Document:

EXCLUSIVE LICENSE AGREEMENT

 

BETWEEN

 

THE JOHNS HOPKINS UNIVERSITY

 

&

 

PROTEA BIOSCIENCES, INC.

 

JHU Agreement Number: A15449

 

JHU Reference Number: C04997

  

 

  

CONFIDENTIAL DRAFT

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (the “Agreement”) is entered into by and between THE JOHNS HOPKINS UNIVERSITY, a Maryland corporation having an address at 3400 N. Charles Street, Baltimore, Maryland, 21218-2695 (“JHU”) and Protea Biosciences, Inc., a Delaware corporation having an address at 955 Hartman Run Road, Morgantown, WV, 26507 (“Company”), with respect to the following:

 

RECITALS

 

WHEREAS, as a center for research and education, JHU is interested in licensing PATENT RIGHTS (hereinafter defined) in a manner that will benefit the public by facilitating the distribution of useful products and the utilization of new processes, but is without capacity to commercially develop, manufacture, and distribute any such products or processes; and

 

WHEREAS, a valuable invention(s) entitled “Albumin-Bound Protein/Peptide Complex As A Biomarker For Disease” (JHU Reference Number: C04997) was developed during the course of research conducted by Drs. Jennifer E. Van Eyk, Rebekah L. Gundry, and Robert J. Cotter (all hereinafter, “Inventors”); and

 

WHEREAS, JHU has acquired through assignment all rights, title and interest, with the exception of certain retained rights by the United States Government, in its interest in said valuable inventions; and

 

WHEREAS, Company desires to obtain certain rights in such valuable inventions as herein provided, and to commercially develop, manufacture, use and distribute products and processes based upon or embodying said valuable inventions throughout the world;

 

NOW THEREFORE, in consideration of the premises and the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1

DEFINITIONS

 

All references to particular Exhibits, Articles or Paragraphs shall mean the Exhibits to, and Paragraphs and Articles of, this Agreement, unless otherwise specified. For the purposes of this Agreement and the Exhibits hereto, the following words and phrases shall have the following meanings:

 

1.1        “AFFILIATED COMPANY” as used herein in either singular or plural shall mean any corporation, company, partnership, joint venture or other entity, which controls, is controlled by or is under common control with Company. For purposes of this Paragraph 1.1, control shall mean the direct or indirect ownership of at least fifty- percent (50%).

	 	 	 
	
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1.2        “EFFECTIVE DATE” of this License Agreement shall mean the date the last party hereto has executed this Agreement.

 

1.3        “EXCLUSIVE LICENSE” shall mean a grant by JHU to Company of its entire right and interest in the PATENT RIGHTS subject to rights retained by the United States Government, if any, in accordance with the Bayh-Dole Act of 1980 (established by P.L. 96-517 and amended by P.L. 98-620, codified at 35 USC § 200 et. seq. and implemented according to 37 CFR Part 401), and subject to the retained right of JHU to make, have made, provide and use for its and The Johns Hopkins Health Systems’ purposes LICENSED PRODUCT(S) and LICENSED SERVICE(S), including the ability to distribute any biological material disclosed and/or claimed in PATENT RIGHTS for nonprofit academic research use to non-commercial entities as is customary in the scientific community.

 

1.4        “LICENSED FIELD” shall mean all fields.

 

1.5        “LICENSED PRODUCT(S)” as used herein in either singular or plural shall mean any process or method, material, compositions, drug, or other product, the manufacture, use or sale of which would constitute, but for the license granted to Company pursuant to this Agreement, an infringement of a claim of PATENT RIGHTS (infringement shall include, but is not limited to, direct, contributory, or inducement to infringe).

 

1.6        “LICENSED SERVICE(S)” as used herein in either singular or plural shall mean the performance on behalf of a third party of any method contained in the PATENT RIGHTS, or the manufacture of any product or the use of any product or composition which would constitute, but for the license granted to Company pursuant to this Agreement, an infringement of a claim of the PATENT RIGHTS, (infringement shall include, but not be limited to, direct, contributory or inducement to infringe).

 

1.7        “NET SALES” shall mean gross sales revenues and fees billed by Company, AFFILIATED COMPANY and SUBLICENSEE(S) from the sale of LICENSED PRODUCT(S) less trade discounts allowed, refunds, returns and recalls, and sales taxes. In the event that Company, AFFILIATED COMPANY or SUBLICENSEE(S) sells a LICENSED PRODUCT(S) in combination with other ingredients or substances or as part of a kit, the NET SALES for purposes of royalty payments shall be based on the sales revenues and fees received from the entire combination or kit.

 

1.8        “NET SERVICE REVENUES” shall mean gross service revenues and fees billed by Company, AFFILIATED COMPANY and SUBLICENSEE(S) for the performance of LICENSED SERVICE(S) less sales and/or use taxes imposed upon and with specific reference to the LICENSED SERVICE(S). In the event that Company, AFFILIATED COMPANY or SUBLICENSEE(S) sells a LICENSED SERVICE(S) in combination with other services or substances or as part of a kit, the NET SERVICE REVENUES for purposes of royalty payments shall be based on the sales revenues and fees received from the entire combination or kit.

	 	 	 
	
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1.9        “PATENT RIGHTS” shall mean the International Application, PCT/US2007/013968, filed on June 14, 2007, and assigned to JHU entitled “Albumin-Bound Protein/Peptide Complex As A Biomarker For Disease”, and the invention disclosed and claimed therein, national stage applications, and all continuations, divisions, and reissues based thereon, and any corresponding foreign patent applications, and any patents, or other equivalent foreign PATENT RIGHTS issuing, granted or registered thereon.

 

1.10      “SUBLICENSEE(S)” as used herein in either singular or plural shall mean any person or entity other than an AFFILIATED COMPANY to which Company has granted a sublicense under this Agreement.

 

1.11      “FIRST COMMERCIAL SALE” shall mean, with respect to LICENSED PRODUCT(S) or LICENSED SERVICE(S), the first sale by Company or AFFILIATED COMPANY at arm’s length.

 

ARTICLE 2

LICENSE GRANT

 

2.1        Grant. Subject to the terms and conditions of this Agreement, JHU hereby grants to Company an EXCLUSIVE LICENSE to make, have made, use, import, offer for sale and sell the LICENSED PRODUCT(S) and to provide the LICENSED SERVICE(S) in the United States and worldwide under the PATENT RIGHTS in the LICENSED FIELD. This Grant shall apply to the Company and any AFFILIATED COMPANY, except that any AFFILIATED COMPANY shall not have the right to sublicense others as set forth in Paragraph 2.2 below. If any AFFILIATED COMPANY exercises rights under this Agreement, such AFFILIATED COMPANY shall be bound by all terms and conditions of this Agreement, including, but not limited to, indemnity and insurance provisions and royalty payments, which shall apply to the exercise of the rights to the same extent as would apply had this Agreement been directly between JHU and the AFFILIATED COMPANY. In addition, Company shall remain fully liable to JHU for all acts and obligations of AFFILIATED COMPANY such that acts of the AFFILIATED COMPANY shall be considered acts of the Company.

 

2.2        Sublicense. Company may sublicense to others under this Agreement, subject to the terms and conditions of this Paragraph 2.2 and subject to JHU’s prior written approval of the sublicense agreement. Such approval shall not be unreasonably withheld. As a condition to its validity and enforceability, each sublicense agreement shall: (a) incorporate by reference the terms and conditions of this Agreement, (b) be consistent with the terms, conditions and limitations of this Agreement, (c) prohibit SUBLICENSEE’s further sublicense of the rights delivered hereunder, (d) name JHU as an intended third party beneficiary of the obligations of SUBLICENSEE without imposition of obligation or liability on the part of JHU or its Inventors to the SUBLICENSEE, (e) specifically incorporate Paragraphs 6.2 “Representations by JHU”, 7.1 “Indemnification”, 10.1 “Use of Name”, 10.4 “Product Liability” into the body of the sublicense agreement, and cause the terms used therein to have the same meaning as in this Agreement, and, (f) bear the signature from JHU indicating JHU’s review and approval of the sublicense agreement. Company shall provide to JHU each proposed sublicense agreement, executed by both Company and proposed SUBLICENSEE, for review, approval and signature by JHU. To the extent that any terms, conditions or limitations of any sublicense agreement are inconsistent with this Agreement, those terms, conditions and limitations are null and void against JHU, even though JHU has approved the sublicense in writing.

