Exhibit 10.18

 

LICENSE AGREEMENT

 

THIS AGREEMENT, made and entered into this the 22nd day of June, 2010 (the
Effective Date) by and between the University of Kentucky Research Foundation, a
corporation duly organized and existing under the laws of the Commonwealth of
Kentucky and having its principal office at Lexington, Kentucky, U.S.A.
(hereinafter “UKRF”), and Biospherics, Incorporated, a corporation duly
organized under the laws of Delaware and having its principal office at 6430
Rockledge Drive, #503, Westmoreland Building, Bethesda, Maryland 20817, U.S.A.
(hereinafter “LICENSEE”).

 

WITNESSETH

 

WHEREAS, UKRF desires to license the Licensed Technology (all capitalized terms
as defined herein) to LICENSEE for Deployment by LICENSEE; and

 

WHEREAS, LICENSEE desires an exclusive license from UKRF under the Licensed
Technology and is competent to facilitate Deployment of “Licensed Product(s)” or
products similar to the Licensed Product(s) and will use reasonable efforts to
develop one or more Licensed Products;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:

 

ARTICLE 1 - DEFINITIONS

 

For the purposes of this Agreement, the following words and phrases shall have
the following meanings:

 

1.1          “Affiliate” of a party means any corporation, company or other
legal entity (a) controlled by the party, (b) controlling the party or (c)
controlled by the corporation, legal entity or persons which control the party. 
For the purposes of this paragraph, to “control” a corporation, company or
entity means to own or control, either directly or indirectly such as by
intermediary entities now or hereafter formed, (a) fifty percent (50%) or more
of voting stock or other securities entitled to vote for election of directors
(or other managing authority) or (b) more than 50% of the equity interest of the
corporation, company or entity; or (c) if the corporation, company or entity
does not have outstanding shares or securities, more than 50% of the ownership
interest representing the right to make decisions for the corporation, company
or entity.

 

1.2          “Clinical Development” means any activity, whether intellectual or
physical, intended to make progress towards commercialization, including, but
not limited to, protocol development, negotiations with a third party regarding
research or other commercialization work, tests or research, evaluation of such
tests or research, pursuit of regulatory approval of rights, or the like,
related to the Licensed Technology.

 

1.3          “Deploy” or “Deployment” means to make, have made, use, sell,
license, offer to sell, offer to license, or import into the U.S., or otherwise
commercialize.

 

1.4          “Know-How” means any confidential information related to the Patent
Rights and made or developed by an inventor(s) thereof, or others working under
the direction of any inventor(s), and known by UKRF that can be used by LICENSEE
in connection with Deployment of Licensed Products or Licensed Processes,
including specifications, designs, plans, inventions, data, prototypes, methods,
processes, business or other technical information that derives value by virtue
of its not being publicly known; provided, however, that Know-How does not
include information: (a) lawfully received by LICENSEE free of restriction from
another source having the right to furnish the information free of restriction;
(b) after it has become readily available to the public without breach of this
Agreement by LICENSEE; and (c) that, at the time of disclosure to LICENSEE, was
known to LICENSEE free of restriction.

 

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1.5          “Licensed Process(es)” means any process that at any time can be
covered in whole or in part by subject matter described in the Patent Rights.

 

1.6          “Licensed Product(s)” means any product that at any time can be
covered in whole or in part by subject matter described in the Patent Rights; or
which the Deployment thereof by LICENSEE, sub-licensee, or direct or indirect
customers of any of the foregoing would, but for this Agreement, constitute
infringement or misappropriation of the Licensed Technology.

 

1.7          “Licensed Technology” means the Licensed Process(es), Licensed
Product(s), the Patent Rights, and Know-How.

 

1.8          “LICENSEE” means Biospherics, Inc. and any Affiliate thereof.

 

1.9          “Patent Rights” means the entirety of UKRF’s right, title and
interest in: (a) (1) Invention Disclosure # 1482, dated Feb. 6, 2007, entitled
“D-tagatose as a Lipid Lowering Agent for Prevention and Treatment of
Atherosclerosis,” derived from research at UKRF by Dr. Robert Lodder or others
working under his direction and attached hereto and made a part hereof as
Appendix “A”; and (2) Invention Disclosure #09/1967, dated October 20, 2009,
entitled “D-tagatose Formulations for Treatment of Dyslipidemias and
Atherosclerosis,” related to research at UKRF by Dr. Robert Lodder or others
working under his direction and attached hereto and made a part hereof as
Appendix “B”; and (b) any corresponding or related right thereof in any
jurisdiction in the world including, but not limited to, the United States
patents and applications and Foreign patents and applications issuing from the
foregoing, including United States provisional patent application 61/193,192,
entitled “Effects of Diets Containing Sucrose vs. D-tagatose in
Hypercholesterolemic Mice,” filed November 4, 2008; (2) International
Application PCT/US09/63293, entitled “Stable Compositions and Methods of
D-Tagatose for Atherosclerosis, Metabolic Syndrome and Their Symptoms,” filed
November 4, 2009; and (c) any continuations, continuations-in-part, divisions,
reissues, reexaminations, or extensions of any of the foregoing, or any other
patent right that claims the benefit of the filing date of any of the foregoing.

