Document:

Unassociated Document

    EXECUTION
VERSION

    

    LOAN AND SECURITY
AGREEMENT

     

    THIS LOAN AND SECURITY
AGREEMENT (this “Agreement”), dated as of March
1, 2010 (the “Effective
Date”) is entered into by and between (i) deltathree, Inc., a Delaware
corporation, Delta Three Israel, Ltd., an Israeli company (the “Israeli
Subsidiary”), (ii) DME Solutions, Inc., a New York corporation (jointly and
severally, the “Borrower”), and (iii) D4
Holdings, LLC, a Delaware limited liability company (“Lender”).

     

    RECITALS

     

    WHEREAS, Lender is a shareholder
of deltathree, Inc.;

     

    WHEREAS, Borrower has
requested that Lender make advances to Borrower from time to time in an
aggregate principal amount thereof not to exceed one million two hundred
thousand dollars ($1,200,000) (the “Maximum Principal Amount”);
and

     

    WHEREAS, Lender is willing to
make such advances to Borrower on the terms and subject to the conditions set
forth herein.

     

    AGREEMENT

     

    NOW, THEREFORE, in consideration of
the premises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower and Lender, intending to be legally bound, hereby agree as
follows:

     

    1.           Loans and
Promissory Note.

     

    (a)           Commitment to
Lend.  Subject to the terms and conditions set forth in this
Agreement, Lender hereby agrees to make advances to Borrower (each a “Loan Advance” and
collectively, the “Loan
Advances”) from time to time, during the period beginning on the date
hereof and ending on the Maturity Date (the “Draw Period”), in an amount up
to, but not to exceed, the Maximum Principal Amount in the aggregate, for the
purposes stated herein only.  During the Draw Period, subject to the
terms and condition of this Agreement, Borrower may borrow, in increments of no
less than $100,000, amounts up to the Maximum Principal Amount at any time and
from time to time.

     

    (b)           Promissory
Note.  The Loan Advances made by Lender hereunder shall be
evidenced by the duly executed Promissory Note of Borrower to Lender, dated as
of the date hereof in an original principal amount equal to the Maximum
Principal Amount and in the form attached hereto as Exhibit
A (as amended, modified, extended, renewed or replaced from time to time,
the “Note”).

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (c)          Repayments.  Borrower
shall pay in full any outstanding principal amount, all accrued but unpaid
interest, and all other Obligations on the Maturity Date.

     

    (d)          Payment of
Interest.

     

    (i)           Subject
to Section 7(b)(ii), the principal amount outstanding under each Loan
Advance shall accrue interest from the date of issuance of such Loan Advance
until the Maturity Date at the rate of twelve percent (12%) per annum,
compounding daily. The initial payment of interest shall be due on May 1, 2010,
and payment of accrued interest shall be due on the first calendar day of each
month thereafter.

     

    (ii)          Interest
will be computed on the basis of a year deemed to consist of 360 days and shall
be paid for the actual number of days elapsed.

     

    2.           Creation
of a Security Interest.

     

    (a)          Grant of Security
Interest.

     

    (i)           Borrower
hereby grants to Lender, to secure the payment and performance in full of all of
the Obligations, a continuing security interest in, and pledges to Lender, all
of Borrower’s right, title and interest in, to and under all the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof.  Borrower represents, warrants, and
covenants that the security interest granted herein is and shall at all times be
a first priority perfected security interest in the Collateral other than with
respect to Permitted Liens.  If Borrower shall acquire a commercial
tort claim, Borrower shall promptly notify Lender in writing of the general
details thereof and grant to Lender a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Lender.

     

    (ii)          If
this Agreement is terminated, Lender’s security interest in the Collateral shall
continue until the Obligations are repaid in full.  Upon payment in
full of the Obligations and at such time as Lender’s obligation to make Loan
Advances has terminated, Lender shall, at Borrower’s sole cost and expense,
release its security interest in the Collateral and all rights therein shall
revert to Borrower.

     

    (b)         Authorization to File
Financing Statements.  Borrower hereby authorizes Lender to
file financing statements, or any document similar thereto (including, without
limitation, collateral agreements and filings with the United States Patent and
Trademark Office), without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Lender’s interest or rights
hereunder.  Such financing statements may indicate the Collateral as
“all assets of the Debtor” or words of similar effect, or as being of an equal
or lesser scope, or with greater detail, all in Lender’s discretion, and may
include a notice that any disposition of the Collateral, either by Borrower or
any other person, shall be deemed to violate the rights of Lender under the
Code.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    3.           Conditions of
Loans.

     

    (a)          Conditions Precedent to Loan
Advances.  Lender’s obligation to make each Loan Advance is
subject to satisfaction of the following conditions:

     

    (i)           Receipt
of an executed Notice of Borrowing (as defined below);

     

    (ii)          The
representations and warranties in Section 4 shall be true in all material
respects on the date of each Notice of Borrowing and each Loan Date (as defined
below);

     

    (iii)         No
Event of Default shall have occurred and be continuing or result from such Loan
Advance;

     

    (iv)         There
shall not have occurred, in Lender’s sole discretion, any Material Adverse
Change.

     

    (b)          Procedure for
Borrowing.  Subject to the prior satisfaction of the conditions
set forth in Section 3(a), to obtain a Loan Advance, Borrower shall give written
notice to Lender in the form attached as Exhibit B (a “Notice of Borrowing”) not
later than the ten (10th)
Business Day prior to the date of the proposed Loan Advance (a “Loan Date”).  Each
Notice of Borrowing shall be in writing and shall specify (a) the Loan Date, (b)
the account of Borrower to be funded and the wire instructions applicable
thereto, (c) the purpose for which such Loan Advance shall be used; and (d) the
amount of such proposed Loan Advance.  Each Loan Advance shall be in
an amount of at least $100,000.  Following Lender’s receipt of a
Notice of Borrowing and satisfaction of the conditions set forth in Section
3(a), Lender shall deliver the applicable Loan Advance to Borrower on the Loan
Date by wire transfer of immediately available funds to the account specified by
Borrower.

     

    4.           Representations
and Warranties of Borrower.  Each Borrower
hereby represents and warrants to Lender as of the date hereof as
follows:

     

    (a)          Binding
Agreement.  The Loan Documents constitute or will constitute,
when issued and delivered, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors’ rights
in general, and general principles of equity.

     

    (b)          Organization; Power;
Authorization.  Each Borrower is a Registered Organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.  Each Borrower has all
requisite power and authority (corporate and otherwise) to execute, deliver and
perform the Loan Documents and to consummate the transactions contemplated
thereby.  The execution, delivery and performance by Borrower of the
Loan Documents and the consummation of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of
Borrower.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (c)          Non-Contravention.  Neither
the execution and the delivery of the Loan Documents, nor the consummation of
the transactions contemplated hereby, will (a) violate any injunction, judgment,
order, decree, ruling, charge or any provision of Borrower’s charter documents,
or, to Borrower’s knowledge, any restriction of any government, governmental
agency, or court to which Borrower is subject, or (b) conflict with, result in a
material breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, any
material agreement, contract, lease, license, instrument, or other arrangement
to which Borrower is a party or by which it is bound or to which any of its
assets are subject.

     

    (d)          Collateral.

     

    (i)           Borrower
has good title to, has rights in, and the power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder, free and clear of
any and all Liens except Permitted Liens. The security interests and Liens
granted to Lender under this Agreement and the other Loan Documents to which
Borrower is a party constitute valid and perfected first priority liens and
security interests in and upon the Collateral to which Borrower now has or
hereafter acquires rights other than with respect to Permitted
Liens.  Borrower has no deposit accounts other than the deposit
accounts described in Exhibit C, or of
which Borrower has given Lender notice and taken such actions as are necessary
to give Lender a perfected security interest therein. The Accounts are bona
fide, existing obligations of the Account Debtors. No obligations remain
outstanding under the letter of credit secured by the Lien described in Section
9(m)(iii) hereof.

     

    (ii)          The
Collateral is not in the possession of any third party bailee (such as a
warehouse). None of the components of the Collateral shall be maintained at
locations other than (A) the primary business address of Borrower, (B)
collocation sites at which Borrower leases space and (C) storage facilities
utilized by Borrower, in the case of (B) and (C) at such locations as have been
previously disclosed to Lender.  In the event that Borrower, after the
date hereof, intends to store or otherwise deliver any portion of the Collateral
to a bailee, then Borrower will first receive the written consent of Lender and
such bailee must execute and deliver a bailee agreement in form and substance
satisfactory to Lender in its sole discretion.

     

    (iii)         All
Inventory is in all material respects of good and marketable quality, free from
material defects.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (iv)        Borrower
is the sole owner of its intellectual property, except for non-exclusive
licenses granted to its customers in the ordinary course of business. Borrower’s
intellectual property does not include any patents, nor does Borrower have any
patents pending or any applications for patents on file. No part of the
intellectual property has been judged invalid or unenforceable, in whole or in
part, and to the best of Borrower’s knowledge and except as previously disclosed
to Lender, no claim has been made that any part of the intellectual property
violates the rights of any third party.

     

    (v)         Borrower
is not a party to, nor is bound by, any material license or other agreement with
respect to which Borrower is the licensee (A) that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property, or (B) for which a default
under or termination of could interfere with Lender’s right to sell any
Collateral.  Borrower shall provide written notice to Lender within
ten (10) days of entering or becoming bound by any such license or agreement
which is reasonably likely (in Borrower’s reasonable determination) to have a
material impact on Borrower’s business or financial condition (other than
over-the-counter software that is commercially available to the public).
Borrower shall take such steps as Lender  requests to obtain the
consent of, or waiver by, any Person whose consent or waiver is necessary for
(Y) all such licenses or agreements to be deemed “Collateral” and for Lender to
have a security interest in it that might otherwise be restricted or prohibited
by law or by the terms of any such license or agreement, whether now existing or
entered into in the future, and (Z) Lender to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with
Lender’s rights and remedies under this Agreement and the other Loan
Documents.

     

    (e)          Good Faith
Transaction.  The loan contemplated by this Agreement is being
made on a good faith, arms length basis on what the Borrower reasonably believes
to be the best available market terms.  After having reviewed its
financial position and forecast, the Borrower reasonably believes that it will
be in position to repay all Loan Advances according to the terms of this
Agreement.

     

    (f)          Tax Returns and
Payments.  Except as previously disclosed to Lender, and in no
event in excess of $50,000 in the aggregate unpaid, Borrower has filed, or
caused to be filed, in a timely manner all material tax returns, reports and
declarations which are required to be filed by it (without requests for
extension except as previously disclosed in writing to Lender).  All
information in tax returns, reports and declarations filed by Borrower is
complete and accurate in all material respects.  Except as previously
disclosed to Lender, and in no event in excess of $50,000 in the aggregate
unpaid, Borrower has paid or caused to be paid prior to delinquency all taxes
due and payable or claimed due and payable in any assessment received by it,
except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its
books.  Adequate provision has been made by Borrower for the payment
of all accrued and unpaid federal, state, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (g)          Arm’s Length
Transaction.  Borrower reasonably believes in good faith that
the terms and conditions of the Loan Documents are substantially equivalent to
and at least as favorable in the aggregate as those Borrower would be able to
receive from an unaffiliated lender.

     

    5.           Covenants.

     

    (a)           Affirmative
Covenants.

     

    (i)           Maintenance of
Properties.  Borrower shall maintain all tangible property
included in the Collateral in good order and repair, subject to normal wear and
tear, and make all needed and proper repairs to its properties so that
Borrower’s business may be properly conducted at all times in accordance with
prudent business management and in compliance with all governmental requirements
and regulations;

     

    (ii)          Government
Compliance.  Borrower shall maintain its legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to have a material adverse effect on Borrower’s business or operations.
Borrower shall comply with all laws, ordinances and regulations to which it is
subject, the noncompliance with which could reasonably be expected to cause, or
causes, a Material Adverse Change;

     

    (iii)         Intellectual Property
Rights.  Borrower shall: (a) take reasonable steps to protect,
defend and maintain the validity and enforceability of its intellectual
property, (b) promptly advise Lender in writing of material infringements of its
intellectual property; and (c) not allow any intellectual property material to
Borrower’s business to be abandoned, forfeited or dedicated to the public
without Lender’s written consent.  If after the date hereof Borrower
(i) obtains any patent, registered trademark or service mark, registered
copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (ii) applies for any
patent or the registration of any trademark or service mark, then Borrower shall
provide written notice thereof to Lender on a quarterly basis and shall execute
such intellectual property security agreements and other documents and take such
other actions as Lender shall request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor of
Lender in such property.  If Borrower registers any copyrights or mask
works in the United States Copyright Office, Borrower shall: (x) provide Lender
with at least fifteen (15) days prior written notice of Borrower’s registration
of such copyrights; (y) execute an intellectual property security agreement and
such other documents and take such other actions as Lender may reasonably
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Lender in the copyrights or
mask works intended to be registered with the United States Copyright Office;
and (z) record such intellectual property security agreement with the United
States Copyright Office contemporaneously with filing the copyright or mask work
application(s) with the United States Copyright Office. Borrower shall promptly
provide to Lender copies of all applications that it files for patents or for
the registration of trademarks, service marks, copyrights or mask works,
together with evidence of the recording of the intellectual property security
agreement necessary for Lender to perfect and maintain a first priority
perfected security interest in such property;

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (iv)        Use of
Proceeds.  Borrower shall use the proceeds of the Loan Advances
solely as working capital and to fund its general business requirements and not
for personal, family, household or agricultural purposes;

     

    (v)         Insurance.  Borrower
shall, at all times, maintain with (in its reasonable determination) financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated;

     

    (vi)        Existing
Liens.  Borrower shall use its reasonable best efforts to
terminate the letter of credit and the Lien securing such instrument described
in Section 9(m)(iii) promptly following the execution of this
Agreement;

     

    (vii)       Further
Assurances.  Borrower shall execute any further instruments and
take further action as Lender reasonably requests to perfect or continue
Lender’s security interest in the Collateral or to otherwise effect the purposes
of this Agreement.