	 	 	 
	
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2.3        Government Rights. The United States Government may have acquired a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the inventions described in PATENT RIGHTS throughout the world. The rights granted herein are additionally subject to: (i) the requirement that any LICENSED PRODUCT(S) produced for use or sale within the United States shall be substantially manufactured in the United States (unless a waiver under 35 USC § 204 or equivalent is granted by the appropriate United States government agency), (ii) the right of the United States government to require JHU, or its licensees, including Company, to grant sublicenses to responsible applicants on reasonable terms when necessary to fulfill health or safety needs, and, (iii) other rights acquired by the United States government under the laws and regulations applicable to the grant/contract award under which the inventions were made.

 

ARTICLE 3

FEES, ROYALTIES, & PAYMENTS

 

3.1        License Fee. Company shall pay to JHU on or before June 30, 2009, the license fee as set forth in Exhibit A. JHU will not submit an invoice for the license fee, which is nonrefundable and the license fee shall not be credited against royalties or other fees.

 

3.2        Minimum Annual Royalties. Company shall pay to JHU minimum annual royalties as set forth in Exhibit A. These minimum annual royalties shall be due, without invoice from JHU, within thirty (30) days of each anniversary of the EFFECTIVE DATE beginning with the first anniversary. Running royalties accrued under Paragraph 3.3 and paid to JHU during the one year period preceding an anniversary of the EFFECTIVE DATE shall be credited against the minimum annual royalties due on that anniversary date.

 

3.3        Running Royalties. Company shall pay to JHU a running royalty as set forth in Exhibit A, for each LICENSED PRODUCT(S) sold, and for each LICENSED SERVICE(S) provided, by Company, AFFILIATED COMPANIES and SUBLICENSEE(S), based on NET SALES and NET SERVICE REVENUES for the term of this Agreement. Such payments shall be made quarterly. All non-US taxes related to LICENSED PRODUCT(S) or LICENSED SERVICE(S) sold under this Agreement shall be paid by Company and shall not be deducted from royalty or other payments due to JHU.

 

In order to insure JHU the full royalty payments contemplated hereunder, Company agrees that in the event any LICENSED PRODUCT(S) shall be sold to an AFFILIATED COMPANY or SUBLICENSEE(S) or to a corporation, firm or association with which Company shall have any agreement, understanding or arrangement with respect to consideration (such as, among other things, an option to purchase stock or actual stock ownership, or an arrangement involving division of profits or special rebates or allowances) the royalties to be paid hereunder for such LICENSED PRODUCT(S) shall be based upon the greater of: 1) the net selling price (per NET SALES) at which the purchaser of LICENSED PRODUCT(S) resells such product to the end user, 2) the NET SERVICE REVENUES received from using the LICENSED PRODUCT(S) in providing a service, 3) the fair market value of the LICENSED PRODUCT(S) or 4) the net selling price (per NET SALES) of LICENSED PRODUCT(S) paid by the purchaser.

	 	 	 
	
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3.4        Developmental Milestones. Company shall pay to JHU Developmental Milestones as set forth in Exhibit A. The Developmental Milestone payments shall be due, without the need for invoice from JHU, within Ninety (90) days of Company meeting the requirement of each milestone.

 

3.5        Sublicense Consideration. In addition to the running royalty as set forth under Paragraph 3.3, Company shall pay to JHU a percentage of consideration received for sublicenses under this Agreement as set forth in Exhibit A. This sublicense consideration shall be due, without the need for invoice from JHU, within forty-five (45) days of the effective date of each sublicense agreement. Such consideration shall mean consideration of any kind received by the Company or AFFILIATED COMPANIES from a SUBLICENSEE(S) for the grant of a sublicense under this Agreement, such as upfront fees or milestone fees and including any premium paid by the SUBLICENSEE(S) over Fair Market Value for stock of the Company or an AFFILIATED COMPANY in consideration for such sublicense. However, not included in such sublicense consideration are amounts paid to the Company or an AFFILIATED COMPANY by the SUBLICENSEE(S) for running royalties on LICENSED PRODUCT(S) and LICENSED SERVICE(S), product development, research work, clinical studies and regulatory approvals performed by or for the Company or AFFILIATED COMPANIES (including third parties on their behalf), each pursuant to a specific agreement including a performance plan and commensurate budget. The term “Fair Market Value” shall mean the average price that the stock in question is publicly trading at for twenty (20) days prior to the announcement of its purchase by the SUBLICENSEE(S) or if the stock is not publicly traded, the value of such stock as determined by the most recent private financing through a financial investor (an entity whose sole interest in the Company or AFFILIATED COMPANY is financial) of the Company or AFFILIATED COMPANY that issued the shares.

 

3.6        Patent Reimbursement. Company will reimburse JHU, within thirty (30) days of the receipt of an invoice from JHU, for all costs associated with the preparation, filing, maintenance, and prosecution of PATENT RIGHTS incurred by JHU on or before the EFFECTIVE DATE of this Agreement. In accordance with Paragraph 4.1 below, Company will reimburse JHU, within thirty (30) days of the receipt of an invoice from JHU, such invoice to be presented to the Company 180 days after the Effective Date, for all costs associated with the preparation, filing, maintenance, and prosecution of PATENT RIGHTS incurred by JHU subsequent to the EFFECTIVE DATE of this Agreement.

 

3.7        Form of Payment. All payments under this Agreement shall be made in U.S. Dollars by either check or wire transfer.

 

3.8        Payment Information. All check payments from Company to JHU shall be sent to:

	 	 	 
	
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Director

Johns Hopkins Technology Transfer

The Johns Hopkins University

100 N. Charles Street, 5th Floor

Baltimore, MD 21201

 

Attn: JHU Agreement Number: A15449

or such other addresses which JHU may designate in writing from time to time. Checks are to be made payable to “The Johns Hopkins University”. Wire transfers may be made through:

 

Bank of America

NY, NY

 

Johns Hopkins University Central Lockbox

Transit/Routing/ABA number: 026009593

SWIFT code: BOFAUS3N

CHIPS ABA number: None

Account Number: 003936830516

Type of Account: Depository

Reference: JHU Tech Transfer

(JHU Agreement Number: A15449)

Attn: Financial Manager

 

Company shall be responsible for any and all costs associated with wire transfers.

 

3.9        Late Payments. In the event that any payment due hereunder is not made when due, the payment shall accrue interest beginning on the tenth day following the due date thereof, calculated at the annual rate of the sum of (a) two percent (2%) plus (b) the prime interest rate quoted by The Wall Street Journal on the date said payment is due, the interest being compounded on the last day of each calendar quarter, provided however, that in no event shall said annual interest rate exceed the maximum legal interest rate for corporations. Each such payment when made shall be accompanied by all interest so accrued. Said interest and the payment and acceptance thereof shall not negate or waive the right of JHU to seek any other remedy, legal or equitable, to which it may be entitled because of the delinquency of any payment including, but not limited to termination of this Agreement as set forth in Paragraph 9.2.

	 	 	 
	
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ARTICLE 4

PATENT PROSECUTION, MAINTENANCE, & INFRINGEMENT

 

4.1        Prosecution & Maintenance. JHU, at Company’s expense, shall file, prosecute and maintain all patents and patent applications specified under PATENT RIGHTS and, subject to the terms and conditions of this Agreement, Company shall be licensed thereunder. Title to all such patents and patent applications shall reside in JHU.  JHU shall have full and complete control over all patent matters in connection therewith under the PATENT RIGHTS, provided however, that JHU shall (a) cause its patent counsel to timely copy Company on all official actions and written correspondence with any patent office, and (b) allow Company an opportunity to comment and advise JHU. JHU shall consider and reasonably incorporate all comments and advice. By concurrent written notification to JHU and its patent counsel at least thirty (30) days in advance (or later at JHU’s discretion) of any filing or response deadline, or fee due date, Company may elect not to have a patent application filed in any particular country or not to pay expenses associated with prosecuting or maintaining any patent application or patent, subject to Company’s timely receipt of Notice, provided that Company pays for all costs incurred up to JHU’s receipt of such notification. Failure to provide such notification can be considered by JHU to be Company’s authorization to proceed at Company’s expense. Upon such notification, JHU may file, prosecute, and/or maintain such patent applications or patent at its own expense and for its own benefit, and any rights or license granted hereunder held by Company, AFFILIATED COMPANIES or SUBLICENSEE(S) relating to the PATENT RIGHTS which comprise the subject of such patent applications or patent and/or apply to the particular country, shall terminate.

 

4.2        Notification. Each party will notify the other promptly in writing when any infringement by another is uncovered or suspected.

