Document:

Filed by Bowne Pure Compliance

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August 29, 2008, by and
between COLORADO GOLDFIELDS INC., a Nevada corporation (the “Company”), and YA GLOBAL
INVESTMENTS, L.P., (the “Investor”).

WHEREAS:

A. In connection with the Standby Equity Distribution Agreement by and between the parties
hereto of even date herewith (the “Standby Equity Distribution Agreement”), the Company has
agreed, upon the terms and subject to the conditions of the Standby Equity Distribution Agreement,
to issue and sell to the Investor shares of the Company’s common stock, par value $0.001 per share
(the “Common Stock”), which can be purchased pursuant to the terms of the Standby Equity
Distribution Agreement. Capitalized terms not defined herein shall have the meaning ascribed to
them in the Standby Equity Distribution Agreement.

B. To induce the Investor to execute and deliver the Standby Equity Distribution Agreement,
the Company has agreed to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the “Securities Act”), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Investor hereby agree as follows:

1. DEFINITIONS.

As used in this Agreement, the following terms shall have the following meanings:

a. “Person” means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.

b. “Register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or
any successor rule providing for offering securities on a continuous or delayed basis (“Rule
415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by
the United States Securities and Exchange Commission (the “SEC”).

c. “Registrable Securities” means the Investor’s Shares, as defined in the Standby
Equity Distribution Agreement, and shares of Common Stock issuable to Investors pursuant to the
Standby Equity Distribution Agreement.

d. “Registration Statement” means a registration statement under the Securities Act
which covers the Registrable Securities.

 

 

 

2. REGISTRATION.

a. Filing of a Registration Statement. The Company shall prepare and file with the
SEC a Registration Statement on Form S-1 or on such other form as is available. The Company shall
cause such Registration Statement to be declared effective by the SEC prior to the first sale to
the Investor of the Company’s Common Stock pursuant to the Standby Equity Distribution Agreement.
After a Registration Statement is declared effective, the Company shall insure that the
Registration Statement and any subsequent Registration Statements remain in effect until all of the
Registrable Securities have been sold, or may be sold without restriction pursuant to Rule 144.

b. Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover
all of the Registrable Securities the Company shall amend the Registration Statement, or file a new
Registration Statement, or both, so as to cover all of such Registrable Securities as soon as
practicable, but in any event not later than fifteen (15) days after the necessity therefore
arises. The Company shall use it best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a Registration Statement shall be
deemed “insufficient to cover all of the Registrable Securities” if at any time the number of
Registrable Securities issuable on an Advance Notice Date is greater than the number of shares
available for resale under such Registration Statement.

3. RELATED OBLIGATIONS.

a. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under
the Securities Act, as may be necessary to keep such Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable Securities shall have
been disposed of in accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-K, Form 10-Q
or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), the Company shall have incorporated such report by reference into the
Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on
the same day on which the Exchange Act report is filed which created the requirement for the
Company to amend or supplement the Registration Statement.

b. The Company shall furnish to the Investor without charge, (i) at least one copy of such
Registration Statement as declared effective by the SEC and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, all exhibits
and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such
other number of copies as such Investor may reasonably request) and (iii) such other documents as
such Investor may reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Investor.

 

 

 

c. The Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities or “blue sky” laws of
such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to maintain the effectiveness thereof
during the Registration Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change to its certificate of incorporation or
by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction. The Company shall
promptly notify the Investor of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable Securities for sale under
the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

d. As promptly as practicable after becoming aware of such event or development, the Company
shall notify the Investor in writing of the happening of any event as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material, nonpublic
information), and promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such supplement or
amendment to each Investor. The Company shall also promptly notify the Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when
a Registration Statement or any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to the Investor by facsimile on the same day of such
effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would be appropriate.

e. The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction within the United States of America
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension
at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.

 

 

 

f. At the reasonable request of the Investor, the Company shall furnish to the Investor, on
the date of the effectiveness of the Registration Statement and thereafter from time to time on
such dates as the Investor may reasonably request (i) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering, and
(ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in an underwritten
public offering, addressed to the Investor.

g. The Company shall make available to the Investor (and will deliver to Investor’s counsel),
(i) copies of any Registration Statement at least 3 business days prior to filing thereof, and (ii)
subject to restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all public correspondence between the Commission and the Company
concerning the Registration Statement. The Company will make available for inspection by the
Investor and any attorney, accountant or other professional retained by the Investor (collectively,
the “Inspectors”) all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the “Records”), as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and cause the Company’s
officers, directors and employees to supply all information which any Inspector may reasonably
request in connection with the Registration Statement. The Investor agrees that Records obtained
by it as a result of such inspections which is conspicuously marked by the Company as
“Confidential” (subject to the Company’s obligations with respect to material non-public
information set forth in Section 8.1(a) herein) shall be deemed confidential and held in strict
confidence by the Investor, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise required under the
Securities Act, (b) the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or (c) the information
in such Records has been made generally available to the public other than by disclosure in
violation of this or any other agreement of which the Inspector and the Investor has knowledge.
The Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means, give prompt notice
to the Company and allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed confidential.

h. The Company shall hold in confidence and not make any disclosure of information concerning
the Investor provided to the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the
Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information.

 

 

 

i. The Company shall use its best efforts either to cause all the Registrable Securities
covered by a Registration Statement (i) to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange or to
secure the inclusion for quotation on a Primary Market. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(j).

j. The Company shall cooperate with the Investor to the extent applicable, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the Investor may
reasonably request and registered in such names as the Investor may request.

k. The Company shall use its best efforts to cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

l. The Company shall make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company’s fiscal quarter next
following the effective date of the Registration Statement.

m. The Company shall otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

n. Within two (2) business days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investor) confirmation that such Registration Statement has been declared effective
by the SEC in the form attached hereto as Exhibit A.

o. The Company shall take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of Registrable Securities pursuant to a Registration Statement.

4. OBLIGATIONS OF THE INVESTOR.

The Investor agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(d), the Investor will immediately discontinue disposition
of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable
Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(d) or receipt of notice that no supplement or amendment is

 

 

 

required. Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended certificates for shares of Common Stock to a transferee of the Investor
in accordance with the terms of the Standby Equity Distribution Agreement in connection with any
sale of Registrable Securities with respect to which the Investor has entered into a contract for
sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of
the kind described in Section 3(d) and for which the Investor has not yet settled.

5. EXPENSES OF REGISTRATION.

All expenses incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees,
printers, legal and accounting fees shall be paid by the Company.