 

1.10        “Territory” means:  worldwide.

 

ARTICLE 2 - GRANT

 

2.1          License Grant.  UKRF hereby grants to LICENSEE and its Affiliates
an exclusive license and right under the Licensed Technology to Deploy the
Licensed Technology within the Territory for the term beginning on the Effective
Date until this Agreement expires as provided herein.  This grant is expressly
subject to the rights of the U.S. Government, if any, with the understanding
that LICENSEE does not believe any such rights exist as to the Licensed
Technology.

 

2.2          Exclusive Nature of Grant.  In order to establish a period of
exclusivity for LICENSEE and its Affiliates, UKRF hereby agrees that it shall
not grant any other license to Deploy the Licensed Technology, Licensed
Product(s), Know-How and Licensed Process(es) during the period of time
commencing with the Effective Date of this Agreement and terminating with the
full end of the term of this Agreement, unless sooner terminated as hereinafter
provided.  LICENSEE is relying on this provision as an essential part of the
economic basis for entering this Agreement.

 

2.3          Right to Sublicense.  LICENSEE shall have the right to sublicense
any of the rights, privileges and licenses granted hereunder, in its sole
discretion, to any party for any legitimate business purpose in the Territory.

 

2.4          Obligations in Sublicenses.  LICENSEE agrees that any sublicenses
granted by it shall include a contractual provision that, upon reasonable notice
to LICENSEE, UKRF will have the right and

 

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ability to proceed directly against the sublicensee to require such sublicensee
to comply with all terms of the sublicense agreement.  LICENSEE further agrees
to include the substance of ARTICLES 4, 5, 10, 12, 13, 14, 15 and 16 of this
Agreement in all sublicense agreements.

 

2.5          Copy of Sublicenses.  LICENSEE agrees to forward to UKRF a copy of
each fully executed sublicense agreement, and further agrees to forward to UKRF
annually a copy of any reports relating to the Licensed Field received by
LICENSEE from its sublicensees during the preceding twelve (12) month period
under the sublicenses.

 

2.6          Retroactive Sublicenses.  Any sublicense permitted under this
Section may be made effective retroactively, but not before the Effective Date.

 

2.7          Certain New Inventions Owned by LICENSEE.  Any inventions related
to the Licensed Technology where the work necessary to the invention was not
performed at the University of Kentucky or by UKRF or using UKRF resources, and
was funded, conceived, or otherwise developed by or on behalf of LICENSEE, is
the sole property of the LICENSEE.

 

ARTICLE 3 - DUE DILIGENCE FOR CLINICAL DEVELOPMENT

 

3.1 Diligence Requirements.  LICENSEE shall use reasonable efforts to Deploy
Licensed Product(s) and/or Licensed Process(es).  At a minimum, LICENSEE shall:

 

Prepare a study methodology / protocol for a pre-clinical study to further
investigate the safety and efficacy of D-tagatose formulations for prevention or
treatment of one or more of the following conditions:  atherosclerosis,
metabolic syndrome, obesity or diabetes.  This study may be used to inform the
preparation of a clinical trial protocol by mid-2011.

 

Initiate an appropriately designed pre-clinical animal study, as described
above, to be conducted under Current Good Laboratory Practice, as will be
required for regulatory submission, by the end of 2011.

 

LICENSEE will update its clinical development plan at least every year until a
first commercial sale of a Licensed Product is achieved.

 

ARTICLE 4 - ROYALTIES

 

4.1          For the rights, privileges, and license granted hereunder, LICENSEE
shall pay to UKRF, on behalf of itself and its sublicensees, in the manner
hereinafter provided to the end of the term of the Patent Rights or until this
Agreement shall be terminated as provided herein under Article 8, a royalty in
the amount of 3 percent (3%) of the Net Sales Price (as defined immediately
below) of the Licensed Product(s) sold by LICENSEE or any sublicensee, plus ten
percent (10%) of any other consideration LICENSEE receives from any
sublicensees.  The parties acknowledge that LICENSEE has borne all costs
pertaining to the preparation and filing of the Patent Rights to date.

