printer-friendly

Sample Business Contracts

Option and License Agreement - University of Southern California and Biokeys Inc.

Sponsored Links

                          OPTION AND LICENSE AGREEMENT

1.    INTRODUCTION

            THIS AGREEMENT is between the UNVERSITY OF SOUTHERN CALIFORNIA,
      (hereinafter USC) a California nonprofit corporation with its principal
      place of business at University Par, Los Angeles, California 90089, and
      Biokeys, Inc., a Delaware corporation, with its principal place of
      business at 16 South Market Street, Petersburg, Virginia 23803
      (hereinafter Licensee).

            WHEREAS USC warrants that it is the owner and that it has the right
      to exclusively license those inventions which are the subject matter of
      the patents and patent applications listed in Appendix A and of which the
      inventors are Colin Spears and Sang-Ihn Kang (File 2199A) and Colin Spears
      and Bengt Gustavsson (Files 2266B & 2266C) (Hereinafter Inventors);

            WHEREAS Licensee desires to obtain an exclusive license in the
      defined FIELD OF USE to manufacture and market products utilizing the
      inventions as hereinafter defined:

            WHEREAS, USC is willing to grant a worldwide, exclusive license in
      the defined FIELD OF USE to Licensee subject to the terms, conditions,
      limitations, and restrictions set forth below:

            NOW, THEREFORE, in consideration of the covenants herein contained,
      the parties agree as follows:

2.    DEFINITIONS

      For the purposes of this Agreement the following terms have meanings
      specified below:

      a.    The term "PATENT" or "PATENTS" shall mean any and all patents listed
            in Appendix A, and all patent applications listed in Appendix A
            including any and all patents issued thereon or any continuation,
            division, extensions or reissue thereof.

      b.    "PRODUCT" or "PRODUCTS" shall mean any article, composition,
            apparatus, substance, chemical, material, method or service which is
            made, used, distributed or sold by Licensee which:


                                       1
<Page>

            i.    is covered in whole or in part by one or more pending or
                  unexpired claims contained in a PATENT in the country in which
                  the PRODUCT(S) is made, used, distributed or sold;

            ii.   is manufactured using a method or process which is covered in
                  whole or in part by one or more pending or un-expired claims
                  contained in a PATENT in the country in which (a) the
                  PRODUCT(S) is made, used, distributed or sold, or (b) the
                  method or process is used or sold; or

            iii.  the use of which is covered in whole or in part by one or more
                  pending or un-expired claims contained in a PATENT in the
                  country in which (a) the PRODUCT(S) is made, used, distributed
                  or sold, or (b) the method or process is used or sold.

      A PRODUCT is covered by a pending or un-expired claim of a PATENT if in
the course of manufacture, use distribution or sale, it would in the absence of
this Agreement, infringe one or more claims of the PATENT which has not been
held invalid by a court from which no appeal can be taken.

      c.    "FIELD OF USE" shall mean all fields.

      d.    "NET SALES PRICE" shall mean:

            i.    the gross billing price of any PRODUCT received by Licensee or
                  SUBLICENSEE for the sale or distribution of any PRODUCT, less
                  the following amounts actually paid by Licensee or
                  SUBLICENSEE:

                  (1)   discounts allowed;

                  (2)   returns;

                  (3)   transportation charges or allowances;

                  (4)   packing and transportation packing material costs (not
                        including product containers or product packing
                        containers as manufactured by the Company);

                  (5)   customs and duties charges: and

                  (6)   sales, transfer and other excise taxes or other
                        governmental charges levied on or measured by the sales
                        but no franchise or income tax of any kind whatsoever.

            ii.   Every commercial use or disposition of any PRODUCT, in
                  addition to a bona fide sale to a customer, shall be
                  considered a sale of such PRODUCT. The NET SALES PRICE, in the
                  case or a use or disposition other than a bona fide sale,
                  shall be


                                       2
<Page>

                  equivalent the then payable NET SALES PRICE of such PRODUCT in
                  an arm's length transaction. Excluded from the calculation of
                  NET SALES PRICE shall be any PRODUCT that is: (1) used by
                  Licensee or provided to SUBLICENSEE free of charge for testing
                  and/or conducting clinical trials; (2) that is donated by
                  Licensee or a SUBLICENSEE to a charitable organization; (3)
                  sales between Licensee and any subsidiary, or between Licensee
                  or any subsidiary and a SUBLICENSEE, provided they are for
                  development, testing or re-sale purposes (the latter of which
                  licensee will pay USC a royalty for such re-sale) and not for
                  intended end use;

      e.    "SUBLICENSEE" shall mean any third party licensed by Licensee to
            make, or sell any PRODUCT in accordance with the terms of this
            Agreement.

      f.    "EFFECTIVE DATE" of this Agreement shall be the date when the last
            party has signed this agreement.

