Document:

MAYOLY SPINDLER / PROTEA

 

JOINT RESEARCH AND DEVELOPMENT AGREEMENT

 

BETWEEN

LABORATOIRES MAYOLY SPINDLER SAS, a corporation created and organized under French laws, having its registered office at 6, avenue de l’Europe, 78400 Chatou, France, represented by its President, SCORPIUS SAS, a corporation created and organized under French laws, having its registered office at 55 rue Jouffroy d’Abbans, 75017 Paris, France, itself being represented by its President Mr. Jean-Nicolas VERNIN;

hereafter referred to as “LMS”,

ON THE ONE HAND,

PROTEA EUROPE SAS, a corporation created and organized under French laws having its registered office at 8 Chemin de Maruejols, 30420 Calvisson, France, represented by its President Mr. Daniel Dupret;

hereafter referred to as “PROTEA EUROPE”,

 

AND

PROTEA Biosciences Inc., a corporation created and organized under the laws of Delaware, whose principal place of business is located at 955 Hartman Run Road, 26507 Morgantown WV, United States of America, represented by its Chief Executive Officer, Mr. Steve Turner,

hereafter referred to as “PROTEA Inc.”,

PROTEA EUROPE and PROTEA Inc. being referred to hereafter, jointly and severally, as “PROTEA”

 

ON THE OTHER HAND

(hereafter “this Agreement”)

LMS and PROTEA each also being referred to hereafter as a “Party” or collectively as “the Parties”, entered into as of the 22nd day of March 2010.

 

WHEREAS, LMS is a duly authorized French laboratory engaged in the development, production, manufacturing, marketing and distribution of over the counter (OTC) and prescription drugs;

  

 

MAYOLY SPINDLER / PROTEA 

 

In 2000, LMS filed an international patent application entitled, “Cloning and expressing an acid-resistant extracellular lipase of Yarrowia lipolytica” such application being published under WO 01/83773. This application has entered the European national stage and was granted and made effective in France, Germany, Belgium, Austria, Cyprus, Denmark, Portugal, Switzerland, Sweden, UK, Spain, Netherlands, Monaco, Finland, Italy, Luxembourg, Ireland, and Greece.

 

On June 15, 2006, LMS filed an international patent application entitled, “Method for producing lipase, transformed Yarrowia lipolytica cell, capable of producing said lipase and their uses”, such application being filed on June, 15, 2006 under Number PCT/FR2006/001352 and published under WO 2007/1444475; (a list of all related patents and applications as stated in Appendix 1).

 

On February 2, 2006, LMS signed a licence agreement named “Accord d’exploitation et de licences croisees” with INRA TRANSFERT representing INRA* and CNRS (a copy attached hereto in Appendix 2).

 

LMS has already carried out and financially contributed to, in an amount of EUR 2,307,665, initial testing, non-clinical studies and Active Ingredient studies. These tests and studies gave interesting results (listed in the Appendix 3) showing that the Active Ingredient is a good candidate as a medicine for cystic fibrosis and pancreatitis.

 

PROTEA EUROPE is a wholly-owned subsidiary of PROTEA Inc., which provides (i) development services in proteomics at the research, non-clinic and clinic stages of development to operators in the pharmaceutical industry and (ii) research and development of new products for health and PROTEA EUROPE has been recently created for the purpose of providing such services in Europe;

 

LMS and PROTEA have been conducting preliminary discussions with respect to the development of the above-mentioned Lipase into various pharmaceutical dosage forms for the treatment of exocrine pancreatic insufficiency in chronic pancreatitis or cystic fibrosis and their respective investments in relation thereto as well as with respect to the manufacturing and worldwide commercialization of any drug resulting from such use;

 

Now, therefore, in consideration of the foregoing premises and the mutual obligations set forth herein, LMS and PROTEA, intending to be legally bound, agree as follows:

 

ARTICLE 1 - DEFINITIONS

 

For the understanding and interpretation of this Agreement the following terms, whether they are capitalized or not, singular or plural, shall have the following meaning:

 

	
1.1

	
Access Rights shall mean licenses and user rights to Foreground or Background.

 

	
1.2

	
Active Ingredient shall mean the lipase produced by the transformed yarrowia lipolytica strain.

 

	
1.3

	
Affiliate shall mean, for a Party, any other business entity which directly or indirectly controls, is controlled by or is under common control with such Party. As used in this definition of “Affiliate”, the term “Control” shall mean direct or indirect beneficial ownership of more than 30% of the voting rights or income interest in such business entity or direct or indirect power to direct or cause the direction of the management and the policies of the other business entity by any means whatsoever.

  

 

MAYOLY SPINDLER / PROTEA 

 

	
1.4

	
Assigned Tasks shall mean the tasks assigned to each Party in the document to be established pursuant to Article 5.1 (a) as may be amended from time to time by the Review Committee.

 

	
1.5

	
Assigned Territory shall mean the geographical area assigned to a Party for the commercialization of any Product, it being provided that North America, referring to the United States of America and Canada, shall be PROTEA’s Assigned Territory and the remaining part of the world shall be LMS’s Assigned Territory. In the event of LMS’s withdrawal from the Development Program, worldwide shall be PROTEA’s Assigned Territory.

 

	
1.6

	
Background shall mean information and knowledge held by a Party prior to the Effective Date of this Agreement as well as copyrights or other intellectual property rights which are needed for carrying out the Project or for using Foreground, provided that regarding intellectual property rights for which a patent application must be filed, only those intellectual property rights for which a patent application was filed before the Effective Date of this Agreement are included.

 

	
1.7

	
Completion Date shall mean the date when the Development Program is anticipated to be completed as provided for in Article 5.2.

 

	
1.8

	
Confidential Information shall mean any information in whatever form, tangible or intangible, whether or not protected by law and whether in writing, disclosed orally, or otherwise, including but not limited to information of a commercial, marketing, scientific or technical nature including, without limitation Foreground and Background, patented or unpatented inventions, concepts, know-how, experimental methods, processes, trade secrets, formulae, graphs, biological materials and other materials relating to any of the Parties and/or the Project. Confidential Information shall not include information which (a) is, on the date received, already known to the recipient, (b) is in, or later enters, the public domain through no wrongful act of the recipient, including without limitation any breach of this Agreement, (c) has been lawfully received by the recipient from a third party without similar restriction and without breach of this Agreement, provided its written records document such receipt, (d) has been independently developed by the recipient prior to the disclosure, provided its written records document such development, or (e) the release or use of which was approved by Notice by the disclosing Party.

 

	
1.9

	
Coordinator shall mean the person appointed pursuant to Article 4.

 

	
1.10

	
Development Program shall mean development of the Active Ingredient various pharmaceutical dosage forms for the treatment of exocrine pancreatic insufficiency in chronic pancreatitis or cystic fibrosis in order to get Marketing Approval by U.S. or Canadian authorities (for PROTEA) and French authorities or the European Medicines Agency (“EMEA”) (for LMS) (Appendix 4).

 

	
1.11

	
Dissemination shall mean the disclosure of Foreground by any appropriate means other than that resulting from the formalities for protecting it, and including the publication of Foreground in any medium.

  

 

MAYOLY SPINDLER / PROTEA 

 

	
1.12

	
Effective Date shall mean the date of signature of this Agreement as stated on the signature page of this Agreement.

 

	
1.13

	
Foreground shall mean the results, including information, materials and knowledge, generated by the Project in whatever form, tangible or intangible, whether or not protected by law and whether in writing, disclosed orally, or otherwise, including but not limited to intellectual property rights such as rights resulting from copyright protection, related rights, design rights, patent rights, plant variety rights or similar forms of protection.

 

	
1.14

	
Good Manufacturing Practices or c-GMP shall mean the regulatory requirements for good manufacturing practices promulgated by the United States Food and Drug Administration (FDA) under the Federal Food, Drug and Cosmetic Act, as amended, 21 C.F.R, § 210 et seq. and 21 C.F.R. § 600-610, as applicable, or any manufacturing standards set now or in the future by the FDA or by the currently applicable regulations, directives, or decisions of the European Union as published in the Official Journal of the European Union or its successor publication or either Party directed specifically to LMS by the appropriate regulatory authorities. Moreover, GMP shall be understood to be the higher or more stringent of the FDA or European Community (“EC”) standards unless otherwise mutually agreed by the Parties.

GLP or Good Laboratory Practices shall mean the regulatory requirement for Good Laboratory practices according to the “Directive 2004/10/EC of the European Parliament and of the Council of 11 February 2004 on the harmonization of laws, regulations and administrative provisions relating to the application of the principles of good laboratory practice and the verification of their applications for tests on chemical substances” and Directive 2004/9/EC of the European Parliament and of the Council of 11 February 2004 on the inspection and verification of good laboratory practice (GLP) and US Food Drug Administration, Good Laboratory Practice Regulations 21 CFR Part 58, December 22, 1978 (and subsequent amendments), Japanese Ministry of Health and Welfare, Good laboratory Practice Standards, Pharmaceutical Affairs Bureau, Ordinance No 21, March 26 ,1997. The GLP embodies a set of principles that provides a framework within which laboratory studies are planned, performed, monitored, recorded, reported and archived.

GCP or Good Clinical Practices shall mean the regulatory requirement for Good Clinical practice according to the ICH E6 guidelines for Clinical Practice, EU Directive 2001/20/EC, article 1, clause 2 “Good clinical practice is a set of internationally recognized ethical and scientific quality requirements which must be observed for designing, conducting, recording and reporting clinical trials that involve the participation of human subjects.” EU Directive 2005/28/EC.

 

	
1.15

	
Management Committee shall mean the management committee established pursuant to Article 4.

 

	
1.16

	
Marketing Approval shall mean the official communication delivered by the competent authority of any portion of the Parties’ Assigned Territories that allows the commercial marketing of any Product in such portion of the Assigned Territories.

 

	
1.17.1

	
Annual Net Sales Price shall mean amount invoiced on the Product to the clients by PROTEA, and all amount invoiced to the clients by PROTEA’s sublicensees, less any taxes, duties, transportation and insurance costs, rebates, discounts, and returns during each twelve months period (starting on January 1st, to December 31st).

  

 

MAYOLY SPINDLER / PROTEA 

 

	
1.17.2

	
Gross Margin Profit shall mean the Annual Net sales Price deducted from the cost of goods. Cost of good shall mean all direct and indirect cost incurred for the manufacturing of Product.

