
Yasuyuki
Yoshida
|
|
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Title:
|
President
|
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|
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OCCULOGIX,
INC.
|
|
|
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By:
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/s/
Thomas P. Reeves
|
|
|
Name:
|
Thomas
P. Reeves
|
|
|
Title:
|
President
and Chief Operating Officer
|
-3-
Exhibit
10.54
Execution
Copy
AMENDING
AGREEMENT
THIS AMENDING AGREEMENT
is
made as of the 3rd day of March, 2008 by and between Nozhat Choudry (the
“Employee”
), a resident of the
Province of Ontario, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into a termination agreement dated as of January 31, 2008 (the
“Termination Agreement”
)
pursuant to which the Employee’s employment with the Employer, as its Vice
President, Clinical Research, was terminated;
AND WHEREAS,
capitalized terms
used in this Amending Agreement, but not otherwise defined, shall have the
respective meanings attributed to such terms in the Termination
Agreement;
AND WHEREAS,
the Employer and
the Employee mutually have agreed that it would be in the best interests of each
of them to permit the Employer to pay up to 50% of the Severance Balance in a
non-cash form of consideration;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Amending
Agreement and the Termination Agreement (the receipt and sufficiency of which
are hereby acknowledged by the parties hereto), the parties hereto agree as
follows:
1.1 Sections
3.3, 3.4 and 3.5 of the Termination Agreement are hereby deleted in their
entirety and replaced with the following Sections 3.3, 3.4, 3.5 and
3.6:
|
3.3
|
At
the sole discretion of the Employer, and subject to the provisions of this
Section 3.3 and Section 3.4, and subject further to the Employer obtaining
all requisite corporate approval therefor (including, without limitation,
the approval of the Employer’s stockholders, if required), the Employer
may satisfy and discharge in full its obligation under Section 3.2 to pay
the Severance Balance by: (i) issuing to the Employee stock
options under the Stock Option Plan in a number equal to the quotient of
(a) some percentage of the Severance Balance, which shall not exceed 50%,
divided by (b) the per stock option value of such stock options, which
shall be determined by the Employer using the Black-Scholes valuation
method (collectively, the
“Severance Stock
Options”
); and (ii) paying the balance of the Severance Balance to
the Employee in cash. The Severance Stock Options shall have a
term of ten years commencing on the date of their grant and, other than as
may be agreed to by the Employer within its sole discretion, will not
become exercisable prior to the 180
th
day following the date of their grant. The exercise price of
the Severance Stock Options shall be determined by the Employer’s board of
directors in accordance with the provisions of the Stock Option Plan and
all applicable laws, regulations and rules (including, without limitation,
the rules of the Toronto Stock
Exchange).
|
|
3.4
|
If, prior
to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should
the Employer become insolvent or make an assignment for the benefit of any
creditor or creditors, or should a receiver or trustee be appointed for
all or any significant part of the Employer’s assets, or should the
Employer consent to the winding-up, liquidation or dissolution of itself
or its affairs (each, a
“Bankruptcy Event”
),
then an amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of
the Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall
become due and payable, in cash, immediately to the
Employee. If a Bankruptcy Event occurs on or after March 31,
2008, then the Severance Balance shall become due and payable, in cash,
immediately to the Employee.
|
|
3.5
|
The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, John Cornish, Bill Dumencu, David Eldridge, Julie Fotheringham,
Stephen Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should
become entitled to receive severance pursuant to his or her executive
employment agreement at any time before the Employer has paid, in full,
the amount due and payable to her pursuant to Section 3.2 or 3.4, as the
case may be, the Employer shall not pay any OLT Member a percentage of his
or her severance entitlement (without regard to applicable deductions and
withholdings) that exceeds the percentage that (i) the Salary Continuance
Amount
plus
the
aggregate amount paid to the Employee pursuant to Sections 3.2 and 3.4,
together with the aggregate amount of deductions and withholdings withheld
by the Employer, represents of (ii) the amount of the Employee’s
Severance. For greater certainty, for purposes of calculating
such percentage in a circumstance in which the Employer has exercised its
discretion pursuant to Section 3.3 and has issued Severance Stock Options,
then the aggregate amount paid to the Employee pursuant to Section 3.2
shall be the sum of (i) the value of such Severance Stock Options, as
determined by the Employer using the Black-Scholes valuation method, and
(ii) the amount of the Severance Balance paid in
cash.
|
|
3.6
|
For
greater certainty, all cash amounts due and payable by the Employer to the
Employee pursuant to this Article 3 shall be paid, net of applicable
deductions and withholdings.
|
1.2 The
Termination Agreement remains in full force and effect, unamended, other than as
specifically amended by this Amending Agreement.