6. INDEMNIFICATION.

With respect to Registrable Securities which are included in a Registration Statement under
this Agreement:

a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend the Investor, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls the Investor within the meaning of the
Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether
or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which
any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of the offering under
the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are
offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in any final prospectus
(as amended or supplemented, if the Company files any amendment thereof or supplement thereto with
the SEC) or the omission or alleged omission to state therein any material fact necessary to make
the statements made therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any other law, including, without limitation, any state securities law, or
any rule or regulation there under relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”). The Company shall reimburse the Investor and each such
controlling person promptly as such expenses are incurred and are due and payable, for any legal
fees or disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the contrary contained

 

 

 

herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a
Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by such Indemnified
Person expressly for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim
is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, if such prospectus was timely made available by the Company pursuant to
Section 3(e); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person.

b. In connection with a Registration Statement, the Investor agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration Statement and each
Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange
Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the
extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by the Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(d), the Investor will reimburse any legal or
other expenses reasonably incurred by them in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written consent of the
Investor, which consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified Party.
Notwithstanding anything to the contrary contained herein, the indemnification agreement contained
in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained in the prospectus
was corrected and such new prospectus was delivered to the Investor prior to the Investor’s use of
the prospectus to which the Claim relates.

c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an

 

 

 

Indemnified Person or Indemnified Party shall have the right to retain its own counsel with
the fees and expenses of not more than one counsel for such Indemnified Person or Indemnified Party
to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully
apprised at all times as to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to
entry of any judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or litigation.
Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action.

d. The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

e. The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7. CONTRIBUTION.

To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of such Registrable
Securities.

 

 

 

8. REPORTS UNDER THE EXCHANGE ACT.

With a view to making available to the Investor the benefits of Rule 144 promulgated under the
Securities Act or any similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration (“Rule 144”)
the Company agrees to:

a. make and keep public information available, as those terms are understood and defined in
Rule 144;

b. file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the Company’s obligations
under Section 6.3 of the Standby Equity Distribution Agreement) and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.

9. AMENDMENT OF REGISTRATION RIGHTS.

Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only by a written
agreement between the Company and the Investor. Any amendment or waiver effected in accordance
with this Section 9 shall be binding upon the Investor and the Company. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of any provision of
any of this Agreement unless the same consideration also is offered to all of the parties to this
Agreement.

10. MISCELLANEOUS.

a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is
deemed to own of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from
the registered owner of such Registrable Securities.

 

 

 

b. Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day after deposit with a
nationally recognized overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications shall be:

	 	 	 
	If to the Company, to:

	 	Colorado Goldfields Inc.
	 

	 	10920 W. Alameda Avenue, Suite 207
	 

	 	Lakewood, Colorado 80226
	 

	 	Attention: Chief Executive Officer
	 

	 	Telephone: (303) 984-5324
	 

	 	Facsimile: (303) 484-2935
	 
	 	 
	With a copy to:
	 	 
	 

	 	David A. Thayer
	 

	 	Jackson Kelly, Attorneys at Law
	 

	 	1099 18th St Ste 2150
	 

	 	Denver, CO 80202-1958
	 
	 	 
	If to the Investor, to:

	 	YA Global Investments, L.P.
	 

	 	101 Hudson Street — Suite 3700
	 

	 	Jersey City, New Jersey 07302
	 

	 	Attention: Mark Angelo
	 

	 	Portfolio Manager
	 

	 	Telephone: (201) 985-8300
	 

	 	Facsimile: (201) 985-8266
	 
	 	 
	With a copy to:

	 	David Gonzalez, Esq.
	 

	 	101 Hudson Street — Suite 3700
	 

	 	Jersey City, NJ 07302
	 

	 	Telephone: (201) 985-8300
	 

	 	Facsimile: (201) 985-8266

Any party may change its address by providing written notice to the other parties hereto at least
five days prior to the effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C) provided by a courier
or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.

c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

 

 

 

d. The corporate laws of the State of Nevada shall govern all issues concerning the relative
rights of the Company and the Investor. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the internal laws of the
State of New Jersey, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New Jersey or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New Jersey. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the Superior Courts of the State of New
Jersey, sitting in Hudson County, New Jersey and the Federal District Court for the District of New
Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. If
any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

e. This Agreement shall inure to the benefit of and be binding upon the permitted successors
and assigns of each of the parties hereto.

f. The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

g. This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.

h. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

 

 

i. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent and no rules of strict construction will be applied against any
party.

j. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed as of day and year first above written.

	 	 	 	 	 
	 	 	Colorado Goldfields Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ C. Stephen Guyer
	 

	 	 	 	 
	 	 	Name: C. Stephen Guyer
	 	 	Title: Chief Financial Officer
	 
	 	 	 	 
	 	 	YA Global Investments, L.P.
	 
	 	 	 	 
	 	 	By: Yorkville Advisors, LLC
	 	 	Its: Investment Manager
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Mark Angelo
	 

	 	 	 	 
	 	 	Name: Mark Angelo
	 	 	Title: Portfolio Manager

 

 

 

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

Attention:

Re: COLORADO GOLDFIELDS INC.

Ladies and Gentlemen:

We are counsel to Colorado Goldfields Inc. (the “Company”), and have represented the
Company in connection with that certain Standby Equity Distribution Agreement (the “Standby
Equity Distribution Agreement”) entered into by and between the Company and YA Global
Investments, LP (the “Investor”) pursuant to which the Company issued to the Investor
shares of its Common Stock, par value $0.001 per share (the “Common Stock”). Pursuant to
the Standby Equity Distribution Agreement, the Company also has entered into a Registration Rights
Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities
Act”). In connection with the Company’s obligations under the Registration Rights Agreement,
on
 _____ 
, the Company filed a Registration Statement on Form
 _____ 
(File No.
333-
 _____ 
) (the “Registration Statement”) with the Securities and Exchange
Commission (the “SEC”) relating to the Registrable Securities which names the Investor as a
selling stockholder thereunder.

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised
us by telephone that the SEC has entered an order declaring the Registration Statement effective
under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that purpose are pending
before, or threatened by, the SEC and the Registrable Securities are available for resale under the
Securities Act pursuant to the Registration Statement.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

cc: YA Global Investments, L.P.Exhibit 10.1  Exclusive Option Agreement

                        EXCLUSIVE OPTION AGREEMENT
                        --------------------------

   This Agreement, effective as of May 1, 2006("Effective Date"), by and
between The Penn State Research Foundation (hereinafter referred to as
"PSRF"), a non-profit corporation duly organized and existing under the laws
of the Commonwealth of Pennsylvania and having an office at 304 Old Main,
University Park, PA 16802, and Northwest Medical Research Inc. (hereinafter
referred to as "NW MEDICAL"), having its principal office at Northwest
Medical Research, Inc., #90 NW Second Street, P.O. Box 910, Stevenson,
Washington 98648.

                                WITNESSETH

   WHEREAS, Dr. Robert Beelman, Joy Dubost and Devin Peterson, employees of
The Pennsylvania State University (hereinafter referred to as "UNIVERSITY"),
have filed PSU Invention Disclosure No. 2005-3098, which is entitled
"Identification of Selenoergothioneine as a Natural Organic Form of Selenium
from Cultivated Mushrooms", hereinafter referred to as the ("INVENTION")
which INVENTION is the property of the UNIVERSITY;

   WHEREAS, PSRF is dedicated to fostering and advancing scientific research
within the Commonwealth of Pennsylvania and, in particular, within the
UNIVERSITY and is responsible for developing inventions made by employees of
the UNIVERSITY by evaluating invention disclosures, pursuing patents and
licensing patents which are obtained thereon;

   WHEREAS, PSRF is the owner of certain "LICENSED PATENTS" (as later
defined herein) and has the right and ability to grant option rights to the
LICENSED PATENTS hereunder;

   WHEREAS, PSRF desires to have LICENSED PATENTS (as defined hereinbelow)
covering certain aspects of INVENTION utilized in the public interest and is
willing to grant licenses thereto;

WHEREAS, NW MEDICAL has represented to PSRF an interest in obtaining an
exclusive option to obtain an exclusive, remuneration-bearing license to
LICENSED PRODUCTS (as hereinafter defined) upon the terms and conditions
hereinafter set forth;

   NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises set forth in this Option Agreement, and with intent
to be legally bound, the parties hereto agree as follows:

                          ARTICLE I - DEFINITIONS

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

   1.1   "NW MEDICAL" shall mean Northwest Medical Research Inc.