 

	
1.18

	
Notice shall mean a certified mail with return receipt requested or a special delivery service, such as Federal Express or DHL, provided that some record of delivery is maintained or, where urgent, a facsimile, or an e-mail, provided that receipt of that facsimile or e-mail is acknowledged by the party to whom it is addressed by non-automatic means.

 

	
1.19

	
Patent(s) shall mean any patent granted in any portion of the Parties’ Assigned Territories as a result of the application filed by LMS and INRA:

 

	
  

	
·

	
On June 15, 2006, LMS filed international patent application number PCT/FR2006/001352, entitled “Method for producing lipase, transformed Yarrowia lipolytica cell, capable of producing said lipase and their uses”, and published under WO 2007/1444475. National and regional phases have been filed, but are not yet issued.

 

	
  

	
·

	
On April, 28, 2000, LMS filed international patent application number PCT/FR00/01148, entitled “Cloning and expressing an acid-resistant extracellular lipase of Yarrowia lipolytica”, and published under WO 01/83773.. National and regional phases have been filed, and have issued in France, Germany, Belgium, Austria, Cyprus, Denmark, Portugal, Switzerland, Sweden, UK, Spain, Netherlands, Monaco, Finland, Italy, Luxembourg, Ireland, and Greece.

 

	
  

	
·

	
On September 1st, 1998, INRA and CNRS filed an international patent application Method for non-homologous transformation of Yarrowia lipolytica”, filed on September 1st 1998 in France, and issuing from national stage applications based on application number PCT/FR99/02079. National and regional phases have been filed, and have issued in, Germany, Austria, Belgium, Cyprus, Denmark, Finland, France, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal, United Kingdom, Sweden, Switzerland, USA.

 

It is established that the industrial application of patents issuing from national stage applications based on PCT/FR2006/001352 and PCT/FR00/01148 are dependent on the patents issued to Institut National de law Recherche Agronomique (“INRA”) and Centre National de Recherche Scientifique (“CNRS”) entitled, “Method for non-homologous transformation of Yarrowia lipolytica”, filed on September 1st 1998 in France, and issuing from national stage applications based on application number PCT/FR99/02079.

 

On February 2, 2006, LMS and INRA TRANSFERT, as representative for INRA and CNRS, signed a reciprocal license agreement named “Accord d’exploitation et de licences croisees” (hereafter the “reciprocal license agreement” a copy of which is attached hereto in Appendix 2 that PROTEA recognizes to have known). LMS and INRA/CNRS patents are defined in the reciprocal license agreement as “INRA-CNRS/LMS Technology”.

  

 

MAYOLY SPINDLER / PROTEA 

 

The Parties acknowledge that PCT/FR2006/001352 is a continuation of the “INRA-CNRS/LMS Technology”, and that LMS and PROTEA will have to comply with the terms of the reciprocal license agreement, especially about agreement by INRA TRANSFERT (subsidiary of INRA in charge of patent management), sublicensing, and the scope of the scope of the licensed activities.

 

By a letter signed on April 29, 2009, INRA TRANSFERT has agreed to the sublicenses granted to PROTEA by LMS under the present agreement on the INRA/CNRS patent application Number PCT/FR99/02079 for lipase production in the field of human therapeutic.

 

	
1.20

	
Products shall mean any human pharmaceutical medicine developed from the Active Ingredient.

 

	
1.21

	
Project shall mean the development of the Active Ingredient into various pharmaceutical dosage forms for the treatment of exocrine pancreatic insufficiency in chronic pancreatitis or cystic fibrosis, and the manufacturing and marketing of any Product

 

	
1.22

	
Project Schedule shall mean the initial schedule referred to in Article 2.2 and attached as Appendix 5 to this Agreement as may be amended from time to time by the Review Committee.

 

	
1.23

	
Development Budget shall mean the expenses anticipated to be incurred for the Development Program as stated in the initial budget attached as Appendix 6 to this Agreement as may be amended from time to time by the Review Committee.

 

	
1.24

	
Review Committee shall mean the review committee established pursuant to Article 4.

 

	
1.25

	
Starting Date shall mean the date when the Development Program is to start as provided in Article 5.2.

 

	
1.26

	
Steps shall mean the stages of activities set forth in Appendix 6 as Steps I, II, III and IV.

 

	
1.27

	
Technical Documentation shall mean the documentation and technical information regarding any Product, including, but not limited to information on the composition, manufacturing process of any Product as well as non-clinical and clinical studies for delivery of any Marketing Approval.

 

	
1.28

	
Use shall mean the direct or indirect utilization of Foreground in further research activities other than those covered by the Project, or for developing creating and marketing a product or process, or for creating and providing a service.

 

ARTICLE 2 - SUBJECT MATTER AND SCOPE OF THE AGREEMENT

 

	
2.1

	
The subject matter of this Agreement is to organize the Parties’ relationships for the completion of the Project including, but not limited to, (i) determining their respective rights and obligations in the conduct of the Project, (ii) organizing the management of the Project, (iii) setting up the rules for the ownership and Access Rights to intellectual property rights, including, but not limited to, Background and Foreground and (iv) setting up the principles for the manufacturing and marketing of any Product.

  

 

MAYOLY SPINDLER / PROTEA 

 

	
2.2

	
The Project shall be conducted, according to the Project Schedule, in four Steps (see Appendix 6).

 

ARTICLE 3 - CONTRIBUTIONS OF THE PARTIES

 

	
3.1

	
Contributions

 

For the performance of the work required for the completion of the Project, each Party shall use reasonable efforts to ensure the success of the Project, including, but not limited, to (i) devoting sufficient personnel and facilities required for the performance of its Assigned Tasks, (ii) making available for the Project appropriately qualified personnel to supervise, analyze, and report on the results obtained in the furtherance of the Project and, (iii) deploying such scientific, technical, financial and other resources as is necessary to conduct the Project as specified herein.

 

	
3.2

	
Financial Contributions and Public Aids

 

Based on the Development Budget, the Parties shall contribute to the financing of the Development Program in respective shares of 60% for LMS and 40% for PROTEA.

 

It is understood that the Parties shall use their best efforts to obtain any public funding for which the Development Program may be eligible to, including, but not limited to, nonreimbursable aids available through French centers of competitiveness such as the one established in Region LR and Region PACA named Orpheme.

 

	
3.3

	
Withdrawal from Development Program and/or Project

 

Either Party may at any time withdraw from the Development Program or the Project with a three (3) month prior Notice to the other Party. In this event, the other Party shall be entitled to continue the Development Program or the Project on its own or in cooperation with a third-party and the continuing Party shall not be prevented access to Confidential Information and all Technical Documentation as may be necessary for the performance of the Development Program or the Project, provided, however, that the continuing Party shall not enter into any kind of agreement with any third-party for the purpose of continuing the Development Program and/or the Project without informing the other Party. Notwithstanding the provisions of Article 14.2, withdrawal of Development Program or Project by one Party shall not be considered as an event of Agreement termination.

 

Notwithstanding the provisions of Article 9 hereafter, in the event of LMS’s withdrawal from the Development Program, PROTEA shall be granted a world wide Access Right to the Patent as per Article 6.2 Background and Foreground hereafter and LMS shall be entitled to the payment by PROTEA of royalties as provided for in Article 6.3.

 

In the event that PROTEA EUROPE and/or PROTEA Inc.’s withdrawal from the Development Program only, but continue to participate in the Project, LMS shall be entitled to the payment of royalties as provided in Article 7.3 on the Annual Net Sales of Products made by or on behalf of PROTEA and/or PROTEA Inc. in PROTEA’s Assigned Territory.

  

 

MAYOLY SPINDLER / PROTEA 

 

In the event of PROTEA’s withdrawal of both the Development Program and the Project, LMS would recover its complete freedom of action in PROTEA’s Assigned Territory.

 

In the event Party’s withdrawal from the Development Program and continuation by the other Party, the entire Agreement shall be maintained in full force except any material and financial obligations that should have been directly performed by the withdrawal party in the Development Program, as referred in the Appendix 4, 5, 6, 7 and except any right to nominate and participate to the Management committee.

 

ARTICLE 4 - PROJECT MANAGEMENT

 

The management of the Project shall be organized with a Coordinator, a Management Committee and a Review Committee.

 

	
4.1

	
Coordinator

 

Appointment. - Promptly upon the Effective Date, LMS shall appoint one of its employees to act as Coordinator, that could be the LMS Project manager/ Project Engineer.

 

Duties. - The Coordinator shall monitor the compliance by each Party with its obligations under this Agreement and act as an effective intermediary between the Parties. In this regard, the Coordinator shall carry out the following tasks, including but not limited to:

 

	
  

	
(a)

	
receiving the financial contributions of each Party provided for under Article 3.2 above and allocating them as decided by the Review Committee;

	
  

	
(b)

	
keeping the records and financial accounts relevant for the financial contributions of each Party;

	
  

	
(c)

	
being responsible for the communication between the Parties including without limitation the exchange of information related to Foreground and Background;

	
  

	
(d)

	
coordinating the day-to-day actions of the Parties ;

	
  

	
(e)

	
convening meetings with the Management Committee and the Review Committee as provided for in Articles 4.2 and 4.3.

 

The Coordinator shall not act beyond the scope of his duties as provided above. He shall not be entitled to enter into any agreements or make any commitments on behalf of either Party or both Parties without their prior written consent.

 

	
4.2

	
Management Committee

 

Composition and Management Committee Meetings. - Within thirty (30) days from the Effective Date, each Party shall designate a Project Manager and/or a Project Engineer who shall compose the Management Committee.

 

Each Project Manager and/or Project Engineer shall be assigned to the Project until satisfactory completion of the Project.

  

 

MAYOLY SPINDLER / PROTEA 

 

Each Project Manager shall be responsible for communicating all instructions and information in relation to the Project to the Coordinator and will be available on an agreed upon regular basis for consultation at pre-arranged times during the course of the Project.

 

In his or her absence, the Party which originally appointed such Project Manager or Project Engineer shall appoint a substitute or replacement, as necessary.

 

The Management Committee shall meet every two months, unless the Coordinator calls for an extraordinary meeting. The Coordinator shall distribute the minutes of each meeting to all members of the Management Committee within twenty (20) days after the relevant meeting.