2.1
|
The
Employee hereby acknowledges that:
|
(a)
|
She
has had sufficient time to review and consider this Amending Agreement
thoroughly;
|
(b)
|
She
has read and understands the terms of this Amending Agreement and her
obligations hereunder;
|
(c)
|
She
has been given an opportunity to obtain independent legal advice, or such
other advice as she may desire, concerning the interpretation and effect
of this Amending Agreement; and
|
(d)
|
She
is entering this Amending Agreement voluntarily and without any pressure
from the Employer.
|
3.1 The
headings in this Amending Agreement are included solely for convenience of
reference and shall not affect the construction or interpretation
hereof.
3.2 The
parties hereto expressly agree that nothing in this Amending Agreement shall be
construed as an admission of liability.
3.3 This
Amending Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective heirs, trustees, administrators, successors
and assigns.
3.4 This
Amending Agreement and the Termination Agreement constitute the entire agreement
between the parties hereto pertaining to the subject matter of the termination
of the Employee’s employment with the Employer. This Amending
Agreement, together with the Termination Agreement, supersede and replace all
prior agreements, if any, written or oral, with respect to such subject matter
and any rights which the Employee may have by reason of any such prior
agreements or by reason of the Employee’s employment with the
Corporation. There are no representations, warranties or agreements
between the parties hereto in connection with the subject matter of this
Amending Agreement, except as specifically set forth herein. No
reliance is placed on any representation, opinion, advice or assertion of fact
made by the Employer or any of its officers, directors, agents or employees to
the Employee, except to the extent that the same has been reduced to writing and
included as a term of this Amending Agreement or the Termination
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
3.5 Each
of the provisions contained in this Amending Agreement is distinct and
severable, and a declaration of invalidity or unenforceability of any provision
or part thereof by a court of competent jurisdiction shall not affect the
validity or enforceability of any other provision hereof.
3.6 This
Amending Agreement shall be governed by, and construed in accordance with, the
laws of the Province of Ontario and the federal laws of Canada applicable
therein.
3.7 This
Amending Agreement may be signed in counterparts and delivered by facsimile
transmission or other electronic means, and each of such counterparts shall
constitute an original document, and such counterparts, taken together, shall
constitute one and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Amending Agreement as of the date set forth
above.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“Nozhat
Choudry”
|
Signature
of Witness
|
|
Nozhat
Choudry
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
5
Exhibit
10.55
Execution
Copy
AMENDING
AGREEMENT
THIS AMENDING AGREEMENT
is
made as of the 3rd day of March, 2008 by and between John Cornish (the
“Employee”
), a resident of the
State of Florida, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into a termination agreement dated as of January 4, 2008 (the
“Termination Agreement”
)
pursuant to which the Employee’s employment with the Employer, as its Vice
President, Operations, was terminated;
AND WHEREAS,
capitalized terms
used in this Amending Agreement, but not otherwise defined, shall have the
respective meanings attributed to such terms in the Termination
Agreement;
AND WHEREAS,
the Employer and
the Employee mutually have agreed that it would be in the best interests of each
of them to permit the Employer to pay up to 100% of the Severance Balance in a
non-cash form of consideration;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Amending
Agreement and the Termination Agreement (the receipt and sufficiency of which
are hereby acknowledged by the parties hereto), the parties hereto agree as
follows:
1.1 Sections
3.3, 3.4 and 3.5 of the Termination Agreement are hereby deleted in their
entirety and replaced with the following Sections 3.3, 3.4, 3.5 and
3.6:
|
3.3
|
At
the sole discretion of the Employer, and subject to the provisions of this
Section 3.3 and Section 3.4, and subject further to the Employer obtaining
all requisite corporate approval therefor (including, without limitation,
the approval of the Employer’s stockholders, if required), the Employer
may satisfy and discharge in full its obligation under Section 3.2 to pay
the Severance Balance by: (i) issuing to the Employee stock
options under the Stock Option Plan in a number equal to the quotient of
(a) some percentage of the Severance Balance, up to 100%, divided by (b)
the per stock option value of such stock options, which shall be
determined by the Employer using the Black-Scholes valuation method
(collectively, the
“Severance Stock
Options”
); and (ii) paying the balance of the Severance Balance to
the Employee in cash. The Severance Stock Options shall have a
term of ten years commencing on the date of their grant and, other than as
may be agreed to by the Employer within its sole discretion, will not
become exercisable prior to the 180
th
day following the date of their grant. The exercise price of
the Severance Stock Options shall be determined by the Employer’s board of
directors in accordance with the provisions of the Stock Option Plan and
all applicable laws, regulations and rules (including, without limitation,
the rules of the Toronto Stock
Exchange).
