EXHIBIT 10.5

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

INTELLECTUAL PROPERTY ASSIGNMENT

AGREEMENT

BETWEEN

QLT USA, INC.

AND

ARIUS TWO, INC.

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TABLE OF CONTENTS

 

          Page

ARTICLE I DEFINITIONS

   1

Section 1.01

  

Definitions

   1

Section 1.02

  

Defined Terms

   6

Section 1.03

  

No Amendment to License Definitions

   6

ARTICLE II PURCHASE, SALE, ASSIGNMENT, AND LICENSE

   6

Section 2.01

  

Purchase and Sales

   6

Section 2.02

  

Know-How License

   7

Section 2.03

  

Consideration

   7

Section 2.04

  

Termination of License Agreement

   7

Section 2.05

  

Expenses

   7

ARTICLE III PATENT INFRINGEMENT

   8

Section 3.01

  

Infringement Claimed by Third Parties

   8

Section 3.02

  

Indemnification of Seller

   8

Section 3.03

  

Indemnification of Buyer

   8

Section 3.04

  

Payment of Costs and Expenses

   8

Section 3.05

  

Termination of Obligations

   9

ARTICLE IV CONFIDENTIALITY

   9

Section 4.01

  

Confidentiality

   9

Section 4.02

  

Disclosure of Agreement

   9

ARTICLE V REPRESENTATIONS AND WARRANTIES

   10

Section 5.01

  

Corporate Power

   10

Section 5.02

  

Due Authorization

   10

Section 5.03

  

Binding Obligation

   10

Section 5.04

  

Ownership of Purchased Assets

   11

Section 5.05

  

Patent Proceedings

   11

Section 5.06

  

Legal Proceedings

   11

Section 5.07

  

Limitation on Warranties

   11

Section 5.08

  

Limitation of Liability

   11

ARTICLE VI COVENANTS

   12

Section 6.01

  

Access to Books and Records

   12

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Section 6.02

  

Commercially Reasonable Efforts

   12

Section 6.03

  

Compliance

   12

Section 6.04

  

Further Actions

   12

ARTICLE VII DELIVERIES

   13

Section 7.01

  

Deliveries By Seller

   13

Section 7.02

  

Deliveries By Buyer

   13

ARTICLE VIII MISCELLANEOUS

   14

Section 8.01

  

Governing Law

   14

Section 8.02

  

Waiver

   14

Section 8.03

  

Severability

   14

Section 8.04

  

Notices

   14

Section 8.05

  

Independent Contractors

   15

Section 8.06

  

Rules of Construction

   15

Section 8.07

  

Publicity

   15

Section 8.08

  

Entire Agreement; Amendment

   15

Section 8.09

  

Headings

   16

Section 8.10

  

Waiver of Jury Trial

   16

Section 8.11

  

Counterparts

   16

Section 8.12

  

Assignment

   16

 

Exhibit A

  -    BEMA Patent Rights

Exhibit B

  -    Guaranty

Exhibit C

  -    Patent and Trademark Assignment Agreement

Exhibit D

  -    Patent and Trademark Security Agreement

Exhibit E

  -    Secured Promissory Note

Exhibit F

  -    Security Agreement

Exhibit G

  -    Termination Agreement

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INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT

This Intellectual Property Assignment Agreement (the “Agreement”) is made as of
September 5, 2007 (the “Effective Date”) by and between QLT USA, Inc. (formerly
Atrix Laboratories, Inc.), a Delaware corporation with its principal office at
2579 Midpoint Drive, Fort Collins, CO 80525-4417 (“Seller”), and Arius Two,
Inc., a Delaware corporation with its principal office at 2501 Aerial Center
Parkway, Suite 205, Morrisville, NC 27560 (“Buyer”). Seller and Buyer are
sometimes referred to collectively herein as the “Parties” or singly as a
“Party.”

RECITALS

WHEREAS, Seller and Arius Pharmaceuticals, Inc. (“Arius”) entered into that
certain License Agreement dated May 27, 2004, as amended July 14, 2005 and
August 2, 2006 (as amended, the “License Agreement”); and

WHEREAS, Seller has agreed to sell to Buyer, and Buyer has agreed to purchase
from Seller the BEMA assets related specifically to the United States.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements contained herein, the Parties hereto, intending to be
legally bound, do hereby agree as follows:

AGREEMENT

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. The following terms as used in this Agreement shall
have the meaning set forth below:

“Affiliate” means an individual, trust, business trust, joint venture,
partnership, corporation, association or any other entity which owns, is owned
by or is under common ownership with, a Party. For the purposes of this
definition, the term “owns” (including, with correlative meanings, the terms
“owned by” and “under common ownership with”) as used with respect to any Party,
shall mean the possession (directly or indirectly) of more than 50% of the
outstanding voting securities of a corporation or comparable equity interest in
any other type of entity.

“Applicable Laws” means all applicable laws, rules, regulations and guidelines
that may apply to the performance of either Party’s obligations under this
Agreement.

“Assumed Liabilities” means all obligations and liabilities arising out of
Buyer’s ownership of the Purchased Assets, whether arising prior to or after the
Effective Date; except for such obligations and liabilities for which Seller is
obligated to indemnify Buyer under Section 3.03 of this Agreement.

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“BEMA” means Seller’s proprietary bioerodible, mucoadhesive multi-layer polymer
film.

