Document:

Exhibit 10

Exhibit 10.1- Agreement entered into as of November 2, 2007, between the U.S. Government, as represented by the U.S. Department of Agriculture, Agricultural Research Service and HepaLife Technologies, Inc., a Florida corporation having offices at 60 State Street, Suite 700, Boston, Massachusetts, Confidential Materials Omitted and Filed Separately With the US Securities and Exchange Commission (“Commission”) in accordance with Rule 24b-2 and Securities and Commission regulations set forth in 17 C.F.R. § 200.80(b)(4). Asterisks denote omissions.

 

Confidential Materials omitted and filed separately with the

US Securities and Exchange Commission. Asterisks denote omissions.

LICENSE AGREEMENT

This Agreement is entered into between the U.S. Government, as represented by the U.S. Department of Agriculture, Agricultural Research Service (hereinafter referred to as “USDA”) and HepaLife Technologies, Inc., a Florida corporation having offices at 60 State Street, Suite 700, Boston, Massachusetts (hereinafter referred to as “HEPALIFE”).

WHEREAS, USDA has performed research to develop novel hepatocyte cell lines derived from the epiblast of pig blastocysts for use in artificial liver devices and in-vitro toxicological testing platforms and has received by assignment certain valuable patent rights thereon; and

WHEREAS, USDA and HEPALIFE have jointly performed research to develop an improved fetal pig hepatocyte cell line denoted “ARS-PICM-19H” and owns certain valuable property rights thereon; and

WHEREAS, such research was performed under the terms of Cooperative Research and Development Agreement No. 58-3K95-3-0967 (the “CRADA”), and the invention resulting from said research constitutes a Subject Invention as defined in the CRADA; and

WHEREAS, USDA and HEPALIFE are continuing to perform joint research on improved fetal pig hepatocyte cell lines for use in artificial liver devices and in-vitro toxicological testing platforms under the terms of Cooperative Research and Development Agreement No 58-3K95-8-1238 (the “CRADA 2”); and

WHEREAS, HEPALIFE desires to exercise its option to an exclusive license to the Subject Invention pursuant to the provisions of the CRADA; and

WHEREAS, USDA desires, in the public interest, that said inventions be perfected, marketed, and practiced so that the benefits are readily available for widest possible utilization in the shortest time possible; and

WHEREAS, HEPALIFE represents that it has access to the cell-based technologies and products markets and has the necessary business expertise as described in their license application to bring the invention to the point of practical application and make the invention available to the public; and

WHEREAS, HEPALIFE intends to enter into agreements with one or more manufacturing and/or clinical testing partners to test, develop and manufacture the invention; and

WHEREAS, USDA is willing to grant a license to HEPALIFE contingent upon HEPALIFE raising the necessary investment capital to carry out its business plan; and

WHEREAS, USDA is willing to provide reasonable assistance to HEPALIFE to help bring the invention to the point of practical application

NOW, THEREFORE, in consideration of the foregoing and pursuant to 35 USC 207 and 37 CFR 404 and the mutual promises and obligations hereinafter set forth, USDA and HEPALIFE, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

1.1

Licensed Patents means U.S. Patent No. 5,532,156, entitled “Hepatocyte Cell Line Derived From the Epiblast of Pig Blastocysts”, which issued on July 2, 1996, all reissues, reexaminations, and patent term extensions of this patent; U.S. Patent No. 5,866,420, entitled “Artificial Liver Device”, which issued on February 2, 1999, all reissues, reexaminations and patent term extensions of this patent; and any U.S. Patent Applications and resulting issued patents encompassed by ARS Invention Disclosure Docket ****, all continuations, divisions, reissues, reexaminations, patent term extensions of such patents, any continuations-in-part that have complied with the requirements set forth in 37 CFR 404.7 and any foreign equivalents thereof.

1.2

Licensed Materials means any and all of the fetal pig hepatocyte cell line(s) described in the Licensed Patents, including, but not limited to “ARS-PICM-19” and “ARS-PICM-19H”, and all progeny, subclones and modified and/ or unmodified derivatives thereof.

1.3

Licensed Products I means any and all in vitro toxicological testing platforms for determining the potential toxicity and metabolism of new pharmacological compounds in the liver using the Licensed Materials and/or the isolated cell line of normal pluripotent parenchymal hepatocytes derived from a primary culture of pig epiblast cells as encompassed by the claims of the Licensed Patents.

1.4

Licensed Products II means any bioartifical liver device for use in human patients as encompassed by the claims of the Licensed Patents or which directly incorporates the Licensed Materials.

1.5

Licensed Products includes Licensed Products I and Licensed Products II.

 

1.6

Licensed Territory means the United States of America, its possessions and territories and any other jurisdiction in which a Valid Claim of a licensed patent exists during the term of this Agreement..

1.7

Manufacturing or Distribution Partner means any person, corporation, university, government laboratory or other entity which has the technical expertise and material resources necessary to assist HEPALIFE in the testing, development, manufacture, sale or distribution of Licensed Products, in accordance with the business plan submitted by HEPALIFE with its license application.

1.8

Financial Partner means any person, corporation, firm, partnership or other entity which agrees to provide capital and/or other resources for the development, scale-up, production, clinical and field trials of Licensed Products, in accordance with the business plan submitted by HEPALIFE with its license application.

1.9

Affiliate means any company, corporation, partnership, or other entity controlled by, controlling, or under common control with HEPALIFE, directly or indirectly, where control means the ownership of at least fifty percent (50%) of the voting stock or other ownership interest of an entity.  For purposes of this Agreement, all references to HEPALIFE shall be deemed to include its Affiliates.

1.10

Net Sales means the gross sales of Licensed Products by HEPALIFE or its sublicensees to an independent third party (excluding Affiliates) less the sum of the following:

(a)

discounts, in amounts customary in the trade, for quantity purchases, cash payments, wholesalers, and distributors;

(b)

amounts repaid or credited by reason of rejection or returns; and

(c)

any freight or other transportation costs, insurance, duties, tariffs and sales and excise taxes based directly on sales or turnover or delivery of material produced under this 

Agreement.

No deductions shall be made for commissions paid to sales persons or agents or for the cost of collections.  Licensed Products produced by HEPALIFE for its own use shall be included for the purposes of computing Net Sales, except such Licensed Products used for non-revenue producing activity such as promotional items or market trials.  Licensed Products shall be considered sold when billed or invoiced.

1.11

Valid Claim means all pending and issued claims of the Licensed Patents which have not been held invalid or unenforceable in a decision rendered by a tribunal of competent jurisdiction. In the event that a decision invalidating or revoking an issued Licensed Patent is overturned on appeal with the effect to reinstate the patent, such claim shall again be considered a Valid Claim as of the date of such decision.

1.12

Effective Date means the later date on which this Agreement is executed by a party to the Agreement.

ARTICLE II

GRANT

2.1

USDA grants to HEPALIFE, subject to the terms and conditions herein, an exclusive license in the Licensed Territory under the Licensed Patents to make, have made, use, have used, sell and have sold Licensed Products for the term of this Agreement.

2.2

USDA grants to HEPALIFE, subject to the terms and conditions herein, an exclusive license in the Licensed Territory to make, have made, use, have used, sell and have sold Licensed Materials for the term of this Agreement.

2.3

USDA grants to HEPALIFE the right to grant sublicenses subject to the provisions of this Agreement and to the prior submission to and approval by USDA of the proposed sublicense, which approval shall not be unreasonably withheld.  All sublicenses shall make reference to this Agreement, including the rights retained by the U.S. Government in accordance with the provisions of Article III below.  HEPALIFE shall provide USDA with a copy of all executed sublicense agreements.

ARTICLE III

RESERVATION OF RIGHTS

3.1

The licenses granted in Article II above are subject to the reservation by USDA of an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of the Licensed Patents throughout the world by or on behalf of the U.S. Government, and on behalf of any foreign government pursuant to any existing or future treaty or agreement to which the United States is a signatory, including the right to engage in research, either alone or with one or more third parties, on inventions covered by the Licensed Patents.