|
|
3.4
|
If, prior
to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should
the Employer become insolvent or make an assignment for the benefit of any
creditor or creditors, or should a receiver or trustee be appointed for
all or any significant part of the Employer’s assets, or should the
Employer consent to the winding-up, liquidation or dissolution of itself
or its affairs (each, a
“Bankruptcy Event”
),
then an amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of
the Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall
become due and payable, in cash, immediately to the
Employee. If a Bankruptcy Event occurs on or after March 31,
2008, then the Severance Balance shall become due and payable, in cash,
immediately to the Employee.
|
|
3.5
|
The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, Bill Dumencu, David Eldridge, Julie Fotheringham,
Stephen Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should
become entitled to receive severance pursuant to his or her executive
employment agreement at any time before the Employer has paid, in full,
the amount due and payable to him pursuant to Section 3.2 or 3.4, as the
case may be, the Employer shall not pay any OLT Member a percentage of his
or her severance entitlement (without regard to applicable deductions and
withholdings) that exceeds the percentage that (i) the Salary Continuance
Amount
plus
the
aggregate amount paid to the Employee pursuant to Sections 3.2 and 3.4,
together with the aggregate amount of deductions and withholdings withheld
by the Employer, represents of (ii) the amount of the Employee’s
Severance. For greater certainty, for purposes of calculating
such percentage in a circumstance in which the Employer has exercised its
discretion pursuant to Section 3.3 and has issued Severance Stock Options,
then the aggregate amount paid to the Employee pursuant to Section 3.2
shall be the sum of (i) the value of such Severance Stock Options, as
determined by the Employer using the Black-Scholes valuation method, and
(ii) the amount of the Severance Balance paid in
cash.
|
|
3.6
|
For
greater certainty, all cash amounts due and payable by the Employer to the
Employee pursuant to this Article 3 shall be paid, net of applicable
deductions and withholdings.
|
1.2 The
Termination Agreement remains in full force and effect, unamended, other than as
specifically amended by this Amending Agreement.
2.1
|
The
Employee hereby acknowledges that:
|
(a)
|
He
has had sufficient time to review and consider this Amending Agreement
thoroughly;
|
(b)
|
He
has read and understands the terms of this Amending Agreement and his
obligations hereunder;
|
(c)
|
He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Amending Agreement; and
|
(d)
|
He
is entering this Amending Agreement voluntarily and without any pressure
from the Employer.
|
3.1 The
headings in this Amending Agreement are included solely for convenience of
reference and shall not affect the construction or interpretation
hereof.
3.2 The
parties hereto expressly agree that nothing in this Amending Agreement shall be
construed as an admission of liability.
3.3 This
Amending Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective heirs, trustees, administrators, successors
and assigns.
3.4 This
Amending Agreement and the Termination Agreement constitute the entire agreement
between the parties hereto pertaining to the subject matter of the termination
of the Employee’s employment with the Employer. This Amending
Agreement, together with the Termination Agreement, supersede and replace all
prior agreements, if any, written or oral, with respect to such subject matter
and any rights which the Employee may have by reason of any such prior
agreements or by reason of the Employee’s employment with the
Corporation. There are no representations, warranties or agreements
between the parties hereto in connection with the subject matter of this
Amending Agreement, except as specifically set forth herein. No
reliance is placed on any representation, opinion, advice or assertion of fact
made by the Employer or any of its officers, directors, agents or employees to
the Employee, except to the extent that the same has been reduced to writing and
included as a term of this Amending Agreement or the Termination
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
3.5 Each
of the provisions contained in this Amending Agreement is distinct and
severable, and a declaration of invalidity or unenforceability of any provision
or part thereof by a court of competent jurisdiction shall not affect the
validity or enforceability of any other provision hereof.
3.6 This
Amending Agreement shall be governed by, and construed in accordance with, the
laws of the State of Florida, without regard to its conflicts of laws rules
which shall be deemed inapplicable to this Amending Agreement.