“Claims” shall mean and include all past, present and future disputes, claims,
controversies, demands, rights, obligations, liabilities, actions and causes of
action of every kind and nature.

“Combination Product” means a Worldwide Product (as defined below) that is sold
together with any other products and/or services at a unit price, whether
packaged together or separately with another pharmaceutical product or other
device, equipment, instrumentation, or other components (other than solely
containers or packaging exclusively for the Worldwide Product).

“Commercially Reasonable Efforts” shall mean, except as otherwise explicitly set
forth in this Agreement, those efforts consistent with the exercise of prudent
scientific and business judgment, as applied to products having comparable
market potential within the relevant product lines of that Party and generally
accepted practices in the pharmaceutical industry. “Comparable market potential”
shall be fairly determined by a Party in good faith and without limitation may
be based upon market size, price, competition, patent rights, product liability
issues and general marketing parameters.

“Competent Authorities” means, collectively, all governmental entities, foreign
or domestic, responsible for the regulation of medicinal products intended for
human use.

“Confidential Information” means any confidential or proprietary information of
a Party, whether in oral, written, graphic or electronic form. Confidential
Information shall not include any information which the receiving Party can
prove by competent evidence:

(a) is now, or hereafter becomes, through no act or failure to act on the part
of the receiving Party, generally known by or available to the public;

(b) is known by the receiving Party at the time of receiving such information,
as evidenced by its written records maintained in the ordinary course of
business;

(c) is hereafter furnished to the receiving Party by a Third Party, as a matter
of right and without restriction on disclosure;

(d) is independently developed by the receiving Party, as evidenced by its
written records maintained in the ordinary course of business, without knowledge
of, and without the aid, application or use of, the disclosing Party’s
Confidential Information; or

(e) is the subject of a written permission to disclose provided by the
disclosing Party.

 

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“Control” means the possession of the ability to assign to Buyer as provided for
herein without violating the terms of any agreement or other arrangement with
any Third Party.

“Encumbrance” means any lien, pledge, hypothecation, mortgage, security
interest, encumbrance, equitable interest, preference, right of possession,
lease, tenancy, license, proxy, covenant, order, option, right of first refusal
or preemptive right, whether arising out of an obligation to pay any taxes or
otherwise.

“BEMA Know-How” means all Know-How related to BEMA or any Product which is under
the Control of Seller as of the Effective Date, including, but not limited to,
data and documentation of clinical trials, pharmacological, toxicological,
clinical, assay, control, and manufacturing data, techniques, processes,
methods, or systems, and any other information relating to BEMA, excluding the
BEMA Patent Rights.

“Marks” means all right, title, and interest in “BEMA” or any additional
trademarks or service marks owned by Seller with respect to the BEMA Technology,
alone or accompanied by any logo or design and any non-English language
equivalents in figure, sound or meaning, whether registered or not, including
but not limited to any and all such rights in the Territory existing solely
under common law, statute, or similar bases not requiring explicit government
notice or registration.

“BEMA Patent Rights” means all Patent Rights claiming BEMA or any Improvement,
or which are necessary, useful, or appropriate to develop, manufacture, or
commercialize Products, and under the Control of Seller as of the Effective
Date, which shall include but not be limited to the patents and patent
applications listed on Exhibit A.

“BEMA Technology” means the BEMA Patent Rights and the BEMA Know-How.

“Books and Records” means, in whatever media, any and all books and records,
reports and accounts and data in connection with or related to any Product, BEMA
Technology, or Marks, or any research, development, or other activities
primarily related to the foregoing (including but not limited to those related
to filing, prosecution, and/or maintenance of the BEMA Patent Rights).

“US Patent Term” means, on a Product-by-Product basis, the period of time ending
on the expiration of the last to expire of the BEMA Patent Rights covering such
Product in the Territory.

“Ex-US Purchase Agreement” means that certain Intellectual Property Assignment
Agreement, dated August 2, 2006, between the Parties.

“Ex-US BEMA Patent Rights” means all Patent Rights assigned to Buyer pursuant to
the Ex-US Purchase Agreement.

“Ex-US Product” means individually and collectively any product which would
infringe one or more valid claims of the Ex-US BEMA Patent Rights.

 

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“Territory” means the United States.

“FDA” means the Food and Drug Administration, the governmental entity
responsible in the United States for the regulation of medicinal products
intended for human use.

“GAAP” means generally accepted accounting principles of the United States
consistently applied on a basis consistent throughout the periods indicated and
consistent with each other.

“Governmental Approval” means all permits, licenses and authorizations,
including but not limited to, import permits and Marketing Authorizations
required by any Competent Authority as a prerequisite to the manufacturing,
marketing or selling of the Product for human therapeutic use.

“Guaranty” means that certain Guaranty to be executed by BioDelivery Sciences
International, Inc. (“BDSI”), owner of all of the outstanding capital stock of
Buyer, in the form attached hereto as Exhibit B.

“Improvement” means any and all developments, inventions or discoveries directly
relating to the BEMA Technology developed or acquired by, or under the Control
of, a Party at any time prior to or following the Effective Date and shall
include, but not be limited to, such developments intended to enhance the safety
and/or efficacy of any Product.

