Option To License And Research Support Agreement

OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.


DATED FEBRUARY 25, 1997


OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.


1. DEFINITIONS 1


2. GRANT OF OPTION RIGHTS LICENSE 2


3. PAYMENTS 3


4. EXERCISE OF THE OPTION 3


5. TERMS OF PROPOSED LICENSE 4


6. OWNERSHIP OF INTELLECTUAL PROPERTY 5


7. DISCLAIMERS 5


8. INDEMNIFICATION 6


9. PROSECUTION AND MAINTENANCE OF PATENT RIGHTS 6


10. TERM AND TERMINATION 8


11. CONFIDENTIAL INFORMATION 9


12. CHOICE OF LAW; DISPUTE RESOLUTION 9


13. DUE DILIGENCE 10


14. NOTICES 10


15. RESEARCH AND SHARING OF INFORMATION 10


16. MISCELLANEOUS 11


OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT


This Option to License and Research Support Agreement (the "Agreement") is made and entered into as of Feb. 25, 1997, by and between The Salk Institute for Biological Studies, a nonprofit public benefit corporation organized under the laws of the State of California ("Salk"), and EPITOPE, INC., a corporation organized under the laws of the State of Oregon ("Epitope").


BACKGROUND


Salk is the owner or co-owner of certain Patent Rights (defined below) and of the Technical Information (defined below) relating to the Patent Rights. The development of certain inventions included within the Patent Rights was sponsored in part by agencies of the Federal Government and, as a consequence, this Agreement is subject to overriding obligations to the Federal Government as set forth in 35 U.S.C. Section 200 et seq. Salk desires that the Patent Rights be developed and utilized to the fullest extent possible so that products resulting from them may be available for public use and benefit. Salk has determined that the best method for disseminating the Patent Rights is through the grant of licenses to entities willing to evaluate and develop products and services covered by the Patent Rights. Epitope has, or has access to, the scientific talent, know-how and facilities to further evaluate, develop and potentially market products which may result from the use of the Patent Rights. Epitope wishes to obtain and Salk is willing to grant to Epitope an option to license the Technical Information so that Epitope can further evaluate and develop the technology for commercial application in plants.


NOW, THEREFORE, IN CONSIDERATION OF THE ABOVE PREMISES, AND THE MUTUAL COVENANTS CONTAINED HEREIN, THE PARTIES HEREBY AGREE AS FOLLOWS:


TERMS AND CONDITIONS


1. DEFINITIONS.


1.1 The term "AFFILIATE" shall mean any entity which controls, is controlled by or is under common control with Epitope, where "control" means beneficial ownership of more than fifty percent (50%) of the outstanding shares or securities or the ability otherwise to elect a majority of the board of directors or other managing authority.


1.2 The term "PLANT BIOLOGY LABORATORY" shall mean collectively the research laboratories at Salk devoted to plant biology research, including, but not limited to, those under the direction of Dr. Christopher Lamb, Dr. Joanne Chory, and Dr. Detlef Weigel.


1.3 The term "FIELD OF USE" shall mean certain fruit and vegetable crops and certain horticultural plants, as spelled out in Schedule A, attached hereto and incorporated by reference herein, but in no event shall include, without limitation, corn, canola, sunflower, safflower, soybeans, cotton, cereals, sorghum, forestry trees, all fruitwood or hardwood species grown primarily for wood or as ornamental trees, plants of any species grown as ornamentals, and other plants not specifically listed in Schedule A.


1.4 The term "LICENSED TECHNOLOGY" shall mean collectively the Patent Rights and the Technical Information (defined below).


1.5 The term "PATENT RIGHTS" shall mean all information, inventions or discoveries covered by the patent applications listed on Schedule A, attached hereto and


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incorporated by reference herein, which Schedule may be modified from time to time by the parties as specified herein, and any and all patents issuing thereon, owned by or licensed to Salk with the right to sublicense. The term "patents" as used in this Agreement shall include, without limitation, all provisional and utility applications, substitutions, continuations, continuations-in-part, divisions, reissues, extensions and foreign counterparts of the aforementioned.


1.6 The term "TECHNICAL INFORMATION" shall mean all know-how, trade secrets, data, processes, procedures, methods, formulas, protocols and information which are not covered by the Patent Rights or any other patent rights of Salk, but which are necessary or useful for the commercial exploitation of the Patent Rights, and which are known or become known during the Term (as hereinafter defined) in the Plant Biology Laboratory and which Salk has the lawful right to license and disclose without accounting to any third party.


1.7 The term "TERM" shall be as defined in Section 10.1.


1.8 The term "TERRITORY" shall mean the territory listed with respect to each entry in Schedule A.


2. GRANT OF OPTION RIGHTS LICENSE.


2.1 PATENT RIGHTS AND TECHNICAL INFORMATION. Subject to the limitations set forth in this Agreement, Salk hereby grants to Epitope and its Affiliates an option (the "Option") (exclusive or nonexclusive as stipulated on the attached Schedule A), for the Term to acquire (1) an exclusive with the right to sublicense, or nonexclusive without the right to sublicense, worldwide commercial license under the Patent Rights in the Field of Use and in the Territory as stipulated for each entry in the attached Schedule A; and (2) a non-exclusive commercial license in and to the Technical Information in the Field of Use and in the Territory as stipulated for each entry in the attached Schedule A, with the right to grant sublicenses to such Technical Information in conjunction with sublicenses of Patent Rights pursuant to an exclusive license under this Section 2.1; which licenses under (1) and (2) are to make, have made, use and sell in the Field of Use and in the Territory products which are composed of or incorporate the Licensed Technology or the production, use or sale of which products is within the scope of any claim in a pending patent application or an issued patent included in the Patent Rights.


For the duration of the Term of this Agreement, Salk grants to Epitope a non-exclusive license under the Licensed Technology, to use the Licensed Technology for research and evaluation purposes in each specified Field of Use to determine Epitope's interest in exercising the Option; provided further that Epitope may also be granted the right to contract with third party independent contractors to use the Licensed Technology for research and evaluation purposes in one or more of the respective Fields of Use upon notification in writing to Salk so long as necessary to help Epitope determine its interest in exercising the option and so long as such contracts are made under conditions at least as protective to Salk as those under this Agreement.


2.2 GOVERNMENT RIGHTS. Epitope acknowledges that certain of the Licensed Technology was developed in part with funds furnished by the Government of the United States of America and that the Government has certain rights relative thereto. This Agreement is explicitly made subject to the Government's rights under any applicable law or regulation. To the extent that there is a conflict between any such applicable law or regulation and this Agreement, the terms of such applicable law or regulation shall prevail.


2.3 SUBLICENSES. Epitope shall have the right to grant sublicenses to third party independent contractors contracted with under Section 2.1 above, which sublicenses shall be limited in duration to the Term and shall include, without limitation, a provision binding


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sublicensees to all terms hereof intended for the protection of Salk and other indemnified parties against liability or loss. Epitope further agrees to deliver to Salk for informational purposes (and under an obligation of confidentiality) a true and correct copy of each sublicense under the Option granted by Epitope, and any modification or termination thereof, within thirty (30) days after execution, modification, or termination.