 

4.3        Infringement. Company shall have the first right, but not the obligation, to enforce any patent within PATENT RIGHTS against any infringement or alleged infringement thereof, and shall at all times keep JHU informed as to the status thereof. Before Company commences an action with respect to any infringement of such patents, Company shall give careful consideration to the views of JHU and to potential effects on the public interest in making its decision whether or not to sue. Thereafter, Company may, at its own expense, institute suit against any such infringer or alleged infringer and control and defend such suit in a manner consistent with the terms and provisions hereof and recover any damages, awards or settlements resulting therefrom, subject to Paragraph 4.5. However, no settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the prior written consent of JHU, which consent shall not be unreasonably withheld. This right to sue for infringement shall not be used in an arbitrary or capricious manner. JHU shall reasonably cooperate in any such litigation at Company’s expense.

 

If Company elects not to enforce any patent within the PATENT RIGHTS, then it shall so notify JHU in writing within ninety (90) days of receiving notice that an infringement exists, and JHU may, in its sole judgment and at its own expense, take steps to enforce any patent, and control, settle, and defend such suit in a manner consistent with the terms and provisions hereof, and recover, for its own account, any damages, awards or settlements resulting therefrom.

 

4.4        Patent Invalidity Suit. If a declaratory judgment action is brought naming Company as a defendant and alleging invalidity of any of the PATENT RIGHTS, JHU may elect to take over the sole defense of the action at its own expense. Company shall cooperate fully with JHU in connection with any such action.

	 	 	 
	
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4.5        Recovery. Any recovery by Company under Paragraph 4.3 shall be deemed to reflect loss of commercial sales, and Company shall pay to JHU fifteen percent (15%) of the recovery net of all reasonable costs and expenses associated with each suit or settlement. If the cost and expenses exceed the recovery, then one-half (1/2) of the excess shall be credited against royalties payable by Company to JHU hereunder in connection with sales of LICENSED PRODUCT covered in the PATENT RIGHTS which are the subject of the infringement suit, in the country of such legal proceedings, provided, however, that any such credit under this Paragraph shall not exceed fifty percent (50%) of the royalties otherwise payable to JHU with regard to sales in the country of such action in any one calendar year, with any excess credit being carried forward to future calendar years.

 

ARTICLE 5

OBLIGATIONS OF THE PARTIES

 

5.1          Reports. Company shall provide to JHU the following written reports according to the following schedules.

 

(a) Company shall provide quarterly Royalty Reports, substantially in the format of Exhibit B and due within thirty (30) days of the end of each calendar quarter following the EFFECTIVE DATE of this Agreement. Royalty Reports shall disclose the amount of LICENSED PRODUCT(S) and LICENSED SERVICE(S) sold, the total NET SALES and NET SERVICE REVENUES of such LICENSED PRODUCT(S) and LICENSED SERVICE(S), and the running royalties due to JHU as a result of NET SALES and NET SERVICE REVENUES by Company, AFFILIATED COMPANIES and SUBLICENSEE(S) thereof. Payment of any such royalties due shall accompany such Royalty Reports.

 

(b) Until Company, an AFFILIATED COMPANY or a SUBLICENSEE(S) has achieved a FIRST COMMERCIAL SALE of a LICENSED PRODUCT or LICENSED SERVICE, or received FDA market approval, Company shall provide semiannual Diligence Reports, due within thirty (30) days of the end of every June and December following the EFFECTIVE DATE of this Agreement. These Diligence Reports shall describe Company’s, AFFILIATED COMPANIES or any SUBLICENSEE(S)’s technical efforts towards meeting its obligations under the terms of this Agreement.

 

(c) Company shall provide Annual Reports within thirty (30) days of the end of every December following the EFFECTIVE DATE of this Agreement. Annual Reports shall include:

(i) evidence of insurance as required under Paragraph 10.4, or, a statement of why such insurance is not currently required, and

(ii) identification of all AFFILIATED COMPANIES which have exercised rights pursuant to Paragraph 2.1, or, a statement that no AFFILIATED COMPANY has exercised such rights, and

(iii) notice of all FDA approvals of any LICENSED PRODUCT(S) or LICENSED SERVICE(S) obtained by COMPANY, AFFILIATED COMPANY or SUBLICENSEE, the patent(s) or patent application(s) licensed under this Agreement upon which such product or service is based, and the commercial name of such product or service, or, in the alternative, a statement that no FDA approvals have been obtained.

	 	 	 
	
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5.2        Records. Company shall make and retain, for a period of three (3) years following the period of each report required by Paragraph 5.1, true and accurate records, files and books of account containing all the data reasonably required for the full computation and verification of sales and other information required in Paragraph 5.1. Such books and records shall be in accordance with generally accepted accounting principles consistently applied. Company shall permit the inspection and copying of such records, files and books of account by JHU or its agents during regular business hours upon ten (10) business days’ written notice to Company. Such inspection shall not be made more than once each calendar year. All costs of such inspection and copying shall be paid by JHU, provided that if any such inspection shall reveal that an error has been made in the amount equal to five percent (5%) or more of such payment, such costs shall be borne by Company. As a condition to entering into any such agreement, Company shall include in any agreement with its AFFILIATED COMPANIES or its SUBLICENSEE(S) which permits such party to make, use, sell or import the LICENSED PRODUCT(S) or provide LICENSED SERVICE(S), a provision requiring such party to retain records of sales of LICENSED PRODUCT(S) and records of LICENSED SERVICE(S) and other information as required in Paragraph 5.1 and permit JHU to inspect such records as required by this Paragraph.

 

5.3        Best Efforts. Company shall exercise best efforts to develop and to introduce the LICENSED PRODUCT(S) and LICENSED SERVICE(S) into the commercial market as soon as practicable, consistent with sound and reasonable business practice and judgment; thereafter, until the expiration or termination of this Agreement, Company shall endeavor to keep LICENSED PRODUCT(S) and LICENSED SERVICE(S) reasonably available to the public consistent with sound and reasonable business practice and judgment. Company shall also exercise reasonable efforts to develop LICENSED PRODUCT(S) suitable for different indications within the LICENSED FIELD, so that the PATENT RIGHTS can be commercialized as broadly and as speedily as good scientific and business judgment would deem possible.

 

5.4        Other Products. After clinical or other evidence, provided in writing by JHU or by another party, to Company demonstrating the practicality of a particular market or use within the LICENSED FIELD which is not being developed or commercialized by Company, Company shall either provide JHU with a reasonable development plan and start development or attempt to reasonably sublicense the particular market or use to a third party. If within twelve months of such notification by JHU, Company has not initiated such development efforts or sublicensed that particular market or use, JHU may terminate this license for such particular market or use. This Paragraph shall not be applicable if Company reasonably demonstrates to JHU that commercializing such LICENSED PRODUCT(S) or LICENSED SERVICE(S) or granting such a sublicense in said market or use would have a potentially adverse commercial effect upon marketing or sales of the LICENSED PRODUCT(S) or LICENSED SERVICE(S) developed and being sold by Company.

5.5        Patent Acknowledgement. Company agrees that all packaging containing individual LICENSED PRODUCT(S) sold by Company, AFFILIATED COMPANIES and SUBLICENSEE(S) of Company will be marked with the number of the applicable patent(s) licensed hereunder in accordance with each country’s patent laws.

	 	 	 
	
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ARTICLE 6

REPRESENTATIONS

 

6.1        Duties of the Parties. JHU is not a commercial organization. It is an institute of research and education. Therefore, JHU has no ability to evaluate the commercial potential of any PATENT RIGHTS or LICENSED PRODUCT or other license or rights granted in this Agreement. It is therefore incumbent upon Company to evaluate the rights and products in question, to examine the materials and information provided by JHU, and to determine for itself the validity of any PATENT RIGHTS, its freedom to operate, and the value of any LICENSED PRODUCTS or SERVICES or other rights granted.

 

6.2        Representations by JHU. JHU warrants that it has good and marketable title to its interest in the inventions claimed under PATENT RIGHTS with the exception of certain retained rights of the United States Government, which may apply if any part of the JHU research was funded in whole or in part by the United States Government. JHU does not warrant the validity of any patents or that practice under such patents shall be free of infringement. EXCEPT AS EXPRESSLY SET FORTH IN THIS PARAGRAPH 6.2, COMPANY, AFFILIATED COMPANIES AND SUBLICENSEE(S) AGREE THAT THE PATENT RIGHTS ARE PROVIDED “AS IS”, AND THAT JHU MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE PERFORMANCE OF LICENSED PRODUCT(S) AND LICENSED SERVICE(S) INCLUDING THEIR SAFETY, EFFECTIVENESS, OR COMMERCIAL VIABILITY. JHU DISCLAIMS ALL WARRANTIES WITH REGARD TO PRODUCT(S) AND SERVICE(S) LICENSED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ALL WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, JHU ADDITIONALLY DISCLAIMS ALL OBLIGATIONS AND LIABILITIES ON THE PART OF JHU AND INVENTORS, FOR DAMAGES, INCLUDING, BUT NOT LIMITED TO, DIRECT, INDIRECT, SPECIAL, AND CONSEQUENTIAL DAMAGES, ATTORNEYS’ AND EXPERTS* FEES, AND COURT COSTS (EVEN IF JHU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, FEES OR COSTS), ARISING OUT OF OR IN CONNECTION WITH THE MANUFACTURE, USE, OR SALE OF THE PRODUCT(S) AND SERVICE(S) LICENSED UNDER THIS AGREEMENT. COMPANY, AFFILIATED COMPANIES AND SUBLICENSEE(S) ASSUME ALL RESPONSIBILITY AND LIABILITY FOR LOSS OR DAMAGE CAUSED BY A PRODUCT AND/OR SERVICE MANUFACTURED, USED, OR SOLD BY COMPANY, ITS SUBLICENSEE(S) AND AFFILIATED COMPANIES WHICH IS A LICENSED PRODUCT(S) OR LICENSED SERVICE(S) AS DEFINED IN THIS AGREEMENT.