“Know-How” means all know-how, trade secrets, inventions, data, processes,
techniques, procedures, compositions, devices, methods, formulas, protocols and
information, whether or not patentable, which are not generally publicly known,
including, without limitation, all chemical, biochemical, toxicological, and
scientific research information, whether in written, graphic or video form or
any other form or format.

“Marketing Authorization” means all necessary and appropriate regulatory
approvals, including but not limited to, variations thereto, and Pricing and
Reimbursement Approvals to put a Product on the market in a particular
jurisdiction.

“Net Sales” means the gross amounts invoiced by Buyer, its Affiliates or
sublicensees for sales of the Worldwide Product by Buyer, its Affiliates, or its
sublicensees, as applicable, to a Third Party in a bona fide arm’s length
transaction, less the following items: ***. Net Sales shall not include any
sales or transfers of Worldwide Products by Buyer or its Affiliates to
Affiliates or sublicensees pursuant to manufacturing or distribution agreements
where such Affiliate or sublicensee will ultimately sell such Worldwide Product
and such amounts received in connection with sale will be included in Net Sales.

A Worldwide Product shall be considered sold when billed out or invoiced.
Components of Net Sales shall be determined in the ordinary course of business
in accordance with historical practice and using the accrual method of
accounting in accordance with GAAP.

In the event Buyer transfers Worldwide Product to a Third Party in a bona fide
arm’s length transaction, for consideration, in whole or in part, other than
cash or to a Third Party in

 

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other than a bona fide arm’s length transaction, the Net Sales price for such
Worldwide Product shall be deemed to be the standard invoice price then being
invoiced by Buyer in an arms length transaction with similar customers. The Net
Sales of a Combination Product shall be calculated as if the invoiced sales
price for a Product included within the Combination Product is ***. In the event
that Buyer includes a Worldwide Product as part of a single bundled sale of
separate products with separately stated prices, the Net Sales attributable to
such Worldwide Product shall be the higher of ***.

“Patent and Trademark Assignment Agreement” means the Patent and Trademark
Assignment Agreement executed by Seller in the form attached hereto as
Exhibit C.

“Patent and Trademark Security Agreement” means that certain Patent and
Trademark Security Agreement between Buyer and Seller in the form attached
hereto as Exhibit D.

“Patent Rights” means all rights under patents and patent applications, and any
and all patents issuing therefrom (including utility, model and design patents
and certificates of invention), together with any and all substitutions,
extensions (including supplemental protection certificates), registrations,
confirmations, reissues, divisionals, continuations, continuations-in-part,
re-examinations, renewals and foreign counterparts of the foregoing, and all
improvements, supplements, modifications or additions.

“Pricing and Reimbursement Approvals” means any pricing and reimbursement
approvals which may or must be obtained before placing a Product on the market
in a particular jurisdiction.

“Product” means a Product, as defined in the License Agreement, excluding an
Ex-US Product.

“Purchased Assets” means (i) the Marks, (ii) BEMA Technology, (iii) Books and
Records, (iv) all Government Approvals (as defined in the License Agreement) and
appropriate correspondence, clearance or transfer letters, or any other form of
authorization, license, permit, or the like from regulatory authorities with
respect to Government Approvals, to the extent not previously assigned to Buyer
under the License Agreement, and (v) any and all benefits, privileges, causes of
action, and remedies relating to any of the foregoing, whether before or
hereafter accrued, including, without limitation, all rights in, to and under
applications for, filings, registrations or renewals, and rights to apply for,
file, register, maintain, extend or renew any of the foregoing and the right to
bring actions for past, present or future infringement of or otherwise enforce
any of the foregoing and to settle and retain the proceeds of such actions
(including, without limitation, all causes of actions relating to any of the
foregoing, claims and demands or other rights accruing with respect to any of
the foregoing, or arising from any infringement of the BEMA Technology and the
Marks, before or after the Effective Date), and any and all other rights
corresponding thereto throughout the world.

“Secured Promissory Note” means that certain secured promissory note made by
Buyer in favor of Seller in the form attached hereto as Exhibit E, the terms and
conditions of which are incorporated herein by reference.

 

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“Security Agreement” means that certain Security Agreement between Buyer and
Seller in the form attached hereto as Exhibit F.

“Third Party” means any entity other than: (a) Seller, (b) Buyer or (c) an
Affiliate of Seller or Buyer.

“United States” or “US” means the United States of America, its territories and
possessions, including the Commonwealth of Puerto Rico.

“Worldwide Product” means, collectively, all Ex-US Products and Products.

Section 1.02 Defined Terms. Each of the following terms is defined in the
Section set forth opposite such term below:

 

Agreement

   Preamble

Arius

   Recitals

Assumed Liabilities

   Section 2.01

Buyer

   Preamble

CDC

   Recitals

Closing Cash Payment

   Section 2.03(a)

Effective Date

   Preamble

Indemnified Party

   Section 3.04

Indemnifying Party

   Section 3.04

License Agreement

   Recitals

Loss

   Section 3.02

Party(ies)

   Preamble

Purchase Price

   Section 2.03

Seller

   Preamble

Third Party Claim

   Section 3.01

Section 1.03 No Amendment to License Definitions. The definition of certain
terms above which are also separately defined above shall not in any way alter,
amend, or be used to interpret the definitions established under the License
Agreement.