3.7 This
Amending Agreement may be signed in counterparts and delivered by facsimile
transmission or other electronic means, and each of such counterparts shall
constitute an original document, and such counterparts, taken together, shall
constitute one and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Amending Agreement as of the date set forth
above.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“John
Cornish”
|
Signature
of Witness
|
|
John
Cornish
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
5
Exhibit
10.56
Execution
Copy
AMENDING
AGREEMENT
THIS AMENDING AGREEMENT
is
made as of the 3rd day of March, 2008 by and between David C. Eldridge (the
“Employee”
), a resident
of the State of Oklahoma, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into a termination agreement dated as of January 4, 2008 (the
“Termination Agreement”
)
pursuant to which the Employee’s employment with the Employer, as its Vice
President, Science and Technology, was terminated;
AND WHEREAS,
capitalized terms
used in this Amending Agreement, but not otherwise defined, shall have the
respective meanings attributed to such terms in the Termination
Agreement;
AND WHEREAS,
the Employer and
the Employee mutually have agreed that it would be in the best interests of each
of them to permit the Employer to pay up to 50% of the Severance Balance in a
non-cash form of consideration;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Amending
Agreement and the Termination Agreement (the receipt and sufficiency of which
are hereby acknowledged by the parties hereto), the parties hereto agree as
follows:
1.1 Sections
3.3, 3.4 and 3.5 of the Termination Agreement are hereby deleted in their
entirety and replaced with the following Sections 3.3, 3.4, 3.5 and
3.6:
|
3.3
|
At
the sole discretion of the Employer, and subject to the provisions of this
Section 3.3 and Section 3.4, and subject further to the Employer obtaining
all requisite corporate approval therefor (including, without limitation,
the approval of the Employer’s stockholders, if required), the Employer
may satisfy and discharge in full its obligation under Section 3.2 to pay
the Severance Balance by: (i) issuing to the Employee stock
options under the Stock Option Plan in a number equal to the quotient of
(a) some percentage of the Severance Balance, which shall not exceed 50%,
divided by (b) the per stock option value of such stock options, which
shall be determined by the Employer using the Black-Scholes valuation
method (collectively, the
“Severance Stock
Options”
); and (ii) paying the balance of the Severance Balance to
the Employee in cash. The Severance Stock Options shall have a
term of ten years commencing on the date of their grant and, other than as
may be agreed to by the Employer within its sole discretion, will not
become exercisable prior to the 180
th
day following the date of their grant. The exercise price of
the Severance Stock Options shall be determined by the Employer’s board of
directors in accordance with the provisions of the Stock Option Plan and
all applicable laws, regulations and rules (including, without limitation,
the rules of the Toronto Stock
Exchange).
|
|
3.4
|
If, prior
to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should
the Employer become insolvent or make an assignment for the benefit of any
creditor or creditors, or should a receiver or trustee be appointed for
all or any significant part of the Employer’s assets, or should the
Employer consent to the winding-up, liquidation or dissolution of itself
or its affairs (each, a
“Bankruptcy Event”
),
then an amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of
the Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall
become due and payable, in cash, immediately to the
Employee. If a Bankruptcy Event occurs on or after March 31,
2008, then the Severance Balance shall become due and payable, in cash,
immediately to the Employee.
|
|
3.5
|
The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, Julie Fotheringham,
Stephen Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should
become entitled to receive severance pursuant to his or her executive
employment agreement at any time before the Employer has paid, in full,
the amount due and payable to him pursuant to Section 3.2 or 3.4, as the
case may be, the Employer shall not pay any OLT Member a percentage of his
or her severance entitlement (without regard to applicable deductions and
withholdings) that exceeds the percentage that (i) the Salary Continuance
Amount
plus
the
aggregate amount paid to the Employee pursuant to Sections 3.2 and 3.4,
together with the aggregate amount of deductions and withholdings withheld
by the Employer, represents of (ii) the amount of the Employee’s
Severance. For greater certainty, for purposes of calculating
such percentage in a circumstance in which the Employer has exercised its
discretion pursuant to Section 3.3 and has issued Severance Stock Options,
then the aggregate amount paid to the Employee pursuant to Section 3.2
shall be the sum of (i) the value of such Severance Stock Options, as
determined by the Employer using the Black-Scholes valuation method, and
(ii) the amount of the Severance Balance paid in
cash.
|
1.2 Section
4.2 of the Termination Agreement is hereby deleted in its entirety and replaced
with the following Section 4.2:
|
4.2
|
For
greater certainty, all cash amounts due and payable by the Employer to the
Employee pursuant to Article 3 and this Article 4 shall be paid, net of
applicable deductions and
withholdings.
|
1.3 The
Termination Agreement remains in full force and effect, unamended, other than as
specifically amended by this Amending Agreement.
2.1 The
Employee hereby acknowledges that:
(a)
|
He
has had sufficient time to review and consider this Amending Agreement
thoroughly;
|
(b)
|
He
has read and understands the terms of this Amending Agreement and his
obligations hereunder;
|
(c)
|
He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Amending Agreement; and
|
(d)
|
He
is entering this Amending Agreement voluntarily and without any pressure
from the Employer.
|
3.1 The
headings in this Amending Agreement are included solely for convenience of
reference and shall not affect the construction or interpretation
hereof.
3.2 The
parties hereto expressly agree that nothing in this Amending Agreement shall be
construed as an admission of liability.
3.3 This
Amending Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective heirs, trustees, administrators, successors
and assigns.