3.2

USDA reserves the right to require HEPALIFE to grant sublicenses to responsible applicants, on reasonable terms, under any of the following circumstances:

(a)

such grant is necessary to fulfill health or safety needs; or

(b)

such grant is necessary to ensure that a specific commercial use for the Licensed Patent, which is not being actively brought to practical application by HEPALIFE in the United States, is made available for utilization by the United States public.  

ARTICLE IV

FEES, ROYALTIES, AND PAYMENTS

4.1

HEPALIFE shall pay to USDA a license execution fee of ****. The first installment of **** shall be due and payable within thirty (30) days of the Effective Date of the Agreement.  The second installment of **** shall be due and payable one (1) year from the Effective Date of the Agreement.  No part of the license execution 

fee shall be refunded for any reason.  

4.2

HEPALIFE shall pay to USDA an annual license maintenance fee in accordance with the following schedule:

****

****

****

****

****

****

****

****

****

****

****

****

An annual maintenance fee of **** shall be due on March 1 of each calendar year thereafter for the term of the Agreement.  The annual license maintenance fee shall be credited against royalties owed to USDA under Paragraph 4.3 below during the same calendar year.  The annual license maintenance fee paid in a given calendar year shall not be credited against royalties owed in subsequent calendar years.  No part of the annual license maintenance fee shall be refunded for any reason.  

4.3

HEPALIFE shall pay USDA royalties **** on the Net Sales of Licensed Products I by HEPALIFE and its sublicensees.  HEPALIFE shall pay USDA royalties **** on the Net Sales of Licensed Products II by HEPALIFE and its sublicensees.  Royalties shall be due and payable upon submission of each royalty report, in accordance with the provisions of Paragraph 5.2 below.

4.4

HEPALIFE shall pay to USDA **** of any payments other than royalties payable under Paragraph 4.3 above received from a sublicensee as consideration for the rights granted to the sublicensee under the Licensed Patents.  Such payments may include, but are not limited to, license execution fees, milestone payments, and license maintenance fees.  Payments specifically committed to further research on the Licensed Products or payments received as consideration for the sale of HEPALIFE, in whole or in part, are excluded and shall not be considered part of this calculation.

4.5

HEPALIFE shall pay USDA a milestone payment upon completion of each of the following milestone events:

Milestone Event

****

I.  FDA Approval to Initiate a Phase I Clinical Trial

****

    Using Licensed Products in the United States

II. FDA Approval to Initiate a Phase III Clinical Trial

****

     For Licensed Products in the United States

III. Grant of Final FDA Approval to Manufacture, Use

****

      Market and Sell Licensed Products in the United States

Milestone payment(s) shall be due within thirty (30) days of receiving an approval or grant from FDA.  Milestone payments will not be creditable against royalties. No part of the milestone payment(s) shall be refunded for any reason.  

4.6

 USDA shall prosecute and maintain the Licensed Patents in the Licensed Territory during the term of this Agreement subject to the conditions set forth herein.  HEPALIFE shall reimburse USDA for all fees and expenses, including reasonable legal fees, incurred by USDA in filing, prosecuting and maintaining the Licensed Patents in the Licensed Territory during the term of this Agreement.  USDA shall keep HEPALIFE advised as to the status of the prosecution of the Licensed Patents., USDA will provide HEPALIFE with cost estimates before costs are incurred and will provide HEPALIFE with timely notice of any changes in cost estimates.  HEPALIFE shall be entitled to review all actions undertaken in the prosecution of the Licensed Patents and shall be given the 

opportunity to make reasonable requests as to the conduct of such prosecution, provided that all such requests are made in writing to USDA.  USDA shall provide HEPALIFE a statement of all such fees and expenses on a quarterly basis, and reimbursement shall be due within thirty (30) days of receipt of such statement.  In the event that HEPALIFE decides not to continue to support the filing, prosecution or maintenance of any patent application or patent included within the Licensed Patents, then HEPALIFE shall reimburse all fees and expenses incurred up to the date of receipt of such notification by USDA.  USDA shall terminate the HEPALIFE license in the country(ies) where patent filing, prosecution and/or maintenance is not supported by HEPALIFE, effective on the date of receipt by USDA of written notification by HEPALIFE.  

4.7

USDA shall not abandon the Licensed Patents without first giving HEPALIFE notice and opportunity to assume full responsibility for the filing and continued prosecution and maintenance of the Licensed Patents.  HEPALIFE shall have the right, but not the obligation, to assume responsibility for the filing, prosecution and maintenance of the Licensed Patents, on a patent-by-patent and country-by-country basis, at its own expense with counsel of its own choice.  Upon written notice from HEPALIFE indicating its election to assume such responsibility, USDA shall transfer or cause to be transferred the complete prosecution file for such patent(s), including all correspondence and filings with patent authorities with respect to such patent(s), whereupon such patent(s) shall remain part of the Licensed Patents hereunder, but HEPALIFE shall be solely responsible for all costs and expenses associated with the filing, prosecution and maintenance of the same.

 

4.8

All payments due USDA under this Article IV shall be payable in United States dollars for the account of USDA/Agricultural Research Service, License No. 1154-002.  All checks and bank drafts shall be drawn on United States banks.  A late payment of a license fee or royalty shall automatically raise said fee or royalty by an amount equal to one percent (1%) of the amount due for each month beyond the due date of such late payment.  Conversion of foreign currency to United States dollars shall be made on the last business day of the applicable reporting period for the purchase of United States dollar bank wire transfers for settlement of such payment obligations.  Any and all loss of exchange, value, taxes, or other expenses incurred in the transfer or conversion of other currency to United States dollars shall be paid entirely by HEPALIFE.

ARTICLE V

REPORTS AND RECORDS

5.1

HEPALIFE shall provide written annual reports within sixty (60) days of the end of each calendar year detailing progress being made to bring the Licensed Patents to practical application.  No further annual progress reports will be required after notification of the first commercial sale of Licensed Products unless otherwise requested by USDA.

5.2

After notification of the first commercial sale of Licensed Products, HEPALIFE shall submit to USDA within sixty (60) days after each calendar half year ending June 30th and December 31st, reports setting forth for the preceding six (6) month period the amount of Licensed Products made, used, or sold or otherwise disposed of by HEPALIFE, and its sublicensees, the Net Sales thereof and the royalties due pursuant to Paragraph 4.3 above.  The report shall include an itemized accounting of the number of units of Licensed Products sold, price per unit, and each deduction taken from the gross sales for the purpose of calculating Net Sales.  A written report shall be due for each reporting period whether or not any royalties are due to USDA.

5.3

HEPALIFE, and its sublicensees, shall keep accurate and complete records as are required for the determination of royalties owed to USDA pursuant to this Agreement.  Such records shall be retained for at least five (5) years following a given reporting period. Upon reasonable notice and at the expense of USDA, such records shall be available during normal business hours for inspection and audit by an independent certified public accountant selected by USDA for the sole purpose of verifying reports and payments hereunder.  Such accountant may be required to sign a confidentiality agreement and shall not disclose to USDA any information other than information relating to the accuracy of reports and payments made under this Agreement.  HEPALIFE, and its sublicensees, shall provide full cooperation in such inspection and audit.  Such cooperation shall include, but not limited to, providing sufficient time for such examination and convenient access to relevant personnel and records.  If an inspection and audit show an underreporting or underpayment in excess of five percent (5%) for any twelve (12) month period, then HEPALIFE shall reimburse USDA for the cost of the inspection at the time HEPALIFE 

pays the unreported royalties, including any late charges as required by Paragraph 4.8 of this Agreement.  Any overpayments shall be fully creditable against amounts payable in subsequent payment periods. All payments required under this Paragraph 5.3 shall be due within thirty (30) days of the date USDA provides HEPALIFE notice of the payment due.  In no event, however, shall such audits be conducted more frequently than once every twelve (12) months.  

