Sublicense Agreement - GTS Duratek Inc. and BNFL Inc.
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT (the "Agreement") is made this 7th day of
November, 1995, by and between GTS Duratek, Inc., a Delaware corporation
("GTSD") and BNFL Inc., a Delaware corporation ("BNFL").
W I T N E S S E T H :
WHEREAS, Dr. Pedro B. Macedo and Dr. Theodore A. Litovitz (collectively
the "Inventors") are the owners of certain patents and patent applications,
and possess certain technology and know-how relating to in-furnace
vitrification of radioactive and hazardous waste, to the use of glass
matrices suitable for the encapsulation of these materials and to the use of
ion exchange as a method of removing radioactive and hazardous materials from
liquids;
WHEREAS, GTSD has obtained an exclusive license, with the right to grant
sublicenses, under said patents and patent applications and the exclusive
right to use such technology pursuant to that certain License Agreement
between GTSD and the Inventors dated August 17, 1992 (the "License
Agreement"), a copy of which is attached hereto as ANNEX A;
WHEREAS, GTSD and BNFL have entered into a Teaming Agreement dated as of
the date hereof (the "Teaming Agreement") pursuant to which GTSD and BNFL
have agreed to jointly pursue contracts and other potential business
opportunities providing services to the United States Department of Energy;
WHEREAS, as contemplated by the Teaming Agreement, BNFL will invest
$10.0 million in GTSD in the form of a convertible debenture (the
"Convertible Debenture"), convertible into the common stock of GTSD;
WHEREAS, BNFL desires a sublicense under said patents and patent
applications and the right to utilize such technology for processing
radioactive or mixed waste in the United Kingdom, and GTSD is willing to
grant such sublicense and rights;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
a. "Patent Rights" shall mean United States patents and foreign
patents, and United States and foreign patent applications listed on SCHEDULE
A, and all other future United States and foreign patent applications
relating thereto in the Sublicensed Field, including any
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continuations, continuations-in-part, divisions, reissues, renewals,
additions and extensions thereof; and all United States and foreign patents
that may be granted thereon.
b. "Affiliate" of a specified person shall mean a person that directly,
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the person specified.
c. "Technology" shall mean all ideas, inventions (patentable and
unpatentable), know-how and technical information either conceived, invented,
discovered or possessed by GTSD, including but not limited to processes,
articles, devices, equipment, techniques, compositions, formulations, data,
etc., and any use thereof, all in the Sublicensed Field and either acquired
by GTSD through the License Agreement or otherwise.
d. "Sublicensed Subject Matter" shall mean (i) any process, composition
of matter, article of manufacture or apparatus covered by any valid product
or process claim, in any patent included in the Patent Rights or arising out
of or resulting from the use of the Technology.
e. "Sublicensed Field" shall mean stabilizing, fixating or immobilizing
by melting, vitrification, sintering or any other thermal or chemical method
any radioactive material and/or any other non-radioactive material when
intermingled with the radioactive material ("mixed waste"), and to all uses
thereof.
f. "License Year" shall mean any calendar year.
g. "Sublicensed Territory" shall mean only the United Kingdom and no
other territory.
Unless a particular context clearly indicates to the contrary, all terms
not herein defined shall have the same meanings given to them in the License
Agreement.
II. GRANT OF SUBLICENSE
GTSD hereby grants to BNFL a non-exclusive sublicense, without the right
to sublicense, to market, sell and practice the inventions covered by the
Patent Rights and the Technology in the Sublicensed Field in the Sublicensed
Territory to the full end of the term of this Sublicense. BNFL shall not be
permitted by this Agreement to market, sell and practice the inventions
covered by the Patent Rights and the Technology outside of the Sublicensed
Territory. Nothing in this Agreement shall be construed to prohibit GTSD
from the granting of other similar sublicenses to any person or entity within
the Sublicensed Territory or to prohibit GTSD from marketing, selling and
practicing the inventions covered by the Patent Rights and the Technology in
the Sublicensed Territory.