3.4 This
Amending Agreement and the Termination Agreement constitute the entire agreement
between the parties hereto pertaining to the subject matter of the termination
of the Employee’s employment with the Employer. This Amending
Agreement, together with the Termination Agreement, supersede and replace all
prior agreements, if any, written or oral, with respect to such subject matter
and any rights which the Employee may have by reason of any such prior
agreements or by reason of the Employee’s employment with the
Corporation. There are no representations, warranties or agreements
between the parties hereto in connection with the subject matter of this
Amending Agreement, except as specifically set forth herein. No
reliance is placed on any representation, opinion, advice or assertion of fact
made by the Employer or any of its officers, directors, agents or employees to
the Employee, except to the extent that the same has been reduced to writing and
included as a term of this Amending Agreement or the Termination
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
3.5 Each
of the provisions contained in this Amending Agreement is distinct and
severable, and a declaration of invalidity or unenforceability of any provision
or part thereof by a court of competent jurisdiction shall not affect the
validity or enforceability of any other provision hereof.
3.6 This
Amending Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oklahoma, without regard to its conflicts of laws rules
which shall be deemed inapplicable to this Amending Agreement.
3.7 This
Amending Agreement may be signed in counterparts and delivered by facsimile
transmission or other electronic means, and each of such counterparts shall
constitute an original document, and such counterparts, taken together, shall
constitute one and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Amending Agreement as of the date set forth
above.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“David
C. Eldridge”
|
Signature
of Witness
|
|
David
C. Eldridge
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
5
Exhibit
10.57
Execution
Copy
AMENDING
AGREEMENT
THIS AMENDING AGREEMENT
is
made as of the 3rd day of March, 2008 by and between Julie A. Fotheringham (the
“Employee”
), a resident
of the Province of Ontario, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into a termination agreement dated as of January 4, 2008 (the
“Termination Agreement”
)
pursuant to which the Employee’s employment with the Employer, as its Vice
President, Marketing, was terminated;
AND WHEREAS,
capitalized terms
used in this Amending Agreement, but not otherwise defined, shall have the
respective meanings attributed to such terms in the Termination
Agreement;
AND WHEREAS,
the Employer and
the Employee mutually have agreed that it would be in the best interests of each
of them to permit the Employer to pay up to 50% of the Severance Balance in a
non-cash form of consideration;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Amending
Agreement and the Termination Agreement (the receipt and sufficiency of which
are hereby acknowledged by the parties hereto), the parties hereto agree as
follows:
1.1 Sections
3.3, 3.4 and 3.5 of the Termination Agreement are hereby deleted in their
entirety and replaced with the following Sections 3.3, 3.4, 3.5 and
3.6:
|
3.3
|
At
the sole discretion of the Employer, and subject to the provisions of this
Section 3.3 and Section 3.4, and subject further to the Employer obtaining
all requisite corporate approval therefor (including, without limitation,
the approval of the Employer’s stockholders, if required), the Employer
may satisfy and discharge in full its obligation under Section 3.2 to pay
the Severance Balance by: (i) issuing to the Employee stock
options under the Stock Option Plan in a number equal to the quotient of
(a) some percentage of the Severance Balance, which shall not exceed 50%,
divided by (b) the per stock option value of such stock options, which
shall be determined by the Employer using the Black-Scholes valuation
method (collectively, the
“Severance Stock
Options”
); and (ii) paying the balance of the Severance Balance to
the Employee in cash. The Severance Stock Options shall have a
term of ten years commencing on the date of their grant and, other than as
may be agreed to by the Employer within its sole discretion, will not
become exercisable prior to the 180
th
day following the date of their grant. The exercise price of
the Severance Stock Options shall be determined by the Employer’s board of
directors in accordance with the provisions of the Stock Option Plan and
all applicable laws, regulations and rules (including, without limitation,
the rules of the Toronto Stock
Exchange).
|
|
3.4
|
If, prior
to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should
the Employer become insolvent or make an assignment for the benefit of any
creditor or creditors, or should a receiver or trustee be appointed for
all or any significant part of the Employer’s assets, or should the
Employer consent to the winding-up, liquidation or dissolution of itself
or its affairs (each, a
“Bankruptcy Event”
),
then an amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of
the Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall
become due and payable, in cash, immediately to the
Employee. If a Bankruptcy Event occurs on or after March 31,
2008, then the Severance Balance shall become due and payable, in cash,
immediately to the Employee.
