TERM SHEET FOR MUTUAL COOPERATION APPLIEDDNA SCIENCES, INC. / ********

EX-10.1 2 ex10-1.htm EXHIBIT 10.1

Exhibit 10.1

Confidential materials omitted and filed separately with the Securities and Exchange Commission.

Asterisks (********) denote omissions.

TERM SHEET

FOR

MUTUAL COOPERATION

APPLIED DNA SCIENCES, INC. / ********

Between:

********, a joint stock company incorporated in ******** having its registered offices at ********; and

Applied DNA Sciences, Inc., a Delaware corporation having its registered offices at 50 Health Sciences Drive, Stony Brook, New York 11790 (“ADNAS”).

******** and ADNAS together referred to as “PARTIES” and each of them as the “PARTY”.

This term sheet (“TERM SHEET”) outlines the terms and conditions on which the PARTIES intend to cooperate regarding the supply of ADNAS’s DNA markers - and related additives for ********’ polyolefin products to enable traceability throughout the value chain.

This TERM SHEET is subject to additional agreement between the PARTIES and, except as stated otherwise, it is not intended to be legally binding.

General Outline

1.1

The cooperation shall comprise three phases:

Phase 0: Establishment of preliminary test and authentication methods with a minimum accuracy to determine ********.

Phase 1: Test method to be validated and specified. Joint development and scoping of a concept to prepare production at an industrial scale as further set out under section 1.3. The PARTIES shall enter into phase 2, if ********.

Phase 2: Launching the product at industrial scale in ********.

1.2

During phase 0, ADNAS shall develop and establish a preliminary test method. The PARTIES will enter into phase 1 if the established test method ensures an accuracy to identify at least ********.

1.3

During phase 1, the PARTIES undertake and shall perform the following:

1.3.1

Preparation of a marketing concept

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******** to analyze customer needs and value proposition for low cost marked polyolefin products in high value applications;

ADNAS to support up to two customer visits to promote concept and to explore interest on request of ********;

********; and

Joint development of business concepts considering marking and authentication business contribution.

1.3.2

Preparation of a production concept

ADNAS to validate and specify test method established and developed in ********;

ADNAS to deliver DNA markers ********;

ADNAS to provide assessment on legal compliance ********;

******** to run pre-tests at two customers and ADNAS to provide marker volumes for the pre-tests in appropriate form;

********;

Joint development of initial logistics concept to handle markers in Europe and US;

******** to develop and produce two marked compounds for corresponding customer sampling;

********;

******** to run performance tests of application typical properties;

********;

ADNAS to provide authentication of lab and customer trials (********);

Joint assessment and documentation of benefits of DNA marker authentication ********; and

********.

1.4

In order to start with phase 2, the following conditions must be fulfilled:

Marker formulation and documentation fulfills relevant industry standards for health and safety applicable ********;

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********;

********; and

********.

1.5

For the performance of the steps as listed under 1.3 and 1.4, the PARTIES will inform each other on a regular basis regarding the status of the individual tasks. In the course of phase 1, the PARTIES acknowledge and agree that no information on either PARTY’s customers, recipes, formulations and application specifications, polymer properties, processing conditions and ******** will be disclosed.

Duration

This TERM SHEET comes into effect as of the date of its signing by the PARTIES and shall be effective for the period of 40 weeks unless extended or shortened by mutual written consent of both PARTIES. It is the intent of the PARTIES to complete phase 0 within ******** and phase 1 within ******** from completion of phase 0.

Developing fees and Exclusivity in phase 0 and phase 1

In consideration of the total sum of ******** (“CONSIDERATION”), ADNAS will undertake and perform the development services as set forth in this term sheet and shall grant worldwide exclusivity to ******** for ******** of DNA marked polyolefin products ******** (“EXCLUSIVITY AGREEMENT”). ADNAS will terminate any discussion with any key competitors named and listed by ********. “Exclusive polyolefin products” shall not include polyolefin textiles, nor any product sold to the US Government. The CONSIDERATION includes the creation of three (3) unique SigNature DNA Marks (title of DNA marks will pass to ******** upon creation of the marks. Marks will be securely stored by ADNAS for use in Phase 0 and Phase 1. ADNAS will notify ******** when the marks have been created. Marks are necessary to complete dilution experiments in Phase 0.)

3.1

The CONSIDERATION shall be paid by ******** in three instalments:

********;

********; and

********.

All payments are to be made to a bank account specified by ADNAS within two weeks after becoming due.

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Phase 2

4.1

Before entering into phase 2, the PARTIES shall enter into a co-operation negotiating the terms in good faith and regulating inter alia the following:

duration of phase 2;

contribution and services to be provided by both PARTIES;

exclusivity;

consideration;

rights on jointly developed intellectual property.

4.2

Both companies leave open the option of alternative methods for financing the production scale-up, including but not limited to, ********.

Know-how and Intellectual Property Rights

5.1

The PARTIES agree that they (i) will not file any patents with regard to any information which is jointly or independently developed by any PARTY in connection with the activities of phase 0 and 1 without the prior written consent of the other PARTY and (ii) use such information for the purposes as specified in this TERM SHEET only.