   1.2   "LICENSED PATENTS" shall mean all of the following PSRF
Intellectual Property:

   (a) United States patent application(s) covering INVENTION, which is
       derived from U.S. Provisional Patent Application No. 60/782,204,
       filed on March 14, 2006, and names Robert Beelman, Joy Dubost, Devin
       Peterson and Marvin Hausman as co-inventors and any patents issuing
       thereon;

<PAGE>

                                      2

   (b) Any reissues, extensions, divisional applications, and continuations
       of the patent applications described in (a) above, and any patents
       issuing thereon;

   (c) Any Patent Cooperation Treaty (PCT) patent application claiming
       priority to U.S. Provisional Patent Application No. 60/782,204, which
       may be filed and pending during the Option Period (as hereinafter
       defined). NW MEDICAL understands and agrees that NW MEDICAL shall
       directly reimbursed PSRF for all reasonable costs incurred in
       obtaining, maintaining, and defending said PATENT RIGHTS pursuant to
       Article VII of this Agreement, after exercising its option pursuant
       to Paragraph 3.7 herein. Foreign patent rights shall specifically
       refer to the above referenced PCT patent application as well as any
       and all foreign counterpart applications of subparagraphs (a) and (b)
       above. and the resulting patents thereon, in those foreign countries
       from which NW MEDICAL has elected exclusive license rights. Exclusive
       foreign license rights in any particular country or territory shall
       be subject to termination in the event NW MEDICAL notifies PSRF that
       it no longer wishes to pay for the costs of prosecuting applications
       or maintaining patents in particular countries.

   1.3   "LICENSED PRODUCTS" shall mean any product, part thereof, or
process of which (i) is covered in whole or in part by an issued, unexpired
claim or a pending claim contained in the LICENSED PATENTS in the country in
which any such product or part thereof is made, used or sold, (ii) is
manufactured by using a process or is employed to practice a process which
is covered in whole or in part by an issued, unexpired claim or a pending
claim contained in the LICENSED PATENTS in the country in which any such
processes are used or in which such product or part thereof is used or sold,
or (iii) is covered by TECHNICAL INFORMATION.

   1.4   "Commercial Sale" shall mean (1) any transaction which transfers to
a purchaser physical possession of and title to LICENSED PRODUCTS and (2) in
the case of LICENSED PRODUCTS used by NW MEDICAL, upon NW MEDICAL's
commercial use of LICENSED PRODUCTS.

   1.5   "NET SALES" shall mean the gross selling price for LICENSED
PRODUCTS produced hereunder upon their sale by NW MEDICAL, but less
discounts allowed in amounts customary in the trade, sales, tariff duties
and/or taxes directly imposed and with reference to particular sales;
outbound transportation prepaid or allowed, and amounts allowed or credited
on returns. LICENSED PRODUCTS shall be considered "sold" when billed out or
invoiced. For LICENSED PRODUCTS used by NW MEDICAL in its own operations and
not sold commercially, the "NET SALES" shall be deemed to be NW MEDICAL's
bona fide price for similar LICENSED PRODUCTS sold to third parties.

   1.6   "TECHNICAL INFORMATION" shall mean all technical information, know-
how, data concerning chemical and physical properties, methods of
preparation or manufacture, experimental results, compositions, apparatuses,
formulations, specifications, processes, techniques and data which are not
readily available to others through public means and which are not the
subject of an issued or pending patent claim in a country in which LICENSED
PRODUCTS are manufactured, sold or employed relative to the practice of the
INVENTION, including materials, antibodies, components, proteins,
compositions and the like which are in the possession of PSRF as of the
Effective Date of this Option Agreement and are provided to NW

<PAGE>

                                    3

MEDICAL or are developed, replicated, acquired or derived therefrom by or on
behalf of NW MEDICAL using INVENTION provided by PSRF during the term of
this Option Agreement. TECHNICAL INFORMATION shall be documented as Appendix
A of this Agreement and the corresponding License Agreement.

   1.8   "Research Agreement" shall mean one or more sponsored research
agreement(s) with UNIVERSITY, which funds research in the laboratory of Dr.
Robert Beelman in order to further develop LICENSED INTELLECTUAL PROPERTY,
and which contains a budget consistent with the Term Sheet (as attached as
Appendix A).

   1.9   "LICENSED INTELLECTUAL PROPERTY" shall mean LICENSED PATENTS,
TECHNICAL INFORMATION and INVENTION.

                     ARTICLE II- RESEARCH AGREEMENT
                     ------------------------------

   2.1   During the Option Period, the parties hereto agree that NW MEDICAL
and UNIVERSITY shall enter into one or more Research Agreement(s). It is the
general purpose of the Research Agreement to support the development of and
uses for LICENSED INTELLECTUAL PROPERTY. The UNIVERSITY will undertake a
collaborative research program as more fully set forth in the Research
Agreement, which shall be attached as Appendix B. The UNIVERSITY's
activities under the Research Agreement will be under the direct supervision
of Dr. Robert Beelman as principal investigator.

                         ARTICLE II- THE OPTION
                         ----------------------

   3.1   Option. Subject to the reimbursement of patent expenses relating to
         ------
the preparation and filing of U.S. Provisional Patent Application Serial No.
60/782,204, which was filed on March 14, 2006 and names Robert Beelman, Joy
Dubost, Devin Peterson and Marvin Hausman as co-inventors. PSRF hereby
grants to NW MEDICAL, for the duration of the Option Period (hereinafter
defined), an exclusive option to LICENSED INTELLECTUAL PROPERTY covering
LICENSED PRODUCTS to elect to obtain, at the election of NW MEDICAL, an
exclusive license having teens of remuneration consistent with the Term
Sheet in Appendix A, under the LICENSED INTELLECTUAL PROPERTY to make, have
made, use and sell LICENSED PRODUCTS and to perform processes covered
thereby.

   3.2   Term. The term of the exclusive option of Paragraph 2.1 hereinabove
         ----
shall begin upon the Effective Date and expire April 15, 2007 or within two
(2) months after the conclusion of the first Research Agreement referenced
in Article III (hereinafter "Option Period"), so long as NW MEDICAL complies
with the terms of this Option Agreement, with the right of NW MEDICAL in its
sole discretion to extend the Term for an additional period of one year.

   3.3   Option Period License. During the Option Period, NW MEDICAL, at its
         ---------------------
own expense, shall have the right to make, have made and use the LICENSED
PRODUCTS for test purposes but not to sell, distribute or market LICENSED
PRODUCTS for other than said test purposes.