	 	 	 
	
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ARTICLE 7

INDEMNIFICATION

 

7.1        Indemnification. JHU and the Inventors will have no legal liability exposure to third parties if JHU does not license the LICENSED PRODUCT(S) and LICENSED SERVICE(S), and any royalties JHU and the Inventors may receive is not adequate compensation for such legal liability exposure. Therefore, JHU requires Company to protect JHU and Inventors from such exposure to the same manner and extent to which insurance, if available, would protect JHU and Inventors. Furthermore, JHU and the Inventors will not, under the provisions of this Agreement or otherwise, have control over the manner in which Company or its AFFILIATED COMPANIES or its SUBLICENSEE(S) or those operating for its account or third parties who purchase LICENSED PRODUCT(S) or LICENSED SERVICE(S) from any of the foregoing entities, develop, manufacture, market or practice the inventions of LICENSED PRODUCT(S) and LICENSED SERVICE(S). Therefore, Company, AFFILIATED COMPANY and SUBLICENSEE(S) shall indemnify, defend with counsel reasonably acceptable to JHU, and hold JHU, The Johns Hopkins Health Systems, their present and former trustees, officers, Inventors of PATENT RIGHTS, agents, faculty, employees and students harmless as against any judgments, fees, expenses, or other costs arising from or incidental to any product liability or other lawsuit, claim, demand or other action brought as a consequence of the practice of said inventions by Company, AFFILIATED COMPANIES and/or SUBLICENSEE(S), whether or not JHU or said Inventors, either jointly or severally, is named as a party defendant in any such lawsuit and whether or not JHU or the Inventors are alleged to be negligent or otherwise responsible for any injuries to persons or property. Practice of the inventions covered by LICENSED PRODUCT(S) and LICENSED SERVICE(S), by an AFFILIATED COMPANY or an agent or a SUBLICENSEE(S) or a third party on behalf of or for the account of Company or by a third party who purchases LICENSED PRODUCT(S) and LICENSED SERVICE(S) from Company, shall be considered Company’s practice of said inventions for purposes of this Paragraph. The obligation of Company to defend and indemnify as set out in this Paragraph shall survive the termination of this Agreement, shall continue even after assignment of rights and responsibilities to an AFFILIATED COMPANY or SUBLICENSEE, and shall not be limited by any other limitation of liability elsewhere in this Agreement.

 

ARTICLE 8

CONFIDENTIALITY

 

8.1        Confidentiality. If necessary, the parties will exchange information, which they consider to be confidential. The recipient of such information agrees to accept the disclosure of said information which is marked as confidential at the time it is sent to the recipient, and to employ all reasonable efforts to maintain the information secret and confidential, such efforts to be no less than the degree of care employed by the recipient to preserve and safeguard its own confidential information. The information shall not be disclosed or revealed to anyone except employees of the recipient who have a need to know the information and who have entered into a secrecy agreement with the recipient under which such employees are required to maintain confidential the proprietary information of the recipient and such employees shall be advised by the recipient of the confidential nature of the information and that the information shall be treated accordingly.

 

The obligations of this Paragraph 8.1 shall also apply to AFFILIATED COMPANIES and/or SUBLICENSEE(S) provided such information by Company.JHU’s, Company’s, AFFILIATED COMPANIES, and SUBLICENSEES’ obligations under this Paragraph 8.1 shall extend until three (3) years after the termination of this Agreement.

	 	 	 
	
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8.2        Exceptions. The recipient’s obligations under Paragraph 8.1 shall not extend to any part of the information:

 

	
  

	
a.

	
that can be demonstrated to have been in the public domain or publicly known and readily available to the trade or the public prior to the date of the disclosure; or

 

	
  

	
b.

	
that can be demonstrated from written records to have been in the recipient’s possession or readily available to the recipient from another source not under obligation of secrecy to the disclosing party prior to the disclosure; or

 

	
  

	
c.

	
that becomes part of the public domain or publicly known by publication or otherwise, not due to any unauthorized act by the recipient; or

 

	
  

	
d.

	
that is demonstrated from written records to have been developed by or for the receiving party without reference to confidential information disclosed by the disclosing party.

 

	
  

	
e.

	

that is required to be disclosed by law, government regulation or court order.

 

8.3        Right to Publish. JHU may publish manuscripts, abstracts or the like describing the PATENT RIGHTS and inventions contained therein provided confidential information of Company as defined in Paragraph 8.1, is not included or without first obtaining written approval from Company to include such confidential information. Otherwise, JHU and the Inventors shall be free to publish manuscripts and abstracts or the like directed to the work done at JHU related to the PATENT RIGHTS without prior approval.

 

ARTICLE 9

TERM & TERMINATION

 

9.1        Term. The term of this Agreement shall commence on the EFFECTIVE DATE and shall continue, in each country, until the date of expiration of the last to expire patent included within PATENT RIGHTS in that country or if no patents issue then for a term of twenty (20) years from the EFFECTIVE DATE of this Agreement.

 

9.2         Termination By Either Party. This Agreement may be terminated by either party, in the event that the other party (a) files or has filed against it a petition under the Bankruptcy Act, makes an assignment for the benefit of creditors, has a receiver appointed for it or a substantial part of its assets, or otherwise takes advantage of any statute or law designed for relief of debtors or (b) fails to perform or otherwise breaches any of its obligations hereunder, if, following the giving of notice by the terminating party of its intent to terminate and stating the grounds therefor, the party receiving such notice shall not have cured the failure or breach within sixty (60) days. In no event, however, shall such notice or intention to terminate be deemed to waive any rights to damages or any other remedy which the party giving notice of breach may have as a consequence of such failure or breach.

	 	 	 
	
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9.3        Termination by Company. Company may terminate this Agreement and the license granted herein, for any reason, upon giving JHU ninety (90) days written notice.

 

9.4        Obligations and Duties upon Termination. If this Agreement is terminated, both parties shall be released from all obligations and duties imposed or assumed hereunder to the extent so terminated, except as expressly provided to the contrary in this Agreement. Upon termination, both parties shall cease any further use of the confidential information disclosed to the receiving party by the other party. Termination of this Agreement, for whatever reason, shall not affect the obligation of either party to make any payments for which it is liable prior to or upon such termination. Termination shall not affect JHU’s right to recover unpaid royalties, fees, reimbursement for patent expenses, or other forms of financial compensation incurred prior to termination. Upon termination Company shall submit a final royalty report to JHU and any royalty payments, fees, unreimbursed patent expenses and other financial compensation due JHU shall become immediately payable. Furthermore, upon termination of this Agreement, all rights in and to the PATENT RIGHTS shall revert immediately to JHU at no cost to JHU. Upon termination of this Agreement, any SUBLICENSEE(S) shall become a direct licensee of JHU, provided that JHU’s obligations to SUBLICENSEE(S) are no greater than JHU’s obligations to Company under this Agreement. Company shall provide written notice of such to each SUBLICENSEE(S) with a copy of such notice provided to JHU.

 

ARTICLE 10

MISCELLANEOUS

 

10.1      Use of Name. Company, AFFILIATED COMPANIES and SUBLICENSEE(S) shall not use the name of The Johns Hopkins University or The Johns Hopkins Health System or any of its constituent parts, such as the Johns Hopkins Hospital or any contraction thereof or the name of Inventors in any advertising, promotional, sales literature or fundraising documents without prior written consent from an authorized representative of JHU. Company, AFFILIATED COMPANIES and SUBLICENSEE(S) shall allow at least seven (7) business days notice of any proposed public disclosure for JHU’s review and comment or to provide written consent.