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III. DISCLOSURE AND SUBLICENSE OF FUTURE TECHNOLOGY
All Technology in the Sublicensed Field which GTSD creates, develops or
acquires through the License Agreement, the research and development cost
sharing arrangement contemplated by Article XIV of the Teaming Agreement or
as GTSD otherwise acquires and comes into being during the term of this
Agreement ("Future Technology") shall be included within the definition of
Technology and sublicensed to BNFL pursuant to the terms of this Agreement,
and such Future Technology shall be fully disclosed to BNFL in a timely
manner.
IV. ROYALTY PAYMENTS
a. In consideration of the sublicense and rights herein granted, BNFL
shall pay to GTSD in the manner herein provided unless terminated as
hereinafter provided the following:
1. An annual royalty (the "Annual Royalty") of three percent (3%) of
the Net Sales Value (as defined below) of the Sublicensed Subject Matter in
the Sublicensed Territory so long as (i) the Teaming Agreement is in effect,
(ii) GTSD and BNFL are actively pursuing or participating in joint projects,
to the extent able, pursuant to the terms of the Teaming Agreement, as
determined in the reasonable discretion of the Steering Committee (as such
term is defined in the Teaming Agreement) and (iii) BNFL retains in whole the
Convertible Debenture (other than for U.S. regulatory restrictions as
contemplated by Section 11.1 of the Convertible Debenture) or has not sold,
transferred, disposed of, pledged or hypothecated any of the shares of GTSD
common stock received upon conversion of the Convertible Debenture. Upon the
earlier of the following: (i) the termination of the Teaming Agreement, (ii)
GTSD and BNFL are no longer actively pursuing or participating in joint
projects, to the extent able, pursuant to the terms of the Teaming Agreement,
as determined in the reasonable discretion of the Steering Committee (as such
term is defined in the Teaming Agreement) or (iii) BNFL no longer retains in
whole the Convertible Debenture (other than for U.S. regulatory restrictions
as contemplated by Section 11.1 of the Convertible Debenture) or has sold,
transferred, disposed of, pledged or hypothecated any of the shares of GTSD
common stock received upon conversion of the Convertible Debenture, the
Annual Royalty shall be seven and one-half percent (7.50%) of the Net Sales
Value.
2. As used in this Agreement, "Net Sales Value" of Sublicensed Subject
Matter shall mean all amounts or proceeds received by BNFL or its Affiliates
from the sale, lease or use of the Sublicensed Subject Matter, except with
respect to the vitrification of high level radioactive waste, and less the
following deductions where applicable: (i) discounts allowed and taken for
prompt payment, (ii) allowances for prompt returns, (iii) all sales and use
tax imposed upon and with specific reference to particular sales, (iv)
packaging and transportation costs separately billed or prepaid, (v) services
contracted to other subcontractors providing technologies and services
complimentary to and outside of the Sublicensed Field and packaged for sale
with the Sublicensed Subject Matter, and (vi) the revenues associated with
ancillary processes. (Services that directly support sale of Technology in
the Sublicensed Field such as outside laboratory services or brick
installation services, etc. are not deducted from gross sales.)
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No allowance or deduction shall be made for collections or commissions by
whatever name known.
3. The Net Sales Value of Sublicensed Subject Matter sold by BNFL to
any Affiliate of, or person, firm or corporation enjoying a specially favored
course of dealing with, BNFL, shall be the amount which BNFL would receive
for such Sublicensed Subject Matter on an arm's length sale to a bona fide
third party less the deductions under Article IV(a)(2).
b. In the event the United States Government has royalty-free rights
under the Patent Rights or Technology, then in such event any amounts or
proceeds received by BNFL in respect of any Sublicensed Subject Matter caused
to be manufactured by or through BNFL and sold or leased to the United States
Government or services performed for the United States Government shall not
be included within the definition of "Net Sales Value" and no Annual Royalty
shall be required to be paid thereon.
c. Notwithstanding anything herein to the contrary, in the event that
GTSD has defaulted on any of its payment obligations under the Convertible
Debenture, then the Annual Royalty percentage provided in Section IV(a)(i)
shall remain at three percent (3%) until such time as the payment default has
been cured or the payment default has been waived by BNFL, and BNFL shall be
entitled to offset the amounts owed to GTSD as the Annual Royalty under this
Article IV until such time as the payment default has been cured or the
payment default has been waived by BNFL. All amounts so offset shall be
applied in whole toward the cure of the payment default under the Convertible
Debenture.