   3.4   Testing. NW MEDICAL shall, at its own expense, during the Option
         -------
Period, conduct laboratory testing and experimental evaluation under the
LICENSED INTELLECTUAL PROPERTY, with reasonable diligence, for the purpose
of determining its interest in

<PAGE>

                                       4

commercializing the LICENSED PRODUCTS under an appropriate license from PSRF
and for no other purpose.

   3.5   Evaluation Purpose. It is understood and agreed that the
         ------------------
information and tangible material of the INVENTION referred to hereunder
shall be furnished to NW MEDICAL for evaluation in order that NW MEDICAL may
determine its interest in developing products under an appropriate license
from PSRF and for no other purpose. In the event NW MEDICAL does not
exercise its option right granted herein and a license agreement is not
concluded between PSRF and NW MEDICAL during the Option Period, NW MEDICAL
agrees to provide PSRF with a copy of any data which NW MEDICAL has
developed during the Option Period pertaining to the INVENTION, along with
an explanation for its decision not exercise its option rights. Any reliance
that PSRF may place upon such results shall be at PSRF's own risk.

   3.6   Technical Information. NW MEDICAL agrees that TECHNICAL INFORMATION
         ---------------------
it develops to the LICENSED PATENTS during the Option Period shall be
disclosed to PSRF.

   3.7   Exercise of Option. NW MEDICAL may elect to exercise the option
         ------------------
herein granted at any time after the Effective Date hereof and prior to the
expiration of the Option Period, by giving written notice to PSRF, along
with confirmed facsimile transmission, of such intention. If NW MEDICAL does
not exercise its Option granted herein, any TECHNICAL INFORMATION developed
by NW MEDICAL during the Option Period shall become the property of PSRF,
which shall have the right to license said TECHNICAL INFORMATION to third
parties. NW MEDICAL agrees to assign to PSRF its entire right, title and
interest in and to TECHNICAL INFORMATION and any related patents. If NW
MEDICAL exercises its Option granted herein, TECHNICAL INFORMATION shall be
licensed to NW MEDICAL as part of the subsequent license agreement, subject
to grants to PSRF and UNIVERSITY a non-exclusive, paid-up, royalty-free,
non-transferable right and license to use such TECHNICAL INFORMATION for
their research purposes.

   3.8   No additional rights. The option granted hereunder shall not be
         --------------------
construed to confer any rights upon NW MEDICAL by implication, estoppel, or
otherwise as to any technology not specifically set forth in Paragraph 1.2
hereof

   3.9   Exclusivity. During the Option Period, PSRF shall not license,
         -----------
agree to license or enter into discussions regarding the potential licensing
of the LICENSED PATENTS covering LICENSED PRODUCTS, to or with any party
other than NW MEDICAL, unless terminated pursuant to Article IX.

   3.10   Ongoing Research during Option Period. During the Option Period,
          -------------------------------------
PSRF reserves the rights for itself and the UNIVERSITY to practice under the
LICENSED INTELLECTUAL PROPERTY for their own research purposes.

                         ARTICLE IV - THE LICENSE
                         ------------------------

   4.1   PSRF and NW MEDICAL agree that in the event NW MEDICAL shall
exercise the exclusive option to license granted to it hereunder, each shall
negotiate with the other in good faith for the purpose of granting to NW
MEDICAL an exclusive license to LICENSED INTELLECTUAL PROPERTY covering
LICENSED PRODUCTS, with the right to sublicense. The terms and conditions of
such license, as outlined in "Master Exclusive License Agreement" and
Exhibit A of the Term Sheet in Appendix A, are to be negotiated in good
faith and agreed

<PAGE>

                                      5

upon between PSRF and NW MEDICAL. NW MEDICAL shall have ninety (90) days
from the exercise of its option to negotiate a license, which period can be
extended by mutual agreement. In the event the parties fail to reach a
mutually acceptable license agreement within the above specified time
period, PSRF shall be entitled to negotiate in good faith with one or more
third parties a license under any intellectual property owned by PSRF.

   4.2   Terms and Conditions. Any license granted to NW MEDICAL subsequent
         --------------------
to this Agreement shall contain such additional terms and conditions as are
ordinary and commercially reasonable in agreements of that type.

                           ARTICLE V - WARRANTY
                           --------------------

   5.1   PSRF warrants and represents that it has the full right and power
to grant the option set forth in ARTICLE III and the license described in
ARTICLE IV hereof, and shall take no action to negate such right and power,
and further warrants and represents that there are no outstanding
agreements, assignments, or encumbrances inconsistent with the provisions of
this Option Agreement other than certain governmental rights pursuant to
sponsorship of the research which gave rise to the INVENTION. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PSRF MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OR NON-INFRINGEMENT OF PATENT RIGHT
CLAIMS WHICH ARE ISSUED OR PENDING RELATIVE TO LICENSED PATENTS.

                 ARTICLE VI - INDEMNIFICATION & INSURANCE
                 ----------------------------------------

   6.1   NW MEDICAL shall at all times during the term of this Option
Agreement and thereafter, indemnify, defend and hold UNIVERSITY and PSRF,
its trustees. directors, officers, employees and affiliates, harmless
against all claims, proceedings, demands, and liabilities of any kind
whatsoever, 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, or resulting from the use of or reliance upon the LICENSED
INTELLECTUAL PROPERTY or LICENSED PRODUCTS by NW MEDICAL, or any other
obligation of NW MEDICAL hereunder.

   6.2   If the parties enter into a definitive license agreement, such
license agreement will require NW MEDICAL (or any sublicense or assignee) to
maintain products liability insurance covering the risk of claims,
liabilities, expenses and judgments for which NW MEDICAL has agreed in
Paragraph 6.1 of this Agreement to indemnify PSRF and UNIVERSITY. Coverage
shall be in an amount which is not less than $1,000,000 (One Million
Dollars) per occurrence. Both parties agree that adequate evidence of the
required coverage has or will be provided by NW MEDICAL to PSRF, care of the
Intellectual Property Office, The Pennsylvania State University, 113
Technology Center, University Park, PA 16802, and NW MEDICAL agrees to keep
said office informed of any changes in coverage or carriers.

                            ARTICLE VII- PATENTS
                            --------------------

   7.1   U.S. Patent Filings. PSRF shall apply for, seek prompt issuance of,
         -------------------
and maintain the LICENSED PATENTS during the term of this Agreement. Tile
prosecution, filing and maintenance of U.S. patent applications and patents
which issue therefrom shall be the primary responsibility of PSRF, or its
designee, but wherever practical, NW MEDICAL shall be given the opportunity
to review and comment upon the breadth and coverage of said patent
applications. PSRF shall keep NW MEDICAL advised as to all developments with
respect to said patent

<PAGE>

                                      6

application(s) and shall promptly supply copies of all papers received and
filed in connection with the prosecution in sufficient time for NW MEDICAL
to comment. PSRF shall use reasonable efforts to notify NW MEDICAL of cost
estimates with sufficient time to allow for NW MEDICAL to provide advance
written approval. NW MEDICAL understands and agrees that its failure to
respond with clear, written directions may affect PSRF's ability to execute
its instructions. NW MEDICAL shall be obligated to reimburse PSRF for all
actual, documented out-of-pocket costs incurred by PSRF, at the written
request authorization of NW MEDICAL, relating to the filing, prosecution,
maintenance and defense of said LICENSED PATENTS pursuant to the conditions
set forth herein. PSRF shall promptly provide copies of invoices for all
such expenses and NW MEDICAL shall make payment thereof within thirty (30)
days of its receipt. NW MEDICAL's failure to make payments in accordance
with this paragraph shall constitute a material breach or default and shall
be grounds for termination of this Option Agreement pursuant to Article IX
hereof. PSRF shall make all reasonable efforts to ensure that said patent
application(s) adequately addresses the commercial and business needs of NW
MEDICAL, as communicated by NW MEDICAL hereunder. After appropriate
consultation with NW MEDICAL, PSRF shall choose appropriately qualified
patent counsel. During the Option Period, PSRF shall provide, or shall cause
its patent counsel to provide, to NW MEDICAL copies of all documentation
related to relevant patent applications and patents, and NW MEDICAL shall be
authorized to communicate directly with PSRF's outside patent counsel
regarding the INVENTION and the LICENSED PATENTS and all other intellectual
property matters covered by this Option Agreement.

        7.1.1   As consistent with the Term Sheet attached as Appendix B,
PSRF has added Marvin Hausman as a co-inventor. As a condition to execute
this Exclusive Option Agreement, Marvin Hausman shall assign his
inventorship rights to PSRF, and at no cost to PSRF. Marvin Hausman, at his
discretion, shall assist in the preparation of any documents related to
LICENSED PATENTS, and at no expense to PSRF

   7.2   International Patent Filings. NW MEDICAL understands and agrees
         ----------------------------
that the primary responsibility for the costs of all foreign patent filings
shall be NW MEDICAL's, and that NW MEDICAL's failure to timely communicate
its decision regarding foreign filing and/or payment thereof will result in
a loss of said rights to NW MEDICAL. NW MEDICAL shall notify PSRF no later
than nine (9) months after the date of the U.S. patent application referred
to in Paragraph 1.2 (d) as to the foreign countries in which it wishes PSRF
to continue to seek patent protection. NW MEDICAL shall be given the
opportunity to review and comment upon the breath and coverage of said
foreign patent applications. PSRF shall make all reasonable efforts to
ensure that said patent application(s) adequately addresses the commercial
and business needs of NW MEDICAL, as communicated by NW MEDICAL hereunder.
Payment of all fees and costs relating to the filing, prosecution,
maintenance and defense of said foreign patent rights shall be the direct
responsibility of NW MEDICAL, provided NW MEDICAL is kept reasonably
informed and given advance estimates where practical. If NW MEDICAL does not
respond in writing to said estimates within twenty (20) days of receipt
thereof by payment in full thereof, NW MEDICAL agrees herein that said non-
response and/or non-payment shall constitute a binding waiver of any right
to obtain said foreign protection and NW MEDICAL holds PSRF harmless from
any claim based thereon.

        7.2.1   In the event NW MEDICAL elects not to pursue patent
protection in any specific country or region of the world, PSRF may seek
such protection on its own behalf and cost in that specific country and/or
region of the world. From the date of its written notification to PSRF, NW
Medical shall have no further obligation for reimbursing PSRF for any
ongoing patent prosecution or maintenance costs to intellectual property
rights it has declined to support.

<PAGE>

                                      7

         ARTICLE VIII - PAYMENT, NOTICES AND OTHER COMMUNICATIONS
         --------------------------------------------------------

   8.1   Any payment, notice, or other communication required or permitted
to be made or given to either party hereto pursuant to this Option Agreement
shall be sufficiently made or given on the date of mailing if sent to such
party by certified or registered first class mail, postage prepaid, or by
recognized overnight courier, addressed to it at its address set forth
below, or to such other address as it shall designate by written notice to
the other party as follows:

If to NW MEDICAL:    President
                     Northwest Medical Research, Inc.
                     #90 NW Second Street
                     P.O. Box 910
                     Stevenson, Washington 98648

If to PSRF:          President
                     The Penn State Research Foundation
                     c/o Intellectual Property Office 113 Technology Center
                     University Park, PA 16802

                 ARTICLE IX TERMINATION OF OPTION AGREEMENT
                 ------------------------------------------

   9.1   If NW MEDICAL shall (a) become adjudicated of voluntary or
involuntary bankruptcy; or (b) make an assignment of this agreement for the
benefit of a creditor(s); or (c) become insolvent or have a receiver of its
assets appointed, this Option Agreement will be deemed to have automatically
terminated, provided, however, that such termination shall not terminate any
obligations which may have accrued prior thereto,

   9.2   If OPTIONEE fails to make any payments due and payable under
Article Vii, PSRF shall have the right to terminate this Agreement by thirty
(30) days' written notice to OPTIONEE. Such termination shall become
effective unless OPTIONEE shall have fully cured any such breach or default
prior to the expiration of the thirty (30) day period.

   9.3   In addition to the termination rights provided under Paragraph 9.2,
upon any material breach or default of this Agreement by NW MEDICAL, PSRF
shall have the right to terminate this Agreement and the rights, privileges
and option granted hereunder by sixty (60) days' notice to NW MEDICAL. Such
termination shall become effective unless NW MEDICAL shall have cured any
such breach or default prior to the expiration of the sixty (60) day period.

   9.4   NW MEDICAL shall have the right to terminate the Option Agreement
at any time on thirty (30) days notice to PSRF, and upon payment of all
amounts due PSRF through the effective date of the termination.

                         ARTICLE X - NON-USE OF NAMES
                         ----------------------------

   10.1   NW MEDICAL shall not use the names or trademarks of UNIVERSITY,
PSRF, or any of their employees, or any adaptation thereof, in any
advertising, promotional or sales literature, including sales of securities,
without prior written consent obtained from PSRF.

                           ARTICLE XI- ASSIGNMENT
                           ----------------------

                                     8

   11.1   This Option Agreement shall not be assignable by either Party
without the prior written consent of the other Party except as provided
herein. NW MEDICAL may assign its rights hereunder to another entity formed
and controlled by its President, Dr. Marvin Hausman, ("NEWCO") or to another
entity NW MEDICAL or NEWCO either will be forming as a joint venture or will
be joining as a joint venture partner. NW MEDICAL will disclose to PSRF in
such circumstances the identity of the joint venture partner or other
significant owners of the new entity. PSRF acknowledges the potential
involvement of Newco and such joint venture entity and that its consent to
such assignment to, or directly involvement by, Newco and the joint venture
entity will not be required if Dr. Hausman retains voting control of such
entity. If he does not retain such voting control, PSRF's consent to
assignment shall be required, but shall not be unreasonably withheld.
Additionally, NW MEDICAL may assign this Option Agreement, with the prior
written consent from PSRF, which shall not be unreasonably withheld, in
connection with the sale of substantially all of the its assets to a third
party, provided such third party assumes, in writing, all obligations owed
to PSRF under this Agreement, agrees to comply in all respects with the
terms, conditions, and provisions thereof, have the resources and
wherewithal to do so, and gives timely written notice to that effect to
PSRF.