ARTICLE II

PURCHASE, SALE, ASSIGNMENT, AND LICENSE

Section 2.01 Purchase and Sales. Subject to the terms and conditions set forth
in this Agreement, effective on the Effective Date, Seller hereby conveys,
assigns, and transfers to Buyer, and Buyer hereby acquires from Seller, for the
Purchase Price, free and clear of all Encumbrances, the Purchased Assets and
shall assume, pay, discharge, and perform all Assumed Liabilities. For a period
of three months following the Effective Date, Seller will cooperate with Buyer,
as reasonably requested by Buyer and at Buyer’s expense, which expense shall be
commercially reasonable and documented, in effecting the transfer of the Marks
to Buyer and enabling Buyer to file registrations, applications therefor, or
equivalent formal legal recognition of, or rights with respect to, the Marks in
Buyer’s name in the Territory, and Buyer shall own all right, title, and
interest thereto in the Territory.

 

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Section 2.02 Know-How License. To the extent any BEMA Know-How or Improvement
cannot be severed from Know-How related to technology or intellectual property
other than BEMA Technology and assigned to Buyer as contemplated by this
Agreement, Seller hereby grants to Buyer an exclusive, perpetual, royalty-free,
fully-paid license in the Territory, with rights of sublicense, under and to
such Know-How and Improvements (to the extent not claimed in any BEMA Patent
Rights and concerning or related to BEMA (and not any technology other than
BEMA)) made, obtained, or Controlled by Seller and related Books and Records to
use, develop, market, advertise, promote, distribute, offer for sale, sell,
export and import, manufacture, and have manufactured Products, provided that,
following the expiration of the US Patent Term, such license shall be
non-exclusive, fully-paid, perpetual and royalty-free.

Section 2.03 Consideration. As consideration for the Purchased Assets, Buyer
shall pay to Seller total consideration of $7,000,000 (the “Purchase Price”).
The Purchase Price shall be payable as follows:

(a) $3,000,000 (the “Closing Cash Payment”), by wire transfer of immediately
available funds on the Effective Date to an account designated by Seller; and

(b) $4,000,000, as evidenced by a secured promissory note, to Seller as follows:

(i) $2,000,000, within ten (10) business days after the initial Governmental
Approval of a Product in the United States; and

(ii) $2,000,000, the first time that cumulative Net Sales exceed $30,000,000.
Such payment shall be made within 30 days following the end of the calendar
quarter during which cumulative Net Sales exceed such amount.

For the avoidance of doubt, each payment referred to in this Section 2.03(b)
shall be paid only once by Buyer and only be become due and payable at such time
as the event described in the relevant subsection has occurred.

Section 2.04 Termination of License Agreement. Pursuant to the form of
termination agreement attached hereto as Exhibit G (the “Termination
Agreement”), to be executed by Arius, Seller, and CDC prior to or as of the
Effective Date, the License Agreement shall terminate, and be of no further
force and effect, upon the assignment of all Purchased Assets to Buyer pursuant
to Section 2.01.

Section 2.05 Expenses. The Parties shall each bear their own costs and expenses
(including attorneys’ fees) incurred in connection with the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
hereby. Buyer shall pay all documented costs associated with the perfection and
recording of the documents related to the assignment of the Purchased Assets.

 

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ARTICLE III

PATENT INFRINGEMENT

Section 3.01 Infringement Claimed by Third Parties. In the event a Third Party
commences a judicial or administrative proceeding against a Party and such
proceeding pertains to the BEMA Patent Rights or Marks (the “Third Party
Claim”), or threatens to commence such a Third Party Claim, the Party against
whom such proceeding is threatened or commenced shall give prompt notice to the
other Party. Buyer shall, using its choice of counsel and at its own cost and
expense, defend any and all such Third Party Claims or proceedings with respect
to any of the Purchased Assets or the licensing of rights thereto by Seller to
Arius, and Seller shall, at Buyer’ cost and expense, provide such assistance and
cooperation to Buyer as may be reasonably requested by Buyer to defend any such
Third Party Claims. The above notwithstanding, without Seller’s prior written
consent, which shall not be unreasonably withheld, Buyer may only settle any
such claim so long as the terms of such settlement do not (a) impair Seller’s
rights hereunder, or (b) impose any costs directly or indirectly on Seller.

Section 3.02 Indemnification of Seller. Buyer shall indemnify and hold Seller,
its Affiliates, and their respective employees, directors and officers, harmless
from and against any liabilities or obligations, damages, losses, claims,
encumbrances, costs or expenses (including attorneys’ fees) (any or all of the
foregoing herein referred to as “Loss”) insofar as a Loss or actions in respect
thereof occurs subsequent to the Effective Date and arises out of or is based
upon (a) any claims that the use, marketing, sale, promotion, distribution,
manufacture, shipment or sale of a Product by Buyer, its sublicensees or
Affiliates infringes the patent, trademark or proprietary right or any other
published intellectual property right of a Third Party (including any willful
infringement); (b) Buyer’s or its sublicensees’ manufacture, development,
marketing, use, handling, storage, sale, distribution or promotion of the
Product or any demonstration samples; (c) any product liability claim that is
brought against Seller by any Third Party arising out of or related to any
Product made or sold by Buyer, its Affiliates, or its sublicensees; (d) Buyer’s
prosecution of a Third Party infringement claim, (e) any Third Party Claim
arising out of or related to the Purchased Assets; or (f) Buyer’s breach of its
representations, warranties or covenants set forth in this Agreement; provided,
however, Buyer shall not be required to indemnify Seller for any Claim for which
Seller is obligated to indemnify Buyer under Section 3.03.

