DISTRIBUTION
AGREEMENT
This Agreement, effective as of the date of
execution below, is made by and between ISORAY MEDICAL, INC., a
company with a principal place of business located at 350 Hills
Street, Ste. 106, Richland, WA 99354-5411 (hereinafter
“IsoRay”), and BIOCOMPATIBLES, INC., a company with a
principal place of business located at 115 Hurley Road, Building
3B, Oxford, Connecticut 06478 and affiliates (hereinafter
“Biocompatibles”). IsoRay and Biocompatibles
are together referred to as the “Parties”.
REPRESENTATIONS AND
WARRANTIES
WHEREAS, IsoRay, as Manufacturer, is in the
business of manufacturing and selling certain Cesium isotope
(“Cs-131”) radioactive source medical and related
products used in the brachytherapy treatment of prostate and other
cancers;
WHEREAS, Biocompatibles, as Distributor, is in
the business of manufacturing, marketing, distributing, and selling
various medical and related products used in the brachytherapy
treatment of prostate and other cancers;
WHEREAS, IsoRay desires to expand the market
presence for its brachytherapy products in the treatment of cancer
in the United States (herein referred to as the
“Territory”), by having Biocompatibles distribute
IsoRay’s Cs-131 radioactive source products (herein referred
to collectively as the “Products”);
WHEREAS, Biocompatibles represents that it is in
compliance in all material respects with all applicable
governmental Laws and requirements of Regulatory Authorities
relating to its activities hereunder, including reporting and
licensure requirements to allow Biocompatibles to receive, store,
transport, and generally conduct the distribution of the Products,
as well as other non-radioactive medical products in a proper and
legal manner in the Territory, and for purposes of this Agreement,
"Laws" shall mean any federal, state, local, municipal, foreign,
international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty; and "Regulatory Authorities" means
any: (a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign, or other government; (c) governmental or
quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and
any court or other tribunal); (d) multi-national organization or
body; or (e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature, in each
case as such authorities hold responsibility for granting
regulatory manufacturing, distribution and/or marketing approval
for a Product in any part of the Territory;
WHEREAS, as specified herein, IsoRay wishes to
engage Biocompatibles to distribute the Products in the Territory
and Biocompatibles wishes to accept said engagement
desires;
WHEREAS as a condition of the execution of this
Distribution Agreement, the Parties have also agreed to amend that
certain Service Agreement dated March 1, 2006 by and among
Biocompatibles (as successor in interest to Advanced Care Medical,
Inc.) and IsoRay to provide for renewal, extension and added
products and services by Biocompatibles;
NOW THEREFORE, in consideration of the above
recitals, the covenants and conditions contained in this Agreement,
and other good and valuable consideration the Parties agree as
follows:
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EXCLUSIVE
CO-DISTRIBUTION IN TERRITORY.
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Appointment. Subject to all the terms and conditions of this
Agreement, IsoRay hereby appoints Biocompatibles for the Term of
this Agreement as the exclusive co-distributor of the Products to
customers located within the Territory. For the purposes
of clarity, the term “co-distributor” shall mean that
with the exception of IsoRay and its internal or external sales
personnel as further set forth in Section 5.5 and subject to
Section 1.3 below, Biocompatibles will be the only other
distributor of the Products. Biocompatibles accepts these
appointments and agrees to use all commercially reasonable efforts
to promote the sale of the Products in the
Territory. Biocompatibles hereby agrees to acquire
Cs-131 radioactive source products exclusively from IsoRay as
agreed to by the Parties for the treatment of prostate, lung and
ocular melanoma cancers.
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Transfer
Price. The transfer price, as
more particularly described in Exhibit A-1, shall
include [ **] .
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Loss of
Exclusivity . If sales volume of the Products
sold by Biocompatibles pursuant to this Agreement during the
quarter ended [**] (the "Trial Period") does not equal or exceed
[**] cases, then IsoRay shall have the right, but not the
obligation, to convert this Agreement into a nonexclusive agreement
effective the first day of the second calendar month following the
end of the Trial Period, i.e., [**]. If IsoRay elects to exercise
such right, it shall provide Biocompatibles with written notice of
the loss of its co-exclusive rights on or before the
tenth (10 th
) day of the first month following
the end of the Trial Period, i.e. [**]. If written notice is not
given by IsoRay by such tenth (10 th )
day, then Biocompatibles’ exclusive rights shall be
maintained. Future minimum sales volumes shall be as follows (the
“Initial Sales Targets”):
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Quarter
Ending
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Number of
Cases
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[**]
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[**]
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[**]
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Certain information in this document has been
omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with
respect to the omitted portions.