3.    OPTION PHASE

      a.    USC hereby grants Licensee the exclusive rights to conduct various
            technical, pre-clinical, marketing, patent, and other studies on
            PRODUCTS in the FIELD OF USE during a six (6) month period
            commencing on the EFFECTIVE DATE of this Agreement.. The option
            period may be extended by mutual written agreement of the parties.

4.    LICENSE PHASE

      a.    In consideration of the license fees and royalties, and subject to
            the terms and conditions, as set forth in this Agreement and
            effective upon written notification to USC during the option phase
            that Licensee desires to license the PATENT(S), USC hereby grants to
            Licensee:

            i.    the exclusive worldwide license in the FIELD OF USE to use the
                  PATENT to manufacture and sell the PRODUCT(S); and

            ii.   the right to grant sublicenses to any PATENT licensed
                  exclusively hereunder, provided that any SUBLICENSEE agrees to
                  be bound by the terms and conditions of this Agreement
                  applicable to SUBLICENSEES.

      b.    If USC is not notified of Licensee's desire to enter the license
            phase by the end of the option phase or any extensions thereto, this
            Agreement and the license granted herein shall immediately
            terminate.

      c.    All licenses pursuant to 4.a. and 4.b. to inventions conceived or
            first actually reduced to practice during the course of research
            funded by a U.S. Federal Agency are subject to the rights,
            conditions and limitations imposed by U.S. Law. USC agrees to use
            reasonable efforts to comply with the requirements of such laws and
            applicable regulations.


                                       3
<Page>

            The words "exclusive license" as used herein shall mean exclusive
            except for the royalty free non-exclusive license granted to the
            U.S. government by USC pursuant to 35 USC Section 202(c)(4) for any
            PATENT claiming an invention subject to 35 USC Section 201 and
            except for the rights of USC and Inventors as set forth in
            Paragraphs 6.

      d.    In addition to the royalty referred to in Paragraph 5 the Licensee
            shall pay USC a license fee of One Hundred Thousand Dollars
            ($100,000) payable within thirty (30) days of the first private
            placement of equity in Biokeys (exclusive of the original capital
            invested by the founders Licensee) and an additional license fee of
            One Hundred Thousand Dollars ($100,000) due and payable within
            thirty (30) days of the first public offering of equity in Biokeys.

5.    ROYALTY

      a.    On all sales of Products anywhere in the world by Licensee or
            SUBLICENSEE, Licensee shall pay USC a royalty of (SPACE) of the NET
            SALES PRICE.

      b.    Licensee shall pay to USC a prepaid royalty of One Hundred Thousand
            ($100,000) due and payable within thirty (30) days of market
            approval of a NEW DRUG APPLICATION (NDA) by the FDA for any product
            covered by the claims of any PATENT. The prepaid royalty shall be
            deductible from running royalties based on sales made after the date
            that the prepaid royalty is due.

      c.    The obligation to pay a royalty under this Agreement on the NET
            SALES PRICE of a PRODUCT shall be imposed only once with respect to
            the same unit of the PRODUCT regardless of the number of valid
            issued or, assuming they were to issue, pending claims included
            within the PATENTS.

      d.    In the event Licensee is required to pay third party royalty(ies) on
            patents not owned by USC in order to manufacture, use or sell a
            PRODUCT, then the royalty rate on the NET SALES PRICE of such
            PRODUCT shall be reduced by the following formula:

                   New Royalty Rate = (SPACE) minus either (i) (SPACE)
                   or (ii) (SPACE) of the
                   royalty rate owed to the third party, whichever is less.