Section 3.03 Indemnification of Buyer. Seller shall indemnify and hold Buyer,
its Affiliates, and their respective employees, directors, officers, and
licensees harmless from and against any Losses insofar as a Loss or actions in
respect thereof arises out of or is based upon Seller’s breach of any of its
representations, warranties, or covenants set forth in this Agreement.

Section 3.04 Payment of Costs and Expenses. Upon the indemnifying party’s (the
“Indemnifying Party”) receipt of a reasonably detailed invoice setting forth the
reasonable, documented costs and expenses incurred by the indemnified party (the
“Indemnified Party”) with

 

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respect to matters for which the Indemnifying Party is obligated to reimburse or
indemnify the Indemnified Party pursuant to Section 3.01, 3.02, or 3.03, the
Indemnifying Party shall pay such costs and expenses within 30 days.

Section 3.05 Termination of Obligations. Upon the assignment or sale of the
Purchased Assets to Seller, an Affiliate thereof, or any Third Party as a result
of Seller’s exercise of its rights under the Security Agreement or Patent and
Trademark Security Agreement, Buyer shall have no further obligations under
Sections 3.01 and 3.02 solely with respect to any Third Party Claims or Losses
that arise out of, or are caused by, the use of the Purchased Assets by Seller,
its Affiliates or any Third Party assigned the Purchased Assets as a result of
the exercise of Seller’s rights under the Security Agreement or Patent and
Trademark Security Agreement, any assignee of any of the foregoing, or licensees
of any of the foregoing after the date of such assignment or sale.

ARTICLE IV

CONFIDENTIALITY

Section 4.01 Confidentiality. For a period of *** years after the Effective
Date, each Party shall maintain all Confidential Information of the other Party
as confidential and shall not disclose any such Confidential Information to any
Third Party or use any such Confidential Information for any purpose, except
(a) as expressly authorized by this Agreement, (b) as required by law, rule,
regulation or court order (provided that the disclosing Party shall first notify
the other Party, shall use Commercially Reasonable Efforts to obtain
confidential treatment of any such information required to be disclosed, and
shall disclose only the minimum information required to be disclosed in order to
comply), or (c) to its Affiliates, sublicensees, employees, agents, consultants
and other representatives to accomplish the purposes of this Agreement, so long
as such persons are under an obligation of confidentiality no less stringent
than as set forth herein, provided that information concerning any of the
Purchased Assets (or rights licensed under Section 2.02) shall be deemed the
Confidential Information of Buyer. Each Party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Agreement. Each Party shall use at least the same standard of care as it uses to
protect its own Confidential Information (but not less than a reasonable
standard of care) to ensure that its Affiliates, employees, agents, consultants
and other representatives do not disclose or make any unauthorized use of the
other Party’s Confidential Information. Each Party shall promptly notify the
other Party upon discovery of any unauthorized use or disclosure of the other
Party’s Confidential Information.

Section 4.02 Disclosure of Agreement. Neither Party shall release to any Third
Party or publish in any way any non-public information with respect to the terms
of this Agreement without the prior written consent of the other Party, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing a
Party may disclose the terms of this Agreement to potential investors, lenders,
investment bankers and other financial institutions of its choice solely for
purposes of financing the business operations of such Party, or, in the case of
Buyer, to any prospective or actual sublicensee, manufacturer, marketing or
other corporate partner, acquirer, acquisition target, or existing investor or
lender of a Party or any Affiliate thereof,

 

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including but not limited to Meda AB, CDC, or any future licensee of Arius Two
or Arius with respect to any portion of the Purchased Assets; provided such
Party only discloses such information under conditions of confidentiality on
terms substantially similar to those contained in this Article IV. Nothing
contained in this paragraph shall prohibit either Party from filing this
Agreement as required by the rules and regulations of the Securities and
Exchange Commission, national securities exchanges (including those located in
countries outside of the United States) or the Nasdaq Stock Market; provided the
disclosing Party discloses only the minimum information required to be disclosed
in order to comply with such requirements, including requesting confidential
treatment of this Agreement (after consultation with the other Party) and filing
this Agreement in redacted form.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.01 Corporate Power. As of the Effective Date, each Party hereby
represents and warrants that such Party is duly organized and validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has full power and authority to enter into this Agreement and the transactions
contemplated hereby and to carry out the provisions hereof.

Section 5.02 Due Authorization. As of the Effective Date, each Party hereby
represents and warrants that such Party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.