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If the
Agreement is renewed as provided in Section 2.1 below, during each
subsequent quarter following the quarter ended [**], the number of
cases sold will be subject to a new addendum as mutually
agreed to by the parties (the "Subsequent Sales
Targets"). If any of the Initial Sales Targets or
Subsequent Sales Targets are not met, then IsoRay shall have the
right, but not the obligation, to convert this Agreement into a
nonexclusive agreement effective the first day of the second
calendar month following the end of the quarter during which the
Initial or Subsequent Sales Targets, as the case may be, were not
met. If IsoRay elects to exercise such right, it shall provide
Biocompatibles with written notice of the loss of its co-exclusive
rights on or before the tenth day of the first month following the
end of the quarter in which the Initial or Subsequent Sales Target
was not met. If written notice is not given by IsoRay by
such tenth (10 th )
day, then Biocompatibles’ exclusive rights shall be
maintained. For example, in the quarter ended [**], at least
[
**] cases must be sold
to maintain exclusivity, and if this amount is not sold, IsoRay
could convert this Agreement into a nonexclusive agreement
effective as of [**] provided that IsoRay gives notice of its
exercise of such right by [**]. In the event IsoRay converts this
Agreement into a nonexclusive agreement as set forth above, IsoRay
shall [**].
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Initial
Term. The
initial term of this Agreement shall commence as of the effective
date hereof and continue through December 31, 2011.
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Renewal. The initial term shall be
automatically renewed for periods of one (1) year unless canceled
ninety (90) days prior to the end of the initial term or any
renewal term thereafter.
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PURCHASING
AND FULFILLMENT.
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Ordering
Process. Biocompatibles shall place orders
for IsoRay Products in a mutually agreed-upon written or electronic
form, providing in each case all information required by IsoRay to
complete and fill each order. IsoRay shall provide a
specified form for said ordering process. Purchase
Orders are subject to the price schedule per Exhibit A-1 ,
and the specifications and product insert per Exhibit A-2 ,
attached hereto and incorporated by reference. Purchase
Orders are subject to the order/shipping schedule per Exhibit
D, which may change as required by IsoRay and is attached
hereto and incorporated by reference. Purchase Orders
shall be directed as follows:
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350 Hills
Street, Ste. 106
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[**]
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Certain information in this document has been
omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with
respect to the omitted portions.
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Authority To
Receive Radioactive Materials. Biocompatibles represents and
warrants that Biocompatibles is in possession of all regulatory and
nuclear licenses in order to allow Biocompatibles to receive,
store, transport, and generally conduct the distribution of the
Products, as well as other non-radioactive medical Products in a
proper and legal manner in the Territory. Biocompatibles
further agrees and warrants to remain continually authorized to
receive radioactive materials at the ship-to
location. Upon written request as provided herein in
paragraph 15.3, Biocompatibles shall further provide IsoRay all
appropriate documentation for confirmation of said authority to
receive radioactive materials.
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Packaging
and Shipping. IsoRay shall ship to the
Biocompatibles location in Oxford, CT unless otherwise agreed in
writing. Shipment of accepted Orders shall use carriers
chosen by Biocompatibles and agreeable to IsoRay and shall be
scheduled for delivery on or before the delivery date
specified. IsoRay shall not be responsible for any
failure of a carrier to meet its delivery schedule.
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Shipment is
F.O.B. IsoRay, Richland, WA:
Title and risk
of loss passes to Biocompatibles upon leaving IsoRay’s
production facility. IsoRay will pack Products in a
manner suitable for shipment to enable Products to withstand the
normal effects of shipping, including handling during loading and
unloading, all in accordance with IsoRay’s normal packing and
shipping practices for radioactive medical devices and related
products.
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Shipping And
Handling Within Territory. All storage, handling, duties, taxes
and transportation costs subsequent to receipt by Biocompatibles in
Oxford, CT shall be the responsibility of [ **]
, with exceptions of returns due to
product quality or non-conformity.
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INVOICES AND
PAYMENTS TO ISORAY.
