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Exhibit 10.1 Exclusive Option
Agreement
EXCLUSIVE OPTION AGREEMENT
--------------------------
This Agreement, effective as of May 1, 2006("Effective Date"),
by and
between The Penn State Research Foundation (hereinafter referred
to as
"PSRF"), a non-profit corporation duly organized and existing
under the laws
of the Commonwealth of Pennsylvania and having an office at 304
Old Main,
University Park, PA 16802, and Northwest Medical Research Inc.
(hereinafter
referred to as "NW MEDICAL"), having its principal office at
Northwest
Medical Research, Inc., #90 NW Second Street, P.O. Box 910,
Stevenson,
Washington 98648.
WITNESSETH
WHEREAS, Dr. Robert Beelman, Joy Dubost and Devin Peterson,
employees of
The Pennsylvania State University (hereinafter referred to as
"UNIVERSITY"),
have filed PSU Invention Disclosure No. 2005-3098, which is
entitled
"Identification of Selenoergothioneine as a Natural Organic Form
of Selenium
from Cultivated Mushrooms", hereinafter referred to as the
("INVENTION")
which INVENTION is the property of the UNIVERSITY;
WHEREAS, PSRF is dedicated to fostering and advancing scientific
research
within the Commonwealth of Pennsylvania and, in particular,
within the
UNIVERSITY and is responsible for developing inventions made by
employees of
the UNIVERSITY by evaluating invention disclosures, pursuing
patents and
licensing patents which are obtained thereon;
WHEREAS, PSRF is the owner of certain "LICENSED PATENTS" (as
later
defined herein) and has the right and ability to grant option
rights to the
LICENSED PATENTS hereunder;
WHEREAS, PSRF desires to have LICENSED PATENTS (as defined
hereinbelow)
covering certain aspects of INVENTION utilized in the public
interest and is
willing to grant licenses thereto;
WHEREAS, NW MEDICAL has represented to PSRF an interest in
obtaining an
exclusive option to obtain an exclusive, remuneration-bearing
license to
LICENSED PRODUCTS (as hereinafter defined) upon the terms and
conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of the
mutual
covenants and promises set forth in this Option Agreement, and
with intent
to be legally bound, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Option Agreement, the following words and
phrases
shall have the following meanings:
1.1 "NW MEDICAL" shall mean Northwest Medical Research Inc.
1.2 "LICENSED PATENTS" shall mean all of the following PSRF
Intellectual Property:
(a) United States patent application(s) covering INVENTION,
which is
derived from U.S. Provisional Patent Application No.
60/782,204,
filed on March 14, 2006, and names Robert Beelman, Joy Dubost,
Devin
Peterson and Marvin Hausman as co-inventors and any patents
issuing
thereon;
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2
(b) Any reissues, extensions, divisional applications, and
continuations
of the patent applications described in (a) above, and any
patents
issuing thereon;
(c) Any Patent Cooperation Treaty (PCT) patent application
claiming
priority to U.S. Provisional Patent Application No. 60/782,204,
which
may be filed and pending during the Option Period (as
hereinafter
defined). NW MEDICAL understands and agrees that NW MEDICAL
shall
directly reimbursed PSRF for all reasonable costs incurred
in
obtaining, maintaining, and defending said PATENT RIGHTS
pursuant to
Article VII of this Agreement, after exercising its option
pursuant
to Paragraph 3.7 herein. Foreign patent rights shall
specifically
refer to the above referenced PCT patent application as well as
any
and all foreign counterpart applications of subparagraphs (a)
and (b)
above. and the resulting patents thereon, in those foreign
countries
from which NW MEDICAL has elected exclusive license rights.
Exclusive
foreign license rights in any particular country or territory
shall
be subject to termination in the event NW MEDICAL notifies PSRF
that
it no longer wishes to pay for the costs of prosecuting
applications
or maintaining patents in particular countries.
1.3 "LICENSED PRODUCTS" shall mean any product, part thereof,
or
process of which (i) is covered in whole or in part by an
issued, unexpired
claim or a pending claim contained in the LICENSED PATENTS in
the country in
which any such product or part thereof is made, used or sold,
(ii) is
manufactured by using a process or is employed to practice a
process which
is covered in whole or in part by an issued, unexpired claim or
a pending
claim contained in the LICENSED PATENTS in the country in which
any such
processes are used or in which such product or part thereof is
used or sold,
or (iii) is covered by TECHNICAL INFORMATION.
1.4 "Commercial Sale" shall mean (1) any transaction which
transfers to
a purchaser physical possession of and title to LICENSED
PRODUCTS and (2) in
the case of LICENSED PRODUCTS used by NW MEDICAL, upon NW
MEDICAL's
commercial use of LICENSED PRODUCTS.