      e.    Licensee shall pay such royalties to USC on a calendar quarter
            basis. With each quarterly payment, Licensee shall deliver to USC a
            full and accurate accounting to include at least the following
            information:

            i.    Quantity of each PRODUCT sold (by country) by Licensee and its
                  SUBLICENSEES;

            ii.   Total receipts for each PRODUCT (by country);


                                       4
<Page>

            iii.  Quantities of each PRODUCT used by Licensee and its
                  SUBLICENSEES;

            iv.   Names and addresses of SUBLICENSEES of Licensee;

            v.    Total number of PRODUCTS manufactured (by country); and

            vi.   Total royalties payable to USC.

      f.    In each year the amount of royalty due shall be calculated quarterly
            as of March 31, June 30, September 30 and December 31 and shall be
            paid quarterly within the thirty next (30) days following such date.
            Every such payment shall be supported by the accounting prescribed
            in Paragraph 5.e. and shall be made in United States currency.
            Whenever for the purpose of calculating royalties conversion from
            foreign currency shall be required, such conversion shall be at the
            rate of exchange thereafter published in the Wall Street Journal for
            the business day closest to the applicable end of calendar quarter.

      g.    The royalty payments due under this Agreement shall, if overdue,
            bear interest until payment at a per annum rate equal to one and a
            half percent (1.5%) in effect at 5:00pm (Eastern Time) on the due
            date, not to exceed the maximum permitted by law. The payments of
            such interest shall not preclude USC from exercising any other
            rights it may have as a consequence of the lateness of the payment.

6.    RIGHTS RETAINED BY UNIVERSITY

      Notwithstanding the exclusive license granted in Paragraph 4a, USC and
Inventors will have the absolute, nontransferable right to use the technology
covered by the PATENTS and all improvements thereof, for conducting research and
educational purposes.

7.    PATENT PROSECUTION

      a.    USC shall prosecute and maintain the PATENTS during the course of
            this Agreement.

      b.    Licensee shall reimburse all reasonable legal expenses incurred and
            paid by USC in filing, prosecuting and maintaining the U.S. and
            foreign PATENTS, including the expenses associated with parent
            patent applications listed in Appendix A whether such expenses were
            incurred before or after the date of this Agreement. These legal
            expenses shall include the attorneys' and agents' fees, filing fees
            and out-of-pocket costs associated with responding to office actions
            and any other fees and costs directly related to obtaining and/or
            maintaining patent protection. Licensee shall advance payments of
            maintenance fees and annuities as part of such legal expenses to be
            reimbursed by Licensee within thirty (30) days of request by USC,
            unless Licensee is advised otherwise by timely notice from USC.


                                       5
<Page>

      c.    The first reimbursement payment made by Licensee shall be for the
            reimbursement of USC's patent expenses to date and shall be made
            upon the earlier of (i) thirty (30) days following the first public
            offering of equity in Biokeys or (ii) one year from the date that
            the option granted herein is exercised by Licensee. Thereafter,
            reimbursement payments shall be made by Licensee within thirty (30)
            days of receipt of an invoice from USC citing any additional
            expenses.

      d.    If the Licensee elects (i) not to pursue a PATENT or (ii) to
            terminate the prosecution or maintenance of a PATENT, the Licensee
            surrenders its right to make, use or sell PRODUCTS covered by the
            non-elected PATENT and shall grant to USC the exclusive rights
            previously granted to Licensee, without limitation. Licensee agrees
            to execute all necessary documents to carry out this grant of rights
            to USC. Payments referred to in Paragraphs 7.b. and 7.c. shall not
            be refunded upon such non-election or termination.

8.    PATENT INFRINGEMENT

      a.    Defensive Controversy.