 

4.2          As used herein, the phrase “Net Sales Price” shall mean LICENSEE’s
or any sublicensee’s collected billings for market sales of Licensed Product(s)
less the sum of the following:

(a)           Discounts allowed in amounts customary in the trade;

(b)           Sales, tariff duties, governmental charges and/or use taxes
directly imposed and with reference to particular sales;

(c)           Outbound transportation prepaid or allowed;

(d)           Amounts allowed or credited on returns; and

 

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No deductions shall be made for commissions paid to individuals whether they are
with independent sales agencies or regularly employed by LICENSEE and on its
payroll, or for cost of collections.  Licensed Product(s) shall be considered
“sold” when billed out or invoiced.  Other than those payments expressly set
forth in this Agreement, each party will be responsible for the costs it incurs
in carrying out its obligations under this Agreement.

 

4.3          No multiple royalties shall be payable because the Licensed
Product(s) is covered by more than one patent application or patent licensed
under this Agreement.

 

4.4          Royalty payments shall be paid in United States dollars in
Lexington, Kentucky, or at such other place as UKRF may reasonably designate
consistent with the laws and regulations controlling in any foreign country. 
Any withholding taxes which LICENSEE or any sublicensee shall be required by law
to withhold on remittance of the royalty payments shall be deducted from royalty
payments paid to UKRF.  LICENSEE shall furnish UKRF the original copies of all
official receipts for such taxes.  If any currency conversion shall be required
in connection with the payment of royalties hereunder, such conversion shall be
made by using the exchange rate prevailing at a first-class foreign exchange
bank on the last business day of the calendar quarterly reporting period to
which such royalty payments relate.

 

4.5          The LICENSEE or its Affiliate(s) will pay UKRF a quarterly royalty
on all sales of Licensed Products by the LICENSEE.

 

4.6          Royalty payments will continue for a particular country until the
expiration of the Licensed Patent(s) in that country, at which point the
royalties for that country will terminate.

 

ARTICLE 5 - REPORTS AND RECORDS

 

5.1          During the term and for a period of three (3) years following the
end of the calendar year to which they pertain, LICENSEE shall keep full, true
and accurate books of account containing all particulars that may be necessary
for the purpose of showing the amount payable to UKRF by way of royalty as
aforesaid.  Said books of account shall be kept at the principal place of
business of the LICENSEE or any relevant division or Affiliate of LICENSEE to
which this Agreement relates.  UKRF shall have the right to inspect and copy
such books and records of LICENSEE to the extent necessary for such purpose,
provided that such activity shall be conducted during LICENSEE’s regular
business hours upon at least five (5) days prior written notice and, provided
further that, UKRF may not inspect more than once in any calendar year.  The
cost of inspection shall be paid by UKRF.

 

5.2          LICENSEE, within thirty (30) days after December 31, of each year,
shall deliver to UKRF true and accurate reports, giving such particulars of the
business conducted by LICENSEE during the preceding twelve-month period under
this Agreement as shall be pertinent to a royalty accounting hereunder.  These
shall include at least the following:

(a)           All Licensed Products manufactured and sold;

(b)           Total billings for Licensed Product sold;

(c)           Deductions applicable as provided in Article 4;

(d)           Total royalties due (or a statement that none are due);

(e)           Names and addresses of all sublicensees of LICENSEE; and

(f)            Annually, the LICENSEE’s certified financial statements for the
preceding twelve (12) months including, at a minimum, a Balance Sheet and an
Operating Statement.

 

5.3          LICENSEE will provide a copy within 30 days of any other form of
financial report, business plan or other similar report related to the Licensed
Technology that it issues to any third party or to shareholders.  In addition,
upon written request of UKRF, LICENSEE shall make one or more representatives
available for a confidential update about the status of the company.  Such
updates shall be no

 

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more frequent than once per year and UKRF will reimburse any reasonable
out-of-pocket expenses incurred by LICENSEE in complying with such update
requests.

 

ARTICLE 6 - PATENT PROSECUTION

 

6.1          Prosecution and Maintenance of Patent Rights.  During the term
hereof, the filing, prosecution and maintenance of all Licensed Technology,
Patent Rights, Patent Applications, Improvement Patent Applications, and Patent
Rights Patents shall be the primary responsibility of LICENSEE.  Subject to
reasonable, timely consideration of UKRF’s comments on pending patent matters,
LICENSEE will have discretion and control over the filing, prosecution and
maintenance of the Licensed Technology, Patent Rights, Patent Applications and
Patent Rights Patents including, but not limited to, the entire right to file
nonprovisional, continuing, divisional, or continuation-in-part applications for
United States patents relating to the Licensed Technology, and all reissues,
Reexamination Certificates, and extensions thereof, along with the right to file
applications for patent or industrial property rights derived therefrom in any
foreign country and claim priority to the foregoing, to the full end of the term
for which said patents may be granted.  All such patent applications shall be in
the name of UKRF.  LICENSEE shall be solely responsible for such patent
expenses.  LICENSEE will also provide to UKRF copies of all substantive filings
and correspondence to and from the patent offices, in advance of filing, and
consult with UKRF as to the proposed filings.