                   ARTICLE XII - MISCELLANEOUS PROVISIONS
                   --------------------------------------

   12.1   Entire Agreement. This Option Agreement embodies the entire
understanding of the parties and shall supersede all previous
communications, representations, or undertakings, either verbal or written,
between the parties relating to the subject matter hereof.

   12.2   Amendment. This Option Agreement may be amended only by a written
agreement embodying the full terms of the amendment signed by authorized
representatives of both parties.

   12.3   Severability. Should any provision of this Option Agreement be
held to be illegal, invalid or unenforceable, by any court of competent
jurisdiction, such provision shall be modified by such court in compliance
with the law and, as modified, enforced. The remaining provisions of this
Option Agreement shall be construed in accordance with the modified
provision and as if such illegal, invalid or unenforceable provision had not
been contained herein.

   12.4   No Strict Construction. The language used in this Option Agreement
shall be deemed to be the language chosen by both parties hereto to express
their mutual intent and no rule of strict construction against either party
shall apply to any term or condition of this Option Agreement.

   12.5   Relationship of Parties. Nothing contained in this Option
Agreement shall be construed as creating a partnership, joint venture,
agency or an association of any kind.

   12.6   No Waiver. The failure of one party hereto to enforce at any time
any of the provisions of this Option Agreement, or any rights in respect
thereto, or to exercise any election herein provided, shall in no way be
considered to be a waiver of such provision, rights or elections or in any
way to affect the validity of this Option Agreement. Any waiver must be in
writing.

<PAGE>

                                       9

   12.7   Interpretation. The headings of several sections contained herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Option Agreement.

   12.8   Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to any choice of law or conflict of law provision or
rule that would cause the application of the laws of any jurisdiction other
than the Commonwealth of Pennsylvania.

   12.9   Dispute Resolution. Except for the right of either party to apply
to a court of competent jurisdiction for a temporary restraining order, a
preliminary injunction, or other equitable relief to preserve the status quo
or prevent irreparable harm, any and all claims, disputes or controversies
arising under, out of, or in connection with this Option Agreement,
including any dispute relating to patent validity or infringement, which the
parties shall be unable to resolve within sixty (60) days shall be mediated
in good faith. The party raising such dispute shall promptly advise the
other party of such claim, dispute or controversy in a writing which
describes in reasonable detail the nature of such dispute. By not later than
five (5) business days after the recipient has received such notice of
dispute, each party shall have selected for itself a representative who
shall have the authority to bind such party, and shall additionally have
advised the other party in writing of the name and title of such
representative. By not later than ten (10) business days after the date of
such notice of dispute, the party against whore the dispute shall be raised
shall select a mediation firm in Pennsylvania and such representatives shall
schedule a date with such firm for a mediation hearing. The parties shall
enter into good faith mediation and shall share the costs equally. If the
representatives of the parties have not been able to resolve the dispute
within fifteen (15) business days after such mediation hearing, the parties
shall have the right to pursue any other remedies legally available to
resolve such dispute in either the Court of Common Pleas of Centre County or
in the United States District Court for the Middle District of Pennsylvania,
to whose jurisdiction for such purposes PSRF and NW MEDICAL each hereby
irrevocably consents and submits. Notwithstanding the foregoing, nothing in
this Article shall be construed to waive any rights or timely performance of
any obligations existing under this Option Agreement.

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

<PAGE>

                                     10

   IN WITNESS WHEREOF, the parties have each caused their duly authorized
representative to execute this Option Agreement as of the Effective Date.

NORTHWEST MEDICAL RESEARCH INC.

By:     /s/ Marvin S. Hausman
        ---------------------

Name:   Marvin S. Hausman MD
        ---------------------

Title:  President
        ---------------------

THE PENN STATE RESEARCH FOUNDATION

By:     /s/ David E. Branigan
        ---------------------

Name:   David E. Branigan
        ---------------------

Title:  Treasurer
        ---------------------

Date:   May 17, 2006

ipo-mds/option/MarvHausman

<PAGE>

                               APPENDIX A
                               ----------

Term Sheet relating to Sponsored Research and Collaboration Agreement
between Northwest Medical Research Inc. ("NW MEDICAL") and Pennsylvania
State University ("UNIVERSITY")

   Set forth below are the key terms of the Sponsored Research and
Collaboration Agreement between NW MEDICAL and UNIVERSITY regarding
sponsored research to be conducted at UNIVERSITY's laboratory facilities
under the supervision of Dr. Robert Beelman ("Research Agreement"), who will
serve as Principal Investigator:

Sponsored Research and Collaboration:

UNIVERSITY will use its own facilities to conduct research and development
relating to, but not limited to, the following programs and invention under
the direction and supervision of Dr. Beelman: (i) the development of methods
to enhance levels of bioactive substances in cultivated mushrooms, (ii) a
project to be agreed upon relating to the novel antioxidant ergothioneine
and selenoergothioneine in A. bisporus and other mushrooms and fungi (the
"Ergo Project"), and (iii) the development and patenting of PSU Inv. Disc.
No. 2005-3098, entitled "Identification of Selenoergothioneine as a Natural
Organic Form of Selenium from Cultivated Mushrooms" (the -Invention"),
naming as inventors Dr. Bob Beelman and Ms. Joy Dubost (collectively the
"Covered Activities").

Compensation to UNIVERSITY:

NW MEDICAL will make the following payments and financial commitments to
UNIVERSITY for the Covered Activities: (i) an annual budget of $25,000 or
more (for an initial term of one year) in accordance with an agreed upon
scope of work for the Covered Activities, with the timing of payments to be
made in accordance with such budget, (ii) the reimbursement for actual,
documented out-of-pocket patent costs incurred by UNIVERSITY, at the written
authorization of NW MEDICAL, in connection with the Invention within thirty
days of invoicing by UNIVERSITY's Intellectual Property Office. UNIVERSITY
shall use reasonable efforts to notify NW MEDICAL of cost estimates with
sufficient time to allow for NW MEDICAL to provide advance written approval.
NW MEDICAL understands and agrees that its failure to respond with clear,
written directions may affect UNIVERSITY's ability to execute its
instructions. As a condition for UNIVERSITY to execute this Agreement, and
to file a regular. non-provisional patent application covering Invention. NW
MEDICAL agrees to pay UNIVERSITY's Intellectual Property Office the not-
toexceed bid of the patent firm selected by UNIVERSITY, in conjunction with
NW MEDICAL, prior to the UNIVERSITY's authorization of the selected firm.
UNIVERSITY shall keep NW MEDICAL advised as to all developments with respect
to said patent application(s) and shall promptly supply copies of all papers
received and filed in connection with the prosecution in sufficient time for
NW MEDICAL to comment. NW MEDICAL understands and agrees that the primary
responsibility for the costs of all foreign patent filings shall be NW
MEDICAL, and that NW MEDICAL's failure to timely communicate its decisions
regarding foreign filing and payment thereof will result in a loss of said
rights to NW MEDICAL.  NW MEDICAL agrees that the

<PAGE>

reimbursement for any foreign filing shall be paid by NW MEDICAL prior to
UNIVERSITY"s authorization to its patent counsel.