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Invoices. Within [**] days of each month end,
IsoRay will invoice Biocompatibles for all Purchase Orders shipped
during the month just ended. The invoice will include
the Purchase Order number and applicable detail. Per
Exhibit A , the transfer price used for the invoice will be
based on the number of cases shipped during the month just
ended.
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Payment. Payment of all Invoices is due in
full within [**] days of the Invoice
Date. Biocompatibles shall be entitled to a [**] percent
([**]%) discount if paid within [**] days of the Invoice
Date. All invoicing and payments shall be in U.S.
dollars.
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[**]
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Certain information in this document has been
omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with
respect to the omitted portions.
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MARKETING BY
BIOCOMPATIBLES.
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General. Biocompatibles shall be responsible for all
sales, marketing, and distribution of the Products to its
customers. Notwithstanding the foregoing, IsoRay will
provide training to Biocompatibles on its Products and
access to marketing and other materials relating to distribution of
the Products, which training shall consist of a two-day training
session and shall include [ **]
. IsoRay shall set the
date, time and location of the training in its sole discretion and
shall be responsible for the costs of the location at which the
training is held and for the costs of the physician providing the
training, who shall be selected by IsoRay. If
Biocompatibles develops any marketing materials for the Products,
any such materials must be approved in advance by IsoRay as
provided in Section 5.3 below.
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Trade
Practices . Biocompatibles shall diligently and
continuously promote the sale of the Products and shall: (i) avoid
deceptive, unfair, misleading, or unethical trade practices that
are or might be detrimental to IsoRay, the Products, its customers,
or the public, including any disparagement of IsoRay or the
Products; (ii) make no false or misleading representations with
regard to IsoRay or the Products; (iii) refrain from publishing or
employing any misleading or deceptive advertising material; (iv)
refrain from disparaging IsoRay or its Products, or from otherwise
injuring the reputation and good standing of IsoRay; and (v)
conduct its business in a professional manner which will reflect
positively upon IsoRay and its business.
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Advertising
and Marketing Materials: Biocompatibles shall submit for
approval by IsoRay all promotional literature, ad copy, and
marketing collateral items to be used by Biocompatibles with
respect to the promotion of Products, including all such items that
use any of the Trademarks for the Products, and shall obtain
IsoRay’s approval prior to dissemination or use of such
items. IsoRay shall approve or disapprove, in writing,
all items submitted pursuant to the preceding sentence within
fifteen (15) days after receipt, and shall not unreasonably
withhold said approval. Biocompatibles shall provide
IsoRay with at least three (3) copies of all approved materials
concurrent with their deployment by Biocompatibles.
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Regulatory
Compliance: Biocompatibles shall comply in all
material respects with all applicable governmental laws and
requirements of Regulatory Authorities relating to its activities
hereunder, including reporting and licensure
requirements.
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[**]
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Certain information in this document has been
omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with
respect to the omitted portions.
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[**] . The Parties agree to provide each
other with [**] within ten days following execution of this
Agreement, with the [**] to include (a) [**] from the Party, (b)
[**] from the Party and (c) [**] within the next six
months. Such [**] shall be considered "Confidential
Information" and subject to the restrictions contained in
Section 9 below. For a period of six
months from the date of execution of this Agreement
[
**] , the Parties agree
that neither Party shall [**], without prior written consent from
the other Party. The Parties further agree to provide
[**] to each other every ninety days throughout the term of this
Agreement, commencing on the expiration of the [**], which [**]
within the prior ninety (90) days. All [**] shall be
considered "Confidential Information" and subject to the
restrictions contained in Section 9
below. The Parties agree that neither Party shall [**],
without prior written consent from the other Party, for a period of
ninety days from the date of such [**]. However, [**],
then the Parties agree that [**] without being subject to the
restrictions contained in this Section
5.5. Notwithstanding any provision to the contrary, if
[**] then the Parties agree that [**]. Correspondingly, the Parties
also agree that [**]. In the event either Party desires
to maintain the [**] otherwise expressly provided in this Section
5.5, then such Party shall notify the other Party in writing which
shall consider such request on a case-by-case basis and provide a
written response of its decision, including [**].
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Limitation
of Certain Accounts Under Certain Conditions.
In the event IsoRay [**],
Biocompatibles shall [**]. To exercise this right, Biocompatibles
must notify IsoRay in writing which notice shall include [**] and
shall be given, if at all, within ten (10) days after
[**].