 

6.2          Conflict in Patent Prosecution.  LICENSEE confirms agreement that,
in the event its patent counsel becomes aware of an actual conflict between the
parties, that it will advise the parties of the fact that a conflict appears to
exist.  For purposes of clarification, however, patent counsel for Biospherics
and its Affiliate(s) do not represent UKRF or any Affiliate thereof under this
Agreement as to the subject matter thereof, and need only notify the parties of
such a conflict to permit UKRF an opportunity to take any action it deems
appropriate to protect the Patent Rights.

 

6.3          LICENSEE shall also have similar discretion and control over, at
LICENSEE’s expense, to the designation of countries for the filing, prosecution
and maintenance of foreign counterparts to patent applications and patents
included in the Licensed Technology including the Patent Rights and UKRF agrees
to cooperate as necessary to cause such filing(s), prosecution(s) and/or
maintenance(s) to be effectuated.  Such foreign patent applications shall be
filed in the name of UKRF, title shall be in UKRF, and UKRF’s interest in patent
applications and patents issuing thereunder shall be included in the Patent
Rights and the license hereunder. LICENSEE will notify UKRF promptly if LICENSEE
decides, in its sole discretion, not to file any particular foreign counterparts
to patent applications related to the Licensed Technology.  UKRF may then
effectuate such filing(s), prosecution(s) and maintenance(s) in those countries,
solely at the expense of UKRF, and such patent applications and any patent
rights issuing therefrom will be excluded from the license under this Agreement.

 

6.4          LICENSEE has sole discretion to abandon any Patent Right, or to not
pay the annuity, taxes, or maintenance fees due for any patent application,
patent or other similar right.  Prior to LICENSEE abandoning any pending or in
force item included in the Patent Rights, LICENSEE will provide written notice
to UKRF, which shall have the right to provide written notice to LICENSEE within
45 days to take control and prosecute the patent application or maintain the
patent that LICENSEE intended to abandon, all at UKRF’s sole cost and expense. 
Upon abandonment by LICENSEE and filing by UKRF, such applications shall be
excluded from the license under this Agreement

 

ARTICLE 7 - PATENT INFRINGEMENT

 

7.1          Enforcement.  The parties will provide reasonable cooperation to
one another with respect to enforcing the Licensed Technology, including joining
in any suit required for standing to sue by the other, including without
limitation making available to the other party or its attorneys any witnesses,
records, or other information reasonably requested by LICENSEE.

 

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7.2          Notification of Infringement by Third Party.  Each party under this
Agreement shall inform the other party promptly in writing of any alleged
infringement of the Patent Rights by a third party of which a party has
knowledge, and of any available evidence thereof.  A party shall give the other
party at least ninety (90) days notice before filing a litigation against a
third party with respect to any infringement or alleged infringement of the
Licensed Technology, or before taking any action which notifies a third party of
its infringement or likely infringement of the Licensed Technology; provided,
however, that such notice period may be shortened to the extent necessary for a
party to prevent irreparable harm to the party occurring during such ninety (90)
day period.

 

7.3          Enforcement Litigation Control.  During the term of this Agreement,
LICENSEE shall have the sole and exclusive right, but shall not be obligated, to
enforce, prosecute, and/or settle at its own expense any infringement of the
Licensed Technology, including without limitation the Patent Rights, in the
Territory for the Licensed Field, and LICENSEE may, for such purposes, use the
name of UKRF as party plaintiff or require UKRF to join a suit, as necessary to
provide standing; provided, however, that such right to bring such an
infringement action shall remain in effect only for so long as the license
granted herein remains effective.  No settlement, consent judgment or other
voluntary final disposition of the suit may be entered into without the consent
of UKRF, which consent shall not unreasonably be withheld.  LICENSEE shall
indemnify UKRF against any order for costs that may be made against UKRF in such
proceedings brought by LICENSEE, except to the extent caused by negligence or
willful misconduct of UKRF.

 

7.4          Award Sharing.  In the event that LICENSEE shall undertake the
enforcement and/or defense of the Patent Rights by litigation, LICENSEE may
withhold up to fifty percent (50%) of the payments otherwise thereafter due UKRF
under Article 4 hereunder and apply the same toward reimbursement of up to half
of LICENSEE’s expenses, including reasonable attorneys’ fees, in connection
therewith.  Any recovery of damages by LICENSEE for each such suit shall be
applied first in satisfaction of any un-reimbursed expenses and legal fees of
LICENSEE relating to such suit, and next toward reimbursement of UKRF for any
payments under Article 4 past due or withheld and applied pursuant to this
Article 7.  Any award, whether or not collectively granted to both UKRF and
LICENSEE, shall be allocated to UKRF at a rate of 20% of the NET award, after
accounting for LICENSEE fees and expenses in litigating.  Nothing in this
Section 7.4 shall modify the obligation of a party to pay for its own attorney’s
fees pursuant if that party has retained separate counsel when that party does
not have the right to control the litigation.