ARTICLE VI

LICENSEE PERFORMANCE

6.1

HEPALIFE shall expend reasonable efforts and resources to carry out the development and marketing plan submitted with HEPALIFE’s application for a license and to bring the Licensed Patents to the point of practical application as defined in Title 37 of the Code of Federal Regulations, Section 404.3(d).  HEPALIFE shall submit appropriate applications for regulatory approval for the Licensed Products to the Food and Drug Administration (“FDA”) within five (5) years of the Effective Date of the Agreement and HEPALIFE shall offer Licensed Products for sale in the U.S. within one (1) year of receiving regulatory approval from FDA, unless this period is extended by mutual agreement of the parties.  USDA shall not unreasonably withhold approval of any request by HEPALIFE to extend this period if such request is supported by evidence of reasonable efforts by HEPALIFE to bring the Licensed Patents to practical application, including any reasonable and diligent application for regulatory approvals required by any U.S. Government agency.

6.2

HEPALIFE shall enter into an agreement with one or more Financial Partners to secure the additional funding necessary to accomplish the milestones identified in HEPALIFE’s license application within five (5) years of the Effective Date of this Agreement.  This period may be extended for an additional one (1) year period upon written request by HEPALIFE.  No further extensions shall be granted by USDA, except under extraordinary circumstances and by mutual agreement of the parties.

6.3

HEPALIFE shall acquire or lease suitable production facilities or enter into an agreement with Manufacturing or Distribution Partner(s) within one (1) year from receiving regulatory approval from FDA unless this period is extended by mutual agreement of the parties.  USDA shall not unreasonably withhold approval of any request by HEPALIFE to extend this period if such request is supported by evidence of reasonable efforts by HEPALIFE to execute such an agreement.

6.4

HEPALIFE shall notify USDA in writing within fifteen (15) days after the first commercial sale of Licensed Products I and Licensed Products II by HEPALIFE, or its sublicensees.

6.5

Licensed Materials used in Licensed Products sold or otherwise disposed of in the United States by HEPALIFE, or its sublicensees, shall be manufactured substantially in the United States.

6.6

After bringing the Licensed Patents to the point of practical application in the United States, HEPALIFE shall keep Licensed Products reasonably available to the United States public during the term of this Agreement.

ARTICLE VII

DURATION, MODIFICATION, AND TERMINATION

7.1

This Agreement shall commence on the Effective Date and, unless sooner terminated as provided under this Article VII, shall remain in effect until the expiration of the last to expire Licensed Patents.

7.2

This Agreement may be modified or terminated by USDA, subject to the provisions of Paragraphs 7.3 and 12.4 below, if it is determined that any one of the following has occurred:

(a)

HEPALIFE, or its sublicensees, fails to meet the obligations set forth in Article VI above;

(b)

Such action is necessary to meet requirements for public use specified by Federal regulations issued after the date of this Agreement and such requirements are not reasonably satisfied by HEPALIFE, or one of its sublicensees;

(c)

HEPALIFE has willfully made a false statement or willfully omitted a material fact in the license application or in any report required by this Agreement;

(d)

HEPALIFE, or its sublicensees, commits a substantial breach of a covenant or provision contained in this Agreement;

(e)

HEPALIFE has been found by a court of competent jurisdiction to have violated the Federal antitrust laws in connection with its performance under this Agreement;

(f)

HEPALIFE is adjudged bankrupt or has its assets placed in the hands of a receiver or makes any assignment or other accommodation for the benefit of creditors; or

(g)

HEPALIFE, or its sublicensees, misuses the Licensed Patents.

7.3

Prior to modification or termination of this Agreement, USDA shall furnish HEPALIFE and any sublicensees of record a written notice of intention to modify or terminate, and HEPALIFE shall be allowed thirty (30) days after the date of such notice to remedy any breach or default of any covenant or agreement of this Agreement or to show cause why this Agreement should not be modified or terminated.

7.4

HEPALIFE may terminate this Agreement at any time upon ninety (90) days written notice to USDA.  If HEPALIFE terminates this Agreement in accordance with the provisions of this Paragraph 7.4, HEPALIFE shall provide USDA with a summary report of the reasons for termination, whether of a business or technical nature. 

7.5

Upon termination of this Agreement, all sums that have accrued and are due to USDA pursuant to Article IV hereunder shall become immediately payable.  In all other respects, the rights and obligations of the parties hereto concerning the Licensed Patents included in such termination shall cease as of the effective date of such termination.  HEPALIFE may, however, sell all Licensed Products completed and in inventory provided that royalties are paid on any such sales in accordance with the provisions of Article IV. 

7.6

In the event of termination of this Agreement, any sublicense of record granted pursuant to Paragraph 2.3, may either be converted to a license directly between sublicensee and USDA or be terminated, at the option of the sublicensee.

ARTICLE VIII

PATENT ENFORCEMENT

8.1

The U.S. Government is not obligated to enforce the Licensed Patents against infringers.  HEPALIFE shall continue to make all payments accruing to USDA pursuant to Article IV hereunder until such time as this Agreement is terminated by either party, even if the Government elects not to enforce the Licensed Patents against infringers.

8.2

HEPALIFE is granted the first option at its own expense, in its own name, to enforce the Licensed Patents against a specific party who may be infringing the Licensed Patents, subject to the following conditions:

(a)

The right of enforcement granted under this Paragraph 8.2 shall constitute the rights provided under Title 35, Chapter 29, of the U.S. Code.

(b)

If HEPALIFE elects the option to enforce the Licensed Patents against a specific party, the Government shall not be entitled to bring an enforcement action against such party except if it chooses to join with HEPALIFE.

(c)

Prior to enforcement against a specific party, HEPALIFE shall submit a written request to elect the option to enforce the Licensed Patents, and USDA must approve the election before HEPALIFE may bring an enforcement action against such party.  Such 

enforcement actions may include, but are not limited to, notifying such party, either verbally or in writing, to cease and desist the alleged infringing activity or filing an infringement suit against such party.

(i)

If USDA does not approve the election, and cannot reasonably establish non-infringement, within ninety (90) days of HEPALIFE’s request for approval, HEPALIFE shall not be obligated to pay royalties or fees that begin to accrue at the end of the ninety (90) day period.

(ii)

If USDA grants approval after the end of the ninety (90) day period, HEPALIFE shall be obligated to pay royalties and fees that accrue beginning with the day of subsequent approval, but shall not be obligated to pay royalties or fees that previously accrued during the time extending from the end of the ninety (90) day period to the day of subsequent approval.

(d)

If USDA requests in writing that HEPALIFE decide whether to elect the option to enforce the Licensed Patents against a specific party, HEPALIFE shall submit its decision within sixty (60) days of the date of request.  In the absence of a written response during the sixty (60) day period, the U.S. Government may enforce the Licensed Patents without HEPALIFE.

8.3

The following conditions apply to court awards and sublicensing revenues and other considerations as to the Licensed Patents, if HEPALIFE elects the enforcement option against a specific party.

(a)

HEPALIFE is not required to share, with USDA, court awards from such party, but is required to share sublicensing revenues and other considerations from such party pursuant to Article IV hereunder.

(b)

HEPALIFE’s reasonable attorney’s fees for attempting to sublicense or enforce the Licensed Patents against a specific party may be deducted from payments due to USDA under a sublicense to such party, provided that such reasonable attorney’s fees are not recouped as part of a court award for infringement of the Licensed Patents by such party, and provided that any such deductions do not exceed fifty percent (50%) of the payments due to USDA during any single reporting period.

8.4

In the absence of prior written consent from USDA, HEPALIFE shall not be entitled to waive any rights in the Licensed Patents as part of an agreement with a party who may be infringing the Licensed Patents.

ARTICLE IX

CONFIDENTIALITY, MARKING AND NON-USE OF NAMES

9.1

HEPALIFE, and its sublicensees, shall mark Licensed Products or packages containing Licensed Products with all applicable patent numbers.