|
|
3.5
|
The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, David Eldridge,
Stephen Kilmer, Suh Kim, Stephen Parks or Stephen Westing (each, an
“OLT Member”
) should
become entitled to receive severance pursuant to his or her executive
employment agreement at any time before the Employer has paid, in full,
the amount due and payable to her pursuant to Section 3.2 or 3.4, as the
case may be, the Employer shall not pay any OLT Member a percentage of his
or her severance entitlement (without regard to applicable deductions and
withholdings) that exceeds the percentage that (i) the Salary Continuance
Amount
plus
the
aggregate amount paid to the Employee pursuant to Sections 3.2 and 3.4,
together with the aggregate amount of deductions and withholdings withheld
by the Employer, represents of (ii) the amount of the Employee’s
Severance. For greater certainty, for purposes of calculating
such percentage in a circumstance in which the Employer has exercised its
discretion pursuant to Section 3.3 and has issued Severance Stock Options,
then the aggregate amount paid to the Employee pursuant to Section 3.2
shall be the sum of (i) the value of such Severance Stock Options, as
determined by the Employer using the Black-Scholes valuation method, and
(ii) the amount of the Severance Balance paid in
cash.
|
|
3.6
|
For
greater certainty, all cash amounts due and payable by the Employer to the
Employee pursuant to this Article 3 shall be paid, net of applicable
deductions and withholdings.
|
1.2 The
Termination Agreement remains in full force and effect, unamended, other than as
specifically amended by this Amending Agreement.
2.1
|
The
Employee hereby acknowledges that:
|
(a)
|
She
has had sufficient time to review and consider this Amending Agreement
thoroughly;
|
(b)
|
She
has read and understands the terms of this Amending Agreement and her
obligations hereunder;
|
(c)
|
She
has been given an opportunity to obtain independent legal advice, or such
other advice as she may desire, concerning the interpretation and effect
of this Amending Agreement; and
|
(d)
|
She
is entering this Amending Agreement voluntarily and without any pressure
from the Employer.
|
3.1 The
headings in this Amending Agreement are included solely for convenience of
reference and shall not affect the construction or interpretation
hereof.
3.2 The
parties hereto expressly agree that nothing in this Amending Agreement shall be
construed as an admission of liability.
3.3 This
Amending Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective heirs, trustees, administrators, successors
and assigns.
3.4 This
Amending Agreement and the Termination Agreement constitute the entire agreement
between the parties hereto pertaining to the subject matter of the termination
of the Employee’s employment with the Employer. This Amending
Agreement, together with the Termination Agreement, supersede and replace all
prior agreements, if any, written or oral, with respect to such subject matter
and any rights which the Employee may have by reason of any such prior
agreements or by reason of the Employee’s employment with the
Corporation. There are no representations, warranties or agreements
between the parties hereto in connection with the subject matter of this
Amending Agreement, except as specifically set forth herein. No
reliance is placed on any representation, opinion, advice or assertion of fact
made by the Employer or any of its officers, directors, agents or employees to
the Employee, except to the extent that the same has been reduced to writing and
included as a term of this Amending Agreement or the Termination
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
3.5 Each
of the provisions contained in this Amending Agreement is distinct and
severable, and a declaration of invalidity or unenforceability of any provision
or part thereof by a court of competent jurisdiction shall not affect the
validity or enforceability of any other provision hereof.
3.6 This
Amending Agreement shall be governed by, and construed in accordance with, the
laws of the Province of Ontario and the federal laws of Canada applicable
therein.
3.7 This
Amending Agreement may be signed in counterparts and delivered by facsimile
transmission or other electronic means, and each of such counterparts shall
constitute an original document, and such counterparts, taken together, shall
constitute one and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Amending Agreement as of the date set forth
above.
|
OCCULOGIX,
INC.
|
|
|
|
|
|
By:
|
“Suh
Kim”
|
|
|
Suh
Kim
|
|
|
General
Counsel
|
|
|
“Julie
A. Fotheringham”
|
Signature
of Witness
|
|
Julie
A. Fotheringham
|
|
|
|
|
|
|
Name
of Witness (
please
print
)
|
|
|
5
Exhibit
10.58
Execution
Copy
AMENDING
AGREEMENT
THIS AMENDING AGREEMENT
is
made as of the 3rd day of March, 2008 by and between Stephen Parks (the
“Employee”
), a resident of the
State of Mississippi, and OccuLogix, Inc. (the
“Employer”
), a corporation
incorporated under the laws of the State of Delaware, and having its executive
offices at 2600 Skymark Avenue, Building 9, Suite 201, Mississauga, Ontario, L4W
5B2.