      Licensee shall promptly notify USC of all claims, allegations and
notifications of infringement of third party patents. Except for the placing in
escrow of a portion of royalties as referred to hereinafter, USC shall have no
obligation or liability in the event that legal action is brought against
Licensee for patent infringement. Such obligation and liability shall be borne
by Licensee. Licensee may choose legal counsel and defend the patent
infringement lawsuit. During such lawsuit, Licensee may place all of the
royalties derived from the sale of the PRODUCT in the country where such
lawsuit, Licensee may place all of the royalties derived from sales of the
PRODUCT in the country where such lawsuit is pending in an interest-bearing
escrow account. The escrow account shall be established in a bank mutually
acceptable to both parties under escrow instructions insulating the funds from
claims of any creditor. Upon termination of the action, one half (1/2) of any
judgement amount, reasonable attorneys' fees and costs, or $100,000, whichever
amount is greater, may be paid from this escrow account to be applied against
such judgement, fees and costs. If the application of the escrow funds is not
sufficient to pay for one half (1/2) of such judgement, fees, and costs, then up
to (1/2) of all royalties payable to USC may be applied against any such
deficit. In addition, should the settlement of any such patent infringement
lawsuit involve payment of royalties by Licensee to a third party for the
continued right to manufacture, use and sell the PRODUCT, then funds in the
escrow account and royalties payable to USC may be applied against up to one
half (1/2) of such royalties to a third party. Any funds thereafter remaining in
the escrow shall be paid to USC. The above shall constitute USC's sole liability
and responsibility in the event of such action. During the patent infringement
litigation both parties shall keep each other informed in writing of significant
developments in the lawsuit.

      a.    Offensive Controversy.

      Licensee shall promptly notify USC of any potential infringement of a
PATENT. In the event that a third party infringes on a PATENT, Licensee shall
have the right but not an obligation to bring legal action to enforce any such
patent. If Licensee exercises such right,


                                       6
<Page>

Licensee shall select legal counsel and pay all legal fees and costs of
prosecution of such action. In the event that Licensee shall choose not to take
such action, USC shall have the right, at its option and at its own expense, to
prosecute any action to enjoin such infringement or to prosecute any claim for
damages. The party prosecuting any such action shall be entitled to retain any
funds received as a result of settlement or judgement of such action. The
parties may also agree to jointly pursue infringers. After deduction and payment
to the parties of their respective costs and fees (including without limitation
reasonable attorneys' fees) incurred in prosecuting any such actions, the net
funds obtained as a result of settlement or of judgement of any such jointly
prosecuted action shall be divided in the following manner: 25% of all net funds
shall be divided equally by the parties and 75% of all the net funds shall be
divided between the parties in the proportion to the amount of legal fees and
costs incurred by the parties in the prosecution of such actions. If funds are
insufficient to pay all costs and fees then all of the funds shall be paid to
the parties in said proportion.

      c.    During any litigation hereunder both parties shall keep each other
            timely informed of any significant development in the litigation and
            provide all reasonably requested technical assistance. During any
            said controversy, full royalty payment shall continue, except as
            otherwise provided herein.

9.    RECORDS

      Licensee shall keep and shall require its SUBLICENSEES to keep complete,
true and accurate books of account and records for the purpose of showing the
derivation of all amounts payable to USC under this Option and License
Agreement. Said books and records shall be kept at Licensee's principal place of
business for at least four (4) years following the end of the calendar year to
which they pertain, and shall be open at all reasonable times for inspection by
a representative of USC for the purpose of verifying Licensee's royalties
statement or Licensee's compliance in other respects with this Option and
License Agreement. All information obtained as a result of such audit shall be
maintained in confidence, except that the representative may disclose to USC the
aggregate amount of royalties due to USC during each year, as determined in such
audit. Should an audit by USC show an underpayment of royalties by more than
10%, Licensee shall immediately pay such underpayment and all interest, as well
as for USC's reasonable audit expenses.

10.   SERVICES OF INVENTORS

      USC shall make reasonable efforts to make Inventors available during
regular business hours to answer questions concerning certain technical aspects
of the technology. Should Licensee desire to use the services of Inventors for
further testing and/or market studies of the technology, a separate research and
development and/or consulting agreement should be negotiated with Inventors and
the USC Office of Contracts and Grants.


                                       7
<Page>

11.   SUBLICENSE PERMISSION

      Licensee may sublicense the PATENT(S) only with prior written permission
from USC, which permission will not be unreasonably withheld. Notwithstanding
the foregoing, no permission will be granted for a sublicense unless the
SUBLICENSEE agrees in writing to be bound by the terms of this Agreement.

12.   PATENT MARKETING

      Licensee shall use reasonable efforts to place all appropriate patent and
other intellectual property notices, markings and indicia on product and
marketing literature for the PRODUCTS as needed to protect the patent and other
intellectual property rights of USC and right for damages for infringement
thereof.