9.2

HEPALIFE shall not use the name of the U.S. Government, the name of any department or agency of the U.S. Government, the name of any U.S. Government employee, or any adaptation of the above in any promotional activity without prior written approval from USDA.

9.3

HEPALIFE’s business and financial information shall be held in strict confidence and shall not subject to disclosure pursuant to 37 C.F.R. §404.14.  Any unauthorized disclosure of HEPALIFE’s confidential information may subject the violator to personal, civil and/or criminal penalties pursuant to 18 U.S.C. §1905.

9.4

HEPALIFE may disclose confidential information, including the existence of this Agreement, to the extent (and only to the extent) such disclosure is reasonably necessary in order to comply with applicable law or regulation (including any securities law or regulation or the rules of a securities exchange) or with the judicial 

process, if in the reasonable opinion of HEPALIFE’s counsel, such disclosure is necessary for such compliance and to Affiliates, potential and future collaborators (including sublicensees of HEPALIFE), permitted acquirers or assignees, research collaborators, subcontractors, investment bankers, investors, and/or lenders under the terms of a Confidentiality Agreement.

ARTICLE X

REPRESENTATIONS AND WARRANTIES

10.1

USDA represents and warrants that the entire right, title and interest in the Licensed Patent has been assigned to the United States of America as represented by the Secretary of Agriculture and that USDA has the authority to issue licenses under the Licensed Patents.

10.2

USDA does not warrant the patentability or validity of the Licensed Patents and makes no representations whatsoever with regard to the scope of the Licensed Patent or that such Licensed Patents may be exploited without infringing other patents.  USDA makes no warranty that the Licensed Materials may be exploited without infringing other patents.  USDA FURTHER MAKES NO WARRANTIES AS TO THE MERCHANTABILITY OR FITNESS OF THE LICENSED PATENTS, THE LICENSED MATERIALS OR THE LICENSED PRODUCTS FOR ANY PARTICULAR PURPOSE, OR ANY OTHER WARRANTIES EXPRESS OR IMPLIED.

ARTICLE XI

NOTICES

Written notices and reports required to be given under this Agreement, and submission of license execution and maintenance fees and royalties, shall be mailed by first class mail, postage prepaid and addressed as follows:

If to USDA

If to HEPALIFE

Assistant Administrator

Frank Menzler, President & CEO

USDA, ARS, Office of Technology Transfer

HepaLife Technologies, Inc.

5601 Sunnyside Avenue, 4-1159

60 State Street, Suite 700

Beltsville, Maryland 20705-5131

Boston, Massachusetts 02109

ARTICLE XII

MISCELLANEOUS PROVISIONS

12.1

This Agreement shall not be transferred or assigned by HEPALIFE to any party other than to an Affiliate or to a successor or assignee of the entire business interest of HEPALIFE relating to the Licensed Patents, without the prior written approval of USDA, such approval not to be unreasonably withheld.  In no event, however, shall HEPALIFE assign or transfer this Agreement to a party not a citizen or resident of the United States of America.  HEPALIFE shall notify USDA in writing prior to any such transfer or assignment.  This Agreement shall inure to the benefit of, and be binding upon, the legal representatives, successors and permitted assigns of HEPALIFE.

12.2

The interpretation and application of the provisions of this Agreement shall be governed by the laws of the United States as interpreted and applied by the Federal courts in the District of Columbia.

12.3

Neither party may waive or release any of its rights or interest in this Agreement except in writing.  The failure of a party to assert a right hereunder or to insist on compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other party.

12.4

The parties shall make every reasonable effort to resolve amicably any dispute concerning a question of fact arising under this Agreement.  In accordance with the requirements of 37 CFR 404.11, USDA has established an administrative procedure for resolving disputes not settled amicably between the parties.  Any such disputes shall be decided by the Assistant Administrator, Office of Technology Transfer, Agricultural Research 

Service (ARS), who shall reduce such decision to writing and mail or otherwise furnish a copy thereof to HEPALIFE.  Any decision of the Assistant Administrator, ARS, whether it be a question of fact, or to modify or terminate this Agreement, may be appealed to the Administrator, ARS, whose decision shall be administratively final and conclusive.  This shall not preclude HEPALIFE from taking additional legal action once all administrative avenues have been exhausted.  Pending final decision of a dispute hereunder, HEPALIFE shall proceed diligently with the performance of its obligations under this Agreement.

12.5

Nothing relating to the grant of this license, nor the grant itself, shall be construed to confer upon HEPALIFE or its sublicensees any immunity from or defenses under the antitrust laws or from a charge of patent misuse, and the acquisition and use of rights pursuant to this license shall not be immunized from the operation of state or Federal law by reason of the source of the grant.

12.6

The provisions of this Agreement are severable, and the illegality or invalidity of any provision of this Agreement shall not impair, affect, or invalidate any other provisions of this Agreement.

12.7

This Agreement constitutes the entire agreement and understanding between the parties, and neither party shall be obligated by any condition, promise or representation other than those expressly stated herein or as may be subsequently agreed to by the parties hereto in writing.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.

FOR THE UNITED STATES DEPARTMENT OF AGRICULTURE:

/s/ Richard J. Brenner

Signature

Date: November 2, 2007

RICHARD J. BRENNER

Assistant Administrator, Agricultural Research Service

FOR HEPALIFE TECHNOLGIES, INC.:

/s/ Frank Menzler

Signature

Date: November 2, 2007

FRANK MENZLER

President and Chief Executive Officer, HepaLife Technologies, Inc.EXHIBIT 10

EXHIBIT 10.1

Agreement entered into as of November 20, 2007, between the U.S. Government, as represented by the U.S. Department of Agriculture, Agricultural Research Service and HepaLife Technologies, Inc., a Florida corporation having offices at 60 State Street, Suite 700, Boston, Massachusetts, Confidential Materials Omitted and Filed Separately With the US Securities and Exchange Commission (“Commission”) in accordance with Rule 24b-2 and Securities and Commission regulations set forth in 17 C.F.R. § 200.80(b)(4). Asterisks denote omissions.

                                                               

     

				
	 

	 

	 

	 

	UNITED STATES DEPARTMENT OF AGRICULTURE

RESEARCH AGREEMENT

	TYPE OF RESEARCH AGREEMENT

Cooperative Research and Development Agreement

	 

	AGREEMENT NO.

58-3K95-8-1238

	TYPE OF ACTION

NEW

	AGENCY (Name and Address)

Agricultural Research Service

1400 Independence Avenue SW

Washington, D.C. 20250-0302

	PERIOD OF AGREEMENT

11/20/07 through 11/19/09

	 

	FEDERAL OBLIGATION

$ 0

	CHANGE IN FEDERAL OBLIGATION

	This Agreement is authorized by the Federal Technology Transfer Act, 15 USC 3710a, et seq., and is governed by its terms.

	Items

	Descriptions

	1.  Technology Transfer Coordinator

	Robert Griesbach

	2.  Cooperator

	HepaLife Biosystems, Inc.

60 State Street, Suite 700

Boston, MA  02109

Tax ID #  98-0532750

	3.  Principal Investigator

	Frank Menzler, Chief Executive Officer

	4.  USDA Laboratory

	Animal Biosciences and Biotechnology Laboratory

10300 Baltimore Ave., Bldg. 200, Rm. 13A

Beltsville, MD  20705

	5.  USDA Researcher (ADODR)

	Neil Talbot/Thomas Caperna

	6.  National Program Leader & Area

	Dr. Ronald D. Green

	7.  Accounting Code

	891-1265-522

	8.  Amount

	$519,130.00

	9.  Finance Office

	Budget & Fiscal Office, Beltsville Area

10300 Baltimore Ave., Bldg. 003, Room 301

Beltsville, MD  20705

	10.  Cris No.

	1265-31000-087-00D

	11.  Title of Project

	OPTIMIZATION OF THE ARS PICM-19 CELL LINE FOR AN IN VITRO  MODEL OF PIG LIVER FUNCTION AND APPLICATION TO AN EXTRA CORPOREAL LIVER ASSIST DEVICE

	12.  Log #

	34241

	Incorporated into this Agreement are the following:

1.Articles

2.Schedule 1 – Certifications

3.Schedule 2 – Statement of Work

4.Schedule 3 – Estimated Budget

	FOR THE UNITED STATES DEPARTEMENT OF AGRICULTURE

	SIGNATURE

/s/ Martha B. Steinbock

	TYPED NAME

Martha B. Steinbock

Deputy Assistant Administrator

	FOR THE COOPERATOR

(Signature of person(s) authorized by the governing body of the COOPERATOR to incur contractual obligations)

	SIGNATURE

/s/ Frank Menzler

	TYPED NAME AND TITLE

Frank Menzler

Chief Executive Officer

ARTICLES

Article 1.  Definitions

1.1

ARS means the United States Department of Agriculture, Agricultural Research Service.