V. AVOIDANCE OF DUPLICATION OF ROYALTY PAYMENTS
In no event shall more than one royalty payment be due under this
Agreement on the same Sublicensed Subject Matter or component part thereof.
VI. BNFL FEES PAYABLE TO THIRD PARTIES
In the event BNFL, in order to continue to practice in the Sublicensed
Field, must obtain from a third party (other than an Affiliate) a license
under such third party's valid patent and must pay license fees thereunder to
such third party in order to use any portion of the Technology or to operate
under any significant patent included in the Patent Rights, then in such
event, BNFL may credit the license or other fees payable to such third party
against the Annual Royalty payable to GTSD pursuant to Article IV hereof.
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VII. PAYMENT OF ROYALTIES AND ACCOUNTING
The Annual Royalty provided for in Section IV shall be based on the Net
Sales Value generated by BNFL or its Affiliates during each License Year and
shall be paid within 60 days of the end of each License Year less any
deductions allowable hereunder. All payments required to be made under this
Agreement shall be made in U.S. funds. At the time of payment of the Annual
Royalty, BNFL shall render to GTSD a statement in writing showing the
computation of the Annual Royalty payable for such License Year. Any
statement hereunder shall be conclusively presumed to be accurate and deemed
acceptable by GTSD unless it notifies BNFL in writing as to any objections
within one (1) year of GTSD's receipt of such statement. For purposes of
determining the royalty payments owed to GTSD pursuant to Section IV, the
first License Year shall be the calendar year beginning January 1, 1996. The
accounting shall be in accordance with generally accepted accounting
principles in the United Kingdom. In the event that BNFL shall be in default
in the payment of the Annual Royalty, then GTSD may terminate this Agreement
upon 30 days written notice unless during said period the default is cured.
VIII. AUDIT RIGHTS
BNFL and its Affiliates shall maintain normal business records
accurately showing all transactions necessary to compute the Net Sales Value
hereunder. GTSD shall have the right, at its option and sole expense and
within one (1) year after receipt of any payments made to it pursuant to
Article IV hereof, to have BNFL's or its Affiliates' books and records
relating to the Patent Rights and the Technology audited by an independent
certified public accountant ("CPA") selected by GTSD and approved by BNFL,
such approval not to be unreasonably withheld or delayed. BNFL and its
Affiliates will make such books and records available to such CPA during
reasonable business hours upon fourteen (14) calendar days written notice.
The CPA shall agree to advise GTSD only of the accuracy or inaccuracy of
BNFL's royalty payments to GTSD, and if not accurate, the actual amounts as
computed by such CPA. Notwithstanding anything herein to the contrary, in
the event that the CPA reports that the books and records have not been
maintained or are not accurate or that BNFL has failed to make payment of any
of the Annual Royalty required by the Agreement as shown by such books and
records, BNFL shall reimburse GTSD for the cost of reviewing the books and
records, including without limitation, reimbursement of the reasonable fees
and expenses of the CPA if such recalculation results in an increased royalty
payment to GTSD; provided, however, that BNFL shall in no event have any such
reimbursement obligation in excess of the amount of such increase.