Section 5.03 Binding Obligation. As of the Effective Date, each Party hereby
represents and warrants that this Agreement is a legal and valid obligation
binding upon it and is enforceable in accordance with its terms, except that the
enforcement of the rights and remedies created hereby is subject to bankruptcy,
insolvency, reorganization and similar laws of general application affecting the
rights and remedies of creditors and that the availability of the remedy of
specific performance or of injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought. As of the Effective
Date, the execution, delivery and performance of this Agreement by such Party
(a) does not conflict with or violate (with or without notice, passage of time,
or both) (i) any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, (ii) any provision of its
certificate of incorporation, bylaws, or other governance documents or any
resolution adopted by such Party’s Board of Directors or stockholders, or
(iii) any law, regulation, order or requirement of any court, governmental body
or administrative or other agency having authority over it and (b) will not
result in the imposition or creation of any Encumbrance upon or with respect to
any of the Purchased Assets, except as contemplated by this Agreement. Seller
represents and warrants that, to its knowledge, it will not be required to make
any filing with, give notice to, or obtain any consent or approval from any
person, entity, or governmental body or other agency in connection with the
execution and delivery of this Agreement or other agreements and documents that
are referenced herein or attached hereto as exhibit or the consummation of the
transactions contemplated hereby and thereby, which if not obtained or made
could reasonably be expected to have a material adverse effect on the
transactions contemplated by this Agreement.

 

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Section 5.04 Ownership of Purchased Assets. As of the Effective Date, Seller
represents and warrants that it is the sole owner of all right, title and
interest in and to the Purchased Assets, free and clear of all Encumbrances.

Section 5.05 Patent Proceedings. As of the Effective Date, Seller represents and
warrants that to Seller’s actual knowledge, without having made an investigation
or search, (a) no patent or patent application within the BEMA Patent Rights is
the subject of any pending interference, opposition, cancellation or other
protest proceeding, (b) except with respect to matters previously disclosed to
Seller by Buyer or its Affiliates, there is no claim pending, previously made,
or threatened alleging that the BEMA Technology, or the use, manufacture, sale,
or importation of technology or products embodying the BEMA Technology,
infringes or misappropriates any copyright, patent, trade secret, trademark, or
other published intellectual property right of any third party, (c) except with
respect to matters previously disclosed to Seller by Buyer or its Affiliates, no
prior use, manufacture, sale, or importation of the BEMA Technology, or any
technology or products embodying the foregoing by Seller, its Affiliates, or
their Third Party licensees (excluding Seller’s grant of licenses under the
License Agreement) constituted infringement or misappropriation of any
copyright, patent, trade secret, trademark, or other published intellectual
property right of any Third Party, (d) all filings, payments, and other actions
required to be made or taken to maintain such item of the BEMA Patent Rights in
full force and effect have been made by the applicable deadline, and (e) that it
has complied, in all material respects, with its obligations under the License
Agreement. For purposes of this Section 5.05, Seller’s actual knowledge shall
mean the actual knowledge, without having made an investigation or search, of
Sean F. Moriarty, it being understood by the parties that Buyer has been
responsible for maintaining and protecting the BEMA Patent Rights and the Marks
since August 16, 2006, except for the last two items on Exhibit A, for which, to
the extent responsibility therefor has not previously been transferred to Buyer,
such responsibility will be transferred no later than the Effective Date.

Section 5.06 Legal Proceedings. Except as noted below, as of the Effective Date,
each Party hereby represents and warrants to the other Party that there is no
action, suit or proceeding pending against or affecting, or, to the knowledge of
either Party, threatened against or affecting that Party, or any of its assets,
before any court or arbitrator or any governmental body, agency or official that
would, if decided against either Party that would have a material adverse effect
on that Party’s ability to consummate the transactions contemplated by this
Agreement.

Section 5.07 Limitation on Warranties. Except as expressly set forth in this
Agreement, nothing herein shall be construed as a representation or warranty by
Seller to Buyer that the BEMA Technology is not infringed by any Third Party, or
that the practice of such rights does not infringe any published intellectual
property rights of any Third Party. Neither Party makes any warranties, express
or implied, concerning the commercial utility of the Product.

Section 5.08 Limitation of Liability. NEITHER PARTY SHALL BE ENTITLED TO RECOVER
FROM THE OTHER PARTY ANY SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES (AS SUCH TERMS
ARE DEFINED IN BLACK’S LAW DICTIONARY, SIXTH EDITION) IN CONNECTION WITH THIS
AGREEMENT.

 

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ARTICLE VI

COVENANTS

Section 6.01 Access to Books and Records. Upon five days prior written notice
from Seller, Buyer shall permit Seller or its representatives (which
representatives shall be subject to the confidentiality provisions of the
Agreement) to inspect those books and records (including but not limited to
financial records) as Seller deems necessary to ensure Buyer’s compliance with
Section 6.02 of this Agreement. Buyer’s obligations under this Section 6.01
shall terminate three (3) months after Buyer’s payment in full of all amounts
due under the Secured Promissory Note.

Section 6.02 Commercially Reasonable Efforts. Buyer agrees to use Commercially
Reasonable Efforts to pursue Governmental Approval of the Product in the United
States under Section 2.03(b)(i) of this Agreement. Buyer shall promptly advise
Seller of any issues that materially and adversely affect its ability to pursue
Governmental Approval of the Product in the United States in accordance with
Section 2.03(b)(i). Buyer’s obligations under this Section 6.02 shall terminate
upon Buyer’s payment in full of all amounts due under the Secured Promissory
Note.

Section 6.03 Compliance. Buyer covenants and agrees that it shall comply, in all
material respects, with all Applicable Laws affecting the use, possession,
distribution, advertising and promotion in connection with the sale and
distribution of the Products and any demonstration samples. Buyer’s obligations
under this Section 6.03 shall terminate upon Buyer’s payment in full of all
amounts due under the Secured Promissory Note.