1.2

COOPERATOR  means HepaLife Biosystems, Inc..

1.3

Agreement means this Cooperative Research and Development Agreement.

1.4

Confidential Information means trade secrets or commercial or financial information that is privileged or confidential under the meaning of 5 USC 552(b)(4).

1.5

Subject Invention means any invention or other intellectual property conceived or first reduced to practice under this Agreement which is patentable or otherwise protectable under Title 35 of the United States Code, under 7 USC 2321, et seq., or under the patent laws of a foreign country.   Specifically not included in the definition of Subject Inventions are inventions made outside the Scope of Agreement or prior to the execution of this Agreement.   Included in this definition are ARS patents; #5,532,156 “Hepatocyte Cell line Derived from the Epiblast of Pig Blastocysts Licensed to Cell Applications, Inc. and Genespan Corp. and #5,866,420 “Artifical Liver Device”.

1.6

Scope of Agreement means those activities set forth in Schedule 2, entitled “Statement of Work.”

1.7      Period of Agreement means that period set forth under the Period of Agreement on the ARS Office of Technology Transfer cover form for the Agreement.

Article 2.  Publications

2.1

Subject to the requirements of confidentiality and preservation of rights in Subject Inventions, either party may publish the results of this Agreement, PROVIDED:

a.

The other party is allowed to review the manuscript at least sixty (60) days prior to submission for publication by submission to the Authorized Agent.

b.

The publication shall acknowledge this Agreement and the contributions of each party’s personnel.

c.

The final decision as to the publication content rests with the party that writes the publication.

2.2

Publication and/or other disclosure of the results of this Agreement shall be delayed as necessary to preserve both United States of America and foreign patent rights in a Subject Invention.

a.

Such a delay will only be granted if requested in writing; and

b.

The requesting party demonstrates promptness and diligence in seeking patent  protection on the Subject Invention.

Article 3.  Confidentiality

3.1

Confidential Information, which is owned by one party to this Agreement and disclosed to the other, shall be labeled “CONFIDENTIAL” by the submitter and shall not be disclosed by the recipient without permission of the owner, EXCEPT in accordance with Article 2.

3.2

To the extent either party orally submits its Confidential Information to the other party, the submitting party will prepare a document marked “CONFIDENTIAL” embodying or identifying in reasonable detail such orally submitted Confidential Information and provide the document to the other party within thirty (30) days of disclosure.

3.3

Neither party shall be bound by confidentiality if the Confidential Information received from the other party:

a.

Already is available to the public or known to the recipient;

b.

Becomes available to the public through no fault of the recipient; or

c.

Is nonconfidentially received from another party legally entitled to it.

Article 4.  Meetings, Reports and Records

4.1

Frequent and effective communication is essential to the successful accomplishment of the objectives of this Agreement.  To this end, the scientific representatives of ARS and COOPERATOR shall meet (meetings need not be in person if agreed upon) at least once every six (6) months to exchange results, perform critiques, and make plans and recommendations.  Written progress reports shall be supplied by each party to the other at least fifteen (15) calendar days prior to each semi-annual meeting.

4.2

Any such plan or recommendation that is outside the Scope of Agreement shall be reduced to writing and referred to the Authorized Agent of each party for appropriate action.  Any such plan or recommendation so referred shall not be binding upon either party unless incorporated into this Agreement by written amendment.

4.3

Each party shall keep complete records relating to this research.  All such records shall be available for inspection by either party at reasonable times.  The records, or true copies of them, shall be delivered to either party upon request.

4.4

The results of this Agreement and research data that are collected, compiled, and evaluated under this Agreement shall be shared and mutually interchanged by COOPERATOR and ARS.

4.5

A final report summarizing all data shall be submitted by each party, separately or jointly, to both party’s Authorized Agents within sixty (60) days of the completion of this Agreement.

Article 5.  Research Exclusion

5.1

The results of this Agreement owned or co-owned by the U.S. Government may be made available to others by ARS for bona fide noncommercial research purposes if:

a.

Confidentiality is not breached; or

b.

Patent or Plant Variety Protection Certificate rights are not compromised.

5.2

Plants and animals, their genetic materials or information relating thereto, or parts thereof, covered by Plant Variety Protection Certificates, Plant Patents, or Utility Patents, owned or co-owned by ARS, may be made available by ARS to third parties for bona fide research purposes including the development of new animals or plants.

Article 6.  Ownership of Inventions

6.1

All rights, title, and interest in any Subject Invention made solely by employee(s) of ARS shall be owned by ARS.

6.2

All rights, title, and interest in any Subject Invention made jointly by at least one (1) employee of ARS and at least one (1) employee of COOPERATOR shall be jointly owned by ARS and COOPERATOR.

6.3

All rights, title, and interest in any Subject Invention made solely by employees of COOPERATOR shall be owned by COOPERATOR.

Article 7.  Subject Invention Licenses

7.1

COOPERATOR is granted an option to negotiate an exclusive license in each Subject Invention owned or co-owned by ARS for one or more field(s) of use encompassed by the Scope of Agreement.  This license shall be consistent with the requirements of 35 USC 209(a), 209(b) (manufactured substantially in the U.S.), and 209(f) and other such terms and conditions as may be reasonable under the circumstances, as agreed upon through good faith negotiations between COOPERATOR and ARS.

7.2

This option shall terminate whenever COOPERATOR fails to:

a.

Submit a complete application for an exclusive license within (sixty to one-hundred & twenty 60-120) days of being notified by ARS of an Inventions availability for licensing; or

b.

Submit a good faith written response to a written proposal of licensing terms within (forty-five to sixty 45-60) days of such proposal.

7.3

COOPERATOR grants ARS, on behalf of the U.S. Government, a royalty free, nonexclusive, worldwide, 

irrevocable, nontransferable license for any  COOPERATOR solely owned Subject Invention.  The purpose of this license shall be to practice the Subject Invention or have it practiced, by or on behalf of the U.S. Government, for research or other U.S. Government purposes.  15 USC 3710a(b)(2).

Article 8.  Subject Invention Information

8.1

The Authorized Agents or designees of each party shall promptly make written disclosure to each other of each Subject Invention.

8.2

This information shall be treated in confidence by the receiving party, EXCEPT: it may be shared with those having a need to know.

8.3

Each party shall provide, when requested by the other, all information in its possession, or true copies thereof, pertaining to a Subject Invention which may be necessary or useful in the preparation, filing, and prosecution of patent or Plant Variety Protection Certificate applications covering the Subject Invention.

Article 9.  Intellectual Property Protection Applications

9.1

ARS and COOPERATOR agree to cooperate with the other in the preparation, filing, and prosecution of Patent or Plant Variety Protection Certificate applications on Subject Inventions in the United States of America and any other country.

9.2

ARS shall provide COOPERATOR’S Authorized Agent or their designee with a copy of any such application on a Subject Invention within fourteen (14) calendar days of filing.

9.3

ARS shall have the first option to prepare and prosecute patent or Plant Variety Protection Certificate applications on Subject Inventions that are owned or co-owned by the U.S. Government, which option may be waived in whole or in part.