     

    (b)          Negative
Covenants.  Borrower shall not, without Lender’s prior written
consent:

     

    (i)           Dispositions.  Convey,
sell, lease, transfer, assign or otherwise dispose of (collectively, “Transfer”), or permit any of
its subsidiaries to Transfer, all or any part of its business or property,
except for Transfers (a) of Inventory in the ordinary course of business; (b) of
worn-out or obsolete Equipment; (c) of non-exclusive licenses for the use of the
property of Borrower or its subsidiaries in the ordinary course of
business;

     

    (ii)          Mergers or
Acquisitions.  Merge or consolidate, or permit any of its
subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person.  A subsidiary may merge
or consolidate into another subsidiary or into Borrower; provided that, in the
case of a merger of a subsidiary into Borrower, Borrower shall remain the
surviving entity;

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (iii)         Indebtedness.  Borrow
money or engage in any debt or other financing transaction for borrowed money
except under this Agreement and except for trade payables incurred in the
ordinary course of Borrower’s business individually in an amount of up to
$25,000 individually or up to $100,000 in the aggregate;

     

    (iv)        Encumbrances.  Create,
incur, allow, or suffer any Lien on any Collateral, or assign or convey any
right to receive income or permit any of Borrower’s subsidiaries to do so, or
permit any Collateral not to be subject to the first priority security interest
granted herein, in each case other than with respect to Permitted Liens;
provided however, that Borrower shall not, directly or indirectly, (A) take any
action to accelerate or increase the obligations secured by any Permitted Lien,
or (B) draw on or otherwise utilize (or authorize any other person to take any
such action) the letter of credit underlying Lien described in Section 9(m)(iii)
hereof;

     

    (v)         Loans.  Make
any loan to any Person except receivable, prepaid items or deposits incurred in
the ordinary course of business; or

     

    (vi)        Capital
Expenditures.  Make nor agree to make any material capital
expenditures.  

     

    6.           Representations
and Warranties of Lender.

     

    (a)          Binding
Agreement.  This Agreement constitutes or will constitute, when
issued and delivered, a valid and binding obligation of Lender, enforceable in
accordance with its terms, subject to bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors’ rights in general, and general
principles of equity.

     

    (b)          Organization; Power;
Authorization.  Lender is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Lender has full limited liability company power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.  The execution, delivery and
performance by Lender of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary limited liability
company action.

     

    (c)          Non-Contravention.  Neither
the execution and the delivery of the Loan Documents, nor the consummation of
the transactions contemplated hereby, will (a) violate any injunction, judgment,
order, decree, ruling, charge or any provision of Lender’s charter documents,
or, to Lender’s knowledge, any restriction of any government, governmental
agency, or court to which Lender is subject, or (b) conflict with, result in a
material breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, any
material agreement, contract, lease, license, instrument, or other arrangement
to which Lender is a party or by which it is bound or to which any of its assets
are subject.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    7.           Events of
Default; Remedies Upon Default.

     

    (a)          Events of
Default.  The occurrence of any of the following events shall
constitute an event of default (each, an “Event of Default”)
hereunder:

     

    (i)           Borrower
fails to pay timely any of the principal and/or any accrued interest or other
amounts due under the Loan Documents when the same becomes due and
payable;

     

    (ii)          Borrower
(A) files any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law for the relief
of, or relating to, debtors, now or hereafter in effect; (B) applies for or
consents to the appointment of a custodian, receiver, trustee, sequestrator,
conservator or similar official for Borrower or for a substantial part of
Borrower’s assets; (C) makes a general assignment for the benefit of
creditors; (D) becomes unable to, or admits in writing its inability to,
pay its debts generally as they come due; or (E)  takes any corporate
action in furtherance of any of the foregoing;

     

    (iii)         An
involuntary petition is filed against Borrower (unless such petition is
dismissed or discharged within sixty (60) days) under any bankruptcy statute now
or hereafter in effect, or a custodian, receiver, trustee, sequestrator,
conservator, assignee for the benefit of creditors (or other similar official)
is appointed to take possession, custody or control of any property of
Borrower;

     

    (iv)        One
or more judgments for the payment of money in an amount, individually or in the
aggregate,  that could reasonably be expected to have a material
adverse effect on Borrower’s business or operations (not covered by independent
third-party insurance as to which liability has been accepted by such insurance
carrier) are entered by a court of competent jurisdiction against Borrower which
judgment remains undischarged, unsatisfied, unvacated or unstayed for a period
of ten (10) days after such judgment becomes final and non-appealable (and
Lender shall not be required to make any Loan Advances prior to the
satisfaction, vacation or stay of such judgment, order or decree);

     

    (v)         A
default or breach occurs under any agreement between Borrower and any creditor
of Borrower that signed a subordination, intercreditor, or other similar
agreement with Lender, or any creditor that has signed such an agreement with
Lender breaches any terms of such agreement;

     

    (vi)        Any
representation, warranty or other statement made by Borrower in the Loan
Documents, or any other agreement or other document delivered in connection with
any of the Loan Documents, shall prove to have been false or misleading in any
material respect when made;

     

    (vii)       Borrower
violates any covenant set forth in Section 5 hereof;

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (viii)      After
the date hereof, Borrower grants any Person, other than Lender, any Lien or
other encumbrance on all or any substantial part of its assets other than (A)
with respect to Permitted Liens or (B) with respect to any Lien or other
encumbrance that is junior in priority to the Lien created by Section 2 hereof;
or

     

    (ix)         There
is a default in any agreement to which any Borrower is a party with a third
party or parties resulting in a right by such third party or parties, whether or
not exercised, to accelerate the maturity of any indebtedness in an amount that
could, in Lender’s sole discretion, reasonably be expected to result in a
Material Adverse Change; provided, however, that the Event of Default under this
Section 7(a)(ix) caused by the occurrence of a default under such other
agreement shall be cured or waived for purposes of this Agreement upon Lender
receiving written notice from the party asserting such default of such cure or
waiver of the default under such other agreement, if at the time of such cure or
waiver under such other agreement (a) Lender has not declared an Event of
Default under this Agreement and/or exercised any rights with respect thereto;
(b) any such cure or waiver does not result in an Event of Default under any
other provision of this Agreement or any Loan Document; and (c) in connection
with any such cure or waiver under such other agreement, the terms of any
agreement with such third party are not modified or amended in any manner which
could in the good faith judgment of Lender be materially less advantageous to
Borrower.

     

    (b)          Remedies Upon
Default.

     

    (i)           Upon
the occurrence of an Event of Default hereunder:

     

    (A)          all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Lender, be immediately due and payable by Borrower (but if an
Event of Default described in Section 7(a)(ii) occurs, all Obligations are
immediately due and payable without any action by Lender);

     

    (B)           Lender
may terminate its commitment to make additional Loan Advances;

     

    (C)           Lender
shall have the right to exercise all the remedies of a secured party under the
Code, including without limitation the right to require Borrower to assemble the
Collateral and to make it available to  Lender at a place designated
by Lender. Borrower will pay any reasonable expenses (including reasonable
attorneys’ fees) incurred by Lender in connection with the exercise of any of
Lender’s rights hereunder, including without limitation any expense incurred in
disposing of the Collateral; and

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (D)           Lender
may proceed to protect and enforce its right by suit in the specific performance
of any covenant or agreement contained in the Loan Documents or in aid of the
exercise of any power granted in the Loan Documents or may proceed to enforce
the payment of the Loan Documents or to enforce any other legal or equitable
rights as Lender may have, including exercising any right or remedies available
to Lender under the Loan Documents and under the Code (including disposal of the
Collateral pursuant to the terms thereof).

     

    (ii)          Any
and all amounts (including principal, unpaid interest and all reasonable costs
and expenses of collection, including reasonable attorneys’ fees) outstanding
hereunder after an Event of Default shall bear interest from the date due until
paid at the rate of eighteen percent (18%) per annum.

     

    (iii)         Upon
the occurrence of an Event of Default, and upon the filing of a suit or other
commencement of judicial proceedings to enforce the rights of Lender under this
Agreement, Lender shall be entitled, as a matter of right, to the appointment of
a receiver or receivers of the Borrower and of the revenues, issues, payments
and profits thereof, pending such proceedings, with such powers as the court
making such appointment shall confer.

     

    (iv)         If
an Event of Default occurs, in addition to any other right under this Agreement,
Lender shall have the right to require, in writing, the Borrower to hire either
an independent management consultant with sufficient expertise in and knowledge
of the business of the Borrower, or new management, and shall have the
right to consent, in writing, to the independent management consultant,
management personnel and/or company that the Borrower recommends as consultant
or replacement management, as applicable.

     

    (c)          Power of
Attorney.  Borrower hereby irrevocably appoints Lender as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Lender determines reasonable; (d) make,
settle, and adjust all claims under Borrower’s insurance policies; (e) pay,
contest or settle any Lien (except for Permitted Liens), charge, encumbrance,
security interest, and adverse claim in or to the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the same;
and (f) transfer the Collateral into the name of Lender or a third party as the
Code permits.  Borrower hereby appoints Lender as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Lender’s security interest in the Collateral
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full and Lender is under no further obligation to make
Loan Advances hereunder.  Lender’s foregoing appointment as Borrower’s
attorney-in-fact, and all of Lender’s rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and
performed and Lender’s obligation to provide Loan Advances
terminates.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (d)          Application of Payments and
Proceeds.  If an Event of Default has occurred and is
continuing, Borrower shall have no right to specify the order or the accounts to
which Lender shall allocate or apply any payments required to be made by
Borrower to Lender or otherwise received by Lender under this Agreement when any
such allocation or application is not specified elsewhere in this
Agreement.  If an Event of Default has occurred and is continuing,
Lender may apply any funds in its possession, whether from Borrower account
balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Lender shall determine in its sole
discretion.  If Lender, in its good faith business judgment, directly
or indirectly enters into a deferred payment or other credit transaction with
any purchaser at any sale of Collateral, Lender shall have the option,
exercisable at any time, of either reducing the Obligations by the principal
amount of the purchase price or deferring the reduction of the Obligations until
the actual receipt by Lender of cash therefor.

     

    (e)          Lender’s Liability for the
Collateral.  So long as Lender complies with reasonable
practices regarding the safekeeping of the Collateral in the possession or under
the control of Lender customary for Persons in possession or having control of
items similar to the Collateral, Lender shall not be liable or responsible for:
(i) any loss or damage to the Collateral; (ii) any diminution in the value of
the Collateral; or (iii) any act or default of any carrier, warehouseman,
bailee, or other Person. Borrower bears all risk of loss, damage or destruction
of the Collateral.

     

    8.           Other
Provisions.

     

    (a)          Demand Waiver;
Representations and Expenses.  Borrower waives presentment,
notice of dishonor, protest and notice of protest of this Agreement and the Note
and all other notices or demands in connection with the delivery, acceptance,
performance, default or endorsement of the Loan Documents, and shall pay
reasonable out-of-pocket costs and expenses of collection when incurred by
Lender, including, without limitation, reasonable attorneys’ fees and
expenses.

     

    (b)          Waivers; Remedies
Cumulative.  Either party’s failure, at any time or times, to
require strict performance by the other party of any provision of this Agreement
or any other Loan Document shall not waive, affect, or diminish any right of
such party thereafter to demand strict performance and compliance herewith or
therewith. Any waiver is only effective for the specific instance and purpose
for which it is given. Lender’s rights and remedies under this Agreement and the
other Loan Documents are cumulative.  Lender has all rights and
remedies provided under the Code, by law, or in equity.  Lender’s
exercise of one right or remedy is not an election, and Lender’s waiver of any
Event of Default is not a continuing waiver. Any delay in exercising any remedy
by a party is not a waiver, election, or acquiescence.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (c)          Binding Agreement; Governing
Law.  This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.  This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of the State of Delaware and
without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.