13.   PUBLICATIONS

      Nothing in this Agreement shall limit or prevent USC or Inventors from
publishing any information about the PATENT. Thirty (30) days prior to
submission for publication, USC and Inventors will use their reasonable efforts
to submit the proposed publication, for review only, to Licensee.

14.   PUBLICITY

      Neither party shall use the name, trade name, trademark or other
designation of the other party in connection with any products, promotion or
advertising without the prior written permission of the other party.

15.   ASSIGNMENTS/TRANSFERS

      Licensee may not assign or transfer this Agreement in whole or part to any
third party without the prior written permission of USC, which permission shall
be granted in the sole discretion of USC. However, the Licensee may assign the
entire Agreement to successors of the entire business of the PRODUCTS if the
successor agrees to be bound by this Agreement and prior written notice is
provided to USC.

16.   TERMINATION

      a.    Upon the breach or default under this Option and License Agreement
            by either party, the non-breaching party may terminate this Option
            and License Agreement by forty-five (45) days written notice to the
            breaching party. Notwithstanding, USC may terminate this Option and
            License Agreement upon twenty (20) days written notice to Licensee
            if the Licensee


                                       8
<Page>

            fails to obtain and maintain the insurance coverages required by
            Paragraph 24 hereof. Said notice shall be effective at the end of
            such period unless during said period breaching party shall remedy
            such defect or default. Licensee may also terminate this Agreement
            at any time, for any reason, by providing USC a thirty (30) days
            written notice. No option fees, license fees, or royalties shall be
            returnable. This Agreement may also be terminated immediately by USC
            upon notice to Licensee upon the occurrence of any of the following:
            (i) Licensee attempts to use, sublicense, transfer or assign its
            rights or obligations under this Agreement in any manner contrary to
            the terms of this Agreement or in derogation of USC's proprietary
            rights; or ii) Licensee is determined to be insolvent or makes an
            assignment for the benefit of creditors, or has a bankruptcy
            petition filed by or against it, or a receiver or trustee in
            bankruptcy or similar officer is appointed to take charge of all or
            part of Licensees property. Upon termination of the Agreement all
            rights granted to or provided by each party to the other shall
            automatically and irrevocably revert to the granting party.

      b.    Surviving any termination are:


            i.    Licensee's obligation to pay royalties accrue or accruable.

            ii.   Licensee's obligation of Paragraph 9 to keep and allow a final
                  audit.

            iii.  Any cause of action or claim of Licensee or USC, accrue or to
                  accrue, because of any breach or default by the other party.

            iv.   The provisions of paragraphs 22, 23 and 24.

      c.    Upon termination of this Agreement, Licensee agrees to immediately
            discontinue the manufacture and sale of the PRODUCTS and the use of
            the PATENTS. Within twenty (20) days after such termination,
            Licensee shall provide USC with a written inventory of all PRODUCTS
            currently in its stock as of the date of termination (the
            "INVENTORY"). USC shall have the option to grant to Licensee the
            privilege of disposing of such INVENTORY at its normal prices within
            three (3) months after said termination. Licensee shall dispose of
            this INVENTORY only to customers who had previously purchased
            PRODUCTS from Licensee during the term of this Agreement, and in no
            event shall Licensee sell such INVENTORY to wholesalers, diverters,
            jobbers or any other entity which does not sell at retail
            exclusively or to any one else who intends to sell such INVENTORY at
            close-out. The disposition of all such INVENTORY, however, shall be
            subject to all of the terms and conditions of this Agreement. After
            the three (3) month sell-off period, Licensee shall destroy or
            return to USC all remaining unsold PRODUCTS, all packaging and
            marketing materials, and shall certify their destruction or return
            to USC specifying the number of each destroyed or returned. All
            royalty obligations, shall be accelerated and shall become
            immediately due and payable. In addition, Licensee shall immediately
            deliver to USC (i.) all materials relating to the PATENTS, together
            with all copies thereof, and (ii) all market studies or other tests
            or studies conducted by Licensee with respect to the PRODUCTS, all
            at no cost whatsoever to USC. This Paragraph 16.c. shall not apply
            if the termination of this Agreement arises from the expiration of
            the term of this Agreement under Paragraph 21.