 

10.2      No Partnership. Nothing in this Agreement shall be construed to create any agency, employment, partnership, joint venture or similar relationship between the parties other than that of a licensor/licensee. Neither party shall have any right or authority whatsoever to incur any liability or obligation (express or implied) or otherwise act in any manner in the name or on the behalf of the other, or to make any promise, warranty or representation binding on the other.

 

10.3      Notice of Claim. Each party shall give the other or its representative immediate notice of any suit or action filed, or prompt notice of any claim made, against them arising out of the performance of this Agreement or arising out of the practice of the PATENT RIGHTS licensed hereunder.

	 	 	 
	
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10.4      Product Liability. Prior to initial human testing or FIRST COMMERCIAL SALE of any LICENSED PRODUCT(S) or LICENSED SERVICE(S), as the case may be, in any particular country, Company shall establish and maintain, in each country in which Company, an AFFILIATED COMPANY or SUBLICENSEE(S) shall test or sell LICENSED PRODUCT(S) and LICENSED SERVICE(S), product liability or other appropriate insurance coverage in the minimum amount of five million dollars ($5,000,000) per claim and will annually present evidence to JHU that such coverage is being maintained. Upon JHU’s request, Company will furnish JHU with a Certificate of Insurance of each product liability insurance policy obtained. JHU shall be listed as an additional insured in Company’s said insurance policies. If such Product Liability insurance is underwritten on a ‘claims made’ basis, Company agrees that any change in underwriters during the term of this Agreement will require the purchase of ‘prior acts’ coverage to ensure that coverage will be continuous throughout the term of this Agreement.

 

10.5      Governing Law. This Agreement shall be construed, and legal relations between the parties hereto shall be determined, in accordance with the laws of the State of Maryland applicable to contracts solely executed and wholly to be performed within the State of Maryland without giving effect to the principles of conflicts of laws. Any disputes between the parties to the Agreement shall be brought in the state or federal courts of Maryland. Both parties agree to waive their right to a jury trial.

 

10.6      Notice. All notices or communication required or permitted to be given by either party hereunder shall be deemed sufficiently given if mailed by registered mail or certified mail, return receipt requested, or sent by overnight courier, such as Federal Express, to the other party at its respective address set forth below or to such other address as one party shall give notice of to the other from time to time hereunder. Mailed notices shall be deemed to be received on the third business day following the date of mailing. Notices sent by overnight courier shall be deemed received the following business day.

	
If to Company:

	
Attn:

	
Stephen Turner, CEO

	  	  	
Protea Biosciences, Inc.

	  	  	
955 Hartman Run Road

	  	  	
Morgantown, WV 26507

	  	  	
Fax 304.292.7101

	  	  
	
If to JHU:

	
Director

	  	
Technology Transfer

	  	
Johns Hopkins University

	  	
100 N. Charles Street

	  	
5th Floor

	  	
Baltimore, MD 21201

	  	
Attn: Agreement Number: A15449

 

10.7      Compliance with All Laws. In all activities undertaken pursuant to this Agreement, both JHU and Company covenant and agree that each will in all material respects comply with such Federal, state and local laws and statutes, as may be in effect at the time of performance and all valid rules, regulations and orders thereof regulating such activities.

	 	 	 
	
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10.8      Successors and Assigns. Neither this Agreement nor any of the rights or obligations created herein, except for the right to receive any remuneration hereunder, may be assigned by either party, in whole or in part, without the prior written consent of the other party, except that either party shall be free to assign this Agreement in connection with any sale of substantially all of its assets without the consent of the other. Such assignment shall be subject to JHU approval, which approval shall not be unreasonably withheld. This Agreement shall bind and inure to the benefit of the successors and permitted assigns of the parties hereto.

 

10.9      No Waivers; Severability. No waiver of any breach of this Agreement shall constitute a waiver of any other breach of the same or other provision of this Agreement, and no waiver shall be effective unless made in writing. Any provision hereof prohibited by or unenforceable under any applicable law of any jurisdiction shall as to such jurisdiction be deemed ineffective and deleted herefrom without affecting any other provision of this Agreement. It is the desire of the parties hereto that this Agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held by any governmental agency or court of competent jurisdiction to be void, illegal and unenforceable, the parties shall negotiate in good faith for a substitute term or provision which carries out the original intent of the parties.

 

10.10   Entire Agreement; Amendment. Company and JHU acknowledge that they have read this entire Agreement and that this Agreement, including the attached Exhibits constitutes the entire understanding and contract between the parties hereto and supersedes any and all prior or contemporaneous oral or written communications with respect to the subject matter hereof, all of which communications are merged herein. It is expressly understood and agreed that (i) there being no expectations to the contrary between the parties hereto, no usage of trade, verbal agreement or another regular practice or method dealing within any industry or between the parties hereto shall be used to modify, interpret, supplement or alter in any manner the express terms of this Agreement; and (ii) this Agreement shall not be modified, amended or in any way altered except by an instrument in writing signed by both of the parties hereto.

 

10.11   Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party hereto, shall impair any such right, power or remedy to such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or in any similar breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

	 	 	 
	
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10.12   Force Majeure. If either party fails to fulfill its obligations hereunder (other than an obligation for the payment of money), when such failure is due to an act of God, or other circumstances beyond its reasonable control, including but not limited to fire, flood, civil commotion, riot, war (declared and undeclared), revolution, or embargoes, then said failure shall be excused for the duration of such event and for such a time thereafter as is reasonable to enable the parties to resume performance under this Agreement, provided however, that in no event shall such time extend for a period of more than one hundred eighty (180) days.

 

10.13   Further Assurances. Each party shall, at any time, and from time to time, prior to or after the EFFECTIVE DATE of this Agreement, at reasonable request of the other party, execute and deliver to the other such instruments and documents and shall take such actions as may be required to more effectively carry out the terms of this Agreement.

 

10.14   Survival. All representations, warranties, covenants and agreements made herein and which by their express terms or by implication are to be performed after the execution and/or termination hereof, or are prospective in nature, shall survive such execution and/or termination, as the case may be. Paragraphs 3.9 (Late Payments), 5.2 (Records), and Articles 6, 7, 8, 9, and 10 shall survive termination or expiration of this Agreement.

 

10.15   No Third Party Beneficiaries. Nothing in this Agreement shall be construed as giving any person, firm, corporation or other entity, other than the parties hereto and their successors and permitted assigns, any right, remedy or claim under or in respect of this Agreement or any provision hereof.

 

10.16   Headings. Article headings are for convenient reference and not a part of this Agreement. All Exhibits are incorporated herein by this reference.

 

10.17   Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which when taken together shall be deemed but one instrument.

	 	 	 
	
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IN WITNESS WHEREOF, this Agreement shall take effect as of the EFFECTIVE DATE when it has been executed below by the duly authorized representatives of the parties.

 

	
THE JOHNS HOPKINS UNIVERSITY

	  	
PROTEA BIOSCIENCES, INC

	  	  	  
	
/s/ Wesley D. Blakeslee

	  	
/s/ Stephen Turner

	
Wesley D. Blakeslee, J.D.

	  	
Stephen Turner

	
Executive Director

	  	
Chairman & CEO

	
Johns Hopkins Technology Transfer

	  	  
	
6/2/2009

	  	
6.9.09

	
(Date)

	  	
(Date)

EXHIBIT A. LICENSE FEE & ROYALITIES.

EXHIBIT B. SALES & ROYALTY REPORT FORM.

	 	 	 
	 	 	

	 	 	 
	
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EXHIBIT A

 

LICENSE FEE & ROYALTIES

 

	
1.

	
License Fee: The license fee due under Paragraph 3.1 is Seventy-Five thousand dollars ($75,000).

 

2.   Minimum Annual Royalties: The minimum annual royalties pursuant to Paragraph 3.2 are:

 

	
Anniversary

	 	
Amount

	 
	
1

	 	$	5,000	 
	
2

	 	$	10,000	 
	
3

	 	$	20,000	 
	
4

	 	$	30,000	 
	
5

	 	$	40,000	 
	
6

	 	$	50,000	 
	
7 and every year after

	 	$	50,000	 

 

3.   Royalties: The running royalty rate payable under Paragraph 3.3 is 8% (eight percent).

 

4.    Developmental Milestones: The Developmental Milestones under Paragraph 3.4 are:

 

Within thirty (30) days of the issuance of the first U.S. Patent from the PATENT RIGHTS Company will pay to JHU Twenty-five-thousand ($25,000) U.S. Dollars.

 

Within thirty (30) days of the FIRST COMMERCIAL SALE of an Albumin-Bound Protein/Peptide Complex-based research product, company will pay to JHU Twenty-five Thousand ($25,000) U.S. Dollars.