     

    (d)          Further
Assurances.  The parties hereto agree to execute and deliver
all such other papers and documents and to take such other further actions that
may be reasonably necessary or appropriate to carry out the terms of this
Agreement.

     

    (e)          Entire Agreement;
Amendment.  The Loan Documents contain the entire agreement
among the parties with respect to the subject matter hereof and there are no
agreements, understandings, representations, or warranties regarding the subject
matter hereof that are not set forth herein.  This Agreement may not
be amended or revised except by a writing signed by Borrower and
Lender.

     

    (f)          Notices.  Any
notices required or permitted to be sent to Borrower or Lender shall be
delivered to the address of Borrower or Lender, as applicable, as set forth
below.  All notices required or permitted hereunder, to be effective,
shall be in writing and shall be deemed effectively given: (i) when sent by
confirmed facsimile if sent during normal business hours of the recipient, and
if not, then on the next Business Day, or (ii) one (1) Business Day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt.

     

    If to
Borrower, to:

    

    deltathree,
Inc.

    Jerusalem
Technology Park – Bldg. #9

    P.O. Box
48265, Jerusalem 91481, Israel

    Attention:
Chief Executive Officer

    Facsimile:
011.972.2.649.1200

    

    with a
copy (which shall not constitute notice) to:

    

    deltathree,
Inc.

    Jerusalem
Technology Park – Bldg. #9

    P.O. Box
48265, Jerusalem 91481, Israel

    Attention:
General Counsel

    Facsimile:
011.972.2.649.1200

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    If to
Lender, to:

    

    D4
Holdings, LLC

    349-L
Copperfield Blvd, #407

    Concord,
NC 28025

    Attention:  Robert
Stevanovski, Manager

    Facsimile:  704.260.3304

    

    with a
copy (which shall not constitute notice) to:

    

    D4
Holdings, LLC

    349-L
Copperfield Blvd, #407

    Concord,
NC 28025

    Attention:  General
Counsel

    Facsimile:  704.260.3304

    

    (g)          Counterparts.  This
Agreement may be executed in one or more counterparts, all of which when taken
together shall constitute but one instrument, and in the event any signature is
delivered by facsimile or “.pdf” transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or
“.pdf” were an original thereof.

     

    (h)          Severability.  The
provisions of this Agreement are severable, and the invalidity of any provision
shall not affect the validity or enforceability of any other provision
hereof.

     

    (i)           Captions.  The
captions herein have been inserted solely for convenience of reference and in no
way define, limit, or describe the scope or substance of any provision of this
Agreement.

     

    (j)           Interpretation.  All
pronouns used herein shall include the masculine, feminine, and neuter gender as
the context requires.  All defined terms shall include both the plural
and singular case as the context requires.

     

    (k)          Restriction on
Assignment.  Notwithstanding anything herein to the contrary,
Borrower shall not assign this Agreement without obtaining the prior written
approval of Lender.  Lender may assign or transfer any of its rights
or obligations under the Loan Documents without the consent of Borrower, and the
provisions of the Loan Documents shall be binding upon and inure to the benefit
of such assignee or transferee.  Any attempted assignment in violation
of this Section 8(k) shall be void and the other party hereto shall not
recognize any such purported assignment.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (l)           Borrower
Matters.  Any Borrower may, acting singly, request a Loan
Advance hereunder. Each Borrower hereby appoints each other Borrower as such
Borrower’s agent for all purposes hereunder, including with respect to
requesting Loan Advances hereunder. Each Borrower hereunder shall be jointly and
severally obligated to repay all Loan Advances made hereunder, regardless of
which Borrower actually receives said Loan Advances, as if each Borrower
hereunder directly received all Loan Advances. Each Borrower waives any
suretyship defenses available to it under the Code or any other applicable
law.  Each Borrower waives any right to require Lender to: (i) proceed
against any Borrower or any other Person; (ii) proceed against or exhaust any
security; or (iii) pursue any other remedy. Lender may exercise or not exercise
any right or remedy it has against any Borrower or any security it holds
(including the right to foreclose by judicial or non-judicial sale) without
affecting any Borrower’s liability hereunder. Notwithstanding any other
provision of this Agreement or any other Loan Document, each Borrower
irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating Borrower to the rights of Lender under
this Agreement) to seek contribution, indemnification or any other form of
reimbursement from any other Borrower, or any other Person now or hereafter
primarily or secondarily liable for any of the Obligations, for any payment made
by Borrower with respect to the Obligations in connection with this Agreement,
any other Loan Document or otherwise and all rights that it might have to
benefit from, or to participate in, any security for the Obligations as a result
of any payment made by Borrower with respect to the Obligations in connection
with this Agreement or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section 8(l) shall
be null and void. If any payment is made to a Borrower in contravention of this
Section 8(l), such Borrower shall hold such payment in trust for Lender and such
payment shall be promptly delivered to Lender for application to the
Obligations, whether matured or unmatured.

     

    9.           Definitions.  As
used in this Agreement:

     

    (a)          “Account” means all present and
future rights of Borrower to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance.

     

    (b)          “Account Debtor” is any
“account debtor” as defined in the Code with such additions to such term as may
hereafter be made.

     

    (c)          “Business Day” means any day
except Saturday, Sunday and any day which shall be a federal legal holiday or a
day on which banking institutions in the State of Delaware are authorized or
required by law or governmental action to close.

     

    (d)          “Code” means the Uniform
Commercial Code, as the same may, from time to time, be enacted and in effect in
the State of Delaware; provided, that, to the extent that the Code is used to
define any term herein or in any Loan Document and such term is defined
differently in different Articles or Divisions of the Code, the definition of
such term contained in Article or Division 9 shall govern; provided further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection, or priority of, or remedies with respect to,
Lender’s security interest in any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of Delaware,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes on the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes
of definitions relating to such provisions.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (e)          “Collateral” is any and all
properties, rights and assets of Borrower described on Exhibit
C.

     

    (f)           “Equipment” is all “equipment”
as defined in the Code with such additions to such term as may hereafter be
made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing.

     

    (g)          “Inventory” means all
“inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.

     

    (h)          “Lien” means any claim,
mortgage, deed of trust, levy, charge, pledge, security interest or other
encumbrance of any kind, whether voluntarily incurred or arising by operation of
law or otherwise against any property.

     

    (i)           “Loan Documents” means this
Agreement and the Note, each as may be amended, restated, supplemented, varied
or otherwise modified.

     

    (j)           “Material Adverse Change” means
(i) any impairment in the perfection or priority of Lender’s security interest
in the Collateral, other than with respect to any Permitted Lien, or in the
value of such Collateral; (ii) a material adverse change in the business,
operations or condition (financial or otherwise) of Borrower; or (iii) a
material impairment in the prospect of repayment of any portion of the
Obligations.

     

    (k)          “Maturity Date” means March 1,
2011.

     

    (l)          “Obligations” means Borrower’s
obligation to pay when due any debts, principal, interest, and other amounts
Borrower owes Lender now or later under the Loan Documents.

     

    (m)          “Permitted Liens” means the
following, which under no circumstances will exceed the amounts set forth below:
(i) the Lien provided to Jerusalem Technology Park Ltd., the landlord for the
offices leased by the Israeli Subsidiary as of the date hereof, equal to
approximately $175,000 as of the date hereof (and as adjusted pursuant to the
Consumer Price Index) on the deposit in the bank account of the Israeli
Subsidiary maintained at Bank Leumi Ltd., (ii) the Lien provided to Bank Leumi
Ltd. equal to approximately $35,000 as of the date hereof on the deposit in the
bank account of the Israeli Subsidiary maintained at Bank Leumi Ltd., and (iii)
the Lien provided to MCI/WorldCom equal to approximately $157,500 as of the date
hereof on the deposit in the bank account of deltathree, Inc. maintained at
Wachovia Bank.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    (n)          “Person” means an individual,
corporation association, partnership, limited liability company, joint venture,
trust, government, agency department or any other entity.

     

    (o)          “Previously disclosed to
Lender” means those matters described in writing in the disclosure letter
provided by Borrower to Lender on the date of this Agreement.

     

    (p)          “Records” means all of
Borrower’s present and future books of account of every kind or nature, purchase
and sale agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other data
relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of Borrower with respect to the foregoing maintained with or by any other
person).

     

    (q)          “Registered Organization” means
any “registered organization” as defined in the Code with such additions to such
term as may hereafter be made.

    

    [signature
page follows]

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the parties hereto
have executed this Loan and Security Agreement as of the date first above
written.

    

    
      
        
          
            
              	
                      BORROWER:

                    	
                                    

                    	
                      LENDER:

                    
	 
      	 
      	 
      
	
                      DELTATHREE,
      INC.

                    	 
      	
                      D4
      HOLDINGS, LLC

                    
	 
      	 
      	 
      
	
                      By:    

                    	
                      /s/ Effi Baruch

                    	 
      	 
      
	
                      Name:
      Effi Baruch

                    	 
      	
                      By:    

                    	
                      /s/ Robert Stevanovski

                    
	
                      Title:
      Interim CEO and President

                    	 
      	
                      Name:
      Robert Stevanovski

                    
	 
      	 
      	
                      Title:
      Manager

                    
	 
      	 
      	 
      
	
                      DELTA
      THREE ISRAEL, LTD.

                    	 
      	 
      
	 
      	 
      	 
      
	
                      By:

                    	
                      /s/ Effi Baruch

                    	 
      	 
      
	
                      Name:
      Effi Baruch

                    	 
      	 
      
	
                      Title:
      Interim CEO and President

                    	 
      	 
      
	 
      	 
      	 
      
	
                      DME
      SOLUTIONS, INC.

                    	 
      	 
      
	 
      	 
      	 
      
	
                      By:

                    	
                      /s/ Effi Baruch

                    	 
      	 
      
	
                      Name:
      Effi Baruch

                    	 
      	 
      
	
                      Title:
      CEO and President

                    	 
      	 
      

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

      

    Exhibit
A

     

    Form
of Promissory Note

     

    PROMISSORY
NOTE

    

    
      
        	
                Up
      to $1,200,000

              	
                March
      1, 2010

              	 
      

      

    

    

    FOR VALUE RECEIVED, DELTATHREE, INC., a Delaware
corporation, DELTA THREE
ISRAEL, LTD., an Israeli company, and DME SOLUTIONS, INC., a New
York corporation (jointly and severally, the “Borrower”), hereby absolutely,
irrevocably, unconditionally and jointly and severally promises to pay to the
order of D4 HOLDINGS,
LLC, a Delaware limited liability company (“Lender”), in United States
dollars and in immediately available funds, the principal sum of ONE MILLION TWO HUNDRED THOUSAND
DOLLARS ($1,200,000), or such lesser amount as may be advanced by Lender
to the Borrower from time to time in accordance with the terms and conditions of
that certain Loan and Security Agreement dated of even date herewith, between
the Borrower and Lender (as it may be amended, modified, extended or restated
from time to time, the “Loan
Agreement”), together with interest thereon, as provided in the Loan
Agreement.  Notwithstanding the foregoing, the aggregate principal
amount outstanding under this Promissory Note (this “Note”) shall not exceed one
million two hundred thousand dollars ($1,200,000).  This Note is
subject to all of the terms and conditions set forth in, and such terms and
conditions are hereby incorporated herein by reference to, the Loan
Agreement.  All capitalized terms not otherwise defined herein shall
have the meanings set forth in the Loan Agreement.  In the event of
any conflict between the provisions of this Note and the Loan Agreement, the
provisions of the Loan Agreement shall prevail.

     

    The obligations of the Borrower
evidenced by this Note are secured by a first priority perfected security
interest in the Collateral, as set forth in the Loan Agreement.

     

    Except as otherwise provided in the
Loan Documents, all outstanding principal and interest with respect to Loan
Advances shall be due and payable in full on the Maturity Date.  The
daily unpaid principal balance outstanding under this Note shall bear interest
at the rate(s) set forth in the Loan Agreement.

     

    Upon the occurrence of an Event of
Default, Lender shall have, and shall be entitled to exercise, all of the rights
and remedies set forth in the Loan Agreement and the other Loan
Documents.

     

    All payments in respect of amounts
outstanding under this Note shall be paid in immediately available funds to the
account(s) specified by Lender from time to time.  Any payment due in
respect of this Note which falls due on a day other than a Business Day shall be
made on the next Business Day.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The Borrower hereby waives presentment
and demand for payment, notice of dishonor, protest and notice of protest of
this Note.  No release of any security for the payment of this Note or
extension of time for payment of this Note, and no alteration, amendment or
waiver of any provision of this Note made by agreement between Lender and any
other Person shall release, discharge, modify, change or affect the liability of
the Borrower under this Note.