The Invention and new IP:

All intellectual property relating to the Covered Activities in particular,
including without limitation, research, data, published and unpublished
literature, provisional patents or patent applications and all related know
how, will be submitted to NW MEDICAL (under terms of a Confidentiality
Agreement) for review. NW MEDICAL will assist in preparing any additional
patent applications and modifications covering patent applications derived
from the Covered Activities. When appropriate, and in accordance with U.S.
Patent Law, Dr. Marvin S. Hausman will be named as co-inventor for those
claims, in which he contributed intellectually thereto. UNIVERSITY will be
the sole owner of any intellectual property created under the Covered
Activities, and the only rights of NW MEDICAL to use such intellectual
property will be pursuant to its option to enter into an exclusive license
for such intellectual property, as outlined below. NW MEDICAL will not be
obligated to pay any royalties or make any other payments to UNIVERSITY for
any intellectual property it declines to license pursuant to such license
agreement. If NW MEDICAL declines to license any new intellectual property,
it will not be responsible for paying any ongoing patent prosecution or
maintenance costs from the date of its written notification to UNIVERSITY.
UNIVERSITY shall then be free to continue prosecution at UNIVERSITY's
expense and shall have no further obligation to NW MEDICAL in regards to
such intellectual property.

IP Status Reports:

As a condition of Research Agreement, UNIVERSITY will provide to NW MEDICAL,
via Principal Investigator. on a monthly basis an update of recent
developments in the Covered Activities. The Intellectual Property Office of
UNIVERSITY shall be responsible for notifying NW MEDICAL of the status of
any new inventions and discoveries from the Covered Activities, indicating
for each such new invention or discovery. UNIVERSITY shall provide NW
MEDICAL ninety (90) days to determine whether it shall instruct UNIVERSITY
to make any formal filings (such as a provisional patent or regular patent
application) to protect the invention or discovery. UNIVERSITY will disclose
to NW MEDICAL any inventions or discoveries resulting from the Covered
Activities as soon as possible after creation and reduction to practice. If
UNIVERSITY has filed a patent application (provisional or otherwise) at the
instruction of NW MEDICAL, the new intellectual property created will become
subject to NW MEDICAL's exclusive licensing rights as provided below. In
addition to the monthly status reports, the Intellectual Property Office of
UNIVERSITY will provide an annual summary of accomplishments and goals for
the following year. when specifically requested in writing by NW MEDICAL.

Other IP and Know-How:

During the term of this Agreement. UNIVERSITY, to the extent it is
contractually permitted to do so under any third party obligations, agrees
to notify NW MEDICAL of other intellectual property owned by

                                    2
<PAGE>

University in the fields of nutraceuticals, or the nutraceutical or
pharmaceutical applications of mushrooms or other fungi developed by
Principal Investigator ("Other IP"), which may be of potential interest to
NW MEDICAL. The parties will negotiate in good faith the terms of an
agreement relating to the exchange, acquisition, licensing and/or sponsored
research of such Other IP, which belongs to UNIVERSITY.

NW MEDICAL Option to License new intellectual property:

NW MEDICAL will have the right to obtain an exclusive license (with rights
of further sublicense) to i) the Invention and any subsequent patent rights,
and 2) any intellectual property developed from the Covered Activities under
the term of this Agreement, with the terms thereof to be set forth in a
Master Exclusive License Agreement, which will be negotiated in good faith
between both parties, prior to the expiration or termination of the Research
Agreement. NW MEDICAL will have 90 days after notification of its exercise
of this option to negotiate a license agreement consistent with the terms
and conditions of the Master Exclusive License Agreement (as hereinafter
defined).

Master Exclusive License Agreement:

The Master Exclusive License Agreement covering new intellectual property
shall provide, among other things, as follows:

  o  Upfront or milestone payments, consistent with standard
     University/Industry standards for the type of product to be
     commercialized. NW MEDICAL recognizes that UNIVERSITY has a
     responsibility to provide remuneration to its inventors from the
     licensing of its intellectual property. UNIVERSITY understands and
     appreciates the timeline and risks associated with product development
     and commercialization, as well as the creation of value that occurs as
     a product(s) advances to commercialization.
  o  Documented, milestone commitments by NW MEDICAL and/or any
     sublicensee(s) to diligently (subject to commercially reasonable
     efforts) develop and commercialize the licensed inventions and
     technology;
  o  a term that does not exceed any limits imposed by law;
  o  retention by UNIVERSITY of the complete royalty-free right to use any
     licensed intellectual property, including any licensed invention,
     technology, or software exclusively for teaching, research, or other
     educational or academic purposes at UNIVERSITY or affiliated
     institutions;
  o  reservation of the rights of the Government of the United States of
     America as set forth in Public Law 96-517, if applicable:
  o  Indemnification and Dispute Resolution shall be addressed in Research
     Agreement
  o  Under the terms of the Master Exclusive License Agreement. NW MEDICAL
     will continue to reimburse UNIVERSITY for all out-of-pocket patent
     costs of any specific intellectual property licensed by NW MEDICAL;
  o  Following commercialization of a product using any New IP, NW MEDICAL
     (or any permitted assignee) will pay to UNIVERSITY

                                      3
<PAGE>

     "blended" royalties based on its own net sales, where "net sales"
     equals customary definition:

     For nutraceutical products or medical foods: 3% of net sales per year
     -------------------------------------------
     up to $10 million (hereinafter "mm"), 2.0% on net sales in such year in
     excess of $10 mm and up to $50 mm, and 1.5% on net sales in such year
     in excess of $50 mm;

     For pharmaceutical products: 5% of net sales per year up to $50 mm,
     ---------------------------
     3.66% on net sales in such year in excess of $50 mm and up to $500 mm,
     and 2.5% on net sales in such year in excess of $500 mm.

     For food products (other than nutraceutical products or medical foods
     ---------------------------------------------------------------------
     or pharmaceutical products): I% of net sales per year by NW MEDICAL of
     --------------------------
     any new or improved strains of cultivated mushrooms or other fungi for
     consumption by the general public as food products in stores or
     supermarkets.

  o  If NW MEDICAL (or any permitted assignee) sublicenses to a third party
     the licensed intellectual property relating to a product which is
     subsequently commercialized, NW MEDICAL (or such permitted assignee)
     will pay the following "blended" royalties to UNIVERSITY, as a
     percentage of the royalty payments NW MEDICAL receives from such
     sublicensee. In no event, however, will NW MEDICAL's (or an assignee's)
     payments to UNIVERSITY under the Master Exclusive License Agreement
     exceed the amounts that would it would otherwise have to pay if it sold
     the product directly instead of sublicensing the New IP to a third
     party:

     For Nutraceutical Products or Medical Foods: 10% of sublicensing
     -------------------------------------------
     revenues per year. Medical Foods shall mean food which is prescribed by
     a physician to manage a patient's disease or health condition. The
     label of Medical Foods shall clearly state that the product is to be
     used to manage a specific medical disorder or condition. Medical Foods
     are not meant to be used by the general public and may not be available
     in stores or supermarkets. Medical Foods are not those foods included
     within a healthy diet intended to decrease the risk of disease, such as
     reduced fat foods or low sodium foods. Nutraceutical Products shall
     mean a pill or other pharmaceutical product that has nutritional value
     or a food that has had its nutritional value enhanced by
     pharmaceuticals. More specifically, Nutraceutical Products shall mean
     natural bioactive chemical compounds that have health promoting,
     disease preventing or medicinal properties:

     For Pharmaceutical Products: 20% of sublicensing revenues per year.
     ---------------------------
     Pharmaceutical Products shall mean that must go through a clinical
     trial process for marketing approval, overseen by the Food & Drug
     Administation ("FDA") or its foreign equivalent. that may include the
     filing of an Investigational New Drug (IND) application or Biologics
     License Application, along with Phase 1, 2, 3, and 4 human trials.