 

Duties of the Management Committee. - The Management Committee shall be responsible for:

 

	
  

	
(a)

	
preparing a detailed schedule of the Assigned Tasks to be performed by each Party as well as the Development Budget and any other anticipated detailed financial expenses to be incurred;

	
  

	
(b)

	
organizing all logistics and material support for the performance of the Project, it being provided that - Clinical Studies of the Development Program shall be performed under the supervision of LMS’s Project Manager by a team composed of employees of both Parties. PROTEA’s employees shall be based in PROTEA’s facilities;

	
  

	
(c)

	
following-up the Parties’ contributions and the payment of public aid if any;

 

In order to allow a better financial sharing as defined in the present agreement (i.e 60% for LMS and 40% for PROTEA), a balance of Project cost will be drafted, the party having financed more than his commitment shall send an invoice to the other Party who shall pay such invoice within 30 days of receipt. The first such balance of costs shall be drafted at the end of December 2009. Then for the subsequent period, balances will be determined and made every 6 months.

 

During the Agreement, balance of cost will be drafted according to the financial Appendix or as revised by the committee.

 

	
  

	
(d)

	
monitoring the implementation of the Development Program schedule and the Program Budget;

	
  

	
(e)

	
submitting quarterly a scientific, technical, financial progress report (the “Progress Report”) on the implementation of the Project to the Review Committee.

 

	
4.3

	
Review Committee

 

Composition and Review Committee Meetings. - The Review Committee shall consist of:

 

	
  

	
(a)

	
LMS’s President, or his nominee, LMS’s Project Manager and such other person(s) designated by the Project Manager;

	
  

	
(b)

	
PROTEA’s President, or his nominee, PROTEA’s Project Manager and such other person(s) designated by the Project Manager.

  

 

MAYOLY SPINDLER / PROTEA 

 

The Review Committee will meet at least twice a year to review the progress of the Project, unless either Party calls for an extraordinary meeting. Any meeting of the Review Committee shall be called upon at least every 6 months.

The Chairman for each meeting of the Review Committee shall alternate between a representative of LMS and a representative of PROTEA with the initial Chairman of the Review Committee being appointed by LMS. The Chairman of the Review Committee shall be responsible for providing an agenda for each meeting at least ten (10) days in advance of such meeting and shall prepare written minutes of all Review Committee meetings in reasonable details. The Chairman shall distribute such minutes to all members of the Review Committee within twenty (20) days after the relevant meeting.

 

The Parties agree that the first Review Committee shall take place before the end of March 2010, at LMS’s facilities in Chatou.

 

Duties. - The Review Committee shall have the strategic direction of the Project and shall make all decisions required for the implementation of the Project of a strategic, financial and/or contractual nature, including but not limited to:

 

	
  

	
(a)

	
amendments to the Project schedule

	
  

	
(b)

	
amendments to the contributions of the Parties, including, but not limited to, their Assigned Tasks and the Development Budget;

	
  

	
(c)

	
the progress of implementation of the contributions;

	
  

	
(d)

	
amendments to this Agreement.

 

Decisions. - Decisions of the Review Committee shall be taken unanimously LMS and PROTEA each having one vote.

Should the Review Committee fail to agree on any issue related to the Project, the Review Committee shall have an internationally reputed independent expert (the “Independent Expert”) selected as provided for in Article 19 hereafter.

The Independent Expert acting pursuant to this provision shall be a reputed expert qualified in the field relevant to the issue to be determined provided, however, that the Independent Expert shall not act if he/she is, whether individually or through his/her association with any firm or network, in a position of conflict of interest with any of the Parties or with any Affiliate of a Party.

 

	
4.4

	
Locations of Committees

The location of meetings as mentioned art 4.2 and 4.3 will be on a rotating basis between LMS facilities in Chatou and PROTEA’s facilities in Nimes and each Party shall bear its own costs in relation thereto. Additionally, the Committees will communicate by telephone, facsimile and/or video conference, as may be necessary.

  

 

MAYOLY SPINDLER / PROTEA 

 

ARTICLE 5 - COMMITMENTS

 

	
5.1

	
Upon the Effective Date, the Parties will promptly establish:

 

	
  

	
(a)

	
a document stating their detailed respective Assigned Tasks for the performance of the Project, provided that (i) during the performance of step I, II & III, PROTEA shall be responsible for analytical development and work, in biological matrices including serum assays for lipase and related protein targets, and LMS shall be responsible for all other tasks and that (ii) for the performance of Step IV each Party shall be responsible for the marketing of Products on its own Assigned Territory; This sentence is not understood able

	
  

	
(b)

	
Working methods and procedures allowing traceability/tracking of the works and coordination between the Parties;

	
  

	
(c)

	
the structures for the management of the Project as provided for in Article 4 above.

 

	
5.2

	
Duration of Development Program

 

Starting Date. - The Parties shall use their best efforts to start the Development Program i.e., Step I on or before October 31, 2009.

 

Step II shall start immediately upon completion and validation of the Step I.

In the event the Starting Date is not met, either Party shall be entitled to terminate this Agreement upon Notice of such termination to the other Party and without incurring any liability towards such other Party, subject to any extension to be decided, by the Review Committee, in advance of such Starting Date.

 

Completion Date. - Step III shall be deemed performed upon satisfactory completion of the Development Program, provided that the Parties shall use their best efforts to have the Development Program completed by December 31, 2014, subject to any extension to be decided, on a yearly basis, by the Review Committee, in advance of such Completion Date or any anniversary date of such Completion Date.

 

ARTICLE 6 - MARKETING OF PRODUCTS

 

	
6.1

	
Exclusive rights

 

LMS hereby grants to PROTEA the exclusive right to commercialize any Products in its Assigned Territory, subject to the terms and conditions of this Agreement, including the financial terms in Article 6.3, and on other terms and conditions to be negotiated in good faith by the Parties. No later than one year after the completion of Step III, the Parties shall enter into a definitive commercialization license agreement defining such other terms and conditions with respect to such Products. PROTEA shall be the holder of any and all applications to obtain Marketing Approval filed in its Assigned Territory, including New Drug Applications and Investigational New Drug Applications, and shall retain ownership to all such pending and approved applications. For purposes of this Agreement, the term “commercialize” shall mean to market, offer for sale, sell, or distribute.

 

The Parties hereby agree that the definitive commercialization license agreement shall be effective from its effective date and shall continue to be in full force and effect until the expiry date of the international patent filed by LMS on June 15th 2006, under application number PCT/FR2006/001352, entitled “Method for producing lipase, transformed Yarrowia lipolytica cell, capable of producing said lipase and their uses”, i.e. until June 15th, 2026.

  

 

MAYOLY SPINDLER / PROTEA 

 

Terms and conditions of a renewal of the definitive commercialization license agreement shall be provided for in such document.

 

According to INRA Transfert and LMS “reciprocal license agreement” signed on February 2nd 2006, LMS grants to PROTEA a limited Access Rights for “INRA-CNRS/LMS Technology” in the field of human therapeutics, subject to the agreement of INRA Transfert.

 

	
6.2

	
Licenses and Sub-licenses

 

Subject to the terms and conditions of this Agreement, LMS grants to PROTEA an exclusive license in the Assigned Territory, with the right to sublicense, to use the Patents to make, have made, use, import, offer for sale and sell Products. Any sublicenses by PROTEA of its rights under this Agreement shall be consistent with the terms and conditions hereof and shall be subject to LMS’s prior written approval, which shall not be unreasonably withheld. LMS shall give its approval as for any sublicenses within 30 days of PROTEA’s request to sublicense. Failure by LMS to give such approval within the above-mentioned time period shall be deemed as an acceptance to grant the sublicense.

 

	
6.3

	
Lump-Sum and Royalties

 

6.3.1 MILESTONES ROYALTIES PROTEA / LMS

 

Option 1: Achievement of Development Program by both Parties

 

In the event of commercialization of any Product in PROTEA’s Assigned Territory, PROTEA shall pay to LMS:

 

	
  

	
(a)

	
First, a lump sum of EUR 1,000,000 upon the first delivery of a Marketing Approval in PROTEA’s Assigned Territory, and;

	
  

	
(b)

	
Second, for the life of any patent issuing in PROTEA’s Assigned territory from a national stage application based on PCT/FR2006/001352, royalties calculated on the Annual Net Sales Price of the Products of

(i) 7% up to EUR 20,000,000,

(ii) 6% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 5% above EUR 40,000,000,

 

The royalties defined above (b) shall be due only after PROTEA’s actual contribution in the funding of the Development Program, through and including all costs actually incurred for obtaining Marketing Approval in PROTEA’s Assigned Territory for each Product, has been covered by the Gross Profit Margin earned on such Annual Net sales Price.

 

Royalties shall not begin to accrue until after PROTEA recovers amounts actually paid for funding of the development program.

  

 

MAYOLY SPINDLER / PROTEA 

 

Option 2: LMS’s withdrawal during the Development Program, but continuation by PROTEA:

 

	
  

	
·

	
PROTEA shall be entitled to market Products in the whole Assigned Territory, i.e worldwide commercialization.

 

	
  

	
·

	
PROTEA shall pay to LMS:

 

	
  

	
(1)

	
In case of LMS’s withdrawal up to Step I, for the duration of the life of any patents issuing from a national stage application based on PCT/FR2006/001352

 

	
  

	
a)

	
Provided that the commercialization of the Product is carried out by PROTEA and/or PROTEA’s Affiliates.

 

Royalties calculated on the Annual Net Sales Price of the Products of:

 

(i) 3% up to EUR 20,000,000,

(ii) 2% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 1% above EUR 40,000,000,

 

	
  

	
b)

	
Subject to a commercialization of any Product by PROTEA’s sublicense other than PROTEA or PROTEA’s Affiliate, PROTEA will pay to LMS 15% of any kind of amounts earned by PROTEA from its sublicensees.

 

	
  

	
(2)

	
In case of LMS’s withdrawal up to Step 2, for the duration of the life of any patents issuing from a national stage application based on PCT/FR2006/001352, royalties calculated on the Annual Net Sales Price of the Products of

 

	
  

	
a)

	
Provided that the commercialization of the Product is carried out by PROTEA and/or PROTEA’s Affiliates.

 

Royalties calculated on the Annual Net Sales Price of the Products of:

 

(i) 5% up to EUR 20,000,000,

(ii) 4% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 3% above EUR 40,000,000,

 

	
  

	
b)

	
Subject to a commercialization of any Product by PROTEA’s sublicense other than PROTEA or PROTEA’s Affiliate, PROTEA will pay to LMS 20% of any kind of amounts earned by PROTEA from its sublicensees.

 

	
  

	
(3)

	
In case of LMS’s withdrawal up to Step 3, for the duration of the life of any patents issuing from a national stage application based on PCT/FR2006/001352, royalties calculated on the Annual Net Sales Price of the Products of

 

	
  

	
a)

	
Provided that the commercialization of the Product is carry out by PROTEA and/or PROTEA’s Affiliates.