    
 

    Each right, power and remedy of Lender
under this Note, the Loan Agreement, any other Loan Document, or under
applicable laws shall be cumulative and concurrent, and the exercise of any one
or more of them shall not preclude the simultaneous or later exercise by Lender
of any or all such other rights, powers or remedies.  No failure or
delay by Lender to insist upon the strict performance of any one or more
provisions of this Note, the Loan Agreement, any other Loan Document, or to
exercise any right, power or remedy consequent upon an Event of Default shall
constitute a waiver thereof, or preclude Lender from exercising any such right,
power or remedy.  No modification, change, waiver or amendment of this
Note shall be deemed to be made unless in writing signed by the Borrower and
Lender. This Note shall inure to the benefit of and be binding upon the Borrower
and Lender and their respective successors and assigns; provided that except as
set forth in the Loan Agreement, the Borrower shall have no right to assign any
of its rights or delegate any of its obligations under this Note; and provided
further that there shall be no restrictions of any nature on Lender’s right to
assign this Note or its rights hereunder.  The invalidity, illegality
or unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of any other provision.  This
Note shall be deemed to be made in, and shall be governed by the laws of, the
State of Delaware (without regard to its conflicts of laws
principles).

    

    [signature
page follows]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, this Promissory
Note has been duly executed by the undersigned as of the day and year first
above written.

    

    
      
        	 
      	
                BORROWER:

              
	 
      	 
      
	 
      	
                DELTATHREE,
      INC.

              
	 
      	 
      
	 
      	
                By:  

              	
                  

              
	 
      	
                Name:
      Effi Baruch

              
	 
      	
                Title:
      Interim CEO and President

              
	 
      	 
      
	 
      	
                DELTA
      THREE ISRAEL, LTD.

              
	 
      	 
      
	 
      	
                By:

              	
                  

              
	 
      	
                Name:
      Effi Baruch

              
	 
      	
                Title:
      Interim CEO and President

              
	 
      	 
      
	 
      	
                DME
      SOLUTIONS, INC.

              
	 
      	 
      
	 
      	
                By:

              	
                  

              
	 
      	
                Name:
      Effi Baruch

              
	 
      	
                Title:
      CEO and President

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
B

    

    Form
of Notice of Borrowing/Loan Advance Request

    

    NOTICE OF BORROWING/LOAN
ADVANCE REQUEST

     

    Date:                      [________],
20__

    D4
HOLDINGS, LLC

    349-L
Copperfield Blvd, #407

    Concord,
NC 28025

    

    
      	
              Attention: 

            	
              Robert
      Stevanovski, Manager

            

    

     

    
      	
              Advance
      Request: 

            	
              Loan
      and Security Agreement

            

    

    

    Dear
Robert:

    

    Reference is made to that certain Loan
and Security Agreement (as from time to time amended, restated, varied,
supplemented or otherwise modified, the “Loan Agreement”), dated as of
March 1, 2010, by and between (i) deltathree, Inc., a Delaware corporation,
Delta Three Israel, Ltd., an Israeli company, and DME Solutions, Inc., a New
York corporation (jointly and severally, the “Borrower”), and (ii) D4
Holdings, LLC, a Delaware limited liability company (“Lender”).

    

    This is a Notice of
Borrowing.  All capitalized terms used herein and not otherwise
defined shall have the meanings given to them in the Loan
Agreement.

    

    
      	
               
      

            	
              1.

            	
              LOAN
      ADVANCE REQUEST

            

    

     

    In accordance with the Loan Agreement,
the undersigned hereby requests that Lender make a Loan Advance as
follows:

    

    
      	
               
      

            	
              a.

            	
              Loan
      Date:  [________], 20__

            

    

     

    
      
        	
                 

              	
                b.

              	
                Amount
      of Loan Advance:  US$[___________],1
      to be disbursed as follows:

              

      

    

     

    [INSERT
APPLICABLE BORROWER]

    

    Account
Information

    [INSERT
APPLICABLE INFORMATION]

    

    
      	
               
      

            	
              c.

            	
              Purpose
      for which Loan Advance will be
      used:  ______________________.

            

    

     

    
      	
              2. 

            	
              CERTIFICATION

            

    

    

    The Borrower hereby certifies that (a)
the representations and warranties in Section 4 of the Loan Agreement are true
in all material respects as of the date hereof, (b) no Event of Default (i) has
occurred that is continuing as of the date hereof and (ii) will result from the
Loan Advance requested hereunder and (c) no Material Adverse Change has
occurred.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Sincerely,

    

    [INSERT
APPLICABLE BORROWER]

    

    
      
        

      

    

    1           At
least $100,000.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
C

    

    Description
of Collateral

    

    The
Collateral consists of all of Borrower’s right, title and interest in and to the
following personal property:

    

    
      	
              1.

            	
              All
      Accounts and other indebtedness owed to
  Borrower;

            

    

    

    
      	
              2.

            	
              All
      present and future contract rights, general intangibles (including, but
      not limited to, tax and duty refunds, intellectual property, registered
      and unregistered patents, trademarks, service marks, copyrights, trade
      names, applications for the foregoing, technology, software, know-how,
      designs, trade secrets, goodwill, processes, drawings, blueprints,
      customer lists, mailing lists, licenses, whether as licensor or licensee,
      choses in action and other claims and existing and future leasehold
      interests in equipment, real estate and fixtures), chattel paper,
      documents, instruments, securities, investment property, letters of
      credit, proceeds of letters of credit, bankers’ acceptances and
      guaranties;

            

    

    

    
      	
              3.

            	
              All
      present and future monies, securities, credit balances, deposits, deposit
      accounts and other property of Borrower, including without limitation any
      such items now or hereafter held or received by or in transit to Lender or
      any of its affiliates or at any other depository or other institution from
      or for the account of Borrower, whether for safekeeping, pledge, custody,
      transmission, collection or otherwise; and all present and future Liens,
      security interests, rights, remedies, title and interest in, to and in
      respect of Accounts and other Collateral, including, without limitation,
      (a) rights and remedies under or relating to guaranties, contracts of
      suretyship, letters of credit and credit and other insurance related to
      the Collateral, (b) rights of stoppage in transit, replevin, repossession,
      reclamation and other rights and remedies of an unpaid vendor, lienor or
      secured party, (c) goods described in invoices, documents, contracts or
      instruments with respect to, or otherwise representing or evidencing,
      Accounts or other Collateral, including, without limitation, returned,
      repossessed and reclaimed goods, and (d) deposits by and property of
      Account Debtors or other Persons securing the obligations of Account
      Debtors;

            

    

    

    
      	
              4.

            	
              All
      Inventory;

            

    

    

    
      	
              5.

            	
              All
      Equipment;

            

    

    

    
      	
              6.

            	
              All
      Records; and

            

    

    

    
      	
              7.

            	
              All
      products and proceeds of the foregoing, in any form, including, without
      limitation, insurance proceeds and any claims against third parties for
      loss or damage to or destruction of any or all of the
      foregoing.Unassociated Document

    

    

    AGREEMENT

    

    THIS
AGREEMENT, effective November 2, 2000, is entered into

    

    BETWEEN:

    

    YORK
MEDICAL INC.

    a
corporation incorporated under the

    laws of
Ontario, having its principal place of business at

    5045
Orbitor Drive, Building 11, Suite 400,

    Mississauga,
Ontario, L4W 4Y4, Canada

    (hereinafter
referred to as "YORK")

    

    -AND-

    

    UNIVERSITY
OF MANITOBA

    having
its principal place or business at

    Fort
Garry Campus, Rm 631 Drake Centre, 181 Freedman Crescent,

    Winnipeg,
Manitoba, R3E OW3, Canada

    

    (hereinafter
referred to as "UM”)

    

    -AND-

    

    THE
MANITOBA CANCER TREATMENT AND RESEARCH FOUNDATION, carrying on

    its
undertaking as CANCERCARE MANITOBA

    

    having
its principal place of business at

    675
McDermot Ave., Winnipeg, Manitoba, R3E OV9,Canada

    

    (hereinafter
referred to as "CCMB")

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    2  Background
of Agreement

    

    1.1  UM
and CCMB are owners, by assignment, of all right, title and interest in and to
the patents and patent applications listed in Exhibit 1 hereto which have arisen
from studies by Dr. l. Brandes (the "Inventor") in the course of research within
the Manitoba Institute of Cell Biology.

    

    1.2  The
Manitoba Institute of Cell Biology is an Institute of CCMB and UM pursuant to
their agreement dated March 2, 1989 (the "MICB Agreement”) which governs certain
actions related to patents and copyrights arising from research conducted in the
institute.

    

    1.3  By
agreement (the “B-M Agreement”), UM and CCMB licensed the patent rights to
Bristol-Myers Squibb Company and pursuant to the B-M Agreement, Bristol-Myers
Squibb Company funded the production, preclinical and clinical development of
DPPE.

    

    1.4  Through
termination of the B-M Agreement, UM and CCMB have retrieved the licensed
rights.

    

    1.5  UM
and CCMB are interested in continuing research, development and
commercialization of OPPE, Including pursuit of all related clinical and
pre-clinical results and clinical material and production methods
therefor.

    

    1.6  YORK
is a biopharmaceutical licensing and development company, with a management
group experienced in developing human pharmaceuticals in the clinical fields of
oncology and anti-infectives. In addition, York's management group has
experience in partnering with multinational pharmaceutical companies and other
related business development activities.

    

    1.7  UM
and CCMB have revealed to YORK certain information relating to DPPE under terms
of confidentiality agreement dated April 12, 2000.

    

    1.8  YORK,
UM and CCMB now wish to set forth the terms and conditions of an agreement
through which YORK shall acquire a license to exploit the assets of UM and CCMB
related to the Patents, that are useful in the further research, development and
commercialization of DPPE.

    

    

    NOW
THEREFORE, in consideration of the foregoing premises, the mutual covenants and
obligations hereinafter contained, and other good and valuable consideration
which is hereby acknowledged, UM, CCMB and YORK agree as follows:

    

    2  Definitions

    

    As used
herein, the following terms shall have the meanings set forth
below:

    

    2.1  AFFILIATE
means any COMPANY that is controlled directly or indirectly by a party hereto or
any COMPANY that directly or indirectly controls a party hereto, so that
AFFILIATE shall include any parent or subsidiary of a party hereto, or any
directly or indirectly held subsidiary of a party hereto.

    

    2.2  ASSETS
are those existing and arising assets related to DPPE that are or become owned
or controlled by UM and CCMB and are useful to YORK for the purpose herein
licensed, and include DPPE, INFORMATION, MATERIAL and PATENTS.

    

    2.3  COMPANY
means a corporation or other juridical entity.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
2.4  CONTROL
means the ownership, directly or indirectly, of more than 50 % of voting rights
attached to the issued voting shares of a COMPANY.

    

    2.5  DPPE
means N,N-diethyl-2-[4-(phenylmethyl)phenoxy]ethanamine.HCI, as described in the
PATENTS.

    

    2.6  DEVELOPMENT
COSTS means the third party expenses incurred by YORK in connection with the
development of LICENSED PRODUCT including but not limited to the cost of filing,
prosecuting, maintaining, defending and enforcing the PATENTS, the direct cost
of CLINICAL TRIALS and work related thereto including quality control and
assurance, regulatory filings and preparation therefor, production and packaging
of LICENSED PRODUCT and the cost of acquiring further In- licenses as may be
necessary for the commercial exploitation of LICENSED PRODUCT.

    

    2.7   EFFECTIVE
DATE shall be the date first written above.

    

    2.8   IMPROVEMENTS
means products or processes the manufacture, use or sale of which would infringe
a VALID CLAIM.

    

    2.9  INFORMATION
means information relating to DPPE and includes, but is not limited to,
confidential information and know-how, in the knowledge, possession or control
of a party and which the party has a right to disclose, particularly but not
exclusively including information relating to production and to preclinical and
clinical protocols, results and approvals.

    

    2.10  LICENSED
TERRITORY means all countries of the world.

    

    2.11  LICENSED
FIELD means, and is limited to, the exploitation of the ASSETS in respect of
veterinary and human therapeutic products within the area of cancer treatment
and the manufacture, use and sale thereof.

    

    2.12  LICENSED
PRODUCT means all products and formulations thereof for DPPE, the manufacture,
use or sale of which utilizes, wholly or partially, the ASSETS or the YORK
PATENTS and would but for the license herein granted, infringe a VALID
CLAIM.

    

    2.13  MATERIAL
means biological and chemical material that either is incorporated in the
LICENSED PRODUCT or is useful in the production, evaluation or development
thereof.