                                       9
<Page>

      d.    Licensee acknowledges and agrees that any violation of Agreement by
            Licensee would result in irreparable harm to USC. Accordingly,
            Licensee consents and agrees that, if Licensee violates any of the
            provisions of this Agreement, USC shall be entitled, in addition to
            other remedies available to it, to an injunction to be issued by any
            court of competent jurisdiction restraining Licensee from committing
            or continuing any violation of this Agreement, without the need for
            posting any bond or any other undertaking.

17.   NOTICES, REPORTS AND PAYMENTS

      Any notice, report or payment permitted or required under this Agreement
shall be in writing, and shall be sent or delivered to the receiving party at
the address set forth below or at such address as either party may from time to
time designate in writing.

USC:          Office of Patent and Copyright Administration
              University of Southern California
              3716 South Hope Street, Suite 313
              Los Angeles, CA 90007-4344 (U.S.A.)

Attn: Director

LICENSEE:     Biokeys Incorporated
              709 Hamptons Lane
              Chesterfield, MO 63017

Attn: Francis E. O'Donnell Jr., Chief Executive Officer

18.   PARAGRAPH HEADINGS

      Paragraph headings are for the convenience of this Agreement only and
shall not add to or detract from any of the terms or provisions.

19.   SEVERABILITY

      If any provision of this Agreement is held invalid under any law
applicable to the parties, SUBLICENSEES and/or assignees, that provision shall
be considered severable and its invalidity shall not affect the remainder of
this Agreement, which shall continue in full force and effect.

20.   CONTROLLING LAW, JURISDICTION AND VENUE

      This Agreement shall be deemed to be executed and to be performed in the
State of California, and shall be construed in accordance with the laws of the
State of California as to all


                                       10
<Page>

matters, including but not limited to matters of validity, construction, effect
and performance. In the event of any controversy, claim or dispute between the
parties hereto arising out of or relating to this agreement, such controversy,
claim or dispute may be tried exclusively in the courts of the State of
California or in the United States Federal District Court for the Central
District of California, as either party may elect. Each of the parties hereby
waives any defense of lack of in personam jurisdiction, improper venue and forum
non conveniens, and agrees that service of process of such court may be made
upon each of them by personal delivery or by mailing certified or registered
mail, return receipt requested, to the other party at the address provided for
in Paragraph 16 hereof. Both parties hereby submit to the jurisdiction of the
court so selected, to the exclusion of any other courts which may have had
jurisdiction apart from this Paragraph 20.

21.   TERMS OF AGREEMENT

      Except as otherwise terminated pursuant to the other provisions of this
OPTION AND LICENSE AGREEMENT, this Agreement shall terminate upon expiration of
the last to expire of the PATENTS.

22.   NEGATION OF WARRANTIES

      a.    Nothing in this Agreement shall be construed as:

            i.    a warranty or representation by USC as to the validity or
                  scope of the PATENT and/or PATENT Application; or

            ii.   a warranty or representation that any PRODUCTS made, used,
                  sold or otherwise disposed of under any license granted in
                  this Agreement is or will be free from infringement of patents
                  of third parties; or

            iii.  an obligation to bring or prosecute actions or suits against
                  third parties for infringement; or

            iv.   conferring the rights to use in advertising, publicity or
                  otherwise any trademark, trade name, or names or any
                  contraction, abbreviation, simulation or adoption thereof, of
                  USC or Licensee; or

            v.    any obligation to furnish any know-how not provided.

      b.    USC MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
            FITNESS FOR A PARTICULAR PURPOSE, nor does USC represent that the
            rights granted hereunder will result in PRODUCTS that are
            commercially successful.


                                       11
<Page>

      c.    Licensee further agrees that it will not rely upon technical
            information provided by USC and Inventors in developing and
            manufacturing any PRODUCTS hereunder, but will independently test,
            analyze and evaluate all PRODUCTS prior to manufacture and
            distribution of such PRODUCTS.