Article 10.  Use of Name or Endorsements

COOPERATOR shall not in any way state or imply that this Agreement or the results of this Agreement are an endorsement of its organizational units, employees, products, or services except to the extent permission is specifically granted by ARS.

Article 11.  Regulatory Compliance with Government Rules & Regulations

11.1

COOPERATOR is responsible for obtaining appropriate opinions, permits, or licenses from Federal or State agencies, which regulate research materials, or commercial products that may arise from the research work performed within the Scope of Agreement.

11.2

In carrying out its responsibilities under this Article, COOPERATOR shall:

a.

Consult and coordinate regulatory approval actions with ARS; and

b.

Give ARS’ Authorized Agent or designee a copy of any applications andopinions, permits, or licenses issued.                    

11.3

Both parties acknowledge and agree to comply with all applicable laws and regulations of   the Animal Plant Health and Inspection Service, the Center for Disease Control, and /or Export Control Administration pertaining to possession or transference of technical information, biological materials, pathogens, toxins, genetic elements, genetically engineered microorganisms, vaccines, and the like.

 

Article 12.  Liability

            It is understood and agreed that neither party to this Agreement shall be responsible for any damages or injuries arising out of the conduct of activities governed by this Agreement, except to the extent that such damages and/or injuries were caused by the negligent or wrongful acts or omissions of its employees, agents or officers.  ARS’ liability shall be limited by the Federal Tort Claims Act, 28 USC 2671, et seq.

Article 13.  Termination

13.1

Either party may unilaterally terminate this entire Agreement at any time by giving the other party written notice not less then sixty (60) calendar days prior to the desired termination date.

13.2

Articles 2. “Publications”, 3. “Confidentiality”, 6. “Ownership”, 7. “Subject Invention Licenses”, 10. “Use of Name or Endorsements”, and 12. “Liability” shall survive the expiration or termination of this Agreement.

13.3

If either party unilaterally terminates this Agreement pursuant to Article 13.1, each party shall return to the other or destroy, as shall be then agreed, any and all data and materials originated or provided by one party to the other that is still in the receiving party’s possession within 30 days of termination.

Article 14.  Availability of Appropriations

The continuance of this Agreement is subject to the passage by the Congress of the United States of an appropriation of funds from which expenditures may legally be made to cover ARS’ contributions.

Article 15.  Disputes

15.1

Any dispute arising under this Agreement, which cannot be readily resolved, shall be submitted jointly to the Authorized Agents, identified in Article 16 of these General Provisions.

15.2

Each party agrees to seek in good faith to resolve the issue through negotiation or other forms of nonbinding dispute resolution processes mutually acceptable to the parties.

15.3

Pending the resolution of any dispute or claim pursuant to Article15, the parties agree that performance of all obligations shall be pursued diligently.

Article 16.  Notices and Authorized Agents

Notices between the parties and copies of correspondence among the scientific and/or technical representatives of each party that interpret or may have a bearing on the legal effect of this Agreement’s terms and conditions shall be sent to the Authorized Agents.  Referencing Agreement Number 58-3K95-8-1238 thereon, send copies to:

ARS’ Authorized Agent

C

ooperator’s Authorized Agent

Martha B. Steinbock

Frank Menzler, Chief Executive Officer

USDA-ARS-OTT

HepaLife Biosystems, Inc.

5601 Sunnyside Ave.

60 State Street, Suite 700

Beltsville, Maryland 20705-5131

Boston, MA 02109

Tel.: 301-504-6905

Tel.: 617-878-2051; 800-518-4879

Fax: 301-504-5060

Fax: 781-631-2678

E-mail: crada.ott@nps.ars.usda.gov

E-mail: fmenzler@hepalife.com 

Article 17.  Limitation on ARS’ Scientific Representative’s Authority

ARS’ Scientific Representative, also known as the Authorized Departmental Officer’s Designated Representative (“ADODR”), is authorized to perform the research and development falling within the Scope of Agreement.  This individual is not authorized to change or interpret with authority the terms and conditions of this Agreement.

Article 18.  Assignments

18.1

Neither this Agreement nor any rights or obligations of the parties hereto shall be assigned or otherwise transferred by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld.

18.2

In no case shall COOPERATOR assign or transfer this Agreement to a party not a citizen or legal resident of the United States.

18.3

ARS is an agency of the U.S. Government and any rights or obligations created under this Agreement are freely transferable within the U.S. Government and shall not be deemed an “assignment” as contemplated by this Article 18.

Article 19.  Relationship of Parties

19.1

ARS and COOPERATOR act in their independent capacities in the performance of their respective functions under this Agreement and neither party is to be considered the officer, agent, or employee of the other.

19.2

Each party shall allow, consistent with policies and procedures of ARS and the COOPERATOR, access to their facilities, as needed.

19.3

Each party shall separately assign personnel, equipment, supplies, transportation, and facilities, as needed and available to meet respective responsibilities hereunder, such resources to remain the property of the assignor.

Article 20.  Force Majeure

20.1

Neither party shall be liable for any unforeseeable event beyond its reasonable control not caused by the fault or negligence of such party:

a.

Which causes the party to be unable to perform its obligations under this Agreement; and

b.

Which it has been unable to overcome by the exercise of due diligence.

c.

This includes, but is not limited to, flood, drought, earthquake, storm, fire, pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil disturbance or disobedience, strikes, labor dispute, failure, or sabotage of either party’s facilities or any order or injunction made by a court or public agency.

20.2

In the event of the occurrence of such force majeure event, the party unable to perform shall promptly notify the other party.  It shall also:

a.

Use its best efforts to resume performance as quickly as possible;

b.

Suspend performance only for such period of time as is necessary as a result of the force majeure event.

Article 21.  Amendment

21.1

If either party desires a modification in this Agreement, the parties shall confer in good faith to determine the desirability of such modification.

21.2

Such modification shall not be effective until a written amendment is signed by the Authorized Agents of both parties.

Article 22.  Severability

The illegality or invalidity of any provision of this Agreement shall not impair, affect, or invalidate the other provisions of this Agreement.

Article 23.  Ambiguities

ARS and COOPERATOR agree that each party has reviewed this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement.

Article 24.  Officials Not To Benefit

24.1

No Delegate to or Member of the Congress of the United States of America shall have a part of or benefit from this Agreement.

24.2 

This requirement does not include corporations if this Agreement is entered into for the corporation’s general benefit.

Article 25.  Subcontracting Approval

25.1

A party hereto desiring to obtain and use the services of a third party via contract or otherwise shall give prior notice to the other party, including details of the contract or other arrangement.

25.2

This requirement is to assure that confidentiality is not breached and rights in Subject Inventions are not compromised.

Article 26.  Governing Law

The construction, validity, performance, and effect of this entire Agreement shall be governed by the laws applicable to the Government of the United States of America as practiced in the Federal Courts located in the District of Columbia.

Article 27.  Entire Agreement

27.1

This Agreement constitutes the entire agreement between COOPERATOR and ARS and supersedes all prior agreements and understandings between them with respect to its subject matter.

27.2

Any representations, promise, or condition in connection with such subject matter, which is not incorporated in this Agreement, shall not be binding upon either party.

27.3

No modification, renewal, extension, waiver, or termination of this Agreement or any of its provisions shall be binding upon the party against whom enforcement of such modification, renewal, extension, waiver, or termination is sought, unless made in writing and signed on behalf of such party by that party’s Authorized Agent.

27.4 

As used herein, the word “termination” includes any and all means of bringing to an end    prior to its expiration by its own terms of this Agreement, or any provision thereof, whether by release, discharge, abandonment, or otherwise.

SCHEDULE 1

CERTIFICATIONS

COOPERATOR certifies that it:

1.

is a small business.

2.

is not a minority business.

3.

Operates as:

    an individual

    a partnership

X a corporation

__ limited liability corporation

__ public institution

__ private institution

__ educational institution;

and is incorporated in the State of NEVADA.

4.