    

    2.14  NET
SALES shall mean the total NET SALES PRICE of LICENSED PRODUCT sold by YORK and
its AFFILIATES.

    

    2.15  NET
SALES PRICE shall mean the total of net invoice prices for all LICENSED PRODUCTS
sold by YORK and its AFFILIATES, for any given period of time during the term of
this Agreement, less DEVELOPMENT COSTS, less wholesaler's or distributor's
commissions, discounts, rebates, samples and freight charges, and taxes
separately listed on such invoices, and less the amount of any credits or
refunds actually given by YORK for defective or returned LICENSED PRODUCTS. NET
SALES PRICE shall not include any consideration received by YORK in respect of
the sale, use or other disposition of LICENSED PRODUCT prior to the receipt of
all regulatory approvals required to commence full commercial sales of LICENSED
PRODUCT in a given country, such as sales under a "treatment IND”, “named
patient sales”, “compassionate use sales”, and the sale, use or other
disposition of LICENSED PRODUCT in the course of clinical trials.

    

    2.16  PATENTS
means:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
1) The
patents and applications summarized in Exhibit 1 (which may be updated from time
to time during the term of this agreement) and the patents that mature from
those applications.

    

    2) The
patents and applications directed to IMPROVEMENTS

    

    3) All
divisions, continuations in whole and in part, reissues, re-examinations,
substitutes, extensions and foreign and international counterparts of 1) and 2)
and patents that mature therefrom.

    

    4)
Patents and patent applications relating to DPPE that are or become owned or
controlled by UM and/or CCMS and which are included in the definition of
ASSETS

    

    5)
Patents and patent applications related to DPPE licensed to UM and/or CCMB that
UM and/or CCMB YORK are permitted to sub-license and which are included in the
definition of ASSETS.

    

    2.17
SPONSORED RESEARCH means research and clinical development funded by YORK
hereunder and performed in the Inventor's laboratory, or elsewhere on the
Inventor's behalf.

    

    2.18
SUB-LICENSEE means a person or entity who is not an Affiliate and to whom YORK
has sub-licensed all or part of the rights granted to YORK by UM and CCMB by
this Agreement.

    

    2.19
SUBLICENSING REVENUE shall, unless otherwise agreed upon in writing, mean all
payments, whether in cash or otherwise, whether in the form of up front
payments, milestone payments, royalties or otherwise received by YORK from
SUB-LICENSEEs and assignees of, in respect of LICENSED PRODUCT and in
consideration for, the rights granted to YORK under this Agreement, less
DEVELOPMENT COSTS.

    

    2.20  VALID
CLAIM means a granted claim within PATENTS so long as such claim shall not have
been disclaimed or abandoned by the patentee or shall not have been disallowed
by a Patent Office, expired under the patent laws of a country, or held invalid
in a final decision rendered by a court, government or tribunal of competent
jurisdiction from which no appeal has been, or can be, taken.

    

    2.21  YORK
PATENTS means:

    

    1) The
patents and applications summarized in Exhibit 4 (which Exhibit may be updated
from time to time during the term of this Agreement) and relating to DPPE and
the patents that mature from those applications.

    

    2) The
patents and applications directed to IMPROVEMENTS.

    

    3) All
divisions, continuations in whole and in part, reissues, re-examinations,
substitutes, extensions and foreign and international counterparts of (1) and
(2) and patents that mature therefrom.

    

    4)
Patents and patent applications that are or become owned or controlled by YORK,
for clarity this excludes PATENTS as defined in 2.16

    

    5)
Patents and patent applications licensed to YORK and that YORK is permitted to
sub-license.

    

    

    3  License
grant

    

    3.1  UM
and CCMB hereby grant to YORK and its AFFILIATES in the LICENSED FIELD and
LICENSED TERRITORY, an, exclusive license to exploit ASSETS, particularly
including but not limited to PATENTS, to develop and to make, including contract
production by a toll manufacturer, use, sell, and otherwise dispose of LICENSED
PRODUCT. YORK and its AFFILIATES shall use, exploit and commercialize the ASSETS
only within the LICENSED FIELD as LICENSED PRODUCT and undertakes not to use,
exploit or commercialize the ASSETS in any way contrary to the terms and
conditions of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
3.2  The
license granted pursuant to Article 3.1 hereof shall be exclusive.
Notwithstanding the foregoing UM and CCMB shall have the right to use ASSETS and
the YORK PATENTS for academic research purposes. In addition, the Inventor,
and/or his laboratory, shall have the right to use ASSETS and YORK PATENTS
for academic research purposes and for teaching at universities and hospitals;
as defined under SPONSORED RESEARCH. The Inventor shall also have the right to
continue to treat patients who are currently being treated with
DPPE.

    

    3.3 YORK
shall have the right to grant sublicenses on fair and reasonable terms and
conditions consistent with the terms and conditions set out in this Agreement.
In the event of a breach of a term of the sublicense by a SUBLICENSEE (the
"SUBLICENSEE'S breach"), York shall forthwith proceed to enforce the terms of
the sublicense and shall further bear all costs related thereto, thereby
eliminating, as against the University or CCMB, the effect of any such
SUBLICENSEE's breach. YORK agrees to keep UM and CCMB informed of any
material sublicensing discussions and further to provide UM and CCMS each with a
true copy of any and all sublicensing agreements entered into by YORK and a
SUB-LICENSEE.

    

    4  Licensing
consideration and minimum remunerations

    

    4.1  In
consideration of the rights granted by UM and CCMB to YORK under this Agreement,
YORK shall pay the consideration set out in this Article 4. The parties agree
that any such payment shall be made to UM, and that UM shall thereafter allocate
a portion of such payment to CCMB in accordance with the MICB

    Agreement.

    

    4.2  YORK
shall pay a royalty of twenty percent (20%) of all SUBLICENSING
REVENUE.

    

    4.3  YORK
shall further contribute to the University for the Inventor or his laboratory
CDN$ 100,000.00 in funding of SPONSORED RESEARCH in each of the 2000, 2001 and
2002 calendar years, as noted in Exhibit 3. The SPONSORED RESEARCH shall be
conducted by Dr. Brandes or by other researchers, faculty, staff and employees
of UM or CCMB working under the direct supervision and control of Dr.
Brandes.

    

    4.4  In
the event sales are achieved by YORK or its AFFILIATE independently, and not
either by a SUBLICENSEE or by YORK or its AFFILIATE for a SUBLICENSEE, YORK
shall pay a royalty of four (4) percent of NET SALES.

    

    4.5  YORK
shall retain Therudex Inc. as consultant according to the agreement in Exhibit
2.

    

    5  Commercialization
and further research

    

    5.1  Upon
execution of this Agreement, YORK either acting for itself or through a
SUBLICENSEE shall ensure that reasonable commercial efforts are used, in
relation to the LICENSED PRODUCT, to:

    

    a) file a
request for a transfer of the active Canadian IND within 3 months;

    

    b)
identify a manufacturer of drug substance within 6 months;

    

    c)
identify a manufacturer of drug product within 12 months;

    

    d) file
an IND for randomized Phase II trial within 18 months;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
e)
initiating a randomized Phase II clinical trial in a first country in the
LICENSED TERRITORY within twenty four months;

    

    all from
the date of this Agreement, and to

    

    f)
investigate the use of DPPE in combination with other chemotherapeutic agents
and other types of malignancies if warranted; and

    

    g) use
all reasonable efforts to ensure that the LICENSED PRODUCT is efficiently
marketed and distributed in the LICENSED TERRITORY within five (5) years of the
date of this Agreement

    

    5.2  UM
and CCMB shall disclose and provide to YORK, and YORK shall be entitled to use,
ASSETS to enable YORK to perform its obligations and enjoy the rights granted
under this Agreement. UM and CCMB shall provide to YORK, at YORK's request and
expense, any technical assistance reasonably necessary to enable YORK or its
SUBLICENSEE to make, use, sell, sublicense or otherwise dispose of LICENSED
PRODUCT.

    

    5.3  INFORMATION,
MATERIAL and PATENTS that arise during the term of this Agreement shall be
treated as follows: INFORMATION and MATERIAL, and PATENTS therefor, generated or
invented during the term of this Agreement by persons engaged in the SPONSORED
RESEARCH, and ASSETS that are related to DPPE and are owned and controlled by UM
and/or CCMB, shall be hereby licensed exclusively to YORK under terms and
conditions stipulated in this Agreement

    

    5.4  INFORMATION
and MATERIAL, and any PATENTS thereforrelating to DPPE, that are generated
and/or invented jointly by persons engaged in the SPONSORED RESEARCH and by YORK
or its employees or consultants during the term of this Agreement shall be owned
jointly by UM and CGMB and YORK and constitute an ASSET. UM and CCMB's interest
in this ASSET shall be hereby licensed exclusively to YORK under the terms and
conditions stipulated in this Agreement.

    

    5.5  INFORMATION
and MATERIAL and any PATENTS therefore relating to DPPE that during the term of
this Agreement are generated or invented solely and independently by YORK shall
belong solely to YORK and shall constitute YORK PATENTS. UM and CCMB shall have
the right to use these YORK PATENTS for research purposes, under the terms and
conditions of this Agreement.

    

    5.6  For
the purpose of this Article 5, determination of inventorship shall be determined
in accordance with United States patent law.

    

    5.7  UM,
CCMB and YORK shall receive and maintain all disclosures of know-how, inventions
and other intellectual property information under this Agreement, and any other
information about the business or affairs of the other relating to the ASSETS,
the YORK PATENTS or the Agreement, in confidence and shall not at any time
disclose any such received information to persons other than their AFFILIATES,
officers, employees and advisers. The disclosure of such information by YORK to
a SUBLICENSEE or prospective SUBLICENSEE or to a person or entity contracted by
YORK to research and/or develop LICENCED PRODUCT or to a person or entity for
bona fide business purposes. including bona fide financing of YORK, who has
agreed to keep such information confidential, is permitted by this Agreement.
Each party shall take all reasonable steps to ensure that their respective
AFFILIATES, officers, employees and advisers maintain the obligations of
confidence imposed on UM and CCMB and YORK. The obligations of confidentially
shall not apply to any information which:

    

    a) was
already known to the receiving party at the time of its disclosure by the
disclosing party;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
b) has
been published or is otherwise within the public knowledge or is generally known
to the public without any breach of this Agreement;

    c) became
known or available to the receiving party from a source having the right to make
such disclosure to the receiving party without breach of a secrecy agreement and
without restriction on such disclosure to the receiving party;

    

    d) is
disclosed to the public as a result of compliance with any applicable law or
regulation;

    

    e) is
disclosed as the result of any applications for, or publication of, a patent
related to ASSETS;

    

    f) is
required to be disclosed to the Manitoba Lieutenant Governor Council;
or

    

    g) is
developed by the receiving party without reference to the disclosed information
as evidenced by written records.

    

    5.8  Before
any permitted publishing of any INFORMATION, the parties shall disclose the
INFORMATION to each other and give each other at least 30 days prior written
notice of the proposed publication, and during those 30 days, the parties shall
remove from the proposed publication all information which any party considers
to be confidential. If any party requires more time to protect INFORMATION
contained in the proposed publication the other party shall withhold the
publication for a further 60 days. Notwithstanding the above, each party may in
its sale discretion withhold permission to publish INFORMATION. The parties are
however always entitled to disclose information which they are required by law,
regulation, act or order of any governmental authority to disclose, but only to
the extent so required.

    

    5.9  The
parties have agreed on a research and development plan for SPONSORED RESEARCH
that is directed by the parties on an annual basis and is set out in Exhibit 3
as may be amended from time to time.

    

    6  Sublicensing
and Assignment

    

    6.1  As
per Section 3.3 YORK shall have the right to grant sublicenses to arms length
third parties who are not Affiliates Such sublicenses may, at YORK's sore
election, be either exclusive or non-exclusive. At all times YORK shall enforce
and defend the rights of UM and CCMB in any such sublicenses as set forth in
this Agreement.

    

    6.2  Unless
otherwise agreed in writing, YORK may, after having fulfilled its obligations
according to Clauses 5.1 a) and b) above, wholly or partly assign or pledge its
rights or obligations under this Agreement subject to the terms and conditions
set out in Section 12.1 below.

    

    6.3  YORK
shall provide UM and CCMB with a true copy of all agreements regarding
sub-licensing, assignment or disposal of the rights granted to YORK under this
Agreement.

    

    7  Payments

    

    7.1  Not
later than the last day of July and January of each year, YORK shall furnish to
UM and CCMB a written statement of milestones achieved by YORK and of all NET
SALES and SUBLICENSING REVENUE received, if any, due for the semi-annual periods
ended the last days of the June and December, respectively, and shall pay all
amounts due. Such amounts are due within the earlier of (a) thirty (30) days of
the dates the statements or (b) the last day of August (when dealing with a
statement for the semi-annual period ending on the last day of the immediately
preceding June) or the last day of February (when dealing with a statement for
the semi-annual period ending on the last day of the immediately preceding
December). If no NET SALES or SUBLICENSING REVENUE is received by YORK during
any semi-annual periods, a written statement to that effect shall be
furnished.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
7.2  If
this Agreement is terminated for any reason before all of the payments herein
provided for have been made, YORK shall submit a final report as soon as all
revenue reporting is available and pay any remaining unpaid balance which has
accrued.