                                     4
<PAGE>

     For Food Products: 5% of sublicensing revenues per year.
     -----------------
     Sublicensing cash revenues shall include sublicensing upfront payments,
     option fees, milestone payments, sublicense maintenance fees and all
     other payments (including equity instruments and/or securities) and the
     cash equivalent thereof paid or transferred to NW MEDICAL by each
     sublicense in consideration for licensing rights of Invention or
     intellectual property developed from the Covered Activities, but shall
     not include any reimbursements made by a sublicense to NW MEDICAL (or
     its permitted assignee) for out of pocket costs actually incurred.
     SubIicensee(s) shall pay the full royalty payment obligations owed to
     UNIVERSITY referenced above to UNIVERSITY, via NW MEDICAL.

  o  Examples of royalty calculations are listed on Schedule A
     annexed hereto.

Publication Rights:

Standard: NW MEDICAL will have right to delay UNIVERSITY's publication of
new developments for up to ninety (90) days to enable it to initiate patent
filings to protect any new intellectual property that might be identified in
any such publication.

Other Provisions:

Standard, consistent with UNIVERSITY's form of Sponsored Research Agreement
and industry custom and practice.

Term:

One (1) year from the Effective Date of the Research Agreement with an
automatic extension for an additional one-year period, unless either party
gives ninety (90) days prior written notice of non-renewal.

Assignment:

The Research Agreement will be signed by Dr. Marvin Hausman, an authorized
representative of NW MEDICAL. or under a newly formed venture owned or
controlled by Dr. Marvin Hausman ("Newco"). The Research Agreement shall
incorporate the terms and conditions of this Agreement. NW MEDICAL
contemplates that it or Newco would then assign its rights under the
Research Agreement to another entity it or Dr. Hausman either will be
forming as a joint venture or will be joining as a joint venture partner. NW
MEDICAL will disclose to UNIVERSITY in such circumstances the identity of
the joint venture partner or other significant owners of the new entity.
UNIVERSITY acknowledges the potential involvement of Newco and such joint
venture entity and that its consent to such assignment to. or directly
involvement by, Newco and the joint venture entity will not be required if
Dr. Hausman retains voting control of such entity. If he does not retain
such voting control, UNIVERSITY'S consent to assignment shall be required.
but shall not be unreasonably withheld. Additionally, NW MEDICAL may assign
the Research Agreement, with the prior written consent from UNIVERSITY,
which shall not be unreasonably withheld, in connection with the sale of
substantially all of the its assets to a third party, provided such third
party assumes, in writing, all obligations owed to UNIVERSITY under this
Agreement, agrees to comply in all respects with the terms, conditions,

                                      5
<PAGE>

and provisions thereof, have the resources and wherewithal to do so, and
gives timely written notice to that effect to UNIVERSITY.

Additional Documentation; Binding Agreement:

This Term Sheet is binding for a period of 90 days from the date hereof (the
"Interim Period") and will be superseded by the completion of a definitive
Sponsored Research and Collaboration Agreement, containing standard and
customary representations, warranties and undertakings of the parties
relating to the Covered Activities to be conducted and the intellectual
property to be created as a result of such research.

Governing Law

This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Pennsylvania.

                                        6
<PAGE>

   We look forward to our working relationship. We are confident that it
will prove to be very mutually rewarding. So that we may begin the process
of preparing definitive documentation in accordance with the provisions of
this Term Sheet, please indicate your agreement hereto by your execution
hereof.

                                       NW MEDICAL RESEARCH INC.

                                       By: /s/ Marvin S. Hausman
                                       ----------------------------------
                                           Marvin S. Hausman, M.D.,
                                           President

ACCEPTED AND AGREED:

Dated: March 20, 2006
       --------------

PENNSYLVANIA STATE UNIVERSITY

By:    /s/ David F. Marshall
       ------------------------
       Name:  David F. Marshall
       Title: Assistant Treasurer

PRINCIPAL INVESTIGATORS:

/s/ Robert Beelman
------------------
Dr. Robert Beelman

                                    7
<PAGE>

                                                                 EXHIBIT A
                                                             To Term Sheet

                       Sample Royalty Calculations

Product and Annual Sales                Royalty Payment to UNIVERSITY by NW
                                        MEDICAL

Nutraceutical & Medical Foods; $75 mm   3% of 1" $10 mm. ($300,000), plus
                                        2% of next $40 mm
                                        ($800,000), plus 1.5% of next $25
                                        million ($375,000),
                                        for a total of $1475,000

Pharmaceutical; $750 mm                 5% of I" $50 mm ($2,500,000), plus
                                        3.66% of next
                                        $450 mm ($16,470,000), plus 2.5% of
                                        next $250 million
                                        ($6,250,000), for a total of
                                        $25,220,000

Nutraceutical; sublicensing revenues    10% of $3.75mm equals $375,000
received by NW MEDICAL of $3.75 mm

Pharmaceutical; sublicensing revenues   20% of $3.75mm equals $750,000
received by NW MEDICAL of $3.75 mm

                                      8
<PAGE>

                        NORTHWEST MEDICAL RESEARCH INC.
                             #90 NW Second Street
                             Stevenson, WA 98648

                              As of May 1, 2006

The Penn State Research Foundation
304 Old Main
University Park, PA 16802

Re: Sponsored Research Agreement effective as of May 1, 2006 ("SRA') between
    The Pennsylvania State University ("University') and Northwest Medical
    Research Inc. ("NW Medical')

Ladies and Gentlemen:

   This letter reflects our agreement that, by your signature below, The
Penn State Research Foundation ("PSRF") acknowledges that University has
entered into, as of the date hereof, the SRA, which provides, among other
things, for the rights of NW Medical to license certain Intellectual
Property relating to the Project, as those terms are defined in the SRA. You
also acknowledge and agree that PSRF is familiar with the terms of the SRA
and the term sheet annexed as Appendix B thereof, and agrees to be bound by
the terms thereof relating to the licensing by NW Medical of any such
Intellectual Property.

                                       Very truly yours,
                                       NORTHWEST MEDICAL RESEARCH INC.

                                       By: /s/ Marvin S. Hausman
                                           -------------------------------
                                               Marvin S. Hausman, M.D.
                                               President

ACKNOWLEDGED AND AGREED:

THE PENN STATE RESEARCH FOUNDATION

By:    /s/ David E. Branigan
       ---------------------

Name:  David E. Branigan
       ---------------------

Title: Treasurer
       ---------------------

Date:  May 17, 2006

<PAGE>

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