 

Within thirty (30) days of the submission of the first Albumin-Bound Protein/Peptide Complex-based test for regulatory approval in any country, company will pay to JHU One-hundred-thousand ($100,000) U.S. Dollars.

 

Within thirty (30) days of FIRST COMMERCIAL SALE of an Albumin-Bound Protein/Peptide Complex-based approved diagnostic product, company will pay to JHU One-hundred-seventy-five Thousand ($175,000) U.S. Dollars.

 

	
5.

	
Sublicense consideration: The percent sublicense consideration payable under Paragraph 3.4 is 50% (fifty percent).

	 	 	 
	
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EXHIBIT B

 

QUARTERLY SALES & ROYALTY REPORT

 

FOR LICENSE AGREEMENT BETWEEN ______________ AND

 

THE JOHNS HOPKINS UNIVERSITY DATED

 

FOR PERIOD OF _________ TO _________

 

TOTAL ROYALTIES DUE FOR THIS PERIOD $_________

	
PRODUCT

	  	  	  	
*JHU

	  	
1st COMMERCIAL

	  	
TOTAL NET

	  	
ROYALTY

	  	
AMOUNT

	
ID

	
  

	
PRODUCT NAME

	
  

	
REFERENCE

	
  

	
SALE DATE

	
  

	
SALES/SERVICES

	
  

	
RATE

	
  

	
DUE

	  	  	  	  	  	  	  	  	  	  	  	  	  
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

* Please provide the JHU Reference Number or Patent Reference

 

This report format is to be used to report quarterly royalty statements to JHU. It should be placed on Company letterhead and accompany any royalty payments due for the reporting period. This report shall be submitted even if no sales are reported.

	 	 	 
	
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EXCLUSIVE OPTION AGREEMENT

This Exclusive Option Agreement, (hereinafter called “Agreement”) to be effective as of the 19 day of September, 2001 (hereinafter called “Agreement Date”), is by and between West Virginia University Research Corporation, a West Virginia nonprofit corporation having its principal place of business at 886 Chestnut Ridge Road, Morgantown, West Virginia 26505, for and on behalf of West Virginia University (hereinafter collectively referred to as “WVURC”), and Protea Biosciences, Inc., a Delaware corporation having its principal place of business at 129 W. Patrick Street, Suite 8, Frederick, Maryland 21701, and its Affiliates (hereinafter collectively referred to as “LICENSEE”).

WITNESSETH:

WHEREAS, WVURC is the owner of the Subject Technology as defined below; and

WHEREAS, WVURC is willing to grant an option to obtain an exclusive, worldwide, royalty bearing license to the Subject Technology in the Field to LICENSEE on terms to be mutually agreed upon; and

WHEREAS, LICENSEE desires to obtain said option under the Subject Technology.

NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto expressly agree as follows:

	
1.

	
DEFINITIONS AND RECITALS.

1.1         The term “Affiliate(s)” shall mean any corporation, partnership, joint venture or other entity of which the common stock or other equity ownership thereof is twenty five percent (25%) or more owned by LICENSEE.

1.2         The term “Exclusive License Agreement” shall have the meaning set forth in Section 3.3.

1.3         The term “Core Proteomics Facility” shall mean the designated laboratory where 2D-gel electrophoresis, mass spectrometry, column chromography, and other protein analytical services are provided to WVURC researchers.

1.4         The term “Field” shall mean all inventions related to proteomics conceived of and reduced to practice by or under the direction of the Principal Investigators at the Core Proteomics Facility during the term of this Agreement, any Exclusive License Agreement or any Sponsored Research Agreement (if such agreements are executed by and between the Parties) including any and all improvements or modifications to such inventions conceived of and reduced to practice at the Core Proteomics Facility during such time periods.

  

 

  

1.5         The term “Licensed Product(s)” shall mean all products that incorporate, utilize or are made with the use of the Subject Technology.

1.6         The term “Option” shall have the meaning set forth in Section 2.1.

1.7         The term “Option Period” shall mean, with respect to any invention that forms a part of the Subject Technology, the period commencing on the date of disclosure of such invention by the Principal Investigators to WVURC and terminating on the one year anniversary of such date; provided, however, that the Parties may extend the Option Period with respect to any invention that comprises the Subject Technology by mutual agreement.

1.8         The term “Option Termination Date” shall have the meaning set forth in Section 8.1.

1.9         The term “Party” shall mean either LICENSEE or WVURC, and the term “Parties” shall mean LICENSEE and WVURC.

1.10       The term “Principal Investigators” shall mean Daniel Flynn, Ph.D., John Barnett, Ph.D., Aaron Timperman, Ph.D., and Barbara Ducatman, M.D., and such other individual(s) identified by WVURC to LICENSEE in writing.

1.11       The term “Sponsored Research Agreement” shall have the meaning set forth in Section 6.1.2.

1.12       The term “Stock Purchase Agreement” shall have the meaning set forth in Section 6.1.3.

1.13       The term “Subject Technology” shall mean (i) all technology, cell lines, biological materials, compounds, know-how, methods, documents, materials, tests, devices and all confidential information related to the Field which was developed as of the Agreement Date or which are developed during the term of this Agreement, any Exclusive License Agreement or any Sponsored Research Agreement (if such agreements are executed by and between the Parties); and (ii) any one or more United States patent applications arising out of any invention related to the Field which is conceived of and reduced to practice under and during the term of this Agreement, any Exclusive License Agreement or any Sponsored Research Agreement (if such agreements are executed by and between the Parties) together with any United States patent which issues from any such applications and any and all divisionals, reissues, re-examinations, renewals, continuations, claims of continuations-in-part applications and patents issued therefrom directed to subject matter expressly described in the aforementioned patent applications, and extensions thereof, and all other counterpart, pending or issued patents in all other countries (the “Patent Rights”).

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2.

	
GRANT OF OPTION

2.1        WVURC hereby grants to LICENSEE an option to take an exclusive, royalty bearing, worldwide, right and license under the Subject Technology to make, have made, use, market, sell and offer to sell Licensed Products in the Field (the “Option”).

2.2        During an Option Period, WVURC shall not assign, transfer, grant or otherwise convey (collectively, “assign”) to any other person or entity any rights, or options to obtain rights, to any component or invention that forms a part of the Subject Technology, nor offer to assign any such rights or options to obtain rights to such components or inventions.

	
3.

	
EXERCISE OF OPTION

3.1         LICENSEE may exercise the Option with respect to any component or invention that forms a part of the Subject Technology, and the LICENSEE shall retain the right to continue to exercise the Option with respect to the remaining components and inventions that comprise the Subject Technology for the remainder of the Option Period.

3.2         LICENSEE may exercise the Option with respect to any component or invention that forms a part of the Subject Technology by delivering to WVURC on or before the expiration of the Option Period written notice of such election.

3.3         In the event that LICENSEE fails to exercise the Option with respect to any component or invention that forms a part of the Subject Technology, LICENSEE shall grant to WVURC a royalty-free, non-exclusive, worldwide, sublicensable license to any intellectual property to which LICENSEE has rights necessary to allow WVURC to practice such component or invention.

3.4         The exclusive license or licenses, as applicable, referenced in Section 2.1 shall be in substantially the form of the Exclusive License Agreement attached hereto as Exhibit A (each an “Exclusive License Agreement”). Except as otherwise agreed by the Parties, the license fees, royalty payments, minimum royalty payments and milestones and related milestone payments, if applicable, with respect to each Exclusive License Agreement shall be as set forth in the form of Exclusive License Agreement attached hereto.

	
4.

	
ACCESS TO CORE PROTEOMICS FACILITY

During the terms of this Agreement, any Exclusive License Agreement and any Sponsored Research Agreement (if such agreements are executed by and between the Parties) the Principal Investigators and personnel of LICENSEE shall have access to and the right to use the Core Proteomics Facility. Such access and use shall be on such reasonable terms and conditions to be mutually agreed upon by WVURC and LICENSEE.

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5.

	
PATENTS AND INFRINGEMENT

5.1        During the terms of this Agreement and any Exclusive License Agreement (if such agreements are executed by and between the Parties) LICENSEE shall control the development, filing, prosecution and maintenance of the Patent Rights; provided, however, that (i) all filings shall be made in the name and for the benefit of WVURC, (ii) LICENSEE shall provide WVURC with a reasonable opportunity to review and provide input with respect to any patent applications, confirmations, divisionals or related applications with respect to the Subject Technology prior to the filing thereof, and (iii) LICENSEE shall not make any substantive decision with respect to the filing, prosecution, and maintenance of the Patent Rights without first obtaining the consent of WVURC, which consent will not be unreasonably withheld.