 

Royalties calculated on the Annual Net Sales Price of the Products of:

  

 

MAYOLY SPINDLER / PROTEA 

 

(i) 7% up to EUR 20,000,000,

(ii) 6% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 5% above EUR 40,000,000,

 

	
  

	
b)

	
Subject to a commercialization of any Product by PROTEA’s sublicense other than PROTEA or PROTEA’s Affiliate, PROTEA will pay to LMS 25% of any kind of amounts earned by PROTEA from its sublicensees.

 

The royalties defined above under parts 1(a), 2(a), and 3(a) shall be due only after PROTEA’s actual contribution in the funding of the Development Program, through and including all costs actually incurred for obtaining Marketing Approval in PROTEA’s Assigned Territory for each Product, has been covered by the Gross Profit Margin earned on such Annual Net Sales Price.

 

Option 3: PROTEA’s withdrawal during the Development Program, continuation by LMS, but commercialization by Protea in the Assigned Territory, as defined Article 1:

 

	
  

	
(1)

	
PROTEA’s withdrawal up to Step 1,

PROTEA shall initially first pay to LMS for the duration of the life of any patents issuing in PROTEA’s Assigned Territory from a national stage application based on PCT/FR2006/001352, royalties calculated on the Annual Net Sales Price of the Products of

(i) 12% up to EUR 20,000,000,

(ii) 11% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 10% above EUR 40,000,000,

AND only after the supplementary contribution caused by the PROTEA’s withdrawal, and paid by LMS (i.e all expenses above 6 946 200€) in the funding of the Development Program, has been covered by the Gross profit Margin earned on such Annual Net Sales Price.

Following the achievement of this clause and for the life of any patents issuing in PROTEA’s Assigned Territory from a national stage application based on PCT/FR2006/001352, PROTEA will pay to LMS the lump sum (1,000,000€) and royalties according to the whole settlement defined in option 1

 

	
  

	
(2)

	
PROTEA’s withdrawal up to Step 2

 

PROTEA shall initially first pay to LMS for the duration of the life of any patents issuing in PROTEA’s Assigned Territory from a national stage application based on PCT/FR2006/001352, royalties calculated on the Annual Net Sales Price of the Products of

(i) 11% up to EUR 20,000,000,

(ii) 10% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 9% above EUR 40,000,000,

 

AND only after the supplementary contribution caused by the PROTEA’s withdrawal, and paid by LMS (i.e. all expenses above 6 946 200€) in the funding of the Development Program has been covered by the Gross profit Margin earned on such Annual Net Sales Price.

  

 

MAYOLY SPINDLER / PROTEA 

 

Following the achievement of this clause and for the duration of the life of any patents issuing in PROTEA’s Assigned Territory from a national stage application based on PCT/FR2006/001352, PROTEA will pay to LMS the lump sum (1,000,000€) and royalties according to the whole settlement defined in option 1

 

	
  

	
(3)

	
PROTEA’s withdrawal up to Step 3

 

PROTEA shall pay to LMS, for the duration of for the life of any patents issuing in PROTEA’s Assigned Territory from a national stage application based on PCT/FR2006/001352, royalties calculated on the Annual Net Sales Price of the Products of

(i) 7% up to EUR 20,000,000,

(ii) 6% between EUR 20,000,000 and EUR 40,000,000 and

(iii) 5% above EUR 40,000,000,

 

AND only after the supplementary contribution caused by the PROTEA’s withdrawal, and paid by LMS (i.e. all expenses above 6 946 200€) in the funding of the Development Program through and including all costs actually incurred for obtaining Marketing Approval in PROTEA’s Assigned Territory for each Product, has been covered by the Gross Profit Margin earned on such Annual Net Sales Price.

 

Following the achievement of this clause and for the duration of for the life of any patents issuing in PROTEA’s Assigned Territory from a national stage application based on PCT/FR2006/00135, PROTEA will pay to LMS the lump sum (1,000,000€) royalties according to the whole settlement defined in option 1

 

OPTION 4: PROTEA’s withdrawal during the Development Program, at any time, and without commercialization by PROTEA

 

No fee, expenses, or royalties shall be due by both Party.

 

	
6.3.2

	
PROTEA, its Affiliates and Sublicensees shall keep complete, true and accurate books of account and records for the purpose or determining the amounts payable or accountable hereunder. Such books and records shall be kept at one of the principal places of business of Licensee, its Affiliates and Sublicensees for at least five (5) years following the end of the Quarter to which they pertain.

 

Upon the written request of LMS, PROTEA shall permit LMS to have access during normal business hours, and upon reasonable prior written notice, to such of the records of PROTEA as may be reasonably necessary to verify the accuracy of the calculations of royalties and other amounts due and payable under this Agreement.

 

	
6.4

	
Expenses

 

Each Party shall bear the expenses incurred in its own Assigned Territory in relation to the marketing of any Product, including, but not limited to, expenses incurred in relation to any application for the delivery of any Marketing Approval.

  

 

MAYOLY SPINDLER / PROTEA 

 

ARTICLE 7 - MANUFACTURING PROCESS

 

The manufacturing process shall be conducted in compliance with the in force Good Manufacturing Practices. To all possible extent, the production of the Active Ingredient for any Product will be conducted in common facilities, each Party remaining free to choose its own facilities for the manufacture and/or packaging of any Product.

 

ARTICLE 8 - SUBCONTRACTING

 

Subject to written approval consent by the other party, either Party may subcontract the performance of its obligations hereunder to approved subcontractors, provided that the subcontracting Party shall be fully responsible for the work of his subcontractors, as for its own work and that such subcontracting shall not relieve the subcontracting Party of any of its obligations hereunder.

 

ARTICLE 9 - INTELLECTUAL PROPERTY

 

	
9.1

	
Foreground and Background

 

Ownership. - Each Party shall retain ownership of its own Background. Unless otherwise agreed between the Parties in writing, ownership to any part of the Foreground shall be retained by the Party which carried out the work generating that part of the Foreground. Unless otherwise agreed between the Parties in writing, ownership of any part of the Foreground created jointly by LMS and PROTEA shall be owned jointly by the Parties.

 

For the performance of the work required for the completion of the Project, each Party shall be entitled to grant non assignable non-exclusive licenses to third parties in its respective Assigned Territory, without any right to sub-license, subject to the licensing Party giving at least a thirty (30) days prior Notice to the other Party.

 

If employees or other personnel working for a Party are entitled to claim rights to any part of the Foreground that Party shall ensure that it is possible to exercise those rights in a manner compatible with its obligations under this Agreement.

 

Transfer of Foreground. - Subject to the provisions of Article 15, where a Party transfers ownership of all or part of its Foreground, it shall assign its obligations regarding such part of its Foreground under this Agreement to the assignee, including the obligation to assign those obligations on to any subsequent assignee.

 

Where a Party intends to transfer ownership of all or part of its Foreground to a third party established in the other Party’s Assigned Territory, such other Party may oppose such transfer of ownership of Foreground if it considers that such transfer would adversely affect its rights under this Agreement in which case, the transfer of ownership shall not take place unless the other Party has been satisfied that appropriate measures are taken and has authorized the transfer in writing.

  

 

MAYOLY SPINDLER / PROTEA 

 

Protection. - Where all or part of Foreground is capable of industrial or commercial application, the owning Party shall provide for its adequate and effective protection, having due regard to its legitimate interests and the legitimate interests, especially the commercial interests, of the other Party.

 

Where all or part of Foreground is capable of industrial or commercial application and its owner does not protect it, the other Party or an Affiliate of such other Party may assume ownership of that Foreground and take all measures for ensuring its adequate and effective protection. The owning Party may refuse consent only if it can demonstrate that its legitimate interests would be adversely affected.

 

Use. - Either Party may freely, directly or indirectly use its Foreground which it owns in further research activities other than those covered by the Project, or for developing creating and marketing a drug or process, or for creating and providing a service, provided, however, that such Party shall promptly report to the others on the expected Use to be made of Foreground in the Progress Reports.

 

Dissemination. - Dissemination activities by either Party shall be compatible with the protection of intellectual property rights, confidentiality obligations and the legitimate interests of the owner of the Foreground.

 

At least forty-five (45)-day prior a Notice of any Dissemination activity shall be given to the other Party, including sufficient information concerning the planned Dissemination activity and the data considered to be disseminated.

 

Within thirty (30) days from such Notice’ any Party may object to the Dissemination activity if it considers that its legitimate interests in relation to its Foreground or Background could be adversely affected, in which case the Dissemination activity shall not take place unless appropriate steps are taken to safeguard these legitimate interests. This can not apply for dissemination which comes from a legal requirement (as government, court decision auditors, regulatory agencies, etc...). In such ever, the Party will disclose only Dissemination activity that is strictly necessary to satisfy the legal requirement.

 

	
9.2

	
Access Rights

 

Principles. - Access Rights for the implementation of the Project to Foreground and Background under this Agreement shall be granted on the basis of the following principles:

 

	
  

	
(a)

	
the granting of Access Rights shall be conditioned upon the acceptance of specific conditions aimed at ensuring that such rights will be used only for the intended purpose and that appropriate confidentiality obligations are entered into;

	
  

	
(b)

	
without prejudice to their obligations regarding the granting of Access Rights, each Party shall inform the other as soon as possible of any limitation to the granting of Access Rights to Background, or of any other restriction which might adversely affect the granting of Access Rights;

	
  

	
(c)

	
the withdrawal of a Party from the Project shall in no way affect the obligation of that Party to grant Access Rights to the other Party;

	
  

	
(d)

	
a Party shall not be entitled to grant sub-licenses unless expressly authorized in writing by the owner of the relevant Foreground or Background

  

 

MAYOLY SPINDLER / PROTEA 

 

	
  

	
(e)

	
all requests for Access Rights shall be made in writing sent to the other Party with copy to the Coordinator.

 

Access Rights for Implementation of the Project and for Use. - To the extent that they are needed to enable any Party to carry out its own work under the Project and for Use, either Party grants Access Rights to all Foreground and Background to the other Party on a non exclusive, non assignable, paid-up, royalty-free basis, during the term of this Agreement and for so long as Products are marketed under the terms of this Agreement in its own Assigned Territory, provided that, regarding Background, the Party holding the Background is entitled to grant such Access Rights.

 

Access Rights for Use. - Each Party shall be entitled to Access Rights for Use of the other Party’s Foreground to the extent necessary to allow the requesting Party to utilize its own Foreground, provided that, regarding Background, the Party holding the Background is entitled to grant such Access Rights.