1.5 "NET SALES" shall mean the gross selling price for
LICENSED
PRODUCTS produced hereunder upon their sale by NW MEDICAL, but
less
discounts allowed in amounts customary in the trade, sales,
tariff duties
and/or taxes directly imposed and with reference to particular
sales;
outbound transportation prepaid or allowed, and amounts allowed
or credited
on returns. LICENSED PRODUCTS shall be considered "sold" when
billed out or
invoiced. For LICENSED PRODUCTS used by NW MEDICAL in its own
operations and
not sold commercially, the "NET SALES" shall be deemed to be NW
MEDICAL's
bona fide price for similar LICENSED PRODUCTS sold to third
parties.
1.6 "TECHNICAL INFORMATION" shall mean all technical
information, know-
how, data concerning chemical and physical properties, methods
of
preparation or manufacture, experimental results, compositions,
apparatuses,
formulations, specifications, processes, techniques and data
which are not
readily available to others through public means and which are
not the
subject of an issued or pending patent claim in a country in
which LICENSED
PRODUCTS are manufactured, sold or employed relative to the
practice of the
INVENTION, including materials, antibodies, components,
proteins,
compositions and the like which are in the possession of PSRF as
of the
Effective Date of this Option Agreement and are provided to
NW
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MEDICAL or are developed, replicated, acquired or derived
therefrom by or on
behalf of NW MEDICAL using INVENTION provided by PSRF during the
term of
this Option Agreement. TECHNICAL INFORMATION shall be documented
as Appendix
A of this Agreement and the corresponding License Agreement.
1.8 "Research Agreement" shall mean one or more sponsored
research
agreement(s) with UNIVERSITY, which funds research in the
laboratory of Dr.
Robert Beelman in order to further develop LICENSED INTELLECTUAL
PROPERTY,
and which contains a budget consistent with the Term Sheet (as
attached as
Appendix A).
1.9 "LICENSED INTELLECTUAL PROPERTY" shall mean LICENSED
PATENTS,
TECHNICAL INFORMATION and INVENTION.
ARTICLE II- RESEARCH AGREEMENT
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2.1 During the Option Period, the parties hereto agree that NW
MEDICAL
and UNIVERSITY shall enter into one or more Research
Agreement(s). It is the
general purpose of the Research Agreement to support the
development of and
uses for LICENSED INTELLECTUAL PROPERTY. The UNIVERSITY will
undertake a
collaborative research program as more fully set forth in the
Research
Agreement, which shall be attached as Appendix B. The
UNIVERSITY's
activities under the Research Agreement will be under the direct
supervision
of Dr. Robert Beelman as principal investigator.
ARTICLE II- THE OPTION
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3.1 Option. Subject to the reimbursement of patent expenses
relating to
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the preparation and filing of U.S. Provisional Patent
Application Serial No.
60/782,204, which was filed on March 14, 2006 and names Robert
Beelman, Joy
Dubost, Devin Peterson and Marvin Hausman as co-inventors. PSRF
hereby
grants to NW MEDICAL, for the duration of the Option Period
(hereinafter
defined), an exclusive option to LICENSED INTELLECTUAL PROPERTY
covering
LICENSED PRODUCTS to elect to obtain, at the election of NW
MEDICAL, an
exclusive license having teens of remuneration consistent with
the Term
Sheet in Appendix A, under the LICENSED INTELLECTUAL PROPERTY to
make, have
made, use and sell LICENSED PRODUCTS and to perform processes
covered
thereby.
3.2 Term. The term of the exclusive option of Paragraph 2.1
hereinabove
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shall begin upon the Effective Date and expire April 15, 2007 or
within two
(2) months after the conclusion of the first Research Agreement
referenced
in Article III (hereinafter "Option Period"), so long as NW
MEDICAL complies
with the terms of this Option Agreement, with the right of NW
MEDICAL in its
sole discretion to extend the Term for an additional period of
one year.
3.3 Option Period License. During the Option Period, NW MEDICAL,
at its
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own expense, shall have the right to make, have made and use the
LICENSED
PRODUCTS for test purposes but not to sell, distribute or market
LICENSED
PRODUCTS for other than said test purposes.
3.4 Testing. NW MEDICAL shall, at its own expense, during the
Option
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Period, conduct laboratory testing and experimental evaluation
under the
LICENSED INTELLECTUAL PROPERTY, with reasonable diligence, for
the purpose
of determining its interest in
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commercializing the LICENSED PRODUCTS under an appropriate
license from PSRF
and for no other purpose.
3.5 Evaluation Purpose. It is understood and agreed that the
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information and tangible material of the INVENTION referred to
hereunder
shall be furnished to NW MEDICAL for evaluation in order that NW
MEDICAL may
determine its interest in developing products under an
appropriate license
from PSRF and for no other purpose. In the event NW MEDICAL does
not
exercise its option right granted herein and a license agreement
is not
concluded between PSRF and NW MEDICAL during the Option Period,
NW MEDICAL
agrees to provide PSRF with a copy of any data which NW MEDICAL
has
developed during the Option Period pertaining to the INVENTION,
along with
an explanation for its decision not exercise its option rights.
Any reliance
that PSRF may place upon such results shall be at PSRF's own
risk.
3.6 Technical Information. NW MEDICAL agrees that TECHNICAL
INFORMATION
---------------------
it develops to the LICENSED PATENTS during the Option Period
shall be
disclosed to PSRF.
3.7 Exercise of Option. NW MEDICAL may elect to exercise the
option
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herein granted at any time after the Effective Date hereof and
prior to the
expiration of the Option Period, by giving written notice to
PSRF, along
with confirmed facsimile transmission, of such intention. If NW
MEDICAL does
not exercise its Option granted herein, any TECHNICAL
INFORMATION developed
by NW MEDICAL during the Option Period shall become the property
of PSRF,
which shall have the right to license said TECHNICAL INFORMATION
to third
parties. NW MEDICAL agrees to assign to PSRF its entire right,
title and
interest in and to TECHNICAL INFORMATION and any related
patents. If NW
MEDICAL exercises its Option granted herein, TECHNICAL
INFORMATION shall be
licensed to NW MEDICAL as part of the subsequent license
agreement, subject
to grants to PSRF and UNIVERSITY a non-exclusive, paid-up,
royalty-free,
non-transferable right and license to use such TECHNICAL
INFORMATION for
their research purposes.
3.8 No additional rights. The option granted hereunder shall not
be
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construed to confer any rights upon NW MEDICAL by implication,
estoppel, or
otherwise as to any technology not specifically set forth in
Paragraph 1.2
hereof
3.9 Exclusivity. During the Option Period, PSRF shall not
license,
-----------
agree to license or enter into discussions regarding the
potential licensing
of the LICENSED PATENTS covering LICENSED PRODUCTS, to or with
any party
other than NW MEDICAL, unless terminated pursuant to Article
IX.
3.10 Ongoing Research during Option Period. During the Option
Period,
-------------------------------------
PSRF reserves the rights for itself and the UNIVERSITY to
practice under the
LICENSED INTELLECTUAL PROPERTY for their own research
purposes.
ARTICLE IV - THE LICENSE
------------------------
4.1 PSRF and NW MEDICAL agree that in the event NW MEDICAL
shall
exercise the exclusive option to license granted to it
hereunder, each shall
negotiate with the other in good faith for the purpose of
granting to NW
MEDICAL an exclusive license to LICENSED INTELLECTUAL PROPERTY
covering
LICENSED PRODUCTS, with the right to sublicense. The terms and
conditions of
such license, as outlined in "Master Exclusive License
Agreement" and
Exhibit A of the Term Sheet in Appendix A, are to be negotiated
in good
faith and agreed
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upon between PSRF and NW MEDICAL. NW MEDICAL shall have ninety
(90) days
from the exercise of its option to negotiate a license, which
period can be
extended by mutual agreement. In the event the parties fail to
reach a
mutually acceptable license agreement within the above specified
time
period, PSRF shall be entitled to negotiate in good faith with
one or more
third parties a license under any intellectual property owned by
PSRF.
4.2 Terms and Conditions. Any license granted to NW MEDICAL
subsequent
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to this Agreement shall contain such additional terms and
conditions as are
ordinary and commercially reasonable in agreements of that
type.
ARTICLE V - WARRANTY
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5.1 PSRF warrants and represents that it has the full right and
power
to grant the option set forth in ARTICLE III and the license
described in
ARTICLE IV hereof, and shall take no action to negate such right
and power,
and further warrants and represents that there are no
outstanding
agreements, assignments, or encumbrances inconsistent with the
provisions of
this Option Agreement other than certain governmental rights
pursuant to
sponsorship of the research which gave rise to the INVENTION.
EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PSRF MAKES
NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OR NON-INFRINGEMENT OF
PATENT RIGHT
CLAIMS WHICH ARE ISSUED OR PENDING RELATIVE TO LICENSED
PATENTS.