Section 6.04 Further Actions. Upon the terms and subject to the conditions
hereof, each of the Parties hereto shall use its Commercially Reasonable Efforts
to (a) take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary, proper or advisable under Applicable Law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement, (b) obtain from Competent Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by the Parties in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated by this
Agreement and (c) make all necessary filings, and thereafter make any other
required submissions, with respect to this transaction under Applicable Law. The
Parties hereto shall cooperate with each other in connection with the making of
all such filings, including by providing copies of all such documents to the
other Party’s counsel (subject to appropriate confidentiality restrictions)
prior to filing and, if requested, by accepting all reasonable additions,
deletions or changes suggested in connection therewith. Seller covenants that
(i) in the event any Know-How or Patent Rights related to BEMA in the Territory
come under its Control following the Effective Date, (1) it shall immediately
notify Buyer and provide to Buyer all written information related thereto and
(2) subject to Buyer reimbursing Seller for any costs incurred by Seller
following the Effective Date in obtaining such rights, such Know-How and Patent
Rights shall be deemed Purchased Assets for purposes of this Agreement and
immediately assigned, free and clear of all liens, claims, and encumbrances
(except with respect to such liens, claims or encumbrances existing on the date
Seller obtained such rights), to Buyer, or if they cannot be so assigned,
included in the

 

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license granted in Section 2.02, and (ii) if Seller becomes aware of any
Know-How or Patent Rights related to BEMA to which it has rights in the
Territory under the Pliva Agreement (as defined in the License Agreement),
Pfizer Agreement (as defined in the License Agreement), or any other agreement,
Seller shall (1) immediately notify Buyer in writing and provide to Buyer all
written information related thereto and (2) use Commercially Reasonable Efforts,
as requested by Buyer, an at Buyer’s expense, which expense shall be
commercially reasonable and documented, to obtain Control of such Know-How or
Patent Rights for purposes of assigning all right, title, and interest thereto
to Buyer consistent with the foregoing, or if not so assignable, including in
the license granted under Section 2.02.

ARTICLE VII

DELIVERIES

Section 7.01 Deliveries By Seller. On the Effective Date, Seller shall deliver,
or cause to be delivered, the following items, duly executed by Seller, as
applicable:

(a) the Patent and Trademark Assignment Agreement;

(b) all Books and Records (which shall include but not be limited to those
related to filing, prosecution, and/or maintenance of the BEMA Patent Rights)
and any actual filings or correspondence with any patent or trademark offices or
agencies outside in the Territory; provided, however, that Seller shall be
permitted to retain copies of the same for its internal records;

(c) the Termination Agreement; and

(d) any other documents necessary to properly record the assignment to Buyer of
all of Seller’s right, title and interest in and to the Purchased Assets.

Section 7.02 Deliveries By Buyer. On the Effective Date, Buyer shall deliver the
following items, duly executed by Buyer:

(a) the Closing Cash Payment;

(b) the Secured Promissory Note;

(c) the Security Agreement;

(d) the Patent and Trademark Security Agreement;

(e) the Guaranty (executed by BDSI); and

(f) the Termination Agreement (executed by Arius and CDC).

 

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ARTICLE VIII

MISCELLANEOUS

Section 8.01 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York (as permitted
by Section 5-1401 of the New York General Obligations Law), without giving
effect to any choice of law rule that would cause the application of the laws of
any jurisdiction other than the internal laws of the State of New York to the
rights and duties of the Parties.

Section 8.02 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party’s rights or remedies provided in this
Agreement.

Section 8.03 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Any provision of this Agreement held invalid or unenforceable in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.

Section 8.04 Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given (a) on
the date of delivery, if delivered personally, by e-mail or by facsimile
machine, receipt confirmed, (b) on the following business day, if delivered by a
nationally recognized overnight courier service, with receipt acknowledgement
requested, or (c) three business days after mailing, if sent by registered or
certified mail, return receipt requested, postage prepaid, in each case, to the
party to whom it is directed at the following address (or at such other address
as any party hereto shall hereafter specify by notice in writing to the other
parties hereto):

 

If to Seller:

   QLT USA, Inc.    2579 Midpoint Drive    Fort Collins, CO 80525    Attn:
President    Telephone: (970) 482-5868    Facsimile: (970) 482-9735

Copies to:

   Morrison & Foerster LLP    5200 Republic Plaza    370 17th Street    Denver,
Colorado 80202-5638    Attn: Warren L. Troupe, Esq.    Telephone: (303) 592-2255
   Facsimile: (303) 592-1510

 

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If to Buyer:

   Arius Two, Inc.    2501 Aerial Center Parkway, Suite 205    Morrisville,
North Carolina 27560    Attn: Chief Executive Officer    Facsimile: (919)
653-5161

Copies to:

   Wyrick Robbins Yates & Ponton LLP    4101 Lake Boone Trail    Suite 300   
Raleigh, North Carolina 27607-7506    Attn: Larry E. Robbins, Esq.    Telephone:
(919) 781-4000    Facsimile: (919) 781-4865

Section 8.05 Independent Contractors. It is expressly agreed that the
relationship between the two Parties shall not constitute a partnership or
agency of any kind. Neither Seller nor Buyer shall have the authority to make
any statements, representations or commitments of any kind, or to take any
action, which shall be binding on the other Party, without the prior written
consent of the other Party.