    

    7.3  Payment
provided for in this Agreement, when overdue, shall bear interest at a rate per
annum equal to five percent (5 %) in excess of the prime rate at the Canadian
Imperial Bank of Commerce (CIBC).

    

    8  Patent
rights and patent infringement

    

    8.1  The
filing, prosecution, defence, maintenance and enforcement of PATENTS shall be
managed by YORK, which shall diligently pursue prosecution of the PATENTS. It
shall be the responsibility of YORK to advise UM and CCMB of the status of the
PATENTS, and to involve UM and CCMB in all portfolio management decisions. YORK
shall be responsible for all fees and expenses that are incurred in connection
with the preparation, filing, prosecution, maintenance and defence and
enforcement of PATENTS necessary for the exploitation of ASSETS according to
this Agreement. YORK shall have the right, in its sole discretion, to elect not
to file, prosecute, maintain, defend and enforce the PATENTS in one or more
countries. With respect to any such non-elected PATENTS, YORK shall have no
rights thereunder in the country so elected, it shall so advise UM and CCMB on a
timely basis so UM and CCMB can pursue such PATENTS, and UM and CCMB thereafter
shall have the exclusive right to file, prosecute, maintain, defend and enforce
the PATENTS in that country at its expense, provided that the filing,
prosecuting, maintenance, defence or enforcement of the PATENTS in that country
does not compromise the validity, defence or enforceability of the PATENTS in
any other elected country.

    

    8.2  Each
party shall be entitled to receive for comment copies of all patent applications
relating to PATENTS and correspondence, including status reports relating to the
prosecution, maintenance, issue, re-issue, re-examination or division of these
patent applications.

    

    8.3  If
YORK or UM and CCMB is sued by a third party for patent Infringement arising
from the SPONSORED RESEARCH or because of the exercise of the license granted
herein, YORK shall settle or defend the suit at its own expense, but UM and CCMB
shall cooperate to the fullest, at YORK's expense, in the conduct of any such
settlement or defence.

    

    8.4  In
the event that any infringement of any of the PATENTS comes to the attention of
either party hereto, such party shall promptly notify the other party thereof.
YORK or its SUBLICENSEE shall have the right but not the obligation to undertake
an infringement suit at YORK's expense and in the name of UM and CCMB or YORK or
both, as required by law. In such event, UM and CCMB shall cooperate fully with
YORK or its SUBLICENSEE, at no expense to UM and CCMB. YORK shall not
settle
any such suit without obtaining the prior written approval of UM and CCMB, which
shall not be unreasonably withheld. Any recovery obtained by YORK as the result
of such proceeding, by settlement or otherwise, shall be applied for the
following purposes and in the following order: (1) against legal and other
expenses of the suit, (2) against liabilities of YORK or UM or CCMB resulting
from the suit, and (3) to UM and CCMB in accordance with Article 4.2, wherein
such money shall be considered
SUBLICENSING REVENUE.

    

    9  Representations
and warranties

    

    9.1  UM
and CCMB represent and warrant, to their knowledge:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
a) that
the Inventor is the sole inventor of the inventions described and claimed In the
patents listed in Exhibit 1 and that the Inventor has assigned such invention to
UM and CCMB.

    

    b)           i)
that they have not, either alone or together, entered into any agreement
regarding the LICENSED PRODUCT, whether in writing or verbally, with any other
person that is inconsistent with the terms of this Agreement; and

    

                 
ii) that the B-M agreement described in preamble paragraph 1.4 has been
terminated.

    

    c)   that
UM and CCMB have the capacity and authority to enter into this Agreement,
subject to CCMB obtaining approval of the licensing of the PATENTS to York from
the Manitoba Lieutenant Governor in Council.

    

    9.2  YORK
represents and warrants that it has the capacity and authority to enter into
this Agreement.

    

    9.3  Except
as set out in Section 9.1, UM and CCMB make no warranties, express or implied,
as to any matter whatsoever including, without limitation:

    

    a)  the
condition of the ASSETS;

    

    b)  the
ownership, merchantability or fitness for a particular purpose of the ASSETS;
or

    

    c) the
scope of the PATENTS or that such PATENTS may be exploited by YORK or a
SUBLICENSEE without infringing other patents

    

    9.4  None
of the Inventor, UM or CCMB shall have any liability whatsoever to YORK or any
other person for or on account of any injury, loss, or damage, or any kind of
nature, sustained by, or any damage assessed or asserted against, or any other
liability incurred by or imposed upon YORK or any other person, arising out of
or in connection with or resulting from (1) activities under Section 5.1, (2)
the manufacture, use, or sale of any LICENSED PRODUCT; or (3) any advertising or
other promotional activities with respect to any of the foregoing, and YORK
shall hold UM, CCMB, and the Inventor harmless and indemnify them if anyone of
them is held liable. YORK's obligation to indemnify shall not apply if UM and
CCMB has caused injury, loss or damage by gross negligence or breach of any of
the representations or warranties contained in Section 9.1 above.

    

    9.5  YORK,
at its own expense and at all times during the term of this Agreement, will
carry and maintain in full force and effect comprehensive general liability
insurance, including product liability provisions, in a form and with a carrier
acceptable in the pharmaceutical industry. The limits of such policy shall be
sufficient at all times for YORK's then current activities under this Agreement,
and customary for YORK's business within the industry. UM, CCMB and Inventor
shall be named as an additional insured on such insurance and the carrier shall
be required to agree, where enforceable, not to cancel same without providing 60
days prior written notice of cancellation to such additional insured entities.
Certificate of Insurance as evidence of compliance with this Section 9.5 shall
be provided annually to each UM, CCMB and Inventor.

    

    10  Term
and termination

    

    10.1  This
Agreement shall commence on the Effective Date and, unless terminated sooner, in
accordance with the terms hereof, shall remain in force as long as any PATENT is
valid in any part of the LICENSED TERRITORY.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
10.2  In
the event either party shall be in default in the performance of any of its
material obligations hereunder, including but not limited breach of
representation or warranty, and if the default has not been remedied within
ninety (90) days following the date of receipt of a notice in writing from the
other party specifying such default and its claim of right to terminate, the
other party may terminate this Agreement by written notice in addition to any
other remedies available to it by law or equity

    

    10.3  Either
party shall have the right to terminate this Agreement with immediate effect if
the other party should enter into liquidation, either voluntary or compulsory,
or become insolvent, or enter a corporate reorganization proceedings or if
execution be levied on any goods and effects of the other party or the other
party should enter into receivership or bankruptcy.

    

    10.4  YORK
may voluntarily terminate this Agreement, without cause, at any time on ninety
(90) days written notice providing there is no SUBLICENSEE. Termination will
take effect immediately at the end of the notice period. If YORK voluntarily
terminates within the first three (3) years of the Agreement then YORK covenants
that it will not develop, sponsor research or market any product in the LICENSED
FIELD for a period of five (5) years post-termination. In this event, UM and
CCMB

    shall be
free to pursue other commercial opportunities related to the ASSETS as they
shall solely determine.

    

    10.5  Upon
the termination of this Agreement by UM and CCMB under Sections 10.2 or 10.3, or
by YORK under Section 10.4,

    

    a) YORK
and its AFFILIATES shall make no further use of the ASSETS. YORK shall
discontinue to use and exploit the ASSETS and shall promptly return all paper,
data, drawings, manuals, specifications, descriptions and material of any kind
supplied to it by UM and CCMB hereunder. YORK shall, when transmitting such
material, acknowledge in writing that the documentation thus transmitted is
complete and that YORK does not retain any copies thereof.

    

    b) UM,
CCMB and Inventor shall make no further use of the YORK PATENTS. UM, CCMB and
Inventor shall discontinue all use of YORK's INFORMATION and YORK's MATERIAL and
shall promptly return all paper, data, drawings, manuals, specifications,
descriptions and material of any kind supplied to it by YORK hereunder. UM, CCMB
and Inventor shall, when transmitting such material, acknowledge in writing that
the documentation thus transmitted is complete and that UM, CCMB and Inventor do
not retain any copies thereof.

    

    10.6  This
Article 10 and the following rights and obligations shall survive any
termination of this Agreement to the degree necessary to permit the fulfillment
or discharge by each party of their rights and obligations noted
below;

    

    a) YORK's
obligation to supply a final report as specified in Article 7.2 of this
Agreement.

    

    b) UM's
right to receive or recover and YORK's obligation to pay amounts accrued all the
date of termination under Article 4 of this Agreement.

    

    c) YORK's
obligation to maintain records and make them available under Section 11.1 of
this Agreement.

    

    d) The
representations, warranties and indemnities under Article 9 of this
Agreement.

    

    10.7  The
obligations of confidentiality as provided in this Agreement will survive
termination of this Agreement for a period of five (5) years post termination,
except where termination occurs due to default by York under Section 10.2 or the
liquidation, insolvency or corporate reorganization or enter into receivership
or bankruptcy as described in Section 10.3 above in which case UM and CCMB shall
have no further obligations to YORK, including those under Article
5.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
10.8  Notice
of termination shall be effectively served on YORK only when written notice of
termination is received from both UM and CCMB.

    

    11  Records

    

    11.1  YORK
shall keep accurate records relating to all matters relevant to this Agreement
(including payments due hereunder) and shall permit UM and CCMB or its duly
authorized representative to inspect all such records and to make copies of or
extracts from such records during regular business hours and on reasonable
notice throughout the term of this Agreement and for a period of six (6) years
thereafter. YORK shall fully co-operate at such inspection and shall give any
explanations that may be requested. If any such inspection discloses any
underpayment of royalties, YORK shall promptly pay the amount of any shortfall
plus interest at the rate determined in accordance with Section 7.3 hereof from
the date such payment was due until the date that YORK pays the
shortfall.

    

    11.2  YORK
shall at each time of payment of royalties render a report to UM and CCMB
including copies of the SUB-LICENSEES reports to YORK, giving an accurate
account of total manufacture and sale of LICENSED PRODUCT and SUBLICENSING
REVENUES during the preceding two (2) quarters.

    

    12  Assignability

    

    12.1  Subject
to the other party's prior written consent the parties shall have the right to
assign this Agreement together with all rights and obligations herein to any
other person. Such consent shall not be unreasonably withheld or delayed
provided the terms and conditions of the Agreement of assignment are consistent
with the terms and conditions of this Agreement. Notwithstanding the foregoing
YORK shall always be entitled to assign its rights and obligations to an
AFFILIATE. YORK shall the fulfilment by an AFFILIATE of the terms and conditions
of this Agreement.

    

    13  Severability

    

    13.1  The
parties agree that if any part, term, or provision of this Agreement shall be
found illegal or in conflict with any valid controlling law, the validity of the
remaining provisions shall not be affected thereby.

    

    

    14  Use
of Licensor’s name

    

    14.1  YORK
shall not use the UM or CCMB name or trademark, nor the name of any employee or
agent, in any advertising or promotional material or publicity release relating
to the ASSETS or the LICENSED PRODUCTs without UM and CCMB prior written
consent.

    

    15  Waiver,
integration, alteration

    

    15.1  The
waiver of a breach hereunder may be effected only by a written document signed
by the waiving party and shall not constitute a waiver of any other
breach.

    

    15.2  A
provision of this Agreement may be altered only by a written document signed by
both the parties.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
16  Dispute
resolution

    

    16.1  If
the parties are unable to resolve any dispute arising under this Agreement, such
matter shall first be referred for resolution to the Presidents of UM and CCMB
and YORK. In the event that no resolution is reached within 10 business days, or
such further period as the Presidents may mutually agree, resolution of the
dispute shall be determined by arbitration to be held in the English language in
Manitoba, in accordance with Manitoba Law.

    

    17  Applicable
law

    

    17.1  This
Agreement shall be governed and construed in accordance with the laws of
Manitoba.

    

    18  Notices
under the Agreement

    

    18.1  All
written communications and notices between the parties shall be delivered or
sent by prepaid mail, registered mail or facsimile transmission to the attention
of the party at the addresses provided below, or any other addresses of which
either party shall notify the other party in writing. Notices sent by prepaid or
registered mail shall be effective on the date delivered and notices sent by
facsimile shall be effective on the date transmitted.

    

    
      	
              If
      to YORK:

            	
              The
      President

            
	 
      	
              York
      Medical Inc.