2.4 RIGHT OF FIRST NEGOTIATION FOR NEW TECHNOLOGY. For the term of this Agreement, prior to granting any rights to third parties in any of the Fields of Use and any of the Territories as stipulated in the attached Schedule A (collectively referred to as the "Area of Rights") with respect to any new technology not within the definition of Licensed Technology developed in the Plant Biology Laboratory with the access fees paid by Epitope under this Agreement (the "New Technology"), Salk shall first offer rights in such New Technology in the Area of Rights to Epitope. Any such offer shall include an identification of the New Technology and initial data regarding such technology for review by Epitope. Epitope shall have [ ]* days from the date it receives such offer to determine whether or not it wishes to purchase an option to such New Technology at that time and to so notify Salk. Salk shall not negotiate with any third parties regarding such New Technology in the Area of Rights within such [ ]* day period or until Epitope has notified Salk that it does not wish to obtain rights in such New Technology, whichever occurs first. If Epitope desires to obtain rights in such New Technology, such rights may be added to this Agreement or become subject to a new agreement as desired by the parties. If Epitope decides not to obtain rights to such New Technology at that time or if Salk and Epitope cannot negotiate an agreement within [ ]* months following the [ ]* day period after such offer, then Salk may offer the New Technology to one or more third parties in the Area of Rights (as well as continuing to offer the New Technology to third parties outside the Area of Rights).


3. PAYMENTS.


3.1 ACCESS FEE. As consideration for the rights granted to Epitope under this Agreement, Epitope agrees to pay to Salk the Access Fees each year specified in the attached Schedule A for each Technology referred to there. Such fees will be due and payable in four equal installments on the first day of each quarter, i.e., January 1, April 1, July 1 and October 1 for the term of the Agreement except as limited in Section 4. [ ]* Epitope represents that the execution and delivery of this Agreement and the payment of the Access Fees have been duly and validly authorized by all necessary corporate action by Epitope.


3.2 OTHER PAYMENTS. Epitope shall pay Salk amounts received by Epitope in consideration of any sublicense to this Agreement and under this Agreement with any third party (other than an Affiliate of Epitope) in an amount equal to [ ]* of the actual amount received by Epitope under such sublicense; with the understanding that this Section 3.2 applies to sublicenses under the option provided herein.


4. EXERCISE OF THE OPTION.


If Epitope elects to exercise its option rights to enter into a license agreement, Epitope shall notify Salk in writing pursuant to Section 14 (Notices) prior to the expiration of this Agreement.


* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.


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When Epitope exercises its option hereunder with respect to a given Schedule A entry in the particular Field of Use and Territory specified in said Schedule A, and the parties shall accordingly diligently work to execute a license agreement within the guidelines provided herein. Once such license agreement has been executed by the parties, the terms therein shall replace and supersede the terms of this Agreement as to the Schedule A entry covered by the license agreement and Epitope shall not be liable to Salk for any additional Access Fees in regard thereto under this Agreement.


Epitope may notify Salk in writing during the Term of this Agreement, that it no longer has any interest in pursuing commercial development of a particular Schedule A entry (the "Rejected Technology"). In such event, the option for a license of such Rejected Technology shall be terminated as to that technology, such technology shall be deemed to be removed from this Agreement and Epitope shall not be obligated for any future Patent Costs related to such Rejected Technology. [ ]*


5. TERMS OF PROPOSED LICENSE.


If and when Epitope exercises its Option under this Agreement for any of the Schedule A entries, then Epitope and Salk shall thereupon negotiate in good faith to arrive at mutually agreeable, reasonable terms and conditions for the license agreement. The terms of the license agreement shall include, but not be limited to, the following provisions:


(A) a right to sublicense the rights being licensed
if the license is exclusive.


(B) a license issue fee equivalent to [ ]*
for the Schedule A entry being licensed.


(C) a royalty rate to be based on the added value of
the technology to the product, taking into consideration
additional third party technology licenses needed to market
the products covered, but in any event not to exceed [ ]*
from the sale of products incorporating the Licensed
Technology, with the royalty rates being determined with
regard to each Schedule A entry such that if more than one
Schedule A entry is incorporated into the products, the
royalty rates will be additive [ ]*


(D) fees paid to Salk on sublicenses at a rate of [
]* of amounts actually received by Epitope from
sublicensees.