23.   INDEMNITY

      a.    Licensee shall defend, indemnify and hold harmless USC and its
            trustees, officers, medical and professional staff, employees and
            agents and their respective successors, heirs and assigns (the
            "Indemnitees"), against all liabilities, demands, losses, costs, and
            expenses (including without limitation attorneys' fees) incurred by
            or imposed upon the Indemnitees or any one of them in connection
            with any claims, suits, actions, demands or judgements arising out
            of any theory of liability (including but not limited to, actions in
            the form of tort, warrantee, or strict liability) for death,
            personal injury, illness, or property damage arising from Licensee's
            use, sale, or other disposition of the PRODUCTS.

      b.    Licensee agrees, at its own expense, to provide attorneys reasonably
            acceptable to USC to defend against any actions brought or filed
            against any party indemnified hereunder with respect to the subject
            of indemnity contained herein, whether or not such actions are
            rightfully brought.

24.   INSURANCE

      a.    Prior to Licensee exercising the option granted herein, Licensee
            shall at its sole cost and expense, procure and maintain in effect a
            comprehensive general liability policy of insurance in single limit
            coverage of not less than One Million Dollars ($1,000,000) per
            incident and One Million Dollars ($1,000,000) annual aggregate for
            death, bodily injury or illness and Two Hundred Thousand Dollars
            ($200,000) annual aggregate in property damage. Such comprehensive
            general liability insurance shall provide (i) product liability
            coverage and (ii) broad form contractual liability coverage for
            Licensee's indemnification. If Licensee elects to self-insure all or
            part of the limits described above (including deductibles or
            retention which are in excess of $50,000 annual aggregate) such
            self-insurance program must be acceptable to USC. Each such policy
            of insurance shall name USC as an additional insured and shall
            provide for not less than thirty (30) days prior written notice
            before any cancellation or material change in coverage shall be
            effective. A Certificate evidencing the comprehensive general
            liability policy herein defined shall be delivered to USC within ten
            (10) days of the EFFECTIVE DATE of this Agreement. Licensee shall
            maintain such comprehensive general liability insurance until such
            time as the policy in Paragraph 25.b. is procured, or until fifteen
            (15) years after the term of this Agreement.

      b.    During such time and in each country where PRODUCT, or any
            modification thereof, is administered to humans, manufactured or
            distributed for any purpose (including for the purpose of obtaining
            regulatory approvals) Licensee or any SUBLICENSEE, Licensee shall at
            its sole cost and expense, procure and maintain in effect a
            comprehensive general liability policy of


                                       12
<Page>

            insurance in single limit coverage of not less than Ten Million
            Dollars ($10,000,000) per incident and Ten Million Dollars
            ($10,000,000) annual aggregate for death, bodily injury, illness or
            property damage. Such comprehensive general liability insurance
            shall provide (i) product liability coverage and (ii) broad form
            contractual liability coverage for Licensee's indemnification. If
            Licensee elects to self-insure all or part of the limits described
            above (including deductibles or retention which are in excess of
            $250,000 annual aggregate) such self-insurance program must be
            acceptable to USC. Each such policy of insurance shall name USC as
            an additional insured and shall provide for not less than thirty
            (30) days prior written notice before any cancellation or material
            change in coverage shall be effective. A Certificate evidencing the
            comprehensive general liability policy herein defined shall be
            delivered to USC prior to any manufacture, sale, distribution or
            administration to humans. Licensee shall maintain such comprehensive
            general liability insurance during the period that the PRODUCT or
            any modification thereof is being manufactured, sold, distributed or
            administered to humans by the Licensee or its SUBLICENSEES and a
            reasonable period thereafter which in no event shall be less than
            fifteen (15) years.

      c.    Alternatively, Licensee and USC may obtain an independent opinion
            from legal counsel mutually agreeable to the parties in each country
            in which Licensee intends to manufacture and/or distribute PRODUCTS,
            such opinion to assist in determining the amount of general and
            products liability insurance required to be carried by Licensee in
            such country. Where independent legal counsel determines that little
            or no liability risk to USC exists under the present and reasonably
            anticipated future legal trends in that country, Licensee will be
            required to maintain liability insurance on USC's behalf which is
            determined by USC to be reasonably adequate to pay litigation
            defense costs. Where independent legal counsel determines that the
            risk of liability on the part of USC is more than minimal in that
            country, USC and Licensee will evaluate such risk and negotiate in
            good faith to determine the amounts of liability insurance necessary
            to reasonably insure USC's interests. If USC and Licensee cannot
            agree on the amounts and types of insurance reasonably necessary to
            protect USC's interest in a particular country, Licensee will not
            manufacture or market PRODUCTS in that country.