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“Maintenance Period” shall mean the
lesser of the [**].
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“[**]” shall mean [**]. Any [**]
shall [**]. IsoRay may require reasonable documentation from
Biocompatibles to demonstrate [**]. If Biocompatibles does not
provide the [**] as contemplated above then the [**].
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“[**]
Calculations” shall mean the [**].
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Promotion
and Sales. Biocompatibles shall promote and
sell its own products and the Products under each company’s
respective Trademarks and market names. Biocompatibles
specifically shall in all cases promote and refer to the Products
with the name(s): PROXCELAN TM ,
Cesium-131 Brachytherapy Seeds together with Biocompatibles’
own Trademarks “Real Time Strand TM ”, “RTS TM ”, “VariStrand
TM”
, StandardStrand
TM , EchoStrand TM ,
and “AnchorSeed TM ”. Nothing herein shall be
deemed to give either Biocompatibles or IsoRay, either during the
term of this Agreement or thereafter, any right to trademarks or
copyrights of the other Party.
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[**]
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Certain information in this document has been
omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with
respect to the omitted portions.
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Use By
Biocompatibles. Biocompatibles shall not use the
Trademarks of IsoRay in any manner likely to confuse, mislead or
deceive the public, or to be injurious or inimical to the interests
of IsoRay. IsoRay shall retain sole ownership of all
goodwill associated with its Products, as represented and
symbolized by IsoRay’s Trademarks.
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Use By
IsoRay. IsoRay shall not use the Trademarks
of Biocompatibles in any manner likely to confuse, mislead or
deceive the public, or to be injurious or inimical to the interests
of Biocompatibles. Biocompatibles shall retain sole ownership of
all goodwill associated with its products, as represented and
symbolized by the Biocompatibles’ Trademarks.
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PRODUCT
WARRANTY AND LIMITATIONS OF LIABILITY.
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Product
Warranty. IsoRay warrants to Biocompatibles
only that Products, when delivered to customers pursuant to this
Agreement, shall conform in all material respects with the Customer
Order specifications in Exhibit E and with the
specifications and product inserts in Exhibit A-2 and shall
be free from material defects in construction, materials and
workmanship.
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Limitation
of Liability . Other than the indemnity provisions
above and the warranty and other remedies expressly specified
herein, IsoRay’s and its affiliates' entire and collective
liability arising out of or relating to this Agreement, including
without limitation on account of performance or nonperformance of
obligations hereunder, regardless of the form of the cause of
action, whether in contract, tort (including without limitation
gross negligence but not including intentional torts, fraud, or bad
faith), statute or otherwise, shall in no event exceed the amounts
paid to IsoRay under this Agreement for the
Products. EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER
PARTY NOR ITS AFFILIATES OR PARENTS SHALL, UNDER ANY CIRCUMSTANCES,
BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES OR PARENTS FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, PUNITIVE, EXEMPLARY OR SPECIAL
DAMAGES OF ANY NATURE WHATSOEVER, OR FOR ANY DAMAGES ARISING OUT OF
OR IN CONNECTION WITH ANY DELAYS, LOSS OF PROFIT, INTERRUPTION OF
SERVICE OR LOSS OF BUSINESS OR ANTICIPATORY PROFITS, EVEN IF A
PARTY OR ITS AFFILIATES HAVE BEEN APPRISED OF THE LIKELIHOOD OF
SUCH DAMAGES OCCURRING. No action, regardless of form,
arising out of this Agreement may be brought by either party more
than [ **] years after the cause of action has
accrued.
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[**]
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Certain information in this document has been
omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with
respect to the omitted portions.
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Biocompatibles. Biocompatibles shall bear the cost
of liability for any claim for loss, injury, or demand arising out
of Biocompatibles’ acts or omissions in connection with the
distribution of the Products and other products described herein
and agrees to indemnify IsoRay for all such claims.
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IsoRay. IsoRay shall bear the cost of
liability for any claim for loss, injury, or demand arising out of
IsoRay’s acts or omissions in connection with the
distribution of the Products described herein and agrees to
indemnify Biocompatibles for all such claims. Further,
per Section 7.1 herein, IsoRay warrants to Biocompatibles only that
the Products, when delivered to customers pursuant to this
Agreement, shall conform in all material
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