5.2         LICENSEE agrees to pay all costs incident to filing, prosecuting and maintaining the Patent Rights in the United States and elected foreign countries, and any and all costs incurred in filing continuations, divisionals or related applications thereon and any re-examination or reissue proceedings thereof during the term of this Agreement.

5.3        LICENSEE agrees to keep WVURC and its patent counsel fully informed of all prosecutions and other actions pursuant to this Section 5, including submitting to WVURC copies of all official actions and responses thereto. Notwithstanding the foregoing LICENSEE shall select all outside counsel for the prosecution of the Patent Rights.

5.4        In the event that LICENSEE decides not to pay for costs associated with either (i) the prosecution of any patent application that forms a part of the Patent Rights to issuance or (ii) maintenance of any United States or foreign issued patent on any invention that forms a part of the Patent Rights, LICENSEE shall timely notify WVURC of such decision, which notice shall constitute an irrevocable waiver of LICENSEE’S rights therein, if any, including, without limitation, improvements thereto, and WVURC shall have the right to assume said costs and the prosecution and maintenance of such patent or patents. LICENSEE’S right to practice the invention under such patent shall immediately terminate upon the giving of such notice. If LICENSEE fails to notify WVURC in sufficient time for WVURC to assume said costs prior to the abandonment or expiration of any Patent Rights, LICENSEE shall be considered in default of this Agreement.

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-4-

  

5.5         Each Party shall promptly inform the other of any suspected infringement of any claims in the Patent Rights or the misuse, misappropriation, theft or breach of confidence of other proprietary rights in the Subject Technology by a third party, and with respect to such activities as are suspected, LICENSEE shall have the right, but not the obligation, to institute an action for infringement, misuse, misappropriation, theft or breach of confidence of the proprietary rights against such third party. If LICENSEE fails to bring such an action or proceeding within a period of three (3) months after receiving notice or otherwise having knowledge of such infringement, then WVURC shall have the right, but not the obligation, to prosecute the same at its own expense. Should either WVURC or LICENSEE commence suit under the provisions of this Section 5.5 and thereafter elect to abandon the same, it shall give timely notice to the other Party who may, if it so desires, continue prosecution of such action or proceeding. All recoveries, whether by judgment, award, decree or settlement, from infringement or misuse of Subject Technology shall be apportioned as follows: the Party bringing the action or proceeding shall first recover an amount equal to the costs and expenses actually incurred by such Party directly related to the prosecution of such action or proceeding, and the remainder shall be divided equally between LICENSEE and WVURC. WVURC and LICENSEE may agree, at any time before or during the prosecution of any such action or proceeding, to jointly bring or continue the action. Such joint action shall be brought in the names of both WVURC and LICENSEE. If WVURC and LICENSEE decide to jointly prosecute an action or proceeding after it has been instituted, the action shall be continued in the name or names they both agree is expedient for efficient prosecution of such action. In the event of such joint action or proceeding, the out-of-pocket costs shall be borne equally, and any recovery or settlement shall be shared equally. LICENSEE and WVURC shall agree to the manner in which they shall exercise control over any joint action or proceeding. In the absence of such agreement, LICENSEE shall control such joint action or proceeding. WVURC may elect to be represented by separate counsel of its own selection in such joint action or proceeding, the fees for which counsel shall be paid by WVURC.

5.6         Neither WVURC nor LICENSEE shall settle any action covered by Section 5.5 without first obtaining the consent of the other Party, which consent will not be unreasonably withheld.

5.7         WVURC shall not be liable for any losses incurred as the result of an action for infringement brought against LICENSEE as the result of LICENSEE’s exercise of any right granted under this Agreement. The decision to defend or not defend shall be in LICENSEE’s sole discretion.

	
6.

	
COMPENSATION

6.1         As full consideration for the Option granted by WVURC to LICENSEE pursuant to Section 2.1 hereof, LICENSEE shall provide compensation to WVURC as follows:

6.1.1           LICENSEE shall use commercially reasonable efforts to raise capital to finance the purchase of instrumentation and equipment for the Core Proteomics Facility during the term of this Agreement. LICENSEE may also provide such instrumentation and equipment directly. LICENSEE shall also provide support to the Core Proteomics Facility in the form of LICENSEE’s personnel during the Option Period.

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6.1.2           LICENSEE shall, from time to time, sponsor specific, Principal Investigator-directed, research programs pursuant to separately negotiated Sponsored Research Agreements (each a “Sponsored Research Agreement”). Each such Sponsored Research Agreement shall be on such terms and conditions to be mutually agreed upon by the Parties.

6.1.3           LICENSEE shall issue to WVURC an equity interest in LICENSEE, which following such issuance shall be equal to twenty percent (20%) of the outstanding common stock, par value $0.001, of LICENSEE. Such issuance shall be made pursuant to a Stock Purchase Agreement in substantially the form of the Stock Purchase Agreement attached hereto as Exhibit B (the “Stock Purchase Agreement”). Except as otherwise agreed in writing by the Parties, the closing of the Stock Purchase Agreement and the transactions contemplated thereby shall occur no later than ten (10) days following the Agreement Date.

6.1.4           WVURC shall be entitled to receive additional compensation from LICENSEE pursuant to each Exclusive License Agreement and each Sponsored Research Agreement as set forth therein if the same are executed by and between the Parties.

6.2         All reimbursements and cash payments due hereunder shall be paid in United States of America currency, without deduction of exchange, collection or other charges, to WVURC by check, or to the account of WVURC at such bank as WVURC may from time to time designate by written notice to LICENSEE.

6.3         All reimbursements and cash payments shall be sent to the address listed in Section 11.1.

	
7.

	
REPRESENTATIONS AND WARRANTIES.

7.1         WVURC hereby represents and warrants to LICENSEE as follows, intending and acknowledging that LICENSEE shall rely upon such representations and warranties:

7.1.1           Except for the rights, if any, of the United States Government, as set forth below, WVURC hereby represents that it has the full right and power to enter into this Agreement and to grant the Option set forth in this Agreement.

7.1.2           WVURC warrants that each Principal Investigator and inventor of the Subject Technology has executed acknowledgements pursuant to which each has affirmed his or her obligations under the West Virginia University Patent Policy, which, among other things, requires such individuals to assign to WVURC all inventions that any of them conceive of and reduce to practice in conjunction with their employment at West Virginia University. WVURC further covenants that the Principal Investigators shall cause each additional researcher or inventor who may perform research related to the Subject Technology during the term of this Agreement, any Exclusive License Agreement or any Sponsored Research Agreement (if such agreements are executed by and between the Parties) to acknowledge the same obligations.

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7.1.3           WVURC makes no other warranties concerning its rights covered by this Agreement. WVURC makes no express or implied warranty of merchantability or fitness for a particular purpose as to any License Product. WVURC makes no representation or warranty as to the validity and scope of the Patent Rights or that any Licensed Product will be free from an infringement of patents of third parties, or that no third parties are in any way infringing the Patent Rights.

7.2         LICENSEE understands that if the United States Government (through any of its agencies or otherwise) has funded research during the course of or under which any of the Patent Rights were or are conceived or made, the United States Government may have certain requirements and rights relative thereto. Any license granted to LICENSEE as a result of this Agreement shall be subject to such requirements and rights.

	
8.

	
TERMINATION.

8.1         Unless earlier terminated as hereinafter provided, this Agreement shall terminate on the later to occur of (a) the fifth (5th) anniversary of the Agreement Date or (b) the latest effective date of a termination of any Sponsored Research Agreement (the “Option Termination Date”); provided, however, that the Parties may extend the Option Termination Date by mutual agreement.

8.2         On or after the second (2nd) anniversary of the Agreement Date, WVURC shall have the right to cancel and terminate this Agreement in the event that the aggregate financial support LICENSEE has provided to the Core Proteomics Facility and in the form of sponsored research pursuant to Sections 5.1, 6.1.1 and 6.1.2 is not equal to at least $300,000 or its equivalent, taking into consideration non-monetary support in the form of patent expenses, direct instrumentation and equipment contributions, labor and other forms of non-monetary support provided by LICENSEE to the Core Proteomics Facility.

8.3         WVURC shall have the right, at its option, to cancel and terminate this Agreement in the event that LICENSEE shall (i) become the subject of insolvency, dissolution, bankruptcy or receivership proceedings affecting the operation of its business or (ii) make an assignment of all or substantially all of its assets for the benefit of creditors, or in the event that (iii) a receiver or trustee is appointed for LICENSEE and LICENSEE shall, after the expiration of thirty (30) days following any of the events enumerated above, have been unable to secure a dismissal of such proceedings.