      d.    In the event that Licensee does not maintain such insurance, but is
            self-insured, or carries a substantial self-retention, USC may grant
            permission for such self-insurance only if, in the sole discretion
            of USC, the net worth, assets and earnings of the Licensee are
            deemed sufficient to protect USC's economic interests in the event
            of claims, liability, demands, damages, expenses and losses from
            death, personal injury, illness, or property damage.

      e.    The minimum amounts of insurance coverage required under this
            Paragraph (subparts 24.a., 24.b., and 24.c.) shall not be construed
            to create a limit of Licensee's liability with respect to its
            indemnification in Paragraph 23 or any other provision of this
            Agreement.

      f.    By SUBLICENSEES

      As a condition precedent to a grant of permission by USC for Licensee to
sublicense the PATENT rights herein, the prospective SUBLICENSEE shall agree to
indemnify Licensee and USC to the same extent and degree as Licensee has agreed
to indemnify USC herein. Such SUBLICENSEE shall also provide insurance identical
in coverage and amount to that required


                                       13
<Page>

of Licensee in subparagraph b, above, naming both Licensee and USC as additional
insured. A Certificate evidencing the product liability coverage shall be
delivered prior to first manufacture of any PRODUCTS by the SUBLICENSEE. In the
event a prospective SUBLICENSEE does not maintain such insurance, but rather is
self-insured, or carries a substantial self-retention, USC may grant permission
for such sublicense only if, in the sole discretion of USC, the net worth,
assets and earnings of such prospective SUBLICENSEE are deemed sufficient to
protect USC's economic interests in the event of claims, liability, demands,
damages, expenses and losses from death, personal injury, illness, or property
damage.

26.   PRODUCT DEVELOPMENT

      If Licensee exercises its option, Licensee shall use its reasonable
efforts to test, develop the PRODUCT for commercial purposes through the world.
On or before January 1 of each year during the term of this Agreement,
commencing January 1, 1998, Licensee shall submit to USC a report detailing its
research, regulatory approval, marketing and product development objectives the
coming year as well as the research, regulatory approval, marketing and
development activities which Licensee undertook during the preceding year. The
reports shall identify specific future milestones (regulatory approval and
product development) and information demonstrating that the Licensee is
providing sufficient financial and manpower resources to evidence its use of
reasonable efforts. Within six (6) months after the signing of this Agreement
and each two (2) years thereafter, a representative of the Office of Patent and
Copyright Administration of USC, at Licensee's expense (including
transportation, and, if appropriate, lodging and meals), shall visit the
manufacturing and marketing facilities of Licensee and be presented with an
in-depth updating of the manufacturing capability and marketing network of
Licensee.

27.   EXPORT CONTROLS

      It is understood that USC is subject to United State laws and regulations
controlling the export of technical data, computer software, laboratory
prototypes and other commodities (such laws include the Arms Export Control Act,
as amended and the Export Administration Act), and that its obligations
hereunder are contingent on compliance with applicable United States export laws
and regulations. The transfer of certain technical data and commodities by the
Licensee may require a license from the cognizant agency of the United States
Government and/or written assurances by Licensee that Licensee shall not export
data or commodities to certain foreign countries without prior approval of such
agency. USC neither represents that a license shall not be required nor that, if
required, it shall be issued. Licensee shall not engage in any activity in
connection with this Agreement that is in violation of any applicable U.S. law.

28.   INDEPENDENT CONTRACTOR

      In rendering performances under this Agreement, Licensee will function
solely as an independent contractor and not as an agent, partner, employee or
joint venturer with USC.


                                       14
<Page>

Nothing in this Agreement shall be deemed or construed to create the
relationship of principal and agent, or of partnership or joint venture, and
neither party shall hold itself out as an agent, legal representative, partner,
subsidiary, joint venturer, servant or employee of the other. Neither party nor
any officer, employee, agent or representative thereof shall, in any event, have
any right collectively or individually, to bind the other party, to make any
representations or warranties, to accept service of process, to receive notice
or to perform any act or thing on behