EXCLUSIVELICENSE AGREEMENT

1.1

"Affiliate(s)" shall mean every corporation or entity, which, directly or indirectly, or throughone or more intermediaries, controls, is controlled by, or is under common control with Licensee, as well as every officer and director of any such corporation or entity. For the purposes of this definition, the term "control" means (a) beneficial ownership of at least fifty percent (50%) of the voting securities of a business organization with voting securities, or (b) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or business organization without voting securities.

1.2

"Fields of Use" shall mean the fields of use identified in Exhibit A.

1.3

"Improvement" shall mean any invention, the practice of which would also require the practice of an invention claimed in or covered by the Patent Rights and which is a modification of the inventions claimed in or covered by the Patent Rights, made by Dr. Leland Shapiro, or University researchers working in the laboratory of Leland Shapiro.

1.4

"Know-How" shall mean University's proprietary information which has been created, developed, or fixed in any tangible medium of expression including, but not limited to, technical information, devices, models, methods, documents, and materials, and which is directly related to the use of, or esirable for the practice of, the licensed Patent Rights.

1.5

"Licensed Process(es)" shall mean any process, art, or method which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights or that incorporates or makes use of Know-How.

1.6

"Licensed Product(s)" shall mean any:

 

(a)

product or part thereof that is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights or that incorporates or makes use of Know-How; or

 

(b)

product, chemical composition, apparatus, or part thereof that is manufactured or discovered by using a Licensed Process(es) or is employed to practice a Licensed Process(es); or

 

(c)

product produced, discovered, manufactured or created through the use of any Licensed Product defined in §1.06(a) or §1.06(b).

1.7

"Net Sales" shall mean the total gross receipts for sales of Licensed Products or practice ofLicensed Processes by or on behalf of Licensee, its Affiliates and sublicensees, and from leasing, renting, or otherwise making Licensed Products available to others without sale or other dispositions, whether invoiced or not, less returns and allowances, packing costs, insurance costs, freight out, taxes or excise duties imposed on the transaction (if separately invoiced and paid), and wholesaler and cash discounts in amounts customary in the trade to the extent actually granted. No deductions shall be made for commissions, or for the costs of collections. Net Sales shall also include the fair market value of any non-cash consideration received by Licensee, its Affiliates and sublicensees, for the sale, lease, or transfer of Licensed Products or Licensed Processes.

1.8

"Patent Rights" shall mean all of the following University intellectual property and any utilityapplications, PCT applications, continuations, improvements and divisional applications thereof, patents issuing on any of the foregoing and all reissues, reexaminations or extensions of any of the foregoing, and any and all foreign patents and patent applications relating to any of the foregoing:

 

a.

the United States and foreign patents and/or patent applications and/or provisional patent applications listed in Exhibit B;

 

b.

United States and foreign patents issued from the applications listed in Exhibit B and from divisionals and continuations of these applications;

 

c.

claims of U.S. and foreign continuation-in-part applications, and of the resulting patents, which are directed to subject matter specifically described in the U.S. and foreign applications fisted in Exhibit B;

 

d.

claims of all foreign patent applications, and of the resulting patents, which are directed to subject matter specifically described in the United States patents and/or patent applications described in this Subsection; and

 

e.

any reissues of United States patents described in this Subsection.

2.1

University hereby grants and Licensee and Affiliates accept, during the term and subject tothe terms and conditions of this Agreement

2..2

All Know-How due under this Agreement shall be delivered to Licensee prior to or on theEffective Date in written, oral or other form of communication. No additional Know-How shall be due after the Effective Date.

2.3

This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of University other than licensed Patent Rights regardless of whether such patents are dominant or subordinate to licensed Patent Rights.

3.1

Improvements: In the event that University develops any improvements to the inventions claimed in the Patent Rights or to any other preexisting patent application or patent that is dominated by the Patent Rights, then each such improvement or addition will be considered part of this Agreement for no additional consideration.

 

a.

Provided that Leland Shapiro is at the time obligated to assign intellectual property to University and is involved as an employee, board member, consultant to or 10% or greater shareholder of Licensee, in the event that Leland Shapiro or anybody working in a laboratory under the supervision or direction of Leland Shapiro, makes any invention in the Field of Use, the practice of which would not require the practice of an invention claimed in or covered by the Licensed Patent Rights ("Independent Invention"), then provided such Independent Invention is not subject to any prior contractual or legal obligations, the University hereby grants to Licensee an exclusive option ("Option") to obtain the exclusive, worldwide, commercial rights to each Independent Invention on terms and conditions to be negotiated in good faith by the parties following the exercise by Licensee of the Option. In addition, Licensee shall have such further rights to future Independent Inventions as may be set forth in the sponsored research agreement described in Exhibit E to be entered into between the Parties.

 

b.

University shall disclose each Independent Invention to Licensee in reasonable written detail after the University's Technology Transfer Office receives notification from the inventor(s) that such Independent Invention has been made, and Licensee shall have ninety (90) days (the "Option Period") following receipt of such invention disclosure to exercise the Option with respect to such Independent Invention by delivering to University written notice indicating that Licensee desires to exercise the Option. Upon such notice, the parties shall negotiate in good faith for a period of up to sixty (60) days commercially reasonable terms and conditions for a license under the intellectual property rights relating to such Independent Invention

 

 

4.1

Upon prior written approval by University, such approval not to be unreasonable withheld,Licensee may sublicense to one or more third parties, the rights granted in Section 2 subject to the following limitations:

 

a.

Licensee agrees that any sublicenses granted by it shall impose restrictions and conditions upon sublicensees equivalent in scope to those imposed upon Licensee;

 

b.

Licensee agrees that, in the event University terminates this Agreement pursuant to Subsection 13,2(b), any sublicenses granted, in University's sole discretion, shall be directly enforceable by University;

4.2

Licensee agrees to forward to University a copy of each fully executed sublicenseagreement postmarked within thirty (30) days of the execution of such agreement.

 

a.

Notwithstanding any use of descriptive terms within this Agreement such as "exclusive", this Agreement is subject to all of the terms and conditions of Title 35 U.S.C. §§ 200-204, et seq., ("Bayh-Dole Act") and 37 C.F.R. 401, as such may be amended.

 

b.

Further, Licensee agrees to take all reasonable action necessary to enable University to satisfy its obligations hereunder.

5.2

 

a.

University shall have the right to practice the Patent Rights and Know-How for its own research and education, including sponsored research, which right shall be transferable to other nonprofit or educational institutions; provided that University takes reasonable steps to prevent the commercial use of any products or processes resulting from such research and education and to avoid the loss of any patent rights as a result of such activities.

 

b.

University shall have the right to publish any information included in the Patent Rights and the Know-How provided that University takes reasonable steps to avoid the loss of any patent rights as a result of University exercising its rights under this Paragraph. University shall provide Licensee with ten (10) days' advance notice of any such publication, including a copy of the information proposed to be published.

6.1

As consideration for the disclosure of University's Know-How as well as the licenses andrights under University's Patent Rights,

 

a.

Licensee agrees to pay to University an annual, nonrefundable minimum royalty as set forth in Exhibit C. The minimum annual royalty is due and payable on first business day of each calendar year and may be credited against any earned royalties due for Net Sales made that year;

 

b.

Licensee agrees to pay University royalties as set forth in Exhibit C;

6.2

No multiple royalties shall be payable because any Licensed Products or Licensed

6.3

On sales of Licensed Products by Licensee to sublicensees or on sales made in other than arm's-length transactions, the value of the Net Sales attributed under this Section to such a transaction shall be that which would have been received in an arm's-length transaction, based on a like transaction at that time.

6.4

 

a.

Unless otherwise provided herein, all payments required under this Agreement shall be due within thirty (30) days of written notice from University.

 

b.

Payments past due shall bear interest at the rate of one and one-half percent (1 1/2%) per month compounded, or the maximum interest rate allowed by applicable law, whichever is less.

 

a.

Licensee shall, without request by University, within sixty (60) days following the

 

end of each fiscal quarter of Licensee and sixty (60) days following the end of Licensee's fiscal year, render to University written reports of the Net Sales of Licensed Products and/or Licensed Processes subject to royalty hereunder made during the prior three (3) month period and shall simultaneously pay to University the royalties due on such Net Sales, if any, in United States Dollars. Licensee shall not be required to provide any such reports during the period prior to its initial sale of Licensed Products and/or Licensed Processes.

 

b.

Minimum annual royalties, if any, which are due University for any fiscal year, shall be paid by Licensee along with the written report due under this Agreement with respect to such fiscal year.

 

c.

Unless otherwise agreed to by the Parties, the written report shall be in the substantially the same form as Exhibit D.

7.2

 

a.

Licensee shall keep accurate records and shall compel its Affiliates and sublicensees to keep accurate records, in sufficient detail to reflect its operations under this Agreement and to enable the royalties accrued and payable under this Agreement to be determined.

 

b.

Such records shall be retained for at least three (3) years after the close of the period to which they pertain, or for such longer time as may be required to finally resolve any question or discrepancy raised by University.

7.3

 

a.

Upon the request of University, with reasonable notice, but not more frequently than once a year, Licensee shall permit an independent public accountant selected and paid by University to have access during regular business hours to such records as may be necessary to verify the accuracy of royalty payments made or payable hereunder.

 

b.

Said accountant shall disclose information acquired to University only to the extent that it should properly have been contained in the royalty reports required under this Agreement.

 

c.

If an inspection shows an underreporting or underpayment in excess of five percent (5%) for any twelve (12) month period, then Licensee shall reimburse University for the cost of the inspection and pay the amount of the underpayment including any interest as required by this Agreement.

8.1

Both University and Licensee (hereinafter, "Party" or "Parties") shall vigilantly protect theconfidential information related to the Patent Rights and Know-How from disclosure to third parties; and no such disclosure shall be made without the disclosing Party's written permission.

8..2

All written documents containing confidential information and other material in tangible formreceived by either Party under this Agreement shall remain the property of the disclosing Party, and such documents and materials, together with copies of excerpts thereof, shall promptly be returned to disclosing Party upon request, except one copy may be retained for archival purposes.

8.3

Licensee acknowledges that University is subject to the Colorado Open Records Act(C.R.S. § 24-72-201, et seq.). All plans and reports marked "Confidential" shall be treated by University as confidential to the extent permitted under § 24-72-204.

9.1

Licensee shall use commercially reasonable efforts to bring Licensed Products andLicensed Processes to market through a thorough, vigorous and diligent program for      exploitation of the Patent Rights, to develop internal or external manufacturing capabilities, to continue active, diligent marketing efforts, and to satisfy the needs of such market with the Licensed Products and Licensed Processes throughout the life of this Agreement.

9.2 

Licensee acknowledges and agrees to the performance and diligence milestones defined inExhibit E provided however that specific dates for such milestones may be adjusted if required due to developments beyond the reasonable control of Licensee. No changes to the dates of such milestones will be made without the consent, which will not be unreasonably denied, of University.

9.3

Licensee agrees to use commercially reasonable efforts to develop a sublicensing programto commercialize Licensed Products and Licensed Processes in any Field of Use or Territory that Licensee decides not to exploit for its own benefit.

10.1

Licensee shall reimburse University within thirty (30) days from the Effective Date twentythousand dollars ($20,000) representing all patent expenses incurred by University prior to the Effective Date.

10.2

 

a.

Licensee shall control the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Patent Rights on or after the Effective Date and shall furnish copies of relevant patent-related documents to University. Licensee shall provide University with advance written notice of its plans to file or prosecute any such patent applications or patents. University shall cooperate with Licensee in providing any additional scientific and other information reasonably necessary for Licensee to prepare, file, prosecute and maintain such patent applications and patents.

 

University shall have thirty (30) business days to review and comment on patent-related documents prior to the filing of said documents.

 

b.

Licensee may request that University assume primary responsibility for all patent activities, including all costs, associated with the perfection and maintenance of Patent Rights. Licensee shall provide University with sixty (60) days' advance written notice of such request. In the event University agrees to such request:

 

University's patent counsel shall keep Licensee advised as to the status of the Patent Rights by providing Licensee, in a timely manner prior to their due date, with copies of all official documents and correspondence relating to the prosecution, maintenance, and validity of the Patent Rights.

 

Licensee's obligations under this Subsection shall include, without limitation, an obligation to inform University in a timely manner that Licensee will not pursue patents in any foreign countries where patent protection may be available such that University may prosecute patents in such countries if University so desires.

11.1

University and Licensee agree to inform the other Party promptly in writing of anysuspected infringement of the Patent Rights by a third party. Licensee shall have, for a period of 120 days from the date of any notice of infringement of the Patent Rights, the first right to institute suit against such third party and any recovery or settlement shall be applied first to defray the unreimbursed costs and expenses (including reasonable attorneys' fees) incurred by Licensee in the action, second to pay University an amount equal to the Sublicensing Royalty that University would otherwise be entitled to at that time pursuant to Exhibit C to this Agreement if the amount remaining after the reimbursement of costs and expenses was treated as Sublicensing revenue, and third any remaining balance shall be paid to Licensee.

11.2

Thereafter, University and Licensee shall each have the right to institute an action forinfringement of the Patent Rights against such third party in accordance with the following:

 

a.

If both University and Licensee agree to institute suit jointly, the suit shall be brought in both their names, the out-of-pocket costs thereof shall be borne equally, and any recovery or settlement, after the reimbursement of costs and expenses (including reasonable attorneys' fees incurred in the action, shall be shared equally.

 

b.

University and Licensee shall agree to the manner in which they shall exercise control over such suit. Each Party, at its option, may be represented by separate counsel of its own selection, the fees for which shall be paid by University.

 

c.

In the absence of an agreement to institute a suit jointly, University may, but is not obligated to, institute suit, and at its option, join Licensee as a plaintiff. If University decides to institute suit, it shall notify Licensee in writing.

 

d.

Licensee's failure to notify University in writing within thirty (30) days after the date of University's notice pursuant to 11.2(c) above, that it will join in enforcing the Patent Rights pursuant to the terms hereof, shall be deemed conclusively to be Licensee's assignment to University of all rights, causes of action, and damages resulting from any such alleged infringement. University shall bear the entire cost of such litigation and shall be entitled to retain the entire amount of any recovery or settlement.

11.3

In the event that a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights shall be brought against Licensee or raised by way of counterclaim or affirmative defense in an infringement suit brought by Licensee under this Section, pursuant to this Agreement and the provisions of Title 35 U.S.C. § 29 or other statutes, Licensee may:

11.4

In all cases, Licensee agrees to keep University reasonably apprised of the status andprogress of any litigation.

12.1

Representations. University is the owner of the Patent Rights and has full right and authority to enter into this Agreement.

12.2

 

a.

UNIVERSITY MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, SUBLICENSEE(S), OR THEIR VENDEES OR OTHER TRANSFEREES OF LICENSED PRODUCTS OR LICENSED PROCESSES INCORPORATING OR MADE BY USE OF THE PATENT RIGHTS. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OR SALE OF SUCH PRODUCTS OR PROCESSES WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, SERVICE MARK, OR OTHER RIGHTS.

 

b.

Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall be construed as:

 

A warranty or representation by University as to rights in Know-How or the validity or scope of any of the Patent Rights;

 

A warranty or representation that the Patent Rights or anything made, used, sold or otherwise disposed of under the License will or will not infringe patents, copyrights or other rights of third parties; or

 

An obligation to furnish any know-how or technology not agreed to in this Agreement, to bring or prosecute actions or suits against third parties for infringement (except to the extent described in Subsections 11.1 — 11.2), or to provide any services other than those specified in this Agreement.

12.2

Indemnification: Licensee shall indemnify, defend, and hold University, its regents, employees, students, officers, agents, Affiliates, and representatives harmless from and against all liability, demands, damages, losses, and expenses (including reasonable attorney fees) (collectively, "Claims"), for death, personal injury, illness, property damage, noncompliance with applicable laws and any other claim, proceeding, demand, expense and liability of any kind whatsoever in connection with or arising out of:

 

a.

the use by or on behalf of Licensee, its sublicensees, Affiliates, directors, officers, employees, or third parties of any Patent Rights;

 

b.

the design, manufacture, production, distribution, advertisement, consumption, sale, lease, sublicense or use of any Licensed Product(s), Licensed Process(es) or materials by Licensee, or other products or processes developed in connection with or arising out of the Patent Rights; or

 

c.

any right or obligation of Licensee under this Agreement.

12.3

Insurance: Licensee shall obtain general liability insurance, including product liability insurance, on such terms and in such amounts as are reasonable and customary within its industry.

13.1

This Agreement shall become effective as of the Effective Date and shall expire on theexpiration date of the last to expire patents within Patent Rights.

13.2

 

returns any confidential materials provided to Licensee by University in connection with this Agreement;

 

suspends its use and sales of the Licensed Product(s) and Licensed Process(es); provided however, that subject to making the payments required by Section 6 and the reports required by Section 7, Licensee may, for a period of ninety (90) days after the effective date of such termination, sell all Licensed Products which may be in inventory; and

 

failure by Licensee to meet any material due diligence requirement of Exhibit E; in this event, University retains the right to convert this Agreement to a non-exclusive Agreement,

 

operation, manufacture, use of or sale of the Licensed Products or Licensed Processes outside the Fields of Use or Territory;

 

failure to keep adequate records or permit inspection or audit.

14,1

Assignment: This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Parties hereto, However, Licensee may not assign its rights in this Agreement without prior written approval by University, such approval not to be unreasonably withheld or delayed.

14.2

Notice: Notice hereunder shall be deemed sufficient if given by registered mail, postage prepaid, and addressed to the Party to receive such notice at the address given below, or such other address as may hereafter be designated by notice in writing.

14.4

Marking: Licensee agrees to:

 

a.

Cause Licensed Products or the product of Licensed Processes sold under this license to be marked with the notice of the patent numbers or patent pending, as may be appropriate.

 

b.

Comply with all laws and regulations of the United States and any other country as appropriate concerning or controlling the import or export of the Licensed Products, data, software, laboratory prototypes or other commodities. University makes no representation that a license or consent for export will not be required by applicable governmental agencies, or if required, that it will be issued.

 

c.

Comply with all applicable statutes, regulations, and guidelines, including applicable governmental regulations, policies and guidelines in its use of any University- supplied materials. Licensee agrees not to use the materials for research involving human subjects or clinical trials in the United States without complying with 21 C.F.R. Part 50 and 45 C.F.R. Part 46 (as those regulations may be amended from time to time). Licensee agrees not to use the materials for research involving human subjects or clinical trials outside of the United States without notifying University in writing, of such research or trials and complying with the applicable regulations of the appropriate national control authorities. Written notification to University of research involving human subjects or clinical trials outside of the United States shall be given no later than sixty (60) days prior to commencement of such research or trials.

14.5 

Compliance with the Law: Licensee shall comply with all commercially material local, state, federal, and international laws and regulations relating to its obligations under this Agreement regarding the development, manufacture, use, and sale of Licensed Products and Licensed Processes.

14.7 

Dispute Resolution: In the event of any dispute arising out of or relating to this Agreement, the affected Party shall promptly notify the other Party ("Notice Date"), and the Parties shall attempt in good faith to resolve the matter.

 

a.

Any disputes not so resolved shall be referred to senior executives, who shall meet at a mutually acceptable time and location within thirty (30) days of the Notice Date and shall attempt to negotiate a settlement.

 

b.

If the senior executives fail to meet within thirty (30) days of the Notice Date, or if the matter remains unresolved for a period of sixty (60) days after the Notice Date,

 

1.

"Inhibitors Of Serine Protease Activity And Their Use In Methods And Compositions For Treatment Of Bacterial Infections" PCT/USO4/27711, filed August 26, 2004

 

2.

"Inhibitors Of Serine Protease Activity And Their Use In Methods And Compositions For Treatment Of Bacterial Infections" United States Patent Application US 10/925,051, filed August 26, 2004

Expiration of Royalties:

Twenty percent (20%) of all Sublicensing revenue received during the third year after the Effective Date and each year thereafter until this Agreement is terminated or expires.

 

All royalties payable hereunder (minimum royalties, earned royalties and sublicensing royalties) with respect to each Licensed Product or Licensed Process shall expire and terminate on the respective expiration date of the Patent Rights applicable to each such Licensed Product or Licensed Process.

Country

Gross

Sales

* Less:

Allowances

Net

Sales

Royalty

Rate

Period Royalty Amount

This Year

Last Year

U.S.A.

Canada

Europe

Japan

Other:

TOTAL:

Pre Clinical testing

Phase Ill initiation

FDA submission

Market launch

 

(a)

within forty-five (45) days of the Effective Date, a comprehensive business plan that describes the Company's technology commercialization strategy, including product development plans and timelines, marketing strategies, and plans for obtaining necessary financing. The business plan shall include forecasts showing the funds, personnel, and time budgeted and planned for development of the Intellectual Property Rights and Know- How; and

 

(b)

within thirty (30) days of the Effective Date, evidence that Company has secured funding commitments of three hundred thousand dollars ($ 300,000)