WHEREAS,
the Employer and the
Employee entered into a termination agreement dated as of January 4, 2008 (the
“Termination Agreement”
)
pursuant to which the Employee’s employment with the Employer, as its Vice
President, Sales, was terminated;
AND WHEREAS,
capitalized terms
used in this Amending Agreement, but not otherwise defined, shall have the
respective meanings attributed to such terms in the Termination
Agreement;
AND WHEREAS,
the Employer and
the Employee mutually have agreed that it would be in the best interests of each
of them to permit the Employer to pay up to 50% of the Severance Balance in a
non-cash form of consideration;
NOW, THEREFORE,
in
consideration of the mutual promises and covenants contained in this Amending
Agreement and the Termination Agreement (the receipt and sufficiency of which
are hereby acknowledged by the parties hereto), the parties hereto agree as
follows:
1.1 Sections
3.3, 3.4 and 3.5 of the Termination Agreement are hereby deleted in their
entirety and replaced with the following Sections 3.3, 3.4, 3.5 and
3.6:
|
3.3
|
At
the sole discretion of the Employer, and subject to the provisions of this
Section 3.3 and Section 3.4, and subject further to the Employer obtaining
all requisite corporate approval therefor (including, without limitation,
the approval of the Employer’s stockholders, if required), the Employer
may satisfy and discharge in full its obligation under Section 3.2 to pay
the Severance Balance by: (i) issuing to the Employee stock
options under the Stock Option Plan in a number equal to the quotient of
(a) some percentage of the Severance Balance, which shall not exceed 50%,
divided by (b) the per stock option value of such stock options, which
shall be determined by the Employer using the Black-Scholes valuation
method (collectively, the
“Severance Stock
Options”
); and (ii) paying the balance of the Severance Balance to
the Employee in cash. The Severance Stock Options shall have a
term of ten years commencing on the date of their grant and, other than as
may be agreed to by the Employer within its sole discretion, will not
become exercisable prior to the 180
th
day following the date of their grant. The exercise price of
the Severance Stock Options shall be determined by the Employer’s board of
directors in accordance with the provisions of the Stock Option Plan and
all applicable laws, regulations and rules (including, without limitation,
the rules of the Toronto Stock
Exchange).
|
|
3.4
|
If, prior
to the end of the Salary Continuance Period, any petition should be filed
by or against the Employer for liquidation or reorganization, or should
the Employer become insolvent or make an assignment for the benefit of any
creditor or creditors, or should a receiver or trustee be appointed for
all or any significant part of the Employer’s assets, or should the
Employer consent to the winding-up, liquidation or dissolution of itself
or its affairs (each, a
“Bankruptcy Event”
),
then an amount equal to (i) the Employee’s Severance
minus
(ii) the
aggregate net amount paid by the Employer to the Employee to the date of
the Bankruptcy Event, together with the aggregate amount of deductions and
withholdings withheld by the Employer, pursuant to Section 3.1, shall
become due and payable, in cash, immediately to the
Employee. If a Bankruptcy Event occurs on or after March 31,
2008, then the Severance Balance shall become due and payable, in cash,
immediately to the Employee.
|
|
3.5
|
The
Employer hereby agrees that, in the event that any of Elias Vamvakas, Tom
Reeves, Nozhat Choudry, John Cornish, Bill Dumencu, Julie Fotheringham,
David Eldridge, Stephen Kilmer, Suh Kim or Stephen Westing (each, an
“OLT Member”
) should
become entitled to receive severance pursuant to his or her executive
employment agreement at any time before the Employer has paid, in full,
the amount due and payable to him pursuant to Section 3.2 or 3.4, as the
case may be, the Employer shall not pay any OLT Member a percentage of his
or her severance entitlement (without regard to applicable deductions and
withholdings) that exceeds the percentage that (i) the Salary Continuance
Amount
plus
the
aggregate amount paid to the Employee pursuant to Sections 3.2 and 3.4,
together with the aggregate amount of deductions and withholdings withheld
by the Employer, represents of (ii) the amount of the Employee’s
Severance. For greater certainty, for purposes of calculating
such percentage in a circumstance in which the Employer has exercised its
discretion pursuant to Section 3.3 and has issued Severance Stock Options,
then the aggregate amount paid to the Employee pursuant to Section 3.2
shall be the sum of (i) the value of such Severance Stock Options, as
determined by the Employer using the Black-Scholes valuation method, and
(ii) the amount of the Severance Balance paid in
cash.
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1.2 Section
4.2 of the Termination Agreement is hereby deleted in its entirety and replaced
with the following Section 4.2:
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4.2
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For
greater certainty, all cash amounts due and payable by the Employer to the
Employee pursuant to Article 3 and this Article 4 shall be paid, net of
applicable deductions and
withholdings.
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1.3 The
Termination Agreement remains in full force and effect, unamended, other than as
specifically amended by this Amending Agreement.
2.1
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The
Employee hereby acknowledges that:
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(a)
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He
has had sufficient time to review and consider this Amending Agreement
thoroughly;
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(b)
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He
has read and understands the terms of this Amending Agreement and his
obligations hereunder;
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(c)
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He
has been given an opportunity to obtain independent legal advice, or such
other advice as he may desire, concerning the interpretation and effect of
this Amending Agreement; and
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(d)
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He
is entering this Amending Agreement voluntarily and without any pressure
from the Employer.
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3.1 The
headings in this Amending Agreement are included solely for convenience of
reference and shall not affect the construction or interpretation
hereof.