Section 8.06 Rules of Construction. The Parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the Party drafting such agreement or document. Whenever the
context hereof shall so require, the singular shall include the plural, the male
gender shall include the female gender and neuter, and vice versa.

Section 8.07 Publicity. Subject to Section 4.02, Buyer and Seller shall consult
with each other before issuing any press release with respect to this Agreement
or the transactions contemplated hereby and neither shall issue any such press
release or make any such public statement without the prior consent of the
other, which consent shall not be unreasonably withheld; provided, however,
(a) that a Party may, without the prior consent of the other Party, issue such
press release or make such public statement as may upon the advice of counsel be
required by law or the rules and regulations of the Nasdaq or any other stock
exchange, or (b) if it has used reasonable efforts to consult with the other
Party prior thereto, (such consent shall be deemed to have been given if the
recipient of the press release or public statement fails to respond to the other
Party within 48 hours after the recipient’s receipt of such press release or
public statement). No such consent of the other Party shall be required to
release information which has previously been made public.

Section 8.08 Entire Agreement; Amendment. This Agreement (including the Exhibits
attached hereto) sets forth all of the covenants, promises, agreements,
warranties, representations, conditions and understandings between the parties
hereto with respect to the subject matter hereof and supersedes and terminates
all prior agreements and understandings between the Parties. There are no
covenants, promises, agreements, warranties, representations

 

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conditions or understandings, either oral or written, between the parties other
than as set forth herein. No subsequent alteration, amendment, change or
addition to this Agreement shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties.

Section 8.09 Headings. The captions contained in this Agreement are not a part
of this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles hereof.

Section 8.10 Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT.

Section 8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures to this
Agreement may be transmitted via facsimile and such signatures shall be deemed
to be originals.

Section 8.12 Assignment. Neither Party may assign, sell, hypothecate or
otherwise transfer any interest in or obligation under this Agreement without
the prior written consent of the other Party; provided that, notwithstanding the
foregoing, either Party shall be entitled to assign, sell, hypothecate, or
transfer its interest in or obligations under this Agreement without such
consent (i) to any Affiliate or (ii) in connection with any sale of
substantially all of its assets or business (or portion of its assets or
business related to the subject matter hereof), merger, acquisition,
consolidation, or other similar transaction. Notwithstanding the foregoing, any
such assignment shall not relieve the assigning Party of its responsibilities
for performance of its obligations under this Agreement.

[Signature page to follow.]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized officers as of the Effective Date.

 

ARIUS TWO, INC., a Delaware corporation By:  

/s/ Mark A. Sirgo

Name:   Mark A. Sirgo Title:   President

QLT USA, INC.,

a Delaware corporation

By:  

/s/ Michael R. Duncan

Name:   Michael R. Duncan Title:   President

 

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EXHIBIT A

BEMA PATENT RIGHTS

 

App. No./

Patent No.

  

Filing Date/

Issue Date

  

Country

  

Title

  

Status

  

Attorney

Docket No.

08/734,519

5,800,832

  

18-Oct-1996

01-Sep-1998

   US    Bioerodable Film For Delivery Of Pharmaceutical Compounds To Mucosal
Surfaces    Granted    092

09/144,827

6,159,498

  

01-Sep-1998

12-Dec-2000

   US    Same As Above    Granted    092CN PCT/US97/18605    16-Oct-1997    US
   Pharmaceutical Carrier Device Suitable For Delivery Of Pharmaceutical
Compounds To Mucosal Surfaces    Nationalized    092PC 09/069,703    29-Apr-1998
   US    Same As Above    Pending    092CPRCE 09/684,682    04-Oct-2000    US   
Same As Above    Abandoned    092CPDVRCE 10/962,833    12-Oct-2004    US    Same
As Above    Pending    092CPDVCN 11/069,089    01-Mar-2005    US    Same As
Above    Pending    092CPDVCN2 PCT/US99/09378    29-Apr-1999    PCT    Same As
Above    Nationalized    093CPPC 60/495,356    15-Aug-2003    US    Adhesive
Bioerodible Transmucosal Drug Delivery System    Expired    093-1
PCT/US04/026531    16-Aug-2004    PCT    Same As Above    Nationalized    093PC
11/355,312    15-Feb-2006    US    Same As Above    Pending    093CN 11/645,091
   22-Dec-2006    US    Same As Above    Pending    093CN2 10/121,430   
11-Apr-2002    US    Process For Loading A Drug Delivery Device    Abandoned   
094 PCT/US03/11313    11-Apr-2003    PCT    Same As Above    Abandoned    094PC
60/441,829    22-Jan-2003    US    Bioerodable Film For Delivery Of
Pharmaceutical Compounds To Mucosal Surfaces    Expired    095-1 10/763,063   
22-Jan-2004    US    Same As Above    Unknown    095

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EXHIBIT B

GUARANTY

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EXHIBIT C

PATENT AND TRADEMARK ASSIGNMENT AGREEMENT

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EXHIBIT D

PATENT AND TRADEMARK SECURITY AGREEMENT

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EXHIBIT E

SECURED PROMISSORY NOTE

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EXHIBIT F

SECURITY AGREEMENT

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EXHIBIT G

TERMINATION AGREEMENT