LICENSE AGREEMENT
between
IBt SA
and
IsoRay Medical Inc.
IBt , a Société Anonyme incorporated in
Belgium, having its registered office at 7180 Seneffe, Rue Jules
Bordet 1, Zone Industrielle C, Belgium,
hereby duly
represented by its legal representatives John Carden,
Chairman, and hereinafter referred to as " IBt
",
IsoRay
Medical Inc. ,
incorporated in Washington, USA, having its registered office at
Richland, WA 99354-5411, 350 Hills Street, Suite 106, hereby duly
represented by its legal representatives Roger E. Girard,
hereinafter referred to as " Iso ", IBt and Iso
are hereinafter separately referred to as " Party
" and jointly as " Parties ".
IBt has
developed certain technology relating to the production of a
polymer based encapsulation of seeds and is currently fabricating
polymer encapsulated seeds ("OptiSeed") for marketing in the
USA;
IBt has
developed certain technology relating to the formulation of a
jetable fluid (ink) containing the radioactivity to be used in
connection with those seeds; IBt owns certain intellectual property
rights relating to the above mentioned technology, including but
not limited to patent rights and know-how;
Iso owns
intellectual property rights relating to the production of a Cs-131
brachytherapy seed, and is currently producing and marketing a
Titanium (Ti) encapsulated Cs-131 brachytherapy seed;
Iso wishes to
obtain the right to produce polymer encapsulated Cs-131
brachytherapy seeds and to use, sell or otherwise dispose of such
products in the U.S.A. under the intellectual property rights
related to the IBt proprietary technology;
The Parties
have entered into a Letter of Intent dated 15 December 2005
according to which IBt would grant to Iso a license to produce
certain products under the aforementioned intellectual property
rights and the parties desire to document the terms and conditions
of this license.
in
consideration of the premises and mutual covenants hereinafter
contained
IT HAS
BEEN AGREED AS FOLLOWS:
In this
Agreement (including the Schedules) the following capitalised words
and expressions shall have the following meanings whether used in
the singular or in the plural:
"
Agreement " means the present license agreement
including the Schedules .
"
Confidential Information " shall mean confidential
or proprietary information of one of the Parties. Confidential
Information may be in written, graphic, oral, physical or any other
possible form and may include scientific knowledge, know-how,
processes, inventions, techniques, formulae, products, business
operations, customer requirements, designs, sketches, photographs,
drawings, specifications, reports, studies, findings, data, plans
or other records, biological materials, and/or software, and, in
the case of IBt, includes, among others, the information listed in
Schedule 3 , and, in the case of Iso, includes, among
others, the information listed in Schedule 4 .
"
Intellectual Property Rights " shall mean
collectively the Know-How, the Licensed Patents, the industrial
models, designs or copyrights which are vested in IBt or which IBt
is entitled to use or which IBt may acquire or acquire the right to
use.
"
Know-How " shall mean technical and commercial
information, relating to or useful in connection with the Licensed
Patents, and the manufacture, use and sale of polymer seeds on the
basis of said Licensed Patents, as further specified in Schedule
1 .
"
Licensed Patents " shall mean the patents and
patent applications specified in Schedule 2 .
" Net
Sales " with respect to a Product shall mean the gross
amount billed or invoiced on sales of such Product by Iso less
returns. The sale or transfer by Iso to a sub-licensee or
distributor shall not be considered as a sale for the purpose of
this definition, but the resale by such sub-licensee or distributor
to third parties shall be the Net Sale.
"
OptiSeed " shall mean the polymer based seed
fabricated by IBt on the basis of the Licensed Patents.
"
Person " shall mean any person, firm, corporate or
unincorporated association, body or entity, excluding IBt or
Iso.
"
Personnel " shall mean and includes any individual
or company a Party employs as a partner, employee or independent
contractor.
"
Products " shall mean a brachytherapy devices
containing the isotope Cs-131 to be used for the therapy of any
malignant tumor type for which Iso has received clearance to market
in the Territory and (i) embodying at least one claim of one or
more of the Licensed Patents and/or (ii) manufactured or used using
the Know-How.
"
Schedule " shall mean an appendix to the present
license agreement.
"
Territory " shall mean the United States of
America.
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IBt hereby
grants to Iso an exclusive license under the Intellectual Property
Rights in order to manufacture, have manufactured, promote, use and
sell the Products in the Territory subject as hereinafter
provided.
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Iso intends to
develop, produce and commercialize a Cs-131 containing polymer
encapsulated seed and stranding to be used in conjunction with said
Cs-131 polymer encapsulated seed under this license. Should Iso
decide to develop, produce and / or commercialize any other device
falling within the definition of the “Products”,
example; Cs-131 containing microspheres or Cs-131 containing
brachytherapy sources in a form other than seeds (collectively,
“Other Devices”), Iso agrees to inform IBt of its
intention and further agrees not to proceed with such development
without the written consent of IBt, such consent not to be
unreasonably withheld and all development, production and
commercialization of Other Devices shall be pursuant to the terms
and conditions of this Agreement. Subsequently in this agreement,
any reference to Products shall be understood to include Other
Devices as Products.
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The rights and
licenses granted by IBt to Iso under Article 2.1 may not be
transferred or sublicensed by Iso without the prior written consent
of IBt.
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No license is
granted by IBt for any other isotope than Cs-131 and for any other
territory.
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The license
provided under this Article 2 shall only take effect in the
event the feasibility phase referred in Article 3.1 is
terminated with a positive confirmation, as provided in
Article 3.1.1.
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FEASIBILITY PHASE AND
CONFIRMATION
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Because the
most technologically challenging task in the development of the
Products is, according to the Parties, the formulation of an ink
containing the required Cs-131 activity, the Parties agree to
perform the Agreement in two steps as follows :
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As soon as
possible after the signing of the Agreement, technical teams of IBt
and Iso shall meet at the offices of Iso to discuss requirements,
constraints and potential candidate materials for the formulation
of an acceptable Cs-131 ink. These meetings will be held for a
maximum of three days and will be attended by two
representatives of IBt, including John Carden.
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Immediately
after these meetings, Iso representatives will further study the
feasibility of the project contemplated in this Agreement and will
confirm in writing to IBt by 28 February 2006 at the latest,
whether they believe in good faith that the project is feasible in
their views and whether they want to go further into the
implementation of the Agreement.
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Upon a positive
written confirmation of Iso pursuant to Article 3.1.1, the
Parties will further perform the Agreement and will collaborate in
good faith to assess how to proceed with the development of the
final ink, based on the outcome of the feasibility phase. This
final development phase will be performed by Iso with assistance by
IBt, should IBt agree to provide such assistance.
[ **]
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Absence of a
positive confirmation
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Should Iso
reach in good faith the conclusion that the project is not feasible
and send a negative notification to IBt by the date provided in
Article 3.1.1, IBt will pay back to Iso 25,000 USD out of the
50,000 USD already paid by Iso according to Article 5.7 and this
Agreement shall automatically terminate, with the consequences
provided in Article 15. Should Iso fail to provide
notification, either positive or negative, by the date provided in
Article 3.1.1, the Parties agree that this shall be construed
as a positive notification and the program shall proceed as
specified in this document.
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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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PROVISION OF KNOW-HOW AND TECHNICAL
ASSISTANCE
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IBt shall
disclose to Iso the Know-How as shall be necessary to enable Iso to
perform the feasibility phase defined in Article 3 and then to
enable Iso to manufacture, use and sell the Products, as provided
below:
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Facility
design, preparation and commissioning:
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IBt will
provide specifications for the equipment to be used by Iso and
recommend suppliers for such equipment. Iso will place orders [**]
for such equipment, shipping, any taxes or duty and any other costs
associated with obtaining, installing or commissioning the required
equipment.
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IBt will
provide access to [**]. The object of this technical assistance is
to provide to Iso the skills required to install and commission its
in-house Cs-131 polymer seed fabrication area.
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The duration of
this assistance period will be [**] and will be ended when IBt will
have reached the objective and reasonable conclusion that all the
necessary information has been provided to Iso, with a two (2) week
notice to Iso. If required and when needed, IBt will, on a best
effort basis, assist Iso in this process at the facilities of Iso
[**].
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IBt will
provide Iso access to its relevant OptiSeed manufacturing
procedures on an "as is" basis and without implied guarantee
concerning their suitability for the manufacture of a Cs-131
polymeric seed. It will be the sole responsibility of Iso to decide
what procedures are appropriate to use for its manufacturing
process and how, if at all, they should be applied.