5.2

Before starting phase 2, the PARTIES will agree on how to proceed with the intellectual property rights that may arise during their mutual cooperation.

Confidentiality

The existence and content of this TERM SHEET is strictly confidential and shall not be disclosed by any PARTY to a third party without prior written consent of the other PARTY. The confidentiality agreement signed between the PARTIES as of ********, shall remain unaffected except that it shall also cover the information exchanged under this TERM SHEET and the Purpose as defined therein shall include the purpose of this TERM SHEET. In particular, neither PARTY shall issue a press release or make any other public statement with reference to this TERM SHEET or uses the other PARTY’s name or trademarks for advertising or publicity purposes without the express consent of the other PARTY.

Costs and Expenses

Each PARTY shall pay its own costs and expenses incurred by it in connection with this TERM SHEET or the negotiation of the cooperation.

Legal Effect

This TERM SHEET expresses the agreement and understanding of the PARTIES with respect to the matters set forth herein.

Confidential Treatment Requested

Applicable law and jurisdiction

This TERM SHEET shall be construed in accordance with the laws of ********. No conflicts-of-law which might refer such construction and interpretation to the laws of another jurisdiction shall be considered. The competent court in ******** shall have exclusive jurisdiction to adjudicate any dispute arising in connection with this Term Sheet and each PARTY hereby consents to such jurisdiction.

IN WITNESS WHEREOF, the PARTIES hereto have caused this TERM SHEET to be executed and delivered by their respective authorized officers or representatives as of the date hereof.

Applied DNA Sciences, Inc.		********

By:	/s/ James A. Hayward	By:	/s/ ********

Name: James A. Hayward

Name:

Title: Chief Executive Officer, President	Title:	********
and Chairman

31 March 2014

Confidential Treatment Requested

SCHEDULE 1

TERM SHEET

FOR

MUTUAL COOPERATION

APPLIED DNA SCIENCES, INC. / ********

Preamble

In order to achieve the accuracy to identify at least ********, as set out in the TERM SHEET in article 1.2 for phase 0, the requirements for the ANALYTICAL METHOD are defined and described in the following articles of this schedule 1.

Definitions

For the purpose of this schedule 1, the following terms and expressions shall have the following meaning:

2.1

******** MATERIAL means 100% original material, which is marked with DNA at a concentration c (to be developed in co-operation under cost & “accuracy” requirements)

2.2

RANGE means the content range of ******** MATERIAL in any embodiment to be analyzed in percent, in which the ACCURACY needs to be achieved.

2.3

AVERAGE CONTENT means a representative averaged analytical result (see background information below).

2.4

ANALYTICAL METHOD means the analytical process, which yields the analytical result, and starts with sampling through all operations to yield the analytical result.

2.5

PRECISION means the allowed absolute deviation of the ANALYTICAL METHOD, by which the real value could deviate from the AVERAGE CONTENT (analytical result) with a confidence level of ******** within the defined RANGE.

Phase 0 target summary

3.1

PRECISION of the ANALYTICAL METHOD of ********

3.2

RANGE: ********

3.3

COST: under the same cost assumptions required for phase 1 and as set forth in section 1.4 of the TERM SHEET.

3.4

Max. DNA marker concentration: ********

Phase 0 target interpretation

4.1

Phase 0 secures the identification of ******** by non-******** material on the basis of a statistically secured ANALYTICAL METHOD.

4.2

An analytical value within the RANGE of ******** would give the security that the real content would be within ******** of the analytical result delivered by the ANALYTICAL METHOD with a probability of ********, e.g.

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an analytical value of ******** would give the security that the real content would be within ********,

an analytical value of ******** would give the security that the real content would be within ********.

4.3

For the determination of the PRECISION of the ANALYTICAL METHOD this means the following as demonstrated in two examples (which needs to be reached within the co-operation):

for a content of ******** MATERIAL of ******** the ANALYTICAL METHOD needs to guarantee a standard deviation, which is equal or lower than ********.

4.4

AVERAGE CONTENT

In practice, if someone would choose to dilute v MATERIAL, most probably this would be done by filling ******** MATERIAL ******** and non-******** material ******** to the feed tank of the application process. Depending on the mixing efficiency of the application process and ********, individual analytical results in the range from 0 – 100% can be obtained in the final “part” (as e.g. the cable or pipe). The AVERAGE CONTENT needs to deliver a representative value for the determination of the ******** MATERIAL ********.

Principal work schedule

- details to be mutually agreed upon between the PARTIES

5.1

ADNAS to provide DNA marker ********, accompanied by specification of mixing recipe to reach concentration c of ******** MATERIAL; optimum range for marker v in order to achieve homogeneity and constancy in c in ******** MATERIAL to be mutually aligned between the PARTIES;

5.2

******** to prepare ******** MATERIAL and ******** within the RANGE for ********;

5.3

******** to disclose the methodologies for dissolution of polyolefins to ADNAS. ADNAS to perform the analysis on the extracts and to establish the standard deviation achieved by their analysis for the ******** grades for ********;

5.4

******** and ADNAS jointly to establish the standard deviation of the ANALYTICAL METHOD (including sampling and extraction) in dependence of ********;

5.5

If applicable, to be done in two rounds to secure feedback via analytical results for further optimization.