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IX. EXPENSES: PREPARATION, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
a. Upon request for the duration of this Agreement, GTSD and BNFL shall
jointly review the question of patentability or other protection of any idea,
work, invention or discovery which is conceived, invented or discovered by
the Inventors or GTSD in the Sublicensed Field, or any idea, work, invention
or discovery which results from or arises out of any research work conducted
by the Inventors, GTSD, BNFL or any of their Affiliates pursuant to a grant
provided by BNFL pursuant to the research and development cost sharing
arrangement contemplated by Article XIV of the Teaming Agreement,
irrespective of whether or not any such idea, work, invention or discovery is
included or required to be included in the Technology. Conduct of this joint
review does not, in itself, constitute an obligation to grant to BNFL a
license or sublicense, as applicable, for discoveries, works or inventions
outside of the Sublicensed Field.
b. BNFL shall have the power and authority to file and prosecute
applications for patents on any idea, invention or discovery in the
Sublicensed Field in the Sublicensed Territory and to procure and maintain
patents thereon on behalf of the Inventors or GTSD, as appropriate. The
parties shall use their best efforts to ensure that the inventor of any such
idea, invention or discovery shall, at BNFL's request, execute such documents
and perform such acts as BNFL's counsel may deem necessary and advisable to
perfect the filing of such applications for patent in the Sublicensed
Territory and to assist BNFL in procuring, maintaining, enforcing and
defending patents, and other applicable statutory protection granted or
issued thereon, on behalf of the Inventors or GTSD, as appropriate, all at
the expense of BNFL.
c. Any application for patent thus filed and any patent granted or
issued thereon shall be included in the Patent Rights and subject to the
terms and conditions of this Agreement.
d. BNFL shall bear all costs and expenses associated with maintaining
and defending the Patent Rights in the Sublicensed Territory in their
discretion.
e. Anything in this Agreement to the contrary notwithstanding, BNFL may
elect to relinquish its sublicense under any application for patent or patent
included in the Patent Rights by giving GTSD at least sixty (60) days prior
written notice of such election. Any such application for patent or patent
thereafter shall be excluded from the Patent Rights and the Technology and
BNFL thereafter shall not be liable for any costs incurred in the
prosecution, procurement, maintenance, enforcement and defense thereof.
X. INFRINGEMENT
a. BNFL shall have the right, but shall not be obligated, to bring and
prosecute any suit or action in the Sublicensed Territory against an
infringer of any patent included in the Patent Rights in the name of GTSD
and/or the Inventors, as appropriate, at BNFL's sole cost and expense and for
BNFL's own account, and in any such case BNFL shall have control of the
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conduct or settlement of any such suit or action. Any and all recoveries of
any kind from any such suit or action shall be the property of BNFL, except
in the event any recoveries are reasonably considered to be royalties for
past infringement and/or considered to be future royalties and/or for a
paid-up license under any patent included in the Patent Rights, then any such
recoveries less pro rata costs incurred by BNFL for attorney's fees,
witnesses' fees, and court costs shall be considered in the Annual Royalty
calculation according to Section IV hereof.
b. Should BNFL exercise its rights under Section X(a), BNFL agrees to
indemnify the Inventors and GTSD from countersuit by an infringer of any
patent with respect to their roles as inventors or licensees of the patents,
as applicable. Such indemnification is limited to issues related to or
arising out of patent validity or patent infringement only.
c. GTSD shall give promptly upon request and without compensation
(other than reasonable out-of-pocket expenses and as provided in this Article
X) all reasonable information and assistance necessary to enable BNFL to
bring and prosecute any such suit or action.
d. In the event that BNFL shall fail to cause any infringement of
Patent Rights in the Sublicensed Territory to terminate or shall fail to
bring suit or action against any such infringer within six (6) months after
request in writing from GTSD to do so, then in such event GTSD shall have the
right, but shall not be obligated, to bring and prosecute any such suit or
action in its own name and/or the Inventors, at GTSD's sole cost and expense
and for its own account, and in any such case, GTSD shall have sole control
of the conduct or settlement of any such suit or action. Any and all
recoveries for damages, royalties, costs and awards form any such suit or
action shall be the sole property of GTSD, less any reasonable out-of-pocket
costs which may be incurred by BNFL in support of such action or suit.
e. Should GTSD exercise its rights under Section X(d), GTSD agrees to
indemnify BNFL from countersuit by an infringer of any patent with respect to
BNFL's role as sublicensee. Such indemnification is limited to issues
related to patent validity or patent infringement only.
f. The party not bringing such suit or action shall have the right, at
its sole expense, to be represented by counsel during all proceedings of such
suit or action.
XI. WARRANTIES AND COVENANT
a. Each of GTSD and BNFL represents to the other that the respective
representations and warranties contained in Article XIX of the Teaming
Agreement by GTSD and BNFL, respectively, are true and accurate and such
representations and warranties are repeated herein by each of the respective
parties.
b. GTSD hereby covenants and agrees that it will not take any action, or
fail to take a required action, either of which results in the termination of
the License Agreement prior to the expiration of its natural term. GTSD
hereby covenants and agrees that it will use its best
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efforts to maintain the License Agreement and the underlying Patent Rights
and Technology in full force and effect during the term of this Agreement,
however, GTSD shall have the right to amend the License Agreement or enter
into a new license agreement with the Inventors provided that the terms of
such new license agreement would not adversely affect GTSD's performance of
its obligations hereunder.
XII. TERMINATION
a. In the event any party to this Agreement shall fail to perform or
fulfill, at the time and in the manner herein provided, any material
obligation or condition required to be performed or fulfilled by such party
under this Agreement, and in the event such party shall fail to remedy such
default within thirty (30) days after written notice thereof from a party not
at fault, such party not at fault shall have the right to terminate this
Agreement by giving written notice of termination to the party at fault.
b. This Agreement shall terminate immediately upon the termination of
the License Agreement.
c. BNFL shall have the right to terminate this Agreement at any time by
giving at least sixty (60) days written notice of termination to GTSD.
d. In the event of termination pursuant to this Section XII, the
sublicenses, rights and privileges granted to BNFL hereunder shall terminate
forthwith.
e. Any such termination of this Agreement by GTSD or BNFL pursuant to
this Article XII shall be in addition to and shall not be exclusive of or
prejudicial to any other rights or remedies GTSD may have on account of such
termination.
f. The termination of this Agreement shall not affect any accrued
monetary obligation owed to GTSD by BNFL.
XIII. TERMINATION: PRORATED ROYALTIES
In the event of any termination under Section XII hereof, the Annual
Royalty payable hereunder for the License Year in which this Agreement is
terminated shall be reduced by an amount which bears the same relationship to
such royalties that the number of days of such License Year after such
termination bears to three hundred sixty-five (365).
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XIV. RECORDS AND CONFIDENTIAL DATA
a. All memoranda, notices, files, records and other information related
to the Technology shall be retained in confidence by the parties hereto and
their agents, and shall not be disclosed to any third party, except to the
extent reasonably necessary to pursue the business objectives of the parties
hereto or to comply with the contractual commitments of this Agreement.
b. Each of the parties agrees that the other party will be entitled
(without posting bond or other security) to injunctive or other equitable
relief, as deemed appropriate by any such court or tribunal, to prevent a
breach of the other party's obligations set forth in this Article XIV.
XV. TERM OF THE AGREEMENT
This Agreement shall commence on the date hereof, and unless sooner
terminated as herein provided shall continue in full force and effect until
the expiration of the last expiring patent or patent application included in
the Patent Rights.
XVI. PRIOR RIGHTS
The rights of each party regarding the sublicensing of the Technology
shall be as stipulated in this Agreement. Notwithstanding any other
provision herein to the contrary, this Agreement shall be subject to the
Prior Rights of certain parties included in Article XXI of the License
Agreement.
XVII. WAIVER AND SEVERABILITY
a. The waiver by any of the parties of any breach of any provision
hereof by the other shall not be construed to be a waiver of any succeeding
breach of such provision or a waiver of the provision itself.
b. If one or more of the provisions of this Agreement shall be found to
be illegal or invalid, it shall not affect the legality or validity of any of
the remaining provisions hereof.
XVIII. NOTICES
Except as otherwise expressly stated, all notices required to be given or
which may be given under this Agreement shall be in writing and shall be
deemed given upon the earlier of (i) when personally delivered, (ii) three
(3) days after having been mailed by certified mail,
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postage prepaid, return receipt requested, (iii) two (2) days after having
been sent by recognized overnight delivery service or (iv) one (1) day after
having been sent by facsimile transmission, addressed as follows:
If to:
(a) GTSD:
GTS DURATEK, INC.
8955 Guilford Road, Suite 200
Columbia, MD 21046
Attn: Robert E. Prince, President and Chief Executive Officer
Telecopy No.: (301) 621-8211
(b) BNFL:
BNFL INC.
9302 Lee Highway, Suite 950
Fairfax, Virginia 22031
Attn: K. Edward Newkirk
Telecopy No.: (703) 359-0442
XIX. COMPLETE AGREEMENT
This Agreement and the Teaming Agreement and all documents referenced
therein to be entered into between the parties hereto contains the complete
agreement and understanding between the parties concerning the subject matter
hereof and shall supersede all other agreements, understandings or
commitments between the parties as to such subject matter, and the
representations and warranties contained in Article XIX of the Teaming
Agreement are incorporated herein pursuant to Article XI of this Agreement.
XX. ASSIGNMENT
The obligations and rights of each party hereunder shall not be
assignable without the prior written consent of the other party, which
consent may be withheld in such party's sole discretion; provided, however,
that if BNFL assigns this Agreement to an Affiliate, then GTSD will not
unreasonably withhold or delay consent to such assignment. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties' respective heirs, legal representatives, successors and assigns.
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XXI. WAIVER, MODIFICATION OR AMENDMENT
No waiver, modification or amendment of any provision of this Agreement
shall be effective, binding or enforceable unless in writing and signed by
all of the parties hereto.
XXII. GOVERNING LAW
The validity of this Agreement and of any of the terms or provisions as
well as the rights and duties of the parties hereunder shall be governed by
the laws of the State of Maryland, without reference to any conflict of law
or choice of law principles in the State of Maryland that might apply the law
of another jurisdiction.
XXIII. ARBITRATION
Any disputes between the parties relating to the terms of this
Agreement, or the breach thereof, shall be submitted to binding arbitration
in Baltimore, Maryland, in accordance with the rules of the American
Arbitration Association. In the event that either party desires to arbitrate
any such dispute, such party shall so notify the other party and the parties
shall endeavor, for a period of thirty (30) days, to resolve such dispute
without arbitration. In the event that the parties cannot resolve the
dispute within such thirty (30) day period, then within ten (10) days
thereafter, the parties shall jointly designate an arbitrator to hear the
dispute, or, if the parties are unable to jointly select an arbitrator, an
arbitrator shall be chosen by the President of the American Arbitration
Association from lists of candidates provided by each of the parties. The
decision of the arbitrator shall be binding upon the parties. The arbitrator
may order specific performance or other equitable relief or remedies to the
extent it deems it appropriate, in any situation in which a court could so
order. Each party shall pay all of its own expenses in connection with such
arbitration and one-half of the arbitrator's fees and expenses.
XXIV. CONSTRUCTION
Headings or captions of this Agreement are for reference only and are
not to be construed in any way as part of this Agreement, nor in the
interpretation of this Agreement. The masculine pronoun shall include the
feminine and neuter, and vice versa, where the context so requires.
XXV. COUNTERPARTS
This Agreement may be executed in multiple original counterparts, each of
which shall be deemed an original and all of which together shall constitute
but one and the same document.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WITNESS/ATTEST: GTS DURATEK, INC.
/s/ Diane R. Brown By: /s/ Robert E. Prince
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Diane R. Brown, Secretary Name: Robert E. Prince
Title: President and Chief Executive
Officer
BNFL INC.
/s/ Richard H. Peebles By: /s/ Rolland A. Langley
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Richard H. Peebles, Vice President Name: Rolland A. Langley
Title: President
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SCHEDULE A
PATENTS AND PATENT APPLICATIONS
See Attched