            
	 
      	
              5045
      Orbitor Drive, Building 11, Suite 400

            
	 
      	
              Mississauga,
      Ontario L4W 4Y4

            
	 
      	
              Facsimile:
      (905) 629-4959

            
	 
      	 
      
	
              18.2  If
      to UM:

            	
              The
      University of Manitoba

            
	 
      	
              Rm.
      202 Administration Building

            
	 
      	
              Winnipeg,
      Manitoba R3T 2N2

            
	 
      	
              ATTN:
      Vice-President (Administration)

            
	 
      	
              Facsimile:
      (204) 261-1318

            
	 
      	 
      
	
              With
      copy to:

            	
              The
      University of Manitoba

            
	 
      	
              631
      Drake Centre, 181, Freedman Crescent

            
	 
      	
              Winnipeg,
      Manitoba R3T 5V4

            
	 
      	
              Facsimile:
      (204) 261-3475

            
	 
      	 
      
	
              18.3  If
      to CCMB:

            	
              CancerCare
      Manitoba

            
	 
      	
              675
      McDermot Ave.,

            
	 
      	
              Winnipeg,
      Manitoba R3E 0V9

            
	 
      	
              ATTN:
      President and CEO

            
	 
      	
              Facsimile:
      (204) 787-1184

            

    

    

    

    19  Extended
meaning

    

    19.1  The
use of the singular in this Agreement shall include the plural and vice
versa.

    

    20  Force
majeure

    

    20.1  The
parties shall be relieved from liability for a failure to perform any obligation
under this Agreement during such period and to the extent that the due
performance thereof by either of the parties is prevented by reason of any
circumstance beyond the control of the parties, such as war, warlike
hostilities, mobilization or general military call-up, civil war, fire, flood or
other circumstances of similar nature.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
20.2  The
party desiring to invoke an event of force majeure shall give immediate notice
to the other party of the commencement and the cessation of such event of force
majeure, failing which the party shall not be discharged from liability for any
non-performance caused by such event of force majeure.

    

    20.3  Both
parties shall make all reasonable efforts to prevent and reduce the effect of
any non-performance of this Agreement caused by an event of force
majeure.

    

    21  Currency

    

    21.1  All
amounts due under this Agreement shall be paid in Canadian currency and shall be
calculated into Canadian currency using the exchange rate published in the Wall
Street Journal on the date that the payment is due.

    

    22  Entire
agreement

    

    22.1  This
Agreement represents the entire understanding between the parties, and
supersedes all other agreements, express or implied, between the parties
concerning subject matter of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    IN
WITNESS WHEREOF the parties have caused this Agreement to be executed by their
duly authorized officers on the respective dates and at the respective places
hereinafter set forth.

    

    

    
      	
              Mississauga
      __ 2000

            	 
      	
              Winnipeg
      __ 2000

            
	
              YORK
      MEDICAL INC.

            	 
      	
              University
      of Manitoba

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              ________________________________

            	 
      	
              _____________________________

            
	
              By:     
      Mr. David G.P. Allan

            	 
      	
              By:     
      Mr. M. McAdam

            
	
              Title:   Chairman
      and Chief Executive Officer

            	 
      	
              Title:   Vice-President,
      Administration

            
	
              At:      Mississauga,
      Ontario

            	 
      	
              At:      
      Winnipeg, Manitoba

            
	 
      	 
      	 
      
	
               

            	 
      	      
              THE
      MANITOBA CANCER TREATMENT AND RESEARCH FOUNDATION, carrying on its
      undertaking as CANCERCARE MANITOBA

            
	 
      	 
      	 
      
	
              ________________________________

            	 
      	
              ______________________________

            
	
              By:      Dr.
      Niclas Stiernholm

            	 
      	
              By:
      Dr. B. Schacter

            
	
              Title:   Director,
      Science & Technology

            	 
      	
              Title:
      President & CEO

            
	
              At:     
      Mississauga, Ontario

            	 
      	
              At:
      Winnipeg, Manitoba

            

    

    

    

    I, the
undersigned party, acknowledge and fully accept the provisions of this
Agreement.

    

    I also
represent and warrant, to my knowledge, that:

    

    a) I am
the sale inventor of the inventions described and claimed in the patents listed
in Exhibit 1 and that I have assigned such inventions to UM and CCMB;
and

    b) I have
not entered into any agreement regarding the LICENSED PRODUCT, whether in
writing or verbally, that is inconsistent with the terms of this
Agreement.

    

    

    Winnipeg
__ 2000

    

    

    ________________________________

    By:           Dr.
Lorne J. Brandes

    Title:        Professor

    At:           Winnipeg,
Manitoba

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    Exhibit
1

    

    Patent
Technology 80.02.113

    Improved
Treatment Method for Cancer

    

    
      	
              File

            	
              Country

            	
              Status

            	
              Ser./Pat.#

            	
              Attorney

              Reference

            
	
              80.02.113.20

            	
              Canada

            	
              Issued
      08/10/99

            	
              2,098,593

            	
              1887-80

            
	
              80.02.113.21

            	
              Australia

            	
              Issued
      04/02/96

            	
              664,978

            	
              1887-82

            
	
              80.02.113.5

            	
              Japan

            	
              Issued
      10/09/97

            	
              2,706,371

            	
              1887-83

            
	
              80.02.113.22

            	
              Korea

            	
              Abandoned

            	
              93-701846

            	
              1887-84

            
	
              80.02.113.17

            	
              Austria

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.27

            	
              Switzerland

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.10

            	
              Germany

            	
              Issued
      12/07/94

            	
              P69103908.9-08

            	
              1887-81

            
	
              80.02.113.13

            	
              Denmark

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.11

            	
              Spain

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.16

            	
              UK

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.25

            	
              Luxembourg

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.18

            	
              Netherlands

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.26

            	
              Sweden

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.19

            	
              Belgium

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.15

            	
              France

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.12

            	
              Greece

            	
              Issued
      12/07/94

            	
              3014012

            	
              1887-81

            
	
              80.02.113.24

            	
              Italy

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.28

            	
              Monaco

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.4

            	
              US

            	
              Abandoned

            	
              627,836

            	
              1887-39

            
	
              80.02.113.4

            	
              US

            	
              Abandoned

            	
              711,975

            	
              1887-69

            
	
              80.02.113.4

            	
              US

            	
              Issued
      08/25/98

            	
              5,798,339

            	
              1887-79

            
	
              80.02.113.7

            	
              US

            	
              Issued
      04/08/97

            	
              5,618,846

            	
              1887-134

            
	
              80.02.113.6

            	
              US

            	
              Issued
      05/05/98

            	
              5,747,543

            	
              1887-133

            
	
              80.02.113.8

            	
              US

            	
              Issued
      01/12/99

            	
              5,859,065

            	
              1887-184

            
	
              80.02.113.2

            	
              PCT

            	
              Entered
      National Phase

            	
              CA91/00449

            	
              1887-68

            
	
              80.02.113.3

            	
              Europe

            	
              Issued
      in Indiv. Countries

              09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.9

            	
              US

            	
              Abandoned

            	
              09/200,783

            	
              1887-190

            
	
              80.02.113.14

            	
              Brazil

            	
              Not
      Pursued

            	 
      	 
      

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Patent
Technology 80.02.171

    Cancer
Treatment

    

    
      	
              File

            	
              Country

            	
              Status

            	
              Ser./Pat.#

            	
              Attorney

              Reference

            
	
              80.02.171.4

            	
              PCT

            	
              Entered
      Natl.

              Phase

            	
              CA94/00087

            	
              1887-95

            
	
              80.02.171.5

            	
              Japan

              Japan

            	
              Issued
      12/09/98 Pending

            	
              2,834,328

              167/98

            	
              1887-147

              1887-185

            
	
              80.02.171.6

            	
              US

            	
              Under
      review at Patent Office

            	
              08/505,269

            	
              1887-148

            
	
              80.02.171.7

            	
              Canada

            	
              Under
      review at Patent Office

            	
              2,156,162

            	
              1887-151

            
	
              80.02.171.8

            	
              Australia

            	
              Under
      review at Patent Office

            	
              14804/97

            	
              1887-179

            
	
              80.02.171.9

            	
              Europe

            	
              Under
      review at Patent Office

            	
              94906813.4

            	
              1887-150

            
	
              80.02.171.10

            	
              Brazil

            	
              Potential
      Application

            	 
      	
              1887-95

            
	
              80.02.171.11

            	
              Korea

            	
              Abandoned

            	
              95-703444

            	
              1887-146

            
	
              80.02.171.12

            	
              US

            	
              Under
      review at Patent Office

            	
              08/773,987

            	
              1887-174

            
	
              80.02.171.13

            	
              Australia

            	
              Issued
      02/17/94

            	
              693,780

            	
              1887-149

            

    

    

    

    Patent
Technology 80.02.194

    Method
of Treatment of Hormone-Unresponsive Metastatic Prostate Cancer

    

    
      	
              File

            	
              Country

            	
              Status

            	
              Ser./Pat.#

            	
              Attorney

              Reference

            
	
              80.02.194.1

            	
              US

            	
              Issued
      07/11/95

            	
              5,432,168

            	
              1887-93

            
	
              80.02.194.2

            	
              PCT

            	
              Entered
      Natl. Phase

            	
              CA94/00676

            	
              1887-119

               

            
	
              80.02.194.4

            	
              Canada

            	
              Under
      review at Patent Office

            	
              2,179,377

            	
              1887-161

            
	
              80.02.194.5

            	
              Korea

            	
              Abandoned

            	
              96-703457

            	
              1887-162

            
	
              80.02.194.6

            	
              Europe

            	
              Under
      review at Patent Office

            	
              95902723.6

            	
              1887-165

            
	
              80.02.194.7

            	
              Japan

            	
              Published

            	
              517694/95

            	
              1887-163

            
	
              80.02.194.8

            	
              Australia

            	
              Issued
      04/01/99

            	
              699,798

            	
              1887-166

            
	
              80.02.194.9

            	
              US

            	
              Issued
      01/26/99

            	
              5,863,912

            	
              1887-164

            

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit
2.

    

    CONSULTANCY
AGREEMENT

    

    Effective,
_________, 2000 ("Effective Date") York Medical Inc. having an address at 5045
Orbiter Drive, Building 11, Suite 400, Mississauga, Ontario, L4W 4Y4 ("YORK
MEDICAL") and Therudex Inc. of 223 Cordova Street, Winnipeg, Manitoba, R3N 1A3
("CONSULTANT") agree to the following terms and conditions under which
CONSULTANT has agreed for a term of three years to provide YORK MEDICAL with
Consulting Services from the Effective Date of the Agreement ("Term"). Therudex
will employ a duly qualified consultant/principal investigator, who shall be
approved by YORK MEDICAL in advance. YORK MEDICAL hereby approves Dr. Lome
J. Brandes as such consultant.

    

    1.
 Scope of
Work

    

    The
services performed by CONSULTANT for YORK MEDICAL pursuant to this
Agreement shall be deemed to be within the general scope of cancer
therapeutics, specifically, but not limited to,
N,N-diethyl-2-[4-(phenylmethyl)phenoxy]ethanamine.HCI (“DPPE")("Field of
the Agreement"). The "DPPE Project" is defined as any commercialization
activities operating under patents summarized in Appendix A. "Consulting
Services" include clinical and technical information, advice and opinions
in the field of oncology, as related to the DPPE Project.

    

    2.  Compensation

    

    It is
further understood and agreed that YORK MEDICAL shall pay CONSULTANT for
Consulting Services rendered hereunder at the rate of CDN $50,000.00, plus GST,
per year, which is to be paid in four equal quarterly installments in advance,
with the first payment (to include a prorated sum for any portion of a
quarter prior to the last quarter of the year 2000) to

    be made
on ________, 2000.

    

    In the
event that YORK MEDICAL requests CONSULTANT to provide Consulting Services at
a

    location
away from the metropolitan area of CONSULTANT's regular place of business,
YORK

    MEDICAL
will reimburse CONSULTANT for reasonable travel and living expenses incurred
by

    CONSULTANT.
lt is understood and agreed that YORK MEDICAL will stipulate the places and
locations wherein CONSULTANT will provide the Consulting Services. Payment for
any travel expenses will be made within thirty (30) days of submission by
CONSULTANT of an itemized account to YORK MEDICAL of the travel expenses
incurred and payments due. It is understood that the CONSULTANT will not be
expected to travel more than 10 days/calendar year, excluding actual travel
time.

    

    3.  Manner of
Performance

    

    CONSULTANT
represents that CONSULTANT has the requisite expertise and ability to render the
Consulting Services, and will perform the Consulting Services in an efficient
manner and in accordance with the terms of this Agreement. CONSULTANT will abide
by all laws, rules and regulations that apply to the performance of the
Consulting Services and when on YORK MEDICAL's premises, will comply with YORK
MEDlCAL's policies with respect to conduct of visitors. CONSULTANT is an
independent contractor, and shall not be considered an employee of YORK
MEDICAL.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
4.  Confidentiality

    

    All
communications between the parties hereto and all information and other material
supplied to or received by a party hereto from the other party which is either
marked "confidential" or is by its nature intended to be exclusively the
knowledge of the parties hereto alone, and any information concerning the
business transactions or the financial arrangements of YORK MEDICAL coming to
the knowledge of the CONSULTANT shall be kept confidential by each
of

    the
parties hereto unless and until it is agreed that it is, or part of it is, in
the public domain, whereupon, to the extent that it is public, this obligation
shall cease. In any case of uncertainty a party shall treat information and
material as confidential until clearance is obtained from the other
party.