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IBt will
provide Iso [ **] and, within the limits specified in agreements
between IBt and third parties, [**].
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The Know-How
and the information provided by IBt or developed in cooperation
with IBt pursuant to the Agreement shall be used by Iso solely for
the purpose of the development, manufacture, use and sale of the
Products in the Territory during the term of this
Agreement.
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Where Iso's
Personnel attend at the premises of IBt, Iso shall [**].
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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.
In
consideration for the rights granted to Iso pursuant to this
Agreement, Iso shall pay to IBt license fees (the "License Fee")
and royalties as determined below:
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The License Fee
amounts to $500,000, including the upfront payment of $50,000
referred to in Article 5.7, the remaining of which Iso shall pay to
IBt as follows: $225,000 no later than March 5, 2006 and (ii)
$225,000 no later than August 15, 2006.
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Except for
50 % of the upfront payment referred to in Article 5.7, the
License Fee shall not be refundable for whatever reason and shall
in all cases be and remain the sole property of IBt.
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Iso shall pay
to IBt royalties equal to the larger of the Royalty on Net Sales as
calculated in 5.3 below or the Minimum Royalties as mentioned in
the following table:
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Year
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2006
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2007
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2008 through
2009
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2010 through
end
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Royalty payment
as a function of Net Sales revenue:
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Year
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Net
Sales
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Royalty
Rate
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[**]
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[**]
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The License Fee
and the royalty payments shall be paid to IBt in USD in Belgium on
account number [**], at ING bank with IBAN number [**] with mention
“License Fee & royalty” or at such other place as
IBt may reasonably designate consistent with the laws and
regulations controlling in any foreign country.
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Royalty
payments shall be made by Iso on a quarterly basis with payment
received by IBt no later than the 45 days following the end of the
quarter and with submission of the reports required by Article 6.
All amounts due under this Agreement shall, if overdue,
automatically bear interest until payment at a per annum rate of
eight percent (8%) above the prime rate in effect at the European
Central Bank published on the due date. The payment of such
interest shall not foreclose IBt from exercising any other rights
it may have resulting from any late payment.
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Any failure or
any delay by Iso of more than 60 days to fully pay the License Fee
or the annual royalties owed to IBt as specified in this
Article 5 shall entitle IBt to terminate the Agreement in
accordance with Article 14.1 below. In this case, IBt shall have a
first right of refusal to purchase from Iso all of the equipment
used in the production of the Products at book value and shall have
access to the relevant records and books of Iso to check that book
value, as provided in Article 6. In the event IBt exercises
this right of first refusal, IBt shall have no right to produce the
Products or use the equipment for production of the
Products.
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Upon signing of
the Letter of Intent referred to in the preamble, Iso has paid to
IBt an upfront payment on the License Fee defined in
Article 5.1 of $50,000.
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If a negative
conclusion is reached in good faith by Iso at the end of the
feasibility phase in accordance with Article 3.1.3 with the
consequence that Iso believe that an acceptable ink solution cannot
be developed for Cs-131 seeds, $25,000 out of this upfront payment
shall be reimbursed by IBt to Iso upon receipt of the notification
mentioned in Article 3.1.3.
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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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Iso shall keep
records containing all particulars necessary to show the amounts
payable to IBt under the Agreement. The books of account shall be
kept at Iso's principal place of business. The books and supporting
data shall be open at all reasonable times for three (3) years
following the end of the calendar year to which they pertain, for
inspection by IBt or its agents to the extent necessary to verify
Iso's royalty statement or compliance in other respects with this
Agreement, provided, however, that such inspection shall take place
no more frequently than once every six (6) months. Iso agrees to
permit such books and records to be examined at ordinary business
hours with reasonable prior notice to Iso. Such examination is to
be made under appropriate confidentiality restrictions, at the
expense of IBt, except that if such inspection leads to the
discovery of discrepancy in reporting which is greater than five
percent (5%) to IBt's detriment, Iso agrees to pay the full cost of
such inspection.
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Iso shall
provide to IBt a written annual report on or before 31 January of
each calendar year. The annual report shall summarize progress on
research and development, regulatory ap
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