 

Affiliate. - An Affiliate of a Party established in that Party’s Assigned Territory shall also be entitled to Access Rights to Foreground and/or Background as provided above under the same conditions as the Party to which it is affiliated to the extent, that (i) such access is needed to utilize its own Foreground, and (ii) the Foreground was transferred by assignment or license to such Affiliate.

 

A request for Access Rights under this provision may be made up to one (1) year after either of the following events: (i) the end of the Project (Project Completion); (ii) the withdrawal from the Project of the owner of the relevant Background or Foreground; or (iii) the issuance of any patent to Foreground for which Access Rights are deemed necessary or useful by the requesting Party.

 

	
9.3

	
Claims

 

All claims in relation to any rights provided in this Articles 9.1 or 9.2 which cannot be decided by the Review Committee shall be submitted to an Independent Expert selected as provided for in Article 19 hereafter.

 

The Independent Expert acting pursuant to such provision shall be an internationally reputed expert qualified in the field relevant the claim to be determined, provided, however, that the Independent Expert shall not act if he/she is, whether individually or through his/her association with any firm or network, in a position of conflict of interest with any of the Parties or with any affiliate of a Party.

 

ARTICLE 10 - CONFIDENTIALITY

 

	
10.1

	
The Parties will maintain the Confidential Information in strict confidence, prevent their respective employees and advisors from disclosing Confidential Information, limit the exposure of Confidential Information to those of their employees and representatives with a need-to-know, prevent disclosure of any Confidential Information by any employee, agent or representative to unauthorized parties and will not use any Confidential Information except for the performance of the Project, unless otherwise agreed in writing by the non-disclosing Party.

  

 

MAYOLY SPINDLER / PROTEA 

 

	
10.2

	
The Parties shall take all measures necessary to protect and safeguard the Confidential Information against any unauthorized use, publication or disclosure. The Parties shall advise the other Party of the persons to whom it provides access to any of the Confidential Information of the other Party for the performance of the Project, ensure that such persons are strictly prohibited from making any use, publishing or otherwise disclosing to others, or permitting others to use for their benefit or to the detriment of the other Party any of the Confidential Information. Upon the request of either Party, the other Party shall provide a copy of a written agreement signed by such persons acknowledging their commitment to abide by such prohibition. Either Party shall hold harmless and indemnify the other of any direct or indirect damages resulting from any breach of such agreement by any such person.

The confidentiality obligation as set forth in this Article shall not apply to Confidential Information for which the recipient Party reasonably proves is legally required (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand or similar process) to disclose, provided that the recipient party promptly (and, in any event, before complying with any such requirement) has provided the discloser with notice of such requirement so that it may seek a protective order or other appropriate remedy.

 

	
10.3

	
Neither Party shall, directly or indirectly, research any manufacturing secrets of the other Party which have not been communicated to it pursuant to this Agreement.

 

	
10.4

	
Termination or expiration of this Agreement for any reason shall not relieve the Parties of their obligations hereunder with respect to the non-disclosure and protection of the Confidential Information received prior to the effective date of the termination or expiration.

 

ARTICLE 11 - LIMITATION OF LIABILITY

Subject to the provisions of Articles 12 and 13 below, each Party will carry out the Project and use the other Party’s Background at its own risk. To the full extent permitted at law, each Party excludes all warranties applicable to the Project and its Background. Where under law any warranty cannot be excluded, each Party’s liability is, at the option of the other Party, limited to the performance of its contributions to the Project or the payment of the cost of having its contributions to the Project performed again. TO THE FULL EXTENT LAWFUL, NEITHER PARTY IS LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT OF CONSEQUENTIAL DAMAGES ARISING UNDER OR PURSUANT TO THIS AGREEMENT, WHETHER IN RESPECT OF ITS NEGLIGENCE OR OTHER DEFAULT, OR OTHERWISE.

 

ARTICLE 12 - REPRESENTATIONS AND WARRANTIES

 

	
12.1

	
Each Party represents and warrants to the other that:

 

	
  

	
(a)

	
it has the legal power, authority and right to enter into this Agreement and to perform its respective obligations set forth herein;

  

 

MAYOLY SPINDLER / PROTEA 

 

	
  

	
(b)

	
as of the Effective Date of this Agreement it is not a party to any agreement or arrangement with any third party or under any obligation or restriction, including pursuant to its certificate of incorporation or bylaws or rules, which in any way limits or conflicts with its ability to fulfill any of its obligations under this Agreement, and will not enter into any such agreement during the term of this Agreement;

	
  

	
(c)

	
to the best of its belief as of the Effective Date of this Agreement, there are no actions, suits, investigations, claims or proceedings pending or threatened in any way relating to its Background.

 

	
12.2

	
PROTEA warrants to LMS that it is not bound by, and except as provided in section 3.3 will not during the period the Project is being conducted enter into, any arrangement or understanding with any third party, which arrangement or understanding requires PROTEA or any of its Affiliates to conduct any projects or activities alone or with third parties where the primary purpose of such projects or activities is treatments for exocrine pancreatic insufficiency

 

	
12.3

	
Subject to Articles 12.1 and 12.2, PROTEA and LMS each specifically disclaim that the Project will be successful, in whole or in part, or that any activities undertaken by one or both of them with respect to the Project will be successful. PROTEA AND LMS EXPRESSLY DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY RIGHTS OF SUCH PARTY INCLUDING WITHOUT LIMITATION, PATENTS OR KNOW-HOW, IMPROVEMENTS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF FOREGROUND, PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE 13 - INDEMNIFICATION AND INSURANCE

 

	
13.1

	
Indemnification

Either Party will indemnify, defend and hold harmless the other Party and its officers, employees and agents from and against any and all third party actions, claims, demands, costs, liabilities or expenses (including reasonable legal costs and fees) (each a “Liability”) made, sustained, brought or prosecuted or in any manner based upon, occasioned by or attributable to any injury to any person (including death) or loss of or damage to property which may arise from or as a direct result of such Party’s conduct of activities in connection with the Project; except, in each case, to the extent due to the negligence or willful misconduct of any Party. The aggregate liability of LMS shall not exceed the maximum amount of the LMS’s guarantee policy insurance; i.e., €7, 900,000. The aggregate liability of PROTEA shall not exceed the maximum amount of the PROTEA’s guarantee policy insurance i.e., $2,000,000.

  

 

MAYOLY SPINDLER / PROTEA 

 

	
13.2

	
Insurance

Each Party will procure adequate insurance coverage such as are customary and appropriate in its industry, including product liability insurance at the time of exploitation by such Party, and third party liability insurance in respect of its participation in the Project and its use and permitted exploitation of the Background and Foreground. Each Party will, upon the request of the other Party, produce evidence of the currency of the insurance policies referred to in this Article 13.2. Each Party undertakes at all times to comply with the terms of its insurance policies the subject of this Article 13.2.

 

ARTICLE 14 - TERM AND TERMINATION

 

	
14.1

	
Term

This Agreement is entered into from its Effective Date and, unless terminated earlier as provided in this Article 14.2, it shall continue in full force and effect on a country-by-country and Product-by-Product basis until there is no remaining obligation for such Product in such country.

 

	
14.2

	
Anticipated Termination

Termination with Immediate Effect.- Either Party may at any time terminate this Agreement as of right prior to the end of its term, effective upon Notice to the other Party, if any of the following events occur:

 

	
  

	
(a)

	
either Party commits a material breach of any of its obligations hereunder which is not cured within one (1) month from the receipt of Notice identifying the breach and requiring its remedial;

	
  

	
(b)

	
either Party (i) becomes unable to pay its debts as they become due, (ii) suspends payment of its debts, (iii) enters into or becomes subject to corporate rehabilitation or bankruptcy proceedings or liquidation or dissolution, (iv) makes an assignment for the benefit of its creditors, or (v) seeks relief under similar laws for debtor’s relief;

	
  

	
(c)

	
subject to the terms of Article 5.2, the Starting Date is not met;.

 

Unless otherwise provided herein, such termination as of right shall be in addition to any other remedy the non-breaching Party may have due to the other Party’s breach of its obligations hereunder and shall occur without the need to have recourse to any judicial authority whatsoever.

 

	
14.3

	
Effect of Termination

 

Upon the expiration or termination of this Agreement:

 

	
  

	
(a)

	
the respective rights of the Parties to indemnification shall survive termination of this Agreement with respect to any claims that relate to or derive from the Project, or any acts or failures to act, of either Party in connection with the Project that occurred prior to termination;

	
  

	
(b)

	
LMS and PROTEA will each promptly return to the other Party all Confidential Information received from the other Party, except for a single copy and/or sample to be retained for documentation purposes only;

  

 

MAYOLY SPINDLER / PROTEA 

 

	
14.4

	
WITHDRAWAL OF THE DEVELOPMENT PROGRAM

 

Notice of withdrawal.- Either Party may at any time terminate the Development Program with a three (3) month prior Notice to the other Party as provided for in Article 3.3 above if it withdraws from the Project.

 

According to Article 3.3 and except as otherwise provided herein, the licenses and Access Rights granted to the Parties under this Agreement in effect on the date of such Termination shall survive; provided, however, that nothing in this Article 14.4 shall prohibit or be construed to prohibit the later termination of such a surviving Access Right.

 

ARTICLE 15 - ASSIGNMENT

 

Notwithstanding any provision of this Agreement to the contrary, neither Party may assign any of its rights or obligations under this Agreement in any country to any third party without the prior written consent of the non-assigning Party, which consent will not be unreasonably withheld; provided, however, that either party may assign its rights and obligations under this Agreement without the consent of the other party to any Affiliate. Notwithstanding the foregoing, any such assignment to an Affiliate will not relieve the assigning Party of its responsibilities for performance of its obligations under this Agreement. In the event of such transaction, however, intellectual property rights of a party to such transaction other than one of the Parties to this Agreement will not be included in the technology licensed under this Agreement. Any successor to substantially all of the business of Party to which this Agreement relates, whether by merger, sale of stock, sale of assets or other transaction shall be deemed a third party requiring prior written consent of the other Party that shall not be unreasonably refused. The acceptance or non acceptance shall not be given in more than thirty (30) days from the notification to the other Party.

 

ARTICLE 16 - NON WAIVER AND SEVERABILITY

 

The failure of either Party to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof, or the right of either Party thereafter to enforce each and every provision. Notwithstanding the above, the Parties may modify or amend any provisions of this Agreement if in writing and signed by both Parties.