    

    The
parties shall take all reasonable steps to minimize the risk of disclosure of
confidential information, by ensuring that only persons whose duties will
require them to possess any such information shall have access thereto, and they
shall be instructed to treat the same as confidential.

    

    The
CONSULTANT shall keep confidential, all information coming to his knowledge in
the course of the performance of his duties hereunder relating to the business
associations and transactions of YORK MEDICAL with other persons or bodies
including other technical or commercial co-operative arrangements.

    

    The
obligations of confidentiality herein shall survive the expiration or
termination of this Agreement.

    

    5.  Relationship
with Others

    

    During
the Term of this Agreement, CONSULTANT agrees not to perform any service within
the Field of the Agreement or which may utilize any of the information obtained
from YORK MEDICAL or any information developed during the course of performing
the Consulting Services for YORK MEDICAL for any competitor or potential
competitor of YORK MEDICAL. It is understood that CONSULTANT is permitted to
continue to serve in an advisory capacity to the pharmaceutical industry as long
as this is done in accordance with Article 4 of this Agreement.

    

    6.  Ownership
of Developments

    

    CONSULTANT
agrees and does hereby assign to YORK MEDICAL, any and all of CONSULTANT's
interest in any inventions or discoveries created by the CONSULTANT during the
direct performance of Consulting Services within the Field of the Agreement
during the Term, which includes all written material and unpatentable
information, discoveries, and ideas (including but not limited to any computer
software) which are made, conceived or written by CONSULTANT during the Term and
which are based upon any information received from YORK MEDICAL, and/or
developed as a result of the direct performance of the Consulting Services for
YORK MEDICAL during the Term (herein "Developments"). CONSULTANT agrees to hold
all such Developments confidential in accordance with Article 4 of this
Agreement. CONSULTANT shall disclose promptly to YORK MEDICAL Developments and
upon YORK MEDlCAL's request and at YORK MEDICAL's expense, CONSULTANT will
assist YORK MEDICAL, or anyone it designates, in filing and prosecuting patent
or copyright applications covering such Developments in any country in the
world. Each copyrightable work, to the extent permitted by law, will be
considered a work made for hire and the authorship and copyright of the work
shall be in YORK MEDICAL's name. CONSULTANT will execute all papers and do all
things which may be necessary or advisable, in the opinion of YORK MEDICAL, to
prepare, file and prosecute such applications, and to evidence the assignment in
YORK MEDICAL, or its designee, of all right, title and interest in and to such
Developments.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
YORK
MEDICAL acknowledges that CONSULTANT is required to assign inventions to his
employer, and this obligation shall supercede this Article.

    

    YORK
MEDICAL agrees to compensate CONSULTANT for any time CONSULTANT actually spends
in response to a specific request for assistance by YORK MEDICAL under this
Article, at a rate of CDN$ 1,000.00 per day.

    

    7.  Term

    

    The Term
of this Agreement is as specified on the first page of this Agreement. The
parties agree that this Agreement may be extended by mutual agreement. In the
event that YORK MEDICAL chooses to terminate the DPPE Project, YORK MEDICAL has
the right to terminate this Agreement upon thirty (30) days written
notice.

    

    8.  Indemnification
and Warranties

    

    YORK
MEDICAL agrees to hold harmless, indemnify and defend CONSULTANT from any and
all claims for damages, expenses, losses or injuries arising out of the use,
manufacture, design, or distribution of products developed in connection with or
arising out of Consulting Services, by YORK MEDICAL, its directors, employees,
contractors, subcontractors, by any party acting on behalf of or under
authorization from YORK MEDICAL, or by third parties. Such indemnity shall
include all costs and expenses, including legal costs and any costs of
settlement.

    

    9.  General

    

    No
assignment by CONSULTANT of this Agreement, or any sums due under it. will be
binding on YORK MEDICAL without YORK MEDICAL's prior written consent. This
Agreement supersedes all prior agreements and understandings between the parties
respecting the subject matter of this Agreement. No change in any provision of
this Agreement shall be binding unless it is in writing and signed by both the
CONSULTANT and a duly authorized representative of YORK MEDICAL. This Agreement
shall be construed according to the laws of the Province of
Ontario.

    

    10.  Severability

    

    If any of
the provisions of this Agreement are void or unenforceable, the remaining
provisions shall nevertheless be effective, the intent being to effectuate this
Agreement to the fullest extent possible.

    

    11.  Entire
Agreement

    

    This
Agreement is the entire agreement with respect to the subject matter of this
Agreement

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    IN
WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.

     

    

    
      	
              ______________________________

            	 
      	
              ______________________________

            
	
              David
      G.P. Allan

            	 
      	
              Therudex
      Inc.

            
	
              Chairman

            	 
      	
              Dr.
      Lorne J. Brandes (President)

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              ______________________________

            	 
      	
              ______________________________

            
	
              Date:

            	 
      	
              Date:

            

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Appendix
A

    

    Patent
Technology 80.02.113

    Improved
Treatment Method for Cancer

    

    
      	
              File

            	
              Country

            	
              Status

            	
              Ser./Pat.#

            	
              Attorney

              Reference

            
	
              80.02.113.20

            	
              Canada

            	
              Issued
      08/10/99

            	
              2,098,593

            	
              1887-80

            
	
              80.02.113.21

            	
              Australia

            	
              Issued
      04/02/96

            	
              664,978

            	
              1887-82

            
	
              80.02.113.5

            	
              Japan

            	
              Issued
      10/09/97

            	
              2,706,371

            	
              1887-83

            
	
              80.02.113.22

            	
              Korea

            	
              Abandoned

            	
              93-701846

            	
              1887-84

            
	
              80.02.113.17

            	
              Austria

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.27

            	
              Switzerland

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.10

            	
              Germany

            	
              Issued
      12/07/94

            	
              P69103908.9-08

            	
              1887-81

            
	
              80.02.113.13

            	
              Denmark

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.11

            	
              Spain

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.16

            	
              UK

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.25

            	
              Luxembourg

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.18

            	
              Netherlands

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.26

            	
              Sweden

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.19

            	
              Belgium

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.15

            	
              France

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.12

            	
              Greece

            	
              Issued
      12/07/94

            	
              3014012

            	
              1887-81

            
	
              80.02.113.24

            	
              Italy

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.28

            	
              Monaco

            	
              Issued
      09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.4

            	
              US

            	
              Abandoned

            	
              627,836

            	
              1887-39

            
	
              80.02.113.4

            	
              US

            	
              Abandoned

            	
              711,975

            	
              1887-69

            
	
              80.02.113.4

            	
              US

            	
              Issued
      08/25/98

            	
              5,798,339

            	
              1887-79

            
	
              80.02.113.7

            	
              US

            	
              Issued
      04/08/97

            	
              5,618,846

            	
              1887-134

            
	
              80.02.113.6

            	
              US

            	
              Issued
      05/05/98

            	
              5,747,543

            	
              1887-133

            
	
              80.02.113.8

            	
              US

            	
              Issued
      01/12/99

            	
              5,859,065

            	
              1887-184

            
	
              80.02.113.2

            	
              PCT

            	
              Entered
      National Phase

            	
              CA91/00449

            	
              1887-68

            
	
              80.02.113.3

            	
              Europe

            	
              Issued
      in Indiv. Countries

              09/07/94

            	
              0563127

            	
              1887-81

            
	
              80.02.113.9

            	
              US

            	
              Abandoned

            	
              09/200,783

            	
              1887-190

            
	
              80.02.113.14

            	
              Brazil

            	
              Not
      Pursued

            	 
      	 
      

    

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Patent
Technology 80.02.171

    Cancer
Treatment

    

    
      	
              File

            	
              Country

            	
              Status

            	
              Ser./Pat.#

            	
              Attorney
      Reference

            
	
              80.02.171.4

            	
              PCT

            	
              Entered
      Natl.

              Phase

            	
              CA94/00087

            	
              1887-95

            
	
              80.02.171.5

            	
              Japan

              Japan

            	
              Issued
      12/09/98 Pending

            	
              2,834,328

              167/98

            	
              1887-147

              1887-185

            
	
              80.02.171.6

            	
              US

            	
              Under
      review at Patent Office

            	
              08/505,269

            	
              1887-148

            
	
              80.02.171.7

            	
              Canada

            	
              Under
      review at Patent Office

            	
              2,156,162

            	
              1887-151

            
	
              80.02.171.8

            	
              Australia

            	
              Under
      review at Patent Office

            	
              14804/97

            	
              1887-179

            
	
              80.02.171.9

            	
              Europe

            	
              Under
      review at Patent Office

            	
              94906813.4

            	
              1887-150

            
	
              80.02.171.10

            	
              Brazil

            	
              Potential
      Application

            	 
      	
              1887-95

            
	
              80.02.171.11

            	
              Korea

            	
              Abandoned

            	
              95-703444

            	
              1887-146

            
	
              80.02.171.12

            	
              US

            	
              Under
      review at Patent Office

            	
              08/773,987

            	
              1887-174

            
	
              80.02.171.13

            	
              Australia

            	
              Issued
      02/17/94

            	
              693,780

            	
              1887-149

            

    

    

    

    Patent
Technology 80.02.194

    Method
of Treatment of Hormone-Unresponsive Metastatic Prostate Cancer

    

    
      	
              File

            	
              Country

            	
              Status

            	
              Ser./Pat.#

            	
              Attorney
      Reference

            
	
              80.02.194.1

            	
              US

            	
              Issued
      07/11/95

            	
              5,432,168

            	
              1887-93

            
	
              80.02.194.2

            	
              PCT

            	
              Entered
      Natl. Phase

            	
              CA94/00676

            	
              1887-119

               

            
	
              80.02.194.4

            	
              Canada

            	
              Under
      review at Patent Office

            	
              2,179,377

            	
              1887-161

            
	
              80.02.194.5

            	
              Korea

            	
              Abandoned

            	
              96-703457

            	
              1887-162

            
	
              80.02.194.6

            	
              Europe

            	
              Under
      review at Patent Office

            	
              95902723.6

            	
              1887-165

            
	
              80.02.194.7

            	
              Japan

            	
              Published

            	
              517694/95

            	
              1887-163

            
	
              80.02.194.8

            	
              Australia

            	
              Issued
      04/01/99

            	
              699,798

            	
              1887-166

            
	
              80.02.194.9

            	
              US

            	
              Issued
      01/26/99

            	
              5,863,912

            	
              1887-164

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    Exhibit
3

    SPONSORED
RESEARCH

    

    PAYMENT
SCHEDULE:                                                      Annually,
in advance

    

    RESEARCH
PLAN:

    

    Our
synthesis of DPPE, an arylalkylamine derivative of tamoxifen, led us to
characterize microsomal and nuclear sites, designated HIC, through
which histamine acts as an intracellular mediator, and DPPE as an inhibitor, of
diverse cell processes, including human platelet aggregation and proliferation,
e.g. lymphocyte mitogenesis. A major proportion, at least, of the microsomal
HIC
sites with which Histamine and DPPE interact, are on cytochromes P450, an
important family of microsomal enzymes that are present in all cells, but most
abundant in the liver. These enzymes are involved in the metabolism of
xenobiotics (including many antineoplastic agents) and natural substrates,
including lipid hormones that modulate gene function and cell growth. In
previously published studies, we demonstrated that, like DPPE, various
growth-modulatory substances such as polyamines, hormones (including estrogen,
testosterone and progesterone), anti-hormones (including tamoxifen and
flutamide) antidepressants and antihistamines, all inhibit histamine binding to
P450; we have postulated that, through binding to the heme moiety, intracellular
histamine regulates cell function by modulating the catalytic activity of P450
enzymes, an action that may be perturbed by endogenous and exogenous substances.
Since the family of non-P450 heme enzymes (e.g. cytochrome C, cyclooxygenase,
nitric oxide synthase) also may represent common targets where multiple
bioamines, hormones and drugs (e.g. DPPE) interact to influence cell function
and growth, studies funded over 3 years through a grant by York Medical, Inc.,
will assess whether (a) in addition to histamine, the biogenic amines dopamine,
serotonin and noradrenaline, as well as melatonin, may bind to P450 isozymes
and/or interact at other heme enzymes that modulate cell function and (b)
whether DPPE and other growth-modulatory drugs, hormones and antihormones may
bind to/interact with the various amines and with each other at P450 and other
heme enzymes.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}]]