Has not paid or agreed to pay any company or person (other than a bona fide employee working solely for COOPERATOR) any fee, commission, percentage, or brokerage fee, contingent upon the award of this Agreement, and if so, agrees to furnish information relating thereto, as requested, by the Authorized Departmental Officer.

5.

Has not employed or retained any company or person (other than a full-time bona fide employee working solely for COOPERATOR) to solicit or secure this Agreement.

6.

Its Principal Officers are not listed on the U.S. Government's list of debarred and suspended organizations and individuals; shall notify the Authorized Departmental Officer if so listed; and shall not subcontract or otherwise award to any organization or individual so listed.

7.

Agrees to comply with the provisions of the Civil Rights Act of 1964, as amended, and Executive Order 11246, addressing equal opportunity and affirmative action.

8.

Agrees to comply with the provisions of Title IX of the Education Amendment of 1972, 20 USC 1681, et seq.; Section 504 of the Rehabilitation Act of 1973, as amended, 29 USC 794; Age Discrimination Act of 1975, 42 USC 6101-6107; Clean Air Act, 42 USC 7401,  et seq. ; and Drug-Free Workplace Act of 1988, 41 USC 701,  et seq.

9.

Is in a position to undertake, perform, and complete this Agreement and will diligently perform work in accordance with its provisions.

SCHEDULE 2

STATEMENT OF WORK

A.

Introduction/Background

ARS has developed several in vitro model systems to investigate various aspects of hepatic gene expression and metabolic regulation. These systems encompass both established cell lines and primary liver cell cultures. One stem-like cell line, derived from porcine epiblast (embryonic) tissue is the ARS-PICM-19 cell line (ARS patent #5,532,156), hereafter referred to as PICM-19 cells, has been partially characterized and is a non-transformed immortal cell line that possesses many characteristics similar to that of intact liver parenchymal cells. ARS is interested in further characterization and improvements in the culture technology that would ultimately result in the cell line not requiring feeder cell support for growth in suspension culture, or for growth in a completely serum-free defined medium. These advancements would facilitate our understanding of regulatory events in pig liver gene/proteome expression and in regulation of nutrient metabolism. It has already been demonstrated that the unique hepatic characteristics of the ARS-PICM-19 cell line would have potential application for use in the production of a rescue device for human patients in liver failure (ARS patent # 5,866,420; “Artificial Liver Device”, granted to ARS on 2/2/1999). To date, the cellular components of artificial liver devices that are being tested by other institutions are based on freshly isolated porcine hepatocytes, human transformed tumor cells, or poorly defined stem-like cells prepared from fresh human adult liver tissue. It is widely recognized that the greatest hindrance to the development of a completely functional artificial liver rescue device is the lack of an appropriate defined cell line that will provide the life supportive functions of an intact liver. The primary interest of the Cooperator is to explore the possibility that the ARS-PICM-19 cell line is indeed the most appropriate cell line to use in such a device.

B.

Objective

The overall objective of the work is to optimize the patented ARS-PICM-19 cell line as an in vitro model of the pig liver. The first objective is to investigate and discover culture conditions for the ARS-PICM-19 cell line, or modifications of the ARS-PICM-19 cell line technology that will optimize function, i.e., culture conditions or cell line modifications that will enable, as closely as possible, the reproduction of normal pig liver functions in an  in vitro  environment.  Directly related to the first objective will be the second and third objectives.  The second objective is adapting and applying the optimized ARS-PICM-19 cell line technology to the development of an extracorporeal liver assist device as, for example, described in patent #5,866,420.  The third objective is to use the ARS-PICM-19 cell line in the development of  in vitro  assay formats for testing, a.) cell metabolism and toxicity responses, b.)  hepatocyte and bile duct epithelium cell function responses, and c.) cell transformation responses, i.e., loss of normal differentiation.

C.

Approach and Methodology

ARS will study culture conditions for the ARS-PICM-19 cell line, its derivative cell lines, or other pig epiblast-derived liver cell lines (as described under ARS patent #5,532,156, “Hepatocyte Cell Line Derived from the Epiblast of Pig Blastocysts”) so as to optimize their hepatocyte functions for use as an  in vitro  liver model, for their use in a flow-through bioreactor (“HepaLife bioreactor”), a multicompartment flow-through hollow-fiber bioreactor currently manufactured by Stem Cell Systems GmbH, Germany, or any other bioreactor design designated by HepaLife Biosystems, Inc., and for their use in the  in vitro  assay of metabolic or toxic responses.  

D.

ARS’ Responsibilities

1. Conduct these portions of the research project or perform the following tasks:

a. Provide advisory duties of two part-time (10%) USDA senior scientists.

b. Retain or hire one support scientist using cooperator funds for the duration of this agreement.

c. Provide laboratory and office space for the support scientist associate.

d. Provide full equipped cell culture laboratory and biochemistry laboratory.

e. Provide experimental animals (e.g. pigs) and slaughter facilities.

e. Acquire specific laboratory equipment and supplies to conduct the CRADA objectives as mutually agreed.

f. Conduct research on the optimization of the ARS-PICM-19 cell line, or its derivative cell lines (or related pig epiblast-derived cell lines), as an  in vitro  pig liver cell model, and adapt the ARS-PICM-19 liver cell technology to an extracorporeal liver assist device and to  in vitro  formats for metabolic and toxicological assays.

g. Prepare quarterly annual progress reports on project objectives.

h. Prepare and submit technical reports for publication or presentation.

i.  Support technology transfer of ARS-PICM-19 cell culture methods and HepaLife

Bioreactor methods and processes to newly created HepaLife Laboraties.

j.   Provide scientific raw data and experimental results to HepaLife.

2.

a.  Provide access to laboratory space in Building 200, Rooms 13, 202, 204, 213-215, at     the Beltsville Agricultural Research Center for those Cooperator personnel, both visiting or permanent, assigned to this project by HepaLife Biosystems, Inc.

b. Provide utilities, services, and general support to the Cooperator's personnel, both visiting or permanent, as needed and available.

E.

COOPERATOR’S Responsibilities

1.

Perform these portions of the research effort:

a. Provide funds for one support scientist.

b. Provide funds for project related laboratory equipment, supplies, and off-site research services such as electron microscopy and bioreactor manufacturing.

c. Provide funds for on-site laboratory space (Bldg. 200, Rm. 213 and 215)

 

d. Provide funds for professional activities of USDA support scientist (R. Willard) and scientists (T. Caperna and N. Talbot) such as travel to meetings and project specific training activities.

e. Provide for the visitation of HepaLife scientists and technicians at BARC, Bldg. 200, Beltsville, MD.

f. Acquire specific laboratory equipment and supplies to conduct the CRADA objectives

as mutually agreed.

h.  Provide scientific, industrial and regulatory guidance.

2.

Pay $519,530.00 to ARS.  

a.

The payment schedule is:

(Year 1)

Four payments of $69,103.13 on or before:

December 1, 2007

March 1, 2008

June 1, 2008

September 1, 2008

(Year 2)

Four payments of $60,679.38 on or before:

December 1, 2008

March 1, 2009

June 1, 2009

September 1, 2009

b.

Make checks or money orders out to the "Agricultural Research Service," cite Agreement No. 58-3K95-8-1238 thereon, and send to:

USDA, ARS, BA, Budget and Fiscal Office

10300 Baltimore Ave., Bldg. 003, Room 301

Beltsville, MD  20705]

3.

COOPERATOR may pay the travel and per diem of ARS scientific representatives traveling pursuant to this Agreement if such payment receives the prior approval of the appropriate ARS Area Director.

F.

ARS & COOPERATOR’S Joint or Mutual Responsibilities

1.

Perform these portions of the effort jointly:

a. Develop strategies for the design or testing of flow-through bioreactors to grow and maintain ARS-PICM-19, or its 

derivative cell lines, or related pig liver epiblast-derived cell lines.

b. Evaluate efficacy of ARS-PICM-19, its derivative cell lines, or related epiblast-derived pig liver cell lines, in an in vitro  pig liver model system for potential use in an extracorporeal liver assist device and in the development and testing of  in vitro  formats for assaying metabolic, toxicological, and carcinogenic responses in pig hepatocytes and bile ductules.  Analyze scientific raw data and experimental results.

c. Characterize and validate PICM-19 performance in comparison with alternative cell source.