 

If any provision of this Agreement or application thereof to any person or circumstance is held invalid,

 

	
  

	
(a)

	
such invalidity shall not affect the validity of this Agreement if it can be given effect without the invalid provision or application,

	
  

	
(b)

	
this Agreement shall be construed, and the Parties shall agree to amend this Agreement, so as to effectuate as nearly as possible the intent of the invalid clauses or application and

	
  

	
(c)

	
to this end the provisions of this Agreement are declared to be severable.

  

 

MAYOLY SPINDLER / PROTEA 

 

ARTICLE 17 - FORCE MAJEURE AND HARDSHIP

 

The ICC Force Majeure Clause 2003 and the ICC Hardship Clause 2003 ICC Publication 650 E) are, hereby, incorporated by reference, provided, however, that the “reasonable period” and the “reasonable time” referred to in paragraphs 8 and 2 of the ICC Force Majeure Clause and the ICC Hardship Clause, respectively, shall be three (3) months.

 

ARTICLE 18 - MISCELLANEOUS

 

	
18.1

	
Expenses

No party shall be responsible for any expenses of the other Party in connection with the negotiations, documents or transactions contemplated therein.

 

	
18.2

	
Entire Agreement

The binding provisions of this Agreement, constitute the entire agreement between the parties, superseding all prior oral or written agreements, understandings, representations and warranties, and course of conduct or dealing among the parties on the subject matter hereof. This Agreement cancels and replaces the agreement signed for the same purpose between the Parties on May, 27th 2009. Except as otherwise provided, herein, this Agreement may be amended or modified only by a writing signed by all Parties.

 

	
18.3

	
Publicity

No press release or other form of publicity regarding the Project or this Agreement shall be permitted by either Party to be published unless all the Parties have indicated their consent to the form of the release in writing.

 

	
18.4

	
Compliance with Laws

The Parties shall perform the work for the completion of the Project hereunder in compliance with c-GMP, GLP, GCP, as applicable, and all laws, ordinances and governmental rules or regulations applicable in their respective Assigned Territories.

 

	
18.5

	
Notices

Any Notice required or permitted to be given under this Agreement shall be deemed to have been validly delivered to the Parties following address:

	
  

	
if to LMS at

	
LABORATOIRES MAYOLY SPINDLER,

6, avenue de l’Europe,

78400 Chatou, France

Attn: Mr. Olivier GUTH

E-mail: olivier.guth@mayoly-spindler.fr

  

 

MAYOLY SPINDLER / PROTEA 

	
  

	
if to PROTEA at

	
PROTEA EUROPE SAS,

80 rue Etienne Lenoir,

30900 Nimes, France

Attn: Mr. Daniel Dupret

Facsimile: +33 4 66 67 41 77

E-mail: d.dupret@eu.proteabio.com

with copy via facsimile or e-mail to

PROTEA Inc.,

955 Hartman Run Road,

26507 Morgantown WV, United States of America

Attn: Mr. Stephen Turner

Facsimile: (304)29-7101

E-mail: stephen.turner@proteabio.com

 

or at such other address as either Party may from time to time notify in writing to the other Party.

 

	
18.6

	
LANGUAGE

This Agreement is executed in the English and French languages. The Parties intend that the English and French language provisions have the same meaning. In the event of a dispute between the English and French language provisions, the Agreement executed in the English language will be controlling in all respects.

 

ARTICLE 19 – TECHNICAL EXPERTISE

 

The Independent Expert provided for in Articles 4.3, 5.1 and 9.3 herein shall be selected by mutual agreement of the Parties within one (1) month from a Notice of either Party requesting such selection and specifying the issues as to which the Parties have not agreed and to be determined by the Independent Expert (the “Disputed Item”).

 

If the Parties have not agreed upon the selection of the Independent Expert within the above-mentioned time limit, the Independent Expert shall be appointed at the request of the first Party to make such request by the International Center for Expertise of the International Chamber of Commerce acting pursuant to its Rules for Expertise (ICC Publication Nr. 649), a copy of which is attached hereto as Appendix 7.

 

In either case, the work of the Independent Expert shall be administered according to such Rules. The Independent Expert shall apply the provisions and principles set forth in this Agreement to resolve the Disputed Item. The Independent Expert shall not review any item other than those required to resolve the Disputed Item and shall base his/her determination exclusively on the materials and arguments presented by the Parties. The Parties shall cooperate with the Independent Expert in all reasonable respects.

  

 

MAYOLY SPINDLER / PROTEA 

 

The Independent Expert shall simultaneously deliver to the Parties a letter setting forth his/her final determination of the Disputed Item within the shortest practicable time and shall use his/her reasonable efforts to do so within one (1) month after his/her_appointment.

 

Such final determination shall, except in the case of manifest error, be final and binding on the Parties, and shall be given by the Independent Expert as an expert and not as an arbitrator.

 

ARTICLE 20 - GOVERNING LAW

 

This Agreement shall be governed by, and interpreted in accordance with, the laws of France.

 

ARTICLE 21 – DISPUTE RESOLUTION

 

	
21.1

	
Amicable Settlement

 

The Parties recognize that disputes as to certain matters may from time to time arise during the Term which relate to either Party’s rights and/or obligations hereunder. It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to arbitration. The Parties agree that prior to any arbitration pursuant to Article 21.3 hereafter. LMS’ Project Manager and PROTEA’s Project Manager will meet in person or by video-conferencing in a good faith effort to resolve any disputes concerning this Agreement. Within thirty days of formal request by either Party to the other Party, either Party may by Notice to the other Party have such disputes referred to their respective officers for attempted resolution by good faith negotiations, such good faith negotiations to begin within thirty (30) days after such Notice is received. Any dispute which is not resolved between the Parties or the designated officers will be resolved in accordance with Article 21.3.

 

	
21.2

	
Pre Arbitral Referee

 

Any Party to this Agreement shall have the right to have recourse to and shall be bound by the pre-arbitral referee procedure of the International Chamber of Commerce in accordance with its Rules for a Pre-arbitral Referee Procedure.

 

	
21.3

	
Arbitration

 

All disputes arising out of or in connection to this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one (1) arbitrator appointed in accordance with the said Rules.

 

The place of arbitration shall be Paris, France and the language to be used in the arbitration shall be the English language.

  

 

MAYOLY SPINDLER / PROTEA 

 

If the Parties have not agreed upon the selection of the Independent Expert within the above-mentioned time limit, the Independent Expert shall be appointed at the request of the first Party to make such request by the International Center for Expertise of the International Chamber of Commerce acting pursuant to its Rules for Expertise (ICC Publication Nr. 649), a copy of which is attached hereto as Appendix 7.

 

In either case, the work of the Independent Expert shall be administered according to such Rules. The Independent Expert shall apply the provisions and principles set forth in this Agreement to resolve the Disputed Item. The Independent Expert shall not review any item other than those required to resolve the Disputed Item and shall base his/her determination exclusively on the materials and arguments presented by the Parties. The Parties shall cooperate with the Independent Expert in all reasonable respects.

 

The Independent Expert shall simultaneously deliver to the Parties a letter setting forth his/her final determination of the Disputed Item within the shortest practicable time and shall use his/her reasonable efforts to do so within one (1) month after his/her_appointment.

 

Such final determination shall, except in the case of manifest error, be final and binding on the Parties, and shall be given by the Independent Expert as an expert and not as an arbitrator.

 

This Agreement is entered into on March 22nd, 2010.

	
/s/ Jean-Nicolas VERNIN

	
/s/ Daniel DUPRET

	
Laboratoires MAYOLY SPINDLER SAS

	
PROTEA EUROPE SAS

	
Mr. Jean-Nicolas VERNIN

	
Mr. Daniel DUPRET

	
President

	  
	  	  
	  	
/s/ Stephen TURNER

	  	
PROTEA, Inc.

	  	
Mr. Stephen TURNER

  

 

MAYOLY SPINDLER / PROTEA 

APPENDIX 1

List of patents

APPENDIX 2

INRA/CNRS/MAYOLY License

APPENDIX 3

PROTEA acknowledges to have received the hereinafter non clinical study reports by e-mail from Yves Leblond on February, 4, 2009 to Daniel Dupret and the “Executive summary” on March 30, 2009.

APPENDIX 4

Development Program

APPENDIX 5

Project Schedule

APPENDIX 6

Development Budget

APPENDIX 7

Rules of Expertise ICC Publication No. 649LOAN AGREEMENT

 

THIS LOAN AGREEMENT (“Loan Agreement”), made and entered into this 3rd day of August, 2009, by and between the West Virginia Economic Development Authority (“WVEDA”), 160 Association Drive, NorthGate Industrial Park, Charleston, West Virginia 25311, and Protea Biosciences, Inc., 955 Hartman Run Road, Suite 210, Morgantown, West Virginia 26507.

 

WITNESSETH:

 

WHEREAS, Protea Biosciences, Inc., a Delaware corporation authorized to transact business in West Virginia (the “Company”), has purchased, acquired and installed certain equipment in its facility located at Morgantown, Monongalia County, West Virginia, which equipment, machinery and fixtures are more particularly described in Exhibit A attached hereto (the “Project”); and

 

WHEREAS, the total estimated cost of the Project is $569,811.82; and

 

WHEREAS, WVEDA has agreed to make a loan to the Company in the amount of $242,631.00 for a term of ten (10) years with an interest rate of four percent (4%) per annum to be used to pay a portion of the cost of the Project (the “WVEDA Loan”);

 

WHEREAS, the balance of the cost of the Project is to be paid with funds of the Company in the amount of $84,550.82, and a loan in the amount of $242,630.00 made by the West Virginia Infrastructure and Jobs Development Council (the “WVIJDC”) to the Company (the “WVIJDC Loan”);

 

WHEREAS, the collateral for said WVEDA Loan shall be all equipment, fixtures, and replacements thereto of the Company described in Exhibit A attached hereto, shared on a pro rata basis with respect to security interests of the WVIJDC therein to secure the repayment of the WVIJDC Loan, in accordance with the provisions of that certain Intercreditor Agreement of even date herewith between WVEDA and the WVIJDC; and

 

2549011.2

Loan Agreement

  

 

  

 

WHEREAS, Company has represented to WVEDA that the WVEDA Loan shall ultimately be applied toward the permanent financing of the costs of the purchase, acquisition and installation of said equipment, machinery and fixtures as outlined in the loan application submitted to WVEDA.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto covenant and agree to and with each other as follows:

 

A.          The Loan and Collateral:

 

1.           The WVEDA Loan shall be made and disbursed, as set out in the loan application to WVEDA.

 

2.           WVEDA agrees to loan to Company the sum of $242,631.00 for a term of ten (10) years at an annual rate of interest equal to four percent (4%) per annum, which WVEDA Loan shall represent not more than forty-five percent (45%) of the total cost of the Project.