ARTICLE VI - INDEMNIFICATION & INSURANCE
----------------------------------------
6.1 NW MEDICAL shall at all times during the term of this
Option
Agreement and thereafter, indemnify, defend and hold UNIVERSITY
and PSRF,
its trustees. directors, officers, employees and affiliates,
harmless
against all claims, proceedings, demands, and liabilities of any
kind
whatsoever, including legal expenses and reasonable attorneys'
fees, arising
out of the death of or injury to any person or persons or out of
any damage
to property, or resulting from the use of or reliance upon the
LICENSED
INTELLECTUAL PROPERTY or LICENSED PRODUCTS by NW MEDICAL, or any
other
obligation of NW MEDICAL hereunder.
6.2 If the parties enter into a definitive license agreement,
such
license agreement will require NW MEDICAL (or any sublicense or
assignee) to
maintain products liability insurance covering the risk of
claims,
liabilities, expenses and judgments for which NW MEDICAL has
agreed in
Paragraph 6.1 of this Agreement to indemnify PSRF and
UNIVERSITY. Coverage
shall be in an amount which is not less than $1,000,000 (One
Million
Dollars) per occurrence. Both parties agree that adequate
evidence of the
required coverage has or will be provided by NW MEDICAL to PSRF,
care of the
Intellectual Property Office, The Pennsylvania State University,
113
Technology Center, University Park, PA 16802, and NW MEDICAL
agrees to keep
said office informed of any changes in coverage or carriers.
ARTICLE VII- PATENTS
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7.1 U.S. Patent Filings. PSRF shall apply for, seek prompt
issuance of,
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and maintain the LICENSED PATENTS during the term of this
Agreement. Tile
prosecution, filing and maintenance of U.S. patent applications
and patents
which issue therefrom shall be the primary responsibility of
PSRF, or its
designee, but wherever practical, NW MEDICAL shall be given the
opportunity
to review and comment upon the breadth and coverage of said
patent
applications. PSRF shall keep NW MEDICAL advised as to all
developments with
respect to said patent
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application(s) and shall promptly supply copies of all papers
received and
filed in connection with the prosecution in sufficient time for
NW MEDICAL
to comment. PSRF shall use reasonable efforts to notify NW
MEDICAL of cost
estimates with sufficient time to allow for NW MEDICAL to
provide advance
written approval. NW MEDICAL understands and agrees that its
failure to
respond with clear, written directions may affect PSRF's ability
to execute
its instructions. NW MEDICAL shall be obligated to reimburse
PSRF for all
actual, documented out-of-pocket costs incurred by PSRF, at the
written
request authorization of NW MEDICAL, relating to the filing,
prosecution,
maintenance and defense of said LICENSED PATENTS pursuant to the
conditions
set forth herein. PSRF shall promptly provide copies of invoices
for all
such expenses and NW MEDICAL shall make payment thereof within
thirty (30)
days of its receipt. NW MEDICAL's failure to make payments in
accordance
with this paragraph shall constitute a material breach or
default and shall
be grounds for termination of this Option Agreement pursuant to
Article IX
hereof. PSRF shall make all reasonable efforts to ensure that
said patent
application(s) adequately addresses the commercial and business
needs of NW
MEDICAL, as communicated by NW MEDICAL hereunder. After
appropriate
consultation with NW MEDICAL, PSRF shall choose appropriately
qualified
patent counsel. During the Option Period, PSRF shall provide, or
shall cause
its patent counsel to provide, to NW MEDICAL copies of all
documentation
related to relevant patent applications and patents, and NW
MEDICAL shall be
authorized to communicate directly with PSRF's outside patent
counsel
regarding the INVENTION and the LICENSED PATENTS and all other
intellectual
property matters covered by this Option Agreement.
7.1.1 As consistent with the Term Sheet attached as Appendix
B,
PSRF has added Marvin Hausman as a co-inventor. As a condition
to execute
this Exclusive Option Agreement, Marvin Hausman shall assign
his
inventorship rights to PSRF, and at no cost to PSRF. Marvin
Hausman, at his
discretion, shall assist in the preparation of any documents
related to
LICENSED PATENTS, and at no expense to PSRF
7.2 International Patent Filings. NW MEDICAL understands and
agrees
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that the primary responsibility for the costs of all foreign
patent filings
shall be NW MEDICAL's, and that NW MEDICAL's failure to timely
communicate
its decision regarding foreign filing and/or payment thereof
will result in
a loss of said rights to NW MEDICAL. NW MEDICAL shall notify
PSRF no later
than nine (9) months after the date of the U.S. patent
application referred
to in Paragraph 1.2 (d) as to the foreign countries in which it
wishes PSRF
to continue to seek patent protection. NW MEDICAL shall be given
the
opportunity to review and comment upon the breath and coverage
of said
foreign patent applications. PSRF shall make all reasonable
efforts to
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