 

7.5          Procedures Upon Suit By Third Party.  Except as otherwise provided
under this Agreement, each party is responsible for its own defense and costs in
the event of a suit if any of its actions violate, or are alleged to violate,
the rights of any third party.  UKRF may select its own counsel at its own
expense to assist LICENSEE’s counsel in the defense.

 

7.6          Joinder Option.  In the event that a declaratory judgment action
alleging invalidity, non-infringement, or unenforceability, or lack of ownership
of any of the Licensed Technology shall be brought against LICENSEE, UKRF, at
its option, shall have the right to join the defense of the action at its own
expense.

 

7.7          Disclosure Legally Required.  If either party, on the advice of
counsel, is required to disclose the Know-How under applicable law or other
lawful demand under lawful process, including a discovery request in litigation,
the party shall first give the other party notice of the required disclosure and
cooperate with the other party in seeking reasonable protective arrangements for
the party required to make a disclosure under applicable law or other demand
under lawful process.  In no event shall either party’s cooperation require that
party to take any action which, on the advice of its counsel, could result in
the imposition of any sanctions or other penalties against that party.

 

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7.8          Share of Recovered Royalties.  LICENSEE, during the exclusive
period of this Agreement, shall have the sole right in accordance with the terms
and conditions herein to sublicense any alleged infringer for future use of the
Licensed Technology.  Any upfront fees as part of such a sublicense shall be
treated as Section 7.4; all other royalties will be treated as per Article 4.

 

ARTICLE 8 — BANKRUPTCY AND TERMINATION

 

8.1          Bankruptcy by LICENSEE.  If LICENSEE is adjudged bankrupt or
insolvent by a court of competent jurisdiction, or files a petition in
bankruptcy, or if the business of LICENSEE shall be placed in the hands of a
receiver, assignee or trustee for the benefit of creditors, whether by the
voluntary act of LICENSEE or otherwise, this Agreement shall automatically
terminate.

 

8.2          Continuing Nature of Exclusive License.  Notwithstanding the
foregoing, all rights and licenses granted under or pursuant to this Agreement
by UKRF to LICENSEE are, and will otherwise be deemed to be, for purposes of
Section 365(n) of the Bankruptcy Code, licenses of rights to “Intellectual
Property” as defined under Section 101(56) of the Bankruptcy Code.  The parties
agree that LICENSEE will retain and may fully exercise all of its rights in the
event that any proceeding is instituted by or against UKRF seeking to adjudicate
it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property, or it must take action to authorize any of the foregoing actions
(each a “Proceeding”), LICENSEE will have the right to retain and enforce its
rights under this Agreement, including but not limited to the following rights:

 

A. the right to a complete duplicate of, or complete access to, as appropriate,
all materials and documentation embodying the Licensed Technology or related to
the Licensed Products or Licensed Processes, and any versions or derivatives
thereof, to be promptly delivered to LICENSEE if not already in its possession
or made available for LICENSEE to copy during business hours: (i) upon any such
commencement of a Proceeding upon written request by LICENSEE, unless UKRF
continues to perform all of its obligations under this Agreement, or (ii) if not
delivered under (i) above, upon the rejection of this Agreement by or on behalf
of UKRF, upon written request by LICENSEE; and

 

B. the right to continue to use and sublicense the Licensed Technology, and all
documentation and other materials related thereto, in accordance with the terms
and conditions of this Agreement.

 

8.3          Breach Relating to Royalties.  Should LICENSEE fail in its payment
to UKRF of royalties due in accordance with the terms of this Agreement, UKRF
shall have the right to serve notice upon LICENSEE as provided in Article 16 of
its intention to terminate this Agreement within ninety (90) days after receipt
of said notice of termination unless LICENSEE shall cure any deficiency by
paying to UKRF, within the ninety (90) day period, all such royalties due and
payable.  Upon the expiration of the ninety (90) day period, if LICENSEE shall
not have paid all such royalties due and payable, the rights, privileges and
license granted hereunder shall thereupon immediately terminate.

 

8.4          Material Breach.  Upon any material breach or default of this
Agreement by either party, other than those occurrences set out in Paragraphs
8.1 and 8.2 and 8.3 hereinabove, which shall always take precedence in that
order over any material breach or default referred to in this Paragraph, the
non-breaching party shall have the right to terminate this Agreement and the
rights, privileges and license granted hereunder by ninety (90) days’ notice by
certified mail or overnight mail to the breaching party.  Such termination shall
become effective unless the breaching party shall have cured any such breach or
default prior to the expiration of the ninety (90) day period from receipt of
the non-breaching party’s notice of termination.

 

8.5          Right to Terminate.  If no activity towards Clinical Development
occurs during a twelve (12) month consecutive period, either party to this
Agreement may elect to terminate this Agreement upon thirty

 

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(30) days prior notice.  Further, LICENSEE shall have the right to terminate
this Agreement at any time and for any reason on six (6) months’ notice to UKRF.

 

8.6          Rights and Duties Upon Termination.  Upon termination of this
Agreement for any reason:

 

A. nothing herein shall be construed to release either party from any obligation
that matured prior to the effective date of such termination.

 

B. LICENSEE and/or any sublicensee thereof may, however, after the effective
date of such termination, sell all Licensed Products, and complete Licensed
Products in the process of manufacture at the time of such termination and sell
the same, provided that LICENSEE shall pay to UKRF the royalties thereon as
required by Article 4 of this Agreement and shall submit the reports required by
Article 5 hereof on the sales of Licensed Products.

 

C. the rights and obligations of the parties under this Agreement that expressly
or by their nature would or should continue beyond the termination of this
Agreement shall remain in effect and survive termination of this Agreement.

 

ARTICLE 9 — LOSS OF EXCLUSIVITY

 

9.1          Loss of Grant in a Specific Jurisdiction.  In the event LICENSEE
declines to initiate patent protection in a given foreign jurisdiction, UKRF
will have the right to terminate the license granted under Section 2.1 in that
specific jurisdiction.

 

ARTICLE 10 — INDEMNIFICATION AND PRODUCT LIABILITY

 

10.1        Indemnification by LICENSEE.  LICENSEE shall at all times during the
term of this Agreement and thereafter, indemnify, defend and hold University of
Kentucky, UKRF, their trustees, officers, employees and affiliates, harmless
against all claims and expenses, including legal expenses and reasonable
attorneys’ fees, arising out of the death of or injury to any person or persons
or out of any damage to property and against any other claim, proceeding,
demand, expense and liability of any kind whatsoever resulting from the
production, manufacture, sales, use, consumption or advertisement of the
Licensed Product(s) and/or Licensed Process(es) or arising from any obligation
of LICENSEE hereunder except to the extent caused by negligence, fraud, or
willful misconduct of UKRF.

 

10.2        Insurance.  At such time as LICENSEE produces, manufactures or sells
any Licensed Product(s), LICENSEE will maintain product liability insurance,
with an endorsement naming the University of Kentucky Research Foundation, the
University of Kentucky, its Board of Trustees, agents officers and employees as
additional insureds covering liabilities for the production, manufacture and/or
sale of the Licensed Product(s) and Licensed Process(es).  The policy of
insurance shall contain a provision of non-cancellation except upon the
provision of sixty (60) days notice to the University.  Policy limits shall be
not less than $1,000,000 per person per occurrence.

 

10.3        Sublicensee Insurance.  If LICENSEE sublicenses any of the rights,
privileges and licenses granted hereunder, LICENSEE shall require the
sublicensee to provide UKRF evidence of such product liability insurance.

 

10.4        Notice of Claim; Indemnification Procedures.  If, during the term of
this Agreement, any indemnified party seeking indemnification under this
Section has knowledge of any third party claim, action, judgment, or even
evidence of a threatened third party claim, action or judgment (collectively,
the “Third Party Action”), the following provisions will apply:

 

(a) the indemnified party having knowledge of the Third Party Action must give
written notice within ten (10) days of discovering a Third Party Action to the
indemnifying party, with all available details, and the indemnifying party shall
have the option, at its sole cost and expense, to retain counsel for the
indemnified party (which counsel shall be selected by or be reasonably
satisfactory to the indemnified party),

 

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to defend any such demand, claim or lawsuit.  Thereafter, the indemnified party
shall be permitted to participate in such defense at its own expense, unless the
law requires that indemnified party be provided separate counsel.

 

(b) the indemnified party must provide reasonable assistance to the indemnifying
party, including but not limited to testifying, providing information regarding
the Third Party Action, and providing access to its books, records and personnel
as the indemnifying party reasonably requests in connection with the
investigation or defense.  The indemnifying party shall reimburse the
indemnified party for out-of-pocket costs incurred in providing the requested
assistance, provided that the indemnified party promptly provides reasonable
supporting documentation; and

 

(c) with respect to payment due for indemnification under this Section, the
indemnifying party will not be paid until entry of a final judgment, consent
decree, or settlement against the indemnified party and the expiration of any
applicable appeal period.

 

ARTICLE 11 — REPRESENTATIONS AND WARRANTIES

 

11.1        LICENSEE AGREES THAT THE RIGHTS GRANTED ARE MADE AVAILABLE WITHOUT
WARRANTY OF ANY KIND EXPRESSED OR IMPLIED INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

11.2        LICENSEE FURTHER AGREES THAT UKRF HAS NOT CONDUCTED NOR HAD
CONDUCTED A PATENTABILITY OR INFRINGEMENT STUDY AND THUS MAKES NO CLAIMS THAT
THE LICENSED RIGHTS WILL NOT INFRINGE ANY THIRD PARTIES’ VALID PATENT RIGHTS.

 

11.3        UKRF Representations and Warranties.  UKRF represents and warrants
to LICENSEE that:

 

A. the Licensed Technology has not been abandoned or disclaimed or otherwise
knowingly diminished by UKRF or its agents;

 

B. the Licensed Technology is not licensed by UKRF to any other person or
entity; and

 

C. no proceedings have been instituted, are pending or, to the knowledge of
UKRF, are threatened, which challenge any rights with respect to the ownership,
validity, or enforceability of the Licensed Technology or the rights being
licensed rights under this Agreement.

 

ARTICLE 12 - ASSIGNMENT

 

12.1        UKRF will not have the right to assign or transfer any of its rights
and obligations under this Agreement, except that all rights and obligations may
be assigned with the written consent of LICENSEE in its sole discretion.

 

12.2        Any assignment or other transfer which is inconsistent with the
foregoing shall be null and void ab initio.

 

12.3        LICENSEE will have the right to freely assign or transfer its rights
and obligations under this Agreement to any third party that is at least
substantially the same size as LICENSEE based on its resources or revenues,
provided that such third party agrees to be bound by this Agreement.

 

ARTICLE 13 - NON-USE OF NAMES

 

13.1        LICENSEE shall not use the names of the University of Kentucky nor
UKRF, nor any adaptation thereof, in any advertising, promotional or sales
literature without prior written consent obtained from UKRF in each case, which
consent will not unreasonably be withheld, except that LICENSEE may state that
it is licensed by UKRF under the Licensed Technology, including but not limited
to one or more of

 

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the patents and/or applications comprising the Patent Rights.  This restriction
does not apply to disclosure required by law or regulation, including as may be
required in connection with any filings made with the Securities and Exchange
Commission, or foreign equivalent thereof.  Notwithstanding any other provision
of this Agreement, UKRF acknowledges and agrees that LICENSEE has the right to
identify Dr. Lodder as a principal of LICENSEE, and an inventor or co-inventor
with respect to the Patent Rights, and otherwise in connection with the
Deployment of the Licensed Technology.

 

ARTICLE 14 — UNITED STATES MANUFACTURE

 

14.1        In accord with the provisions of the Bayh-Dole Act, Licensed
Products sold in the United States will be manufactured substantially in the
United States to the extent possible, unless such requirement is waived by the
U.S. Government.

 

ARTICLE 15 - EXPORT CONTROLS

 

15.1        It is understood that UKRF is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended, and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations.  The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency.  UKRF neither represents that a license shall not be required nor that,
if required, it shall be issued.

 

ARTICLE 16 - NOTICES AND OTHER COMMUNICATIONS

 

16.1        Notice Provisions.  Any payment, notice, consent, approvals, waivers
or other communication pursuant to this Agreement shall be written, reference
this Agreement and considered made on the date of mailing if sent to such party
by certified first class mail, postage prepaid, addressed to its address below
or as it shall designate by written notice given to the other party, or on the
date of transmission if sent by facsimile or email:

 

In the case of UKRF:

University of Kentucky Research Foundation

 

A144 ASTeCC Building

 

Lexington, Kentucky 40506-0286

 

 

With a copy to:

University Legal Counsel

 

301 Main Building

 

Lexington, Kentucky 40506-0032

 

 

In the case of LICENSEE:

Biospherics, Incorporated

 

6430 Rockledge Drive, #503

 

Westmoreland Building

 

Bethesda, MD 20817

 

 

With a copy to:

Jeffrey A. Wolfson

 

Haynes and Boone, LLP

 

1615 L Street, N.W., Suite 800

 

Washington, DC 20036

 

Jeff.wolfson@haynesboone.com

 

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16.2        Revised Address for Notices.  A party may change its address,
facsimile, or email transmissions for communications by sending written notice
to a previously agreed upon address, facsimile, or email.

 

ARTICLE 17 - CONFIDENTIALITY

 

17.1        Confidentiality of Know-How.  Neither party may disclose Know-How to
any third party, other than their consultants and independent contractors as
described below, without prior written approval of the non-disclosing party. 
LICENSEE and UKRF will restrict disclosure of Know-How to its employees,
officers, managers, consultants and financial and legal advisors with a need to
know; will advise the same of the obligations herein; and will require each such
recipient to be bound by comparable written confidentiality obligations.  Each
party shall take reasonable precautions to prevent the inadvertent or
unauthorized disclosure of Know-How in their possession, including at least
those precautions taken by each party to protect their own Know-How of similar
nature and importance.  For the purposes of this Section, “need to know” means
that the person requires the Know-How to perform his, her or its
responsibilities in connection with this Agreement or to advise the party in
confidence regarding the Agreement.

 

17.2        Indefinite Nature of Confidentiality; Exclusions from
Confidentiality.  The confidentiality restrictions and obligations upon each
party shall last indefinitely due to the trade secret nature of the Know-How,
but such restrictions will not apply to any portion of the Know-How that: 
(a) is disclosed to UKRF in good faith by a third party who is in lawful
possession of the information and who has a right to make such a disclosure,
(b) is or shall have become part of the public domain, by publication or
otherwise through no fault of either party or any third party under obligation
to one of the parties, (c) is independently developed by or for the party by
persons who did not have access to the information, or (d) the party is required
by law, or a court or governmental order, to disclose after reasonable efforts
to restrict the nature and scope of such legal obligation to disclose, and the
party provides reasonable notice of such a requirement to the non-disclosing
party with sufficient time that it may intervene to attempt to limit such
disclosure.

 

17.3        Right to Publish Information that is Not Know-How.  Upon disclosure
to, and with written consent by, the LICENSEE, which consent will not be
unreasonably withheld, UKRF will be free to publish any information within the
Licensed Technology that is not Know-How after a sufficient time period to avoid
any prejudice to LICENSEE’s ability to protect such Licensed Technology using
the intellectual property law of any jurisdiction in the Territory.  Following
such disclosure to and written consent from the LICENSEE, UKRF will be free to
publish and discuss such Licensed Technology that is not part of the Know-How
for its own use in connection with academic research, teaching, and other
entirely educationally-related matters.

 

ARTICLE 18 — OPTION TO PURCHASE

 

18.1        LICENSEE Option to Purchase.  Upon request by LICENSEE to facilitate
any contemplated sale of technology within the Licensed Technology, or of
substantially the entire assets of LICENSEE or any Affiliate, UKRF will consider
in good faith permitting the outright acquisition of the Licensed Technology by
LICENSEE or its Affiliate upon terms to be mutually negotiated by the parties.

 

ARTICLE 19 - MISCELLANEOUS PROVISIONS

 

19.1        Governing Law.  This Agreement shall be construed, governed,
interpreted and applied in accordance with the laws of the Commonwealth of
Kentucky, U.S.A., except that questions affecting the construction and effect of
any patent shall be determined by the law of the country in which the patent was
granted.

 

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19.2        Entire Agreement.  The parties hereto acknowledge that this
Agreement sets forth the entire Agreement and understanding of the parties
hereto as to the subject matter hereof, and supersedes all prior written or oral
negotiations, correspondence, understandings and agreements between the parties
respecting such subject matter.  This Agreement shall not be subject to any
change or modification except by the execution of a written instrument
subscribed to by the parties hereto.

 

19.3        Severability.  If any provision of this Agreement is held to be
illegal, invalid or unenforceable, that provision will be fully severable, and
such invalidity or unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof and the Agreement will remain
in full force and effect.

 

19.4        Non-Waiver.  The failure of either party to assert a right hereunder
or to insist upon compliance with any term or condition of this Agreement shall
not constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.  No waiver or breach
committed by a party in one instance shall constitute a waiver or license to
commit or continue breaches in other or like instances.

 

19.5        Headings.  Headings in this Agreement are included for ease of
reference only and will have no legal effect.

 

19.6.       Counterparts and Electronic Transmission.  This Agreement may be
executed in any number of counterparts and all of the counterparts taken
together shall for all purposes constitute one binding agreement,
notwithstanding that all parties did not originally execute the same
counterpart.  Further, the copies of this Agreement to be delivered by or to a
party or its solicitors may be delivered by facsimile or email transmission.

 

[INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
and duly executed this License Agreement the day and year first set forth below.

 

 

UNIVERSITY OF KENTUCKY

 

 

 

RESEARCH FOUNDATION

 

BIOSPHERICS, INCORPORATED

 

 

 

 

 

By:

/s/ Donald G. Keach

 

By: 

/s/ Claire L. Kruger

 

 

 

 

 

 

 

Name:

Donald G. Keach

 

Name: 

Claire L. Kruger

 

 

 

 

 

 

 

Title:

Director, I.P.D.

 

Title: 

CEO

 

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