 

3.           The note evidencing the WVEDA Loan and the collateral and guaranties which shall secure and guarantee the repayment of the WVEDA Loan shall be as follows:

 

	
  

	
(a)

	
Company agrees to execute and deliver to WVEDA a negotiable Promissory Note payable to the order of WVEDA in the principal sum of $242,631.00 for a term of ten (10) years and bearing interest at the rate set out above, said Promissory Note to be substantially in the form set forth in Exhibit B attached hereto.

 

	
  

	
(b)

	
Company shall grant to WVEDA a first lien security interest, pursuant to the Uniform Commercial Code, shared on a pro rata basis with the WVIJDC Loan, on all equipment, machinery and fixtures of the Company described in Exhibit A and all replacements, additions and improvements thereto and proceeds thereof, to secure WVEDA in the payment of the WVEDA Loan mentioned in paragraph (a) above.

 

2549011.2

Loan Agreement

  

2

  

 

	
  

	
(c)

	
Company shall be in default hereunder upon failure to pay when due any amount payable hereunder or under the said Promissory Note or upon failure to observe or perform any of Company’s other agreements contained herein as further provided in Section D below.

 

	
  

	
(d)

	
Company shall be in default hereunder upon failure to pay when due any amount payable under the WVIJDC Loan or upon failure to observe or perform any covenant or agreement with respect to the WVIJDC Loan.

 

4.           The Project shall be completed for a cost not to exceed $569,811.82. Should at any time said costs exceed $569,811.82, then WVEDA shall not be obligated to close and disburse the WVEDA Loan, until the Company shall have expended or escrowed with WVEDA from funds separate from the proceeds of the WVEDA Loan, such additional amounts as shall be equal to the difference between such increased cost and $569,811.82.

 

5.           If the overall cost of the completed Project is less than $569,811.82, WVEDA participation shall be in the same proportion to total cost as the original commitment.

 

B.          The Disbursement of the WVEDA Loan Proceeds:

 

1.           The total loan proceeds of the WVEDA Loan to the Company hereunder shall be used only for the purposes set forth in the loan application submitted by the Company to WVEDA and shall be applied in those amounts set out in said loan application.

 

2.           Disbursement of the proceeds of said WVEDA Loan shall be made at closing.

 

C.          Representations, Covenants and Warranties of the Company:

 

1.           Company is a duly organized and existing corporation under the laws of the State of Delaware and authorized to transact business in West Virginia.

 

2549011.2

Loan Agreement

  

3

  

 

2.           The execution, delivery and performance of this agreement and other documents and writings referred to herein or otherwise relating hereto are all within the Company’s corporate powers, have been duly authorized and are not in contravention of law, or the terms of the Company’s charters, bylaws, or other corporate papers, or of any indenture, agreement or undertaking to which the Company is a party or by which the Company is bound.

 

3.           Prior to closing and disbursement of any proceeds of the WVEDA Loan by WVEDA to Company, the Company shall:

 

	
  

	
(a)

	
Provide WVEDA with certified copies of the Company’s corporate resolutions authorizing the Company’s officers to execute this loan agreement, all notes and other documents described above, as well as other documents necessary to consummate the WVEDA Loan being made hereunder. All such documents shall be in the usual and customary form, and shall be satisfactory to counsel for WVEDA.

 

	
  

	
(b)

	
Furnish to WVEDA an opinion of its counsel, with current date, covering such matters incident to the transaction herein contemplated as may be requested in form and substance satisfactory to counsel for WVEDA.

 

	
  

	
(c)

	
Acknowledge that the WVEDA Loan will be for permanent financing only. In the event the Project includes construction or future delivery of equipment, the Project shall be completed utilizing interim financing, with the WVEDA Loan closed and disbursed only at the completion of all proposed construction, purchase and placement of all equipment in operating condition and acceptance by WVEDA.

 

	
  

	
(d)

	
Provide to WVEDA those certain items requested by WVEDA, including but not limited to the following:

 

(i) Copies of bank documents, including but not limited to, loan agreement(s), deed(s) of trust, UCC financing statement(s), security agreement(s), and other documents relating to the Project;

 

2549011.2

Loan Agreement

  

4

  

 

(ii) A Certificate of Good Standing for the Company from the office of the Delaware Secretary of State and a Certificate of Authority for the Company from the office of the West Virginia Secretary of State;

 

(iii) A Certificate of Good Standing for the Company for unemployment coverage from the West Virginia Bureau of Employment Programs, Unemployment Compensation Division;

 

(iv) A Certificate of Good Standing for the Company for workers’ compensation coverage from the West Virginia Bureau of Employment Programs, Workers’ Compensation Division;

 

(v) Appropriate insurance policies, as set forth in Section 6,9.(b).;

 

(vi) Proof of Company’s equity participation in the Project;

 

(vii) Copies of all invoices related to the Project; and

 

(viii) Any other document related to the Project that WVEDA may request.

 

4.           Company will provide evidence to the WVEDA that all project equipment is in place and fully operational.

 

5.           All information at any time or times furnished to WVEDA by Company concerning Company’s financial condition or otherwise, for the purpose of obtaining the WVEDA Loan being made hereunder by WVEDA to Company and any other credit or extension or renewal of such WVEDA Loan or other credit, and so long as any part of such WVEDA Loan or extensions or renewals thereof remain outstanding is and will be at the time the same is furnished, accurate and correct in all material aspects and complete insofar as completion may be necessary to give WVEDA true and accurate knowledge with respect thereto.

 

6.           At the time the proceeds of the WVEDA Loan are disbursed, as provided herein, Company shall be in compliance with and shall thereafter remain in compliance with all Federal and State of West Virginia laws, including regulations applicable to its business for so long as any part of the WVEDA Loan referred to in this Loan Agreement is outstanding,

 

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Loan Agreement

  

5

  

 

7.           So long as any part of the WVEDA Loan being made hereunder by WVEDA to Company is outstanding:

 

	
  

	
(a)

	
Company shall promptly give WVEDA notice of any unusual problems or developments affecting its business operations which may adversely affect: (i) its ability to repay such WVEDA Loan; and (ii) the collateral securing such WVEDA Loan.

 

	
  

	
(b)

	
Company shall pay and discharge or cause to be paid or discharged all tax claims relating to the collateral securing the WVEDA Loan being made hereunder, when due, except such as to which a bona fide dispute exists, and which are being contested in good faith.

 

	
  

	
(c)

	
Company shall maintain proper books of records and accounts in accordance with generally accepted accounting principles consistently applied, in which full, true and correct entries shall be made of all of its dealings and business affairs, and Company shall permit WVEDA or its authorized representatives, to inspect and audit its books of record and account at any reasonable time or times upon receiving a request with respect thereto. WVEDA personnel and all agents of WVEDA shall be authorized to enter upon the premises of Company and into any building thereon, whether permanent or temporary, jointly or separately, to carry out inspections. These inspections may be scheduled or unscheduled.

 

	 	
(d)

	
Company shall:

 

(i) Promptly furnish WVEDA annual financial statements within 90 days of the end of Company’s fiscal year, all in reasonable detail and prepared by an independent certified public accountant of recognized standing acceptable to WVEDA and whose certificate or opinion accompanying such financial statements is in form and substance acceptable to WVEDA;

 

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Loan Agreement

  

6

  

 

(ii) Refrain from declaring, or making, or incurring liability to make, any payment in cash or other assets either as dividends, including inter-company and related-company dividends, or other distributions upon any class of capital stock of Company, or purchase, retire, redeem or otherwise acquire for value any shares of any class of capital stock of Company, if any of the following circumstances are in existence at that time: (1) Company is in default of any financial covenant relating to the WVEDA Loan; (2) Company is in default or is unable to pay its current financial obligations under any financing document with any of its lenders; or (3) Company has failed to pay when due any governmental tax, charge, fee or assessment (subject to the absolute right of Company to in good faith challenge such tax, charge, fee or assessment). Any change in this requirement for dividends must be approved by WVEDA. Salaries or compensations of officers or owners will not be increased unless a profit was made in the calendar year immediately preceding such increase and all of Company’s debts are paid to a current status;

 

(iii) Not make any loans or advances to any officer, shareholder, director or employee, except for temporary advances in the ordinary course of business; and

 

(iv) Cause all loans of shareholders, directors or officers to Company to be subordinated, both for collateral and repayment, to the WVEDA Loan, and payments thereon shall be deferred until the WVEDA Loan is paid in full.

 

8.           So long as the WVEDA Loan described hereunder from WVEDA to Company or any renewal or extension thereof, remains unpaid in whole or in part, or so long as any other liability or indebtedness of Company to WVEDA shall exist:

 

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Loan Agreement

  

7

  

 

	
  

	
(a)

	
Company shall conduct its business in a normal manner in the ordinary course of business and remain in business and employ persons from the general vicinity of Monongalia County, West Virginia. The WVEDA Loan shall be callable at the option of WVEDA should Company cease operations of the Project or if there is a Significant Curtailment of Operations at the Project. “Significant Curtailment of Operations” shall mean a condition at the Project location where employment (as measured in terms of man hours) for any calendar quarter is less than 50% of the average quarterly employment for the previous four quarters, unless such reduction is the result of causes wholly beyond the control of the Company.

 

	
  

	
(b)

	
At all times during the term of this Loan Agreement, Company shall, at its own expense, maintain adequate liability insurance in amounts and coverages satisfactory to WVEDA and keep or cause to be kept all property, real or personal, including without limitation the property described in Exhibit A, fully insured against fire with extended coverage in an amount and with an insurance company or companies satisfactory to WVEDA and against other hazards, casualties and contingencies in such amounts and for such coverages and periods as may be required by WVEDA. All casualty insurance relating to the collateral for the WVEDA Loan shall name WVEDA as an additional insured and as loss payee, as its interest may appear, and providing for not less than thirty (30) days written notice to WVEDA of the cancellation of such policy or policies. Such casualty insurance policy or policies shall contain a “New York Standard Mortgage Clause,” or its equivalent. In the event of a failure or refusal of Company to agree with the insurance companies issuing such policies as to the amount and terms of any loss within sixty (60) days from such loss, WVEDA may negotiate with and settle said loss with such insurance company or companies, and neither WVEDA nor the insurance companies so involved shall, upon such settlement being made, be liable in any manner to Company. Company shall carry Workers’ Compensation insurance and other insurance against other risks as are commonly insured against by companies in similar types of business, all in a manner satisfactory to WVEDA. Company shall purchase Federal Flood Insurance in amounts and coverage satisfactory to WVEDA if Company’s county is designated as a flood prone area and the FIA map shows that Company’s property is located within a special flood hazard area, which Federal Flood Insurance, if so required, shall name WVEDA as an additional insured and as loss payee, as its interest may appear.