3.2 The
parties hereto expressly agree that nothing in this Amending Agreement shall be
construed as an admission of liability.
3.3 This
Amending Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective heirs, trustees, administrators, successors
and assigns.
3.4 This
Amending Agreement and the Termination Agreement constitute the entire agreement
between the parties hereto pertaining to the subject matter of the termination
of the Employee’s employment with the Employer. This Amending
Agreement, together with the Termination Agreement, supersede and replace all
prior agreements, if any, written or oral, with respect to such subject matter
and any rights which the Employee may have by reason of any such prior
agreements or by reason of the Employee’s employment with the
Corporation. There are no representations, warranties or agreements
between the parties hereto in connection with the subject matter of this
Amending Agreement, except as specifically set forth herein. No
reliance is placed on any representation, opinion, advice or assertion of fact
made by the Employer or any of its officers, directors, agents or employees to
the Employee, except to the extent that the same has been reduced to writing and
included as a term of this Amending Agreement or the Termination
Agreement. Accordingly, there shall be no liability, either in tort
or in contract, assessed in relation to any such representation, opinion, advice
or assertion of fact, except to the extent aforesaid.
3.5 Each
of the provisions contained in this Amending Agreement is distinct and
severable, and a declaration of invalidity or unenforceability of any provision
or part thereof by a court of competent jurisdiction shall not affect the
validity or enforceability of any other provision hereof.
3.6 This
Amending Agreement shall be governed by, and construed in accordance with, the
laws of the State of Mississippi, without regard to its conflicts of laws rules
which shall be deemed inapplicable to this Amending Agreement.
3.7 This
Amending Agreement may be signed in counterparts and delivered by facsimile
transmission or other electronic means, and each of such counterparts shall
constitute an original document, and such counterparts, taken together, shall
constitute one and the same instrument.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties have executed this Amending Agreement as of the date set forth
above.
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OCCULOGIX,
INC.
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By:
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“Suh
Kim”
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Suh
Kim
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General
Counsel
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“Stephen
Parks”
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Signature
of Witness
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Stephen
Parks
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Name
of Witness (
please
print
)
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5
Exhibit 23.1
Consent
of Independent Registered Public Accounting Firm
We
consent to the incorporation by reference in the following Registration
Statements:
(a)
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the
Registration Statement (Form S-3/A Amendment No.
3 No. 333-141098) and related prospectus of OccuLogix, Inc.
for the registration of 9,441,749 shares of common stock;
and
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(b)
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the
Registration Statement (Form S-8 No. 333-124505) pertaining
to the Employees’ Stock Option Plan of OccuLogix,
Inc.
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Of our
reports dated March 14, 2008, with respect to the consolidated financial
statements and financial statement schedule of OccuLogix, Inc., and the
effectiveness of internal control over financial reporting of OccuLogix, Inc.,
included in this Annual Report (Form 10-K) for the year ended
December 31, 2007.
March
14, 2008
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/s/
Ernst & Young LLP
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Toronto,
Canada
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Chartered
Accountants
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Licensed
Public Accountants
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Exhibit
31.1
CERTIFICATION
PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Elias
Vamvakas, certify that:
1.
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I
have reviewed this Annual Report on Form 10-K of OccuLogix,
Inc.;
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
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a)
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designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
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b)
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designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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c)
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evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
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d)
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disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
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a)
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all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
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b)
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any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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/s/ Elias Vamvakas
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Elias
Vamvakas
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Chief
Executive Officer
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Exhibit
31.2
CERTIFICATION
PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
William G. Dumencu, certify that:
1.
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I
have reviewed this Annual Report on Form 10-K of OccuLogix,
Inc.;
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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c)
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evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
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d)
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disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
a)
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all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
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any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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/s/ William G. Dumencu
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William
G. Dumencu
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Chief
Financial Officer and Treasurer
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Exhibit
32.1
CERTIFICATION
PURSUANT TO
18 U.S.C
SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of OccuLogix, Inc. (the
“Company”) for the year ended December 31, 2007, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Elias Vamvakas,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:
1.
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The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
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2.
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
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By:
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/s/ Elias Vamvakas
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Elias
Vamvakas
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Chief
Executive Officer
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Dated
March 17, 2008:
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Exhibit
32.2
CERTIFICATION
PURSUANT TO
18 U.S.C
SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of OccuLogix, Inc. (the
“Company”) for the year ended December 31, 2007, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, William G.
Dumencu, Chief Financial Officer and Treasurer of the Company, certify, pursuant
to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
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The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
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2.
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
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By:
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/s/ William G. Dumencu
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William
G. Dumencu
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Chief
Financial Officer and
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Treasurer
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Dated:
March 17, 2008
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