1) Cell sources.

a)  Primary pig hepatocyte.

b)  Primary human hepatocyte.

c)  Other hepatocyte cell lines or primary hepatocyte cultures of interest.

2) Characterization assays included but are not limited to:

  

a)  Urea production.  

b)   P450 activity.

c)  Quantization of porcine liver proteins alpha-fetoprotein and albumin.

d.  Develop and validate alternative expansion methods including:

1) T-flasks/flat-bed multi-plate culture dishes.

2) Hollow-fiber bioreactors

3) Suspension culture as individual cells or spheroids (e.g., shaking tubes or  shaking flasks stirrer flasks, rotating cell culture system (RCCS), bioreactors, others).

4) Suspension culture on microcarrier beads or scaffolds.

e.  Validate conditions, methods, biosystem operating life-span and processes for flow-through lab-size and clinical-size bioreactors that enable the growth, differentiation, and maintenance of PICM-19 cells and their metabolic function.

f. Develop and validate alternative mouse and human feeder-cells, feeder-cell-independent culture, and serum-free media that enable the growth, differentiation, and maintenance of  PICM-19 cells.  

g.  Develop and validate custom growth factor containing suspension and anchorage-dependent medium formulations as required (including serum-free or defined media).

h.  Test function and viability of PICM-19 cells for up to 96 h exposures to normal and specific disease-state human blood plasmas in T-flasks and, if successful, in HepaLife bioreactor for up to 30 days.

i.  Support process or methods development for use of PICM-19 cell-containingHepaLife bioreactor in animal models of acute liver failure (e.g., rat treated with toxic amounts of  Tylenol or pig with liver resection) for demonstrating HepaLife bioreactor operating life-span and life supportive liver replacement function.

j. Develop and validate, by in vitro assay, the HepaLife bioreactor, or other flow-through bioreactors as necessary, to enable the growth, differentiation, and maintenance of PICM-19 cells and their metabolic function over long term culture (up to 3 months) in the bioreactor.

k. Validate the stability of the PICM-19 cells by analysis of growth, differentiation, and expression of defined “biomarkers” (e.g., serum-protein production, cytochrome P450 activity, ammonia clearance, urea production) over multiple passages (~50) and extensive periods of continuous culture equivalent to the number of cell divisions required to scale up (e.g. 30,000 liter bioreactor scale at a cell density of one million cells per milliliter).

.

l. Develop, validate, and utilize various liver-specific biochemical assays for the comparison of PICM-19 cell function in T-flask cultures and the HepaLife bioreactor using the same cells at the same time in parallel cultures.

m. ***

n.  Facilitate the creation of a Master Cell Bank of PICM-19 and STO cells:

1)  B/F Test

2)  Mycoplasm Test

3)  Adventitious Agents Test

4)  PERV (w and w/o membranes of bioreactor)

5)  Tumorigenicity Test

6)  Specific tests/assay development

7) Expansion of PICM-19 and STO stocks for creation of “Master Cell Banks” (MCB) and “Working Cell Banks” (WCB) under cGLP and cGMP protocols

8) Cryopreservation of PICM-19 “MCB” and “WCB”

9) Cryopreservation of STO stock cell “MCB” and “WCB”

n. Create a “Research Cell Bank” of PICM-19 cells and STO stock cells by the cryopreservation of 300 hundred 1.5 ml aliquots of cells containing 5-10 million cells per aliquot.

o. Develop and test multi-well cell culture formats for the in vitro assay of the effects of various xenobiotic compounds on the metabolism and viability of  PICM-19 hepatocytes or bile ductules.  Xenobiotic compounds will include but not be limited to the following:  3-methylcholanthrene (CYP1A1, 1A2 inducer), rifampicin (CYP3A4 inducer), Na-phenobarbital (CYP2B6, 2C9 inducer,testosterone (CYP3A4, 3A5 inducer), secobarbital (CYP2C9 inducer), diazepam (CYP1A2, 2C19, 2C8, 3A4 inducer), dexfenfluramine (CYP2D6 interaction), and Acetaminophen  (CYP2E1 interaction).   Toxic compounds will include but not be limited to the following: amphetamine sulfate, caffeine, carbon tetrachloride, chloamphenicol, chloroquine phosphate, ethylene glycol, ethyl alcohol, isopropyl alcohol, hexachlorophene, lindane, lithium sulfate, malathion, and nicotine.

p. ***

q.  Facilitate communication with regulatory government agencies, collaborators or corporate partners.  For example, preparation of cell biology technical data and documentation of bioreactor system methodology  (Master Batch Record and associated SOP’s)  for presentation to the Food and Drug Administration (FDA),  European Agency for the Evaluation of Medicinal Products  (EMEA), institutional safety review boards, institutional animal care and use committees (IACUC) for rodent bioreactor study protocols, or scientific meetings.

r. Support technology transfer of PICM-19 cell culture methods, assay methods, and  HepaLife Bioreactor methods and processes to newly created HepaLife  laboratories.

t.  Prepare or support the preparation of scientific papers concerning PICM-19 cell biology and cell culture, and HepaLife Bioreactor methods, processes, and functions.

u. Prepare or support the preparation of scientific presentations for scientific or trade show meetings.

SCHEDULE 3

ESTIMATED BUDGET

TOTAL YEARS

				
	 

	 

	 

	 

	 

	ARS Receive

Funds for

	ARS In-House

	Cooperator

In-House

	A.  Salaries and Wages

	138,304.00

	59,142.00

	400,000

	B.  Equipment

	 

	120,000.00

	20,000

	C.  Materials and Supplies

	156,000.00

	00.00

	 

	D. Travel

1. Domestic

2. Foreign

	00.00

	00.00

	40,000

	E. Facilities

	121,000.00

	112,000.00

	20,000

	F.  Other Direct Costs

	 

	 

	 

	G.  TOTAL DIRECT           COSTS

	415,304.00

	291,142.00

	480,000

	H.  Indirect Costs*

	103,826.00

	00.00

	00.00

	I. TOTAL COSTS..........$

	519,130.00

	291,142.00

	480,000

YEAR 1

				
	 

	 

	 

	 

	 

	ARS Receive

Funds for

	ARS In-House

	Cooperator

In-House

	A.  Salaries and Wages

	68,130.00

	29,134.00

	180,000

	B.  Equipment

	 

	60,000.00

	10,000

	C.  Materials and Supplies

	96,000.00

	00.00

	 

	E.  Travel

3. Domestic

4. Foreign

	00.00

	00.00

	18,000

	E. Facilities

	57,000.00

	56,000.00

	10,000

	F.  Other Direct Costs

	 

	 

	 

	G.  TOTAL DIRECT           COSTS

	221,130.00

	145,134.00

	218.000

	H.  Indirect Costs

	55,282.50

	00.00

	00.00

	I. TOTAL COSTS..........$

	276,412.50

	145,134.00

	218,000

Year 2

				
	 

	 

	 

	 

	 

	ARS Receive

Funds for

	ARS In-House

	Cooperator

In-House

	A.  Salaries and Wages

	70,174.00

	30,008.00

	220,000

	B.  Equipment

	 

	60,000.00

	10,000

	C.  Materials and Supplies

	60,000.00

	00.00

	 

	F. Travel

5. Domestic

6.Foreign

	00.00

	00.00

	22,000

	E. Facilities

	64,000.00

	56,000.00

	10,000

	F.  Other Direct Costs

	 

	 

	0

	G.  TOTAL DIRECT           COSTS

	194,174.00

	146,008.00

	262,000

	`H.  Indirect Costs

	48,543.50

	00.00

	00.00

	I. TOTAL COSTS..........$

	242,717.50

	146,008.00

	262,000

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