 

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8

  

 

9.           Company covenants and warrants that the real estate on which the equipment, machinery and fixtures used as collateral for the WVEDA Loan is to be installed is not contaminated by the disposal of hazardous substances and the Company hereby agrees to indemnify and hold WVEDA and its assigns harmless from any loss or damage, including costs or expenses connected therewith, resulting from hazardous substances and waste being located on said real estate by reason of the “Comprehensive Environmental Response Compensation and Liability Act of 1980” or other similar acts under the laws of the United States or of any state.

 

10.         Company shall perform and observe all covenants, agreements, terms and conditions contained in the Promissory Note, Security Agreement and other documents required to be executed and delivered hereunder.

 

11.         Except as provided herein or with the prior consent in writing of WVEDA, Company shall not participate in any merger, consolidation or other reorganization, or sell or otherwise transfer all or any part of its business or assets which are encumbered to secure the WVEDA Loan described herein. The WVEDA Loan shall be callable at the option of WVEDA in the event that 51% of the capital stock of the Company ceases to be owned by the present stockholders, unless prior consent in writing is received from WVEDA. The WVEDA Loan shall, at the option of WVEDA, be due upon the sale or other transfer of Project assets in any manner whatsoever by the Company to any person, firm or corporation without the consent in writing of WVEDA.

 

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Loan Agreement

  

9

  

 

12.         Company shall from time to time execute such further writings, instruments and documents and do such further acts as WVEDA may reasonably require to effect the purposes of this Loan Agreement.

 

13.         All of Company’s representations, covenants and warranties contained in this Loan Agreement shall survive the execution and delivery of this Loan Agreement, as well as the Promissory Note, Security Agreement and other documents described above, and the disbursement of the WVEDA Loan proceeds hereunder and any breach thereof by Company shall be considered an event of default under such Note, Security Agreement and other documents.

 

14.         Whenever any approvals may be required hereby by the parties or their respective counsel with respect to the form and sufficiency of any documents or writings, the condition of the title to any collateral securing the loans being made hereunder, or on any other matter, such approval shall not be unreasonably withheld.

 

15.         The Company shall be responsible for all WVEDA Loan closing costs and expenses, including, but not limited to, reasonable attorney’s fees, incurred by WVEDA in connection with this WVEDA Loan. Said closing costs and expenses shall be in a total amount not to exceed one percent (1%) of the principal amount of the loan and in the minimum amount of $2,500.00; provided, however, that WVEDA’s adherence to the 1% cap as hereinabove referenced in contingent upon the Company’s assistance with regard to the compilation and delivery of the certain support documentation required or requested by WVEDA. Attorney’s fees shall be paid by the Company at closing.

 

16.         The Project has been completed for a cost not to exceed $569,811.82, as set forth above.

 

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Loan Agreement

  

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D.          Events of Default and Remedies:

 

1.           The occurrence of any one of the following shall constitute an Event of Default:

 

	
  

	
(a)

	
Failure by the Company to pay any amounts required to be paid under this Loan Agreement at the times specified herein and such failure shall continue for a period of thirty (30) days after the same has become due;

 

	
  

	
(b)

	
Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Loan Agreement, other than as referred to in (a) above and (c) below, for a period of 30 days after written notice, specifying such failure, requesting that it be remedied and stating that it is a notice of default, has been given to the Company by the WVEDA, unless the WVEDA shall agree in writing to an extension of such time prior to its expiration;

 

	
  

	
(c)

	
The dissolution or liquidation of the Company or the commencement by the Company of a voluntary case under the United States Bankruptcy Code, as amended, or its failure promptly to lift or suspend any execution, garnishment or attachment of such consequence as will impair its ability to perform its obligations under this Loan Agreement, or the entry of an order for relief in respect of the Company under the United States Bankruptcy Code, as amended, or the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar official of the Company or of any substantial part of its property, or an assignment by it or by any such guarantor for the benefit of creditors, or the entry by it into an agreement of composition with its creditors, or the filing of a petition applicable to the Company in any proceeding seeking its reorganization, liquidation, adjustment, composition or other arrangement instituted pursuant to any federal or state law; provided, however, that any such petition filed against the Company or not filed by the Company that is dismissed or stayed within thirty (30) days of such filing shall not constitute an Event of Default so long as the Company gives written notice of such filing to the WVEDA;

 

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(d)

	
Any warranty, representation or other statement by or on behalf of the Company contained in this Loan Agreement or in any instrument or certificate furnished in compliance with or in reference to this Loan Agreement is false or misleading in any material respect, or failure by the Company to perform or observe any condition or covenant contained in any such document for a period of 30 days after compliance with the notice and request provisions of paragraph D. 1 .(b) above;

 

	
  

	
(e)

	
The Company shall fail to pay when due any amount payable under the WVIJDC Loan or shall fail to observe or perform any covenant or agreement with respect to the WVIJDC Loan.

 

2.           Whenever any Event of Default shall have happened and is continuing, the WVEDA may, to the extent permitted by applicable law, take any one or more of the following remedial steps:

 

	 	
(a)

	
(i) The WVEDA may exercise any right, power or remedy permitted to it by law, and shall have in particular, without limiting the generality of the foregoing, the right to declare the entire amount of the WVEDA Loan (if not then due and payable) to be due and payable immediately, and upon any such declaration the entire amount of the WVEDA Loan shall become and be immediately due and payable, anything in this Loan Agreement contained to the contrary notwithstanding. The Company shall forthwith pay to the WVEDA such amounts.

 

(ii) The WVEDA may waive, rescind and annul such declaration and the consequences thereof.

 

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12

  

 

	
  

	
(b)

	
The WVEDA may take any action or remedy specified in the Security Agreement dated as of the date hereof between the Company and the WVEDA.

 

	
  

	
(c)

	
The WVEDA may take whatever action at law or in equity may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Loan Agreement.

 

In case the WVEDA shall have proceeded to enforce its rights under this Loan Agreement and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the WVEDA, then and in every such case the Company and the WVEDA shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company and the WVEDA shall continue as though no such proceeding had been taken.

 

The Company covenants that, without limiting any remedies of the WVEDA hereunder, in case an Event of Default shall occur with respect to the payment of any installment payable under WVEDA Loan then, upon demand of the WVEDA, the Company will pay to the WVEDA the whole amount that then shall have become due and payable under the WVEDA Loan, with interest on overdue principal (and interest to the extent permitted by law) at the rate payable on the WVEDA Loan.

 

In case the Company shall fail to pay such amounts within the time provided in Section D.l.(a), the WVEDA shall be entitled and empowered to institute any action or proceeding at law or in equity without demand for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company and collect, in the manner provided by law, out of the property of the Company, the moneys adjudged or decreed to be payable.

 

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3.           In the event the Company should default under any of the provisions of this Loan Agreement and the WVEDA should employ attorneys or incur other expenses for the collection of the payments due under this Loan Agreement or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the WVEDA, the reasonable fees of such attorneys and such other reasonable expenses so incurred by the WVEDA.

 

4.           To the extent permitted by law, the Company will not during the continuance of any Event of Default hereunder insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Loan Agreement. The Company hereby expressly waives all benefits or advantage of any such law or laws and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the WVEDA, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted.

 

5.           No remedy herein conferred upon or reserved to the WVEDA is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the WVEDA to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.

 

6.           In the event any agreement contained in this Loan Agreement should be breached by the Company and thereafter waived by the WVEDA, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

 

7.           The Events of Default and remedies set forth in this Section D shall be in addition to all other defaults and remedies set forth in this Loan Agreement.

 

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Loan Agreement

  

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E.          General Provisions:

 

1.           This Agreement shall be binding upon and inure to the benefit of all of the parties hereto, and their respective successors and assigns. This Agreement and the agreements and documents relating thereto may be assigned by WVEDA without the consent of the Company. Company may not assign this Loan Agreement or any of its rights and obligations hereunder or under the other documents and agreements relating thereto without the written consent of WVEDA, and any attempted assignment without such consent shall be null and void.

 

2.           No statements or representations made before or after the issuance of the WVEDA Loan by any member of the WVEDA Board, or agent or employee of WVEDA, shall be construed as approval to alter or amend the commitment underlying the WVEDA Loan as all such amendments or alterations shall only be made in writing after the approval of WVEDA. The parties hereto shall not be deemed to have waived or agreed to the modification of any of the provisions of this Loan Agreement, except by instrument in writing duly signed by them.

 

3.           If any provision of this Loan Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatsoever.

 

4.           This Loan Agreement and all other agreements related hereto shall be governed and construed in accordance with the laws of the State of West Virginia. Headings and titles herein and therein are for convenience only and shall not influence such construction or interpretation.

 

5.           All notices required or desired to be given hereunder shall be served by certified mail on the party intended at its address shown below, which notice shall be deemed given at the time deposited in the U.S. Mail, postage prepaid:

 

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15

  

 

West Virginia Economic Development Authority

NorthGate Business Park

160 Association Drive

Charleston, West Virginia 25311

 

Protea Biosciences, Inc.

955 Hartman Run Road

Suite 210

Morgantown, West Virginia 26507

 

IN WITNESS WHEREOF, WVEDA and Company have caused their corporate names to be signed hereto by their respective officers or partners duly authorized, all as of the day and year first above written.

	  	
WEST VIRGINIA ECONOMIC

	  	
DEVELOPMENT AUTHORITY

	  	  	  
	  	
By:

	
/s/ David G. Warner

	  	  	
Its:

	
Executive Director

	  	  	  
	  	
PROTEA BIOSCIENCES, INC.

	  	  	  
	  	
By:

	
 
/s/ Stephen Turner

	  	  	
Its:

	
CEO

 

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EXHIBIT A

 

LIST OF EQUIPMENT, MACHINERY AND FIXTURES

 

QTRAP 5500 MASS SPECTROMETER AND ULTRASONIC WELDER

 

2549011.2

Loan Agreement

  

 

  

 

EXHIBIT B

 

PROMISSORY NOTE

 

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Loan Agreement

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