(E) diligence terms requiring Epitope to use
reasonable efforts based on reasonably prudent business
judgment in evaluating the Licensed Technology and producing
products for sale that incorporate the Schedule A entry to be
licensed.


(F) disclaimer and indemnification terms similar to
those set out in Sections 7 and 8.


(G) patent cost obligations similar to those in
Section 9.


(H) termination provisions similar to those in
Section 10.


* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.


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5.2 The license agreement contemplated in Section 5.1 shall be subject to all the applicable provisions pertaining to the rights of the Government of the United States as specified in Section 2.2.


6. OWNERSHIP OF INTELLECTUAL PROPERTY.


6.1 Epitope (for itself, its Affiliates and sublicensees) acknowledges and agrees that Salk is and shall remain (as to Epitope) the sole owner of the Patent Rights, subject to the rights of the Federal Government as set forth in 35 U.S.C. Section 200 et seq., and that Epitope (including its Affiliates and sublicensees) has no rights in or to the Patent Rights other than the rights specifically granted herein.


6.2 Salk warrants to Epitope that it has the lawful right to enter into this Agreement and grant the option contained herein. Epitope is aware that certain technology listed in Schedule A is owned in part by The Samuel Roberts Noble Foundation.


7. DISCLAIMERS.


7.1 WARRANTY DISCLAIMER. Nothing in this Agreement is or shall be construed as:


(A) a warranty or representation by Salk as to the
validity or scope of any Patent Rights;


(B) a warranty or representation that anything made,
used, sold or otherwise disposed of under any license granted
pursuant to this Agreement is or will be free from
infringement of patents, copyrights and other rights of third
parties;


(C) an obligation to bring or prosecute actions or
suits against third parties for infringement, except to the
extent and in the circumstances described in Section 9.3; or


(D) a grant by implication, estoppel, or otherwise of
any licenses under patent applications or patents of Salk or
other persons other than as provided in Section 2 hereof.


7.2 NO WARRANTY. Except as expressly set forth in this agreement, Salk makes no representation and extends no warranty of any kind, either express or implied, including, without limitation, the condition, originality or accuracy of the research or any invention or product, whether tangible or intangible, conceived, discovered or developed under this Agreement; or the merchantability or fitness for a particular purpose of the research or any such invention or product. Salk shall not be liable for any direct, consequential, or other damages suffered by Epitope, any licensee, or any other resulting from the use of the research or any such invention or product.


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8. INDEMNIFICATION.


8.1 INDEMNIFICATION BY EPITOPE. Except to the extent of the limited waiver and indemnity by Salk set forth in Section 8.2, Epitope hereby waives any claims it may have, and agrees to indemnify, defend and hold harmless Salk and its present and former officers, trustees, employees, agents and co-owners of technology from any claim, loss, cost, expense, or liability of any kind including reasonable attorneys' fees and expenses arising out of or related to (a) use by Epitope, its Affiliates or its sublicensees of the Licensed Technology or the results of any work performed pursuant to this Agreement or (b) any manufacture, use, sale or other disposition by Epitope, its Affiliates or its licensees of products made by use of such Licensed Technology or the results of any work performed pursuant to this Agreement. Salk shall promptly notify Epitope of any such claim and shall cooperate with Epitope and its insurance carrier in defense of the claim at Epitope's expense.


8.2 INDEMNIFICATION BY SALK. Salk hereby waives any claims it may have, and agrees to indemnify, defend and hold harmless Epitope and its present and former officers, directors, employees and agents from any claims, loss, cost, expense, or liability of any kind including reasonable attorneys' fees and expenses resulting from the injury or death of an employee or agent of Salk engaged in conducting the research contemplated by or performed under this Agreement, working in the facility in which such research is conducted, or damage to or loss of the property of Salk, caused by the negligence or willful misconduct of Salk in conducting such research.


9. PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.


9.1 PROSECUTION AND MAINTENANCE. As between Salk and Epitope, Salk shall have full control over prosecution and maintenance of the patent applications and patents contained in the Patent Rights. Salk shall diligently prosecute and maintain or use its best efforts to cause a co-owner to prosecute and maintain the United States and foreign patent applications and patents in the Patent Rights. Salk will keep Epitope advised of the status of such prosecution and maintenance by providing Epitope in confidence with prompt and complete copies of all official communications with respect to the patent applications and patents contained in the Patent Rights. Salk agrees to consider carefully adding claims reasonably requested by Epitope to any patent application in the Patent Rights which Epitope believes are necessary to protect products contemplated to be sold under a potential License Agreement.


9.2 PATENT COSTS.


(A) Upon execution of this Agreement, Epitope shall
pay to Salk [ ]*
as reimbursement for the percentages of Patent Costs incurred
through 1996 specified in Schedule A. Epitope shall reimburse
Salk for said percentages of Patent Costs thereafter incurred
during the term of this Agreement with respect to the Patent
Rights; provided that each percentage of Patent Costs to be
borne by Epitope is to be based on and shared with other
licensees and options under the Patent Rights on a pro rata
basis, with the number of licensees. If Epitope exercises its
option rights under this Agreement, Epitope's pro rata share
of the Patent Costs shall be determined based upon the number
of licenses then existing and the extent of the Field of Use
and Territory on a Schedule A entry by entry basis. If Salk
subsequently obtains additional licensees, then Epitope's pro
rata share of the Patent Costs shall be reduced by Salk
accordingly. Conversely, if one or more licensees terminate
their interest then Epitope's share of the Patent Costs shall
increase. "Patent Costs" as used in this Agreement shall mean
only out-of-pocket


* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.


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expenses incurred in connection with the preparation, filing,
prosecution up to and through appeal from a final rejection by
an Examiner of the United States Patent Office and maintenance
of United States patent applications and patents, including
the fees and expenses of attorneys and patent agents, filing
fees and maintenance fees, and the filing of an application
under the Patent Cooperation Treaty, but excluding costs
associated with any patent infringement actions. Salk will
provide an invoice to Epitope for Epitope's pro rata share of
any such Patent Costs on a semiannual basis, and Epitope shall
reimburse Salk for its share of Patent Costs within thirty
(30) days after delivery of any such invoice. Notwithstanding
anything above to the contrary:


(i) Epitope will not pay Patent Costs
associated with [ ]*
without Epitope's agreement in advance [ ]*


(ii) Epitope will not pay extension fees and
will not pay more than [ ]*
of Patent Costs associated with an application,
including continuations from an initial parent
application without Epitope's agreement in advance
that such expenses are desirable and reasonably
necessary business expenses; and


(iii) Epitope will not pay for fees in
connection with an interference in the United States
Patent Office or in a court of law, without Epitope's
agreement in advance that such expenses are desirable
and reasonably necessary business expenses.


(B) Except with regard to any patent rights that
result from applications for which Epitope did not pay fees
and costs in accordance with Section 9.2(a) (ii) and (iii)
above, in the event Epitope elects to discontinue payment for
the filing, prosecution and/or maintenance of any patent
application and/or patent contained in the Patent Rights, any
such patent application or patent shall be excluded from the
definition of the Patent Rights and from the scope of the
license granted under this Agreement, and all rights relating
thereto shall revert to Salk and may be freely licensed by
Salk.


(C) Salk shall provide notice to Epitope at least 4
months before the deadline for any patent application of the
Patent Rights to be filed in a country other than the United
States and Epitope shall, using reasonable business judgment
and with consultation with Salk, determine and notify Salk
before one month from the foreign filing deadline which
countries Epitope elects to pay for the filing, prosecution
and maintenance of such patents. If Epitope elects not to
support in a given country a patent application or patent
included in the Patent Rights and Salk, acting in reliance
thereon, ceases to prosecute such patent application or
maintain such patent, Epitope warrants that it will not sell a
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