8.4         At the date of any termination of this Agreement pursuant to Section 8.2 or Section 8.3 hereof, (i) all rights to the Subject Technology shall revert to WVURC, (ii) the Option granted in Section 2.1 shall terminate on the effective date of such termination, and (iii) WVURC shall be free to license the Subject Technology to any third party without any further obligation to LICENSEE; provided, however, that in the event that any patent to which LICENSEE has rights is necessary to practice the Subject Technology, LICENSEE shall grant WVURC a royalty-free, non-exclusive, worldwide, sublicensable license to such patent.

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8.5         In the event this Agreement is terminated pursuant to Section 8.2 or Section 8.3 hereof, WVURC shall be under no obligation to refund payments made by LICENSEE.

8.6         No termination of this Agreement shall constitute a termination or a waiver of any rights of either Party against the other Party accruing at or prior to the time of such termination. The obligations of Section 12 hereof shall survive termination of this Agreement.

	
9.

	
ASSIGNABILITY

This Agreement shall be binding upon and shall inure to the benefit of WVURC and its assigns and successors in interest, and shall be binding upon and shall inure to the benefit of LICENSEE and the successor to all or substantially all of its assets or business to which this Agreement relates, but shall not otherwise be assignable or assigned by LICENSEE without prior written approval by WVURC being first obtained.

	
10.

	
GOVERNMENTAL COMPLIANCE

LICENSEE shall at all times during the Option Period and for so long as it shall use the Subject Technology comply with all laws that may control the import, export, manufacture, use, sale, marketing, distribution and other commercial exploitation of the Subject Technology or any other activity undertaken pursuant to this Agreement.

	
11.

	
ADDRESSES

11.1       All payments shall be made payable to “West Virginia University Research Corporation” and shall be sent to the address below:

	
  

	
West Virginia Research Corporation

	
Tax ID# 55-066-5758-001

886 Chestnut Ridge Road

Suite 208

P.O. Box 6216

Morgantown, WV 26506-6216

11.2       All notices or other communication pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent to such Party by United States Postal Service certified mail, return receipt requested, postage prepaid, or via overnight courier, or facsimile transmission provided that facsimile transmissions are promptly confirmed by first class mail, addressed to it at its address below or as it shall designate by written notice given to the other Party:

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In the case of WVURC:

	
In the case of LICENSEE:

	  	  
	
President

	
Stephen Turner

	
West Virginia University

	
President

	
Research Corporation

	
Protea Biosciences, Inc.

	
886 Chestnut Ridge Road

	
129 West Patrick Street

	
Suite 208

	
Suite 8

	
P.O. Box 6216

	
Frederick, MD 21701

	
Morgantown, WV 26506-6216

	  
	  	  
	
Facsimile No. 304-293-7498

	
Facsimile No. 301-662-3206

	
12.

	
ADDITIONAL PROVISIONS

12.1       Use of Names and Trademarks. Neither Party has any right to use any name, trade name, trademark, or other designation of the other Party (including any contraction, abbreviation, or simulation) in advertising, publicity or promotional activities without the prior written consent of the other Party.

12.2       Publication. WVURC retains the right to publish or otherwise publicly disclose information it has gained in the course of research sponsored by LICENSEE under any Sponsored Research Agreement (if such agreement is executed by and between the Parties) in professional journals, meeting seminars, and the like. Appropriate recognition of LICENSEE’S support will be included in all such reports. However, in recognition of LICENSEE’S interest in WVURC’s patent protection, WVURC shall provide LICENSEE with the final draft of any manuscript describing studies within the Field and resulting from research sponsored under any Sponsored Research Agreement at least thirty (30) days prior to publication.

12.3       Mutual Confidentiality. LICENSEE and WVURC realize that some information received by one Party from the other pursuant to this Agreement shall be confidential. It is therefore agreed that any information received by one Party from the other and designated in writing as “Confidential” at the time of the transfer, shall not be disclosed by either Party to any third party without the other Party’s prior written consent unless or until (i) said information shall become known to third persons or shall become publicly known through no fault of the receiving Party, (ii) said information was already in the receiving Party’s possession prior to the disclosure of said information to the receiving Party, (iii) said information shall be subsequently disclosed to the receiving Party by a third party who is not under any obligation of confidentiality to the disclosing Party, or (iv) said information is required to be disclosed by court rule or governmental law or regulation, provided that the receiving Party gives the disclosing Party prompt notice of any such requirement and cooperates with the disclosing Party in attempting to limit such disclosure. Except as otherwise excluded by the foregoing, for purposes of this Section 12.3, the Subject Technology shall constitute and be treated as confidential information.

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12.4       Indemnification.

12.4.1         Each Party shall notify the other of any claim, lawsuit or other proceeding related to the Subject Technology.

12.4.2         LICENSEE agrees that it will defend, indemnify and hold harmless WVURC, its faculty members, scientists, researchers, employees, officers, trustees and agents and each of them (the “WVURC Indemnified Parties”), from and against any and all claims, causes of action, lawsuits or other proceedings (the “WVURC Claims”) filed or otherwise instituted against any of the WVURC Indemnified Parties related directly or indirectly to or arising out of the design, process, manufacture or use by any person or party of the Subject Technology, the Licensed Products or any other embodiment of the Subject Technology even though such WVURC Claims and the costs (including, without limitation, the payment of all reasonable attorneys’ fees and costs of litigation or other defense) related thereto result in whole or in part from the negligence of any of the WVURC Indemnified Parties or are based upon doctrines of strict liability or product liability; provided, however, that such indemnity shall not apply to any WVURC Claims arising from the gross negligence or intentional misconduct of any WVURC Indemnified Party. LICENSEE will also assume responsibility for all costs and expenses related to such WVURC Claims for which it is obligated to indemnify the WVURC Indemnified Parties pursuant to this Section 12.4.2, including, but not limited to, the payment of all reasonable attorneys’ fees and costs of litigation or other defense.

12.5       Independent Contractors. The Parties hereby acknowledge and agree that each is an independent contractor and that neither Party shall be considered to be the agent, representative, master or servant of the other Party for any purpose whatsoever, and that neither Party has any authority to enter into a contract, to assume any obligation or to give warranties or representations on behalf of the other Party. Nothing in this Agreement shall be construed to create a relationship of joint venture, partnership, fiduciary or other similar relationship between the Parties.

12.6       Non-Waiver. The Parties covenant and agree that if a Party fails or neglects for any reason to take advantage of any of the terms provided for the termination of this Agreement or if a Party, having the right to declare this Agreement terminated, shall fail to do so, any such failure or neglect by such Party shall not be a waiver or be deemed or be construed to be a waiver of any cause for the termination of this Agreement subsequently arising, or as a waiver of any of the terms, covenants or conditions of this Agreement or of the performance thereof. None of the terms, covenants and conditions of this Agreement may be waived by a Party except by its written consent.

12.7       Reformation. The Parties hereby agree that neither Party intends to violate any public policy, statutory or common law, rule, regulation, treaty or decision of any government agency or executive body thereof of any country or community or association of countries, and that if any word, sentence, section or clause or combination thereof of this Agreement is found, by a court or executive body with judicial powers having jurisdiction over this Agreement or any of the Parties hereto, in a final, unappealable order to be in violation of any such provision in any country or community or association of countries, such words, sentences, sections or clauses or combination shall be inoperative in such country or community or association of countries, and the remainder of this Agreement shall remain binding upon the Parties hereto.

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12.8       Force Majeure. No liability hereunder shall result to a Party by reason of delay in performance caused by force majeure, that is circumstances beyond the reasonable control of the Party, including, without limitation, acts of God, fire, flood, war, civil unrest, labor unrest, or shortage of or inability to obtain material or equipment.

12.9       Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the internal laws of the State of West Virginia, without regard to the principles of conflicts of law.

12.10     Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument.

12.11     Entire Agreement. The terms and conditions herein constitute the entire agreement between the Parties and shall supersede all previous agreements, either oral or written, between the Parties hereto with respect to the subject matter hereof. No agreement of understanding bearing on this Agreement shall be binding upon either Party hereto unless it shall be in writing and signed by the duly authorized officer or representative of each of the Parties and shall expressly refer to this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement in multiple originals by their duly authorized officers and representatives on the respective dates shown below, but effective as of the Agreement Date.

	
PROTEA BIOSCIENCES, INC.

	
WEST VIRGINIA UNIVERSITY

	  	
RESEARCH CORPORATION

	  	  
	
By:

	
/s/ Stephen Turner

	  	
By:

	
/s/ John D. Weete

	  
	  	
Stephen Turner

	  	  	
Name: John D. Weete

	  
	  	
President

	  	  	
Title: President

	  
	  	  	  	  	  	  
	
Date:

	
9-19-01

	  	
Date:

	
9-19-01

	  

 

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Exhibit A

(Form of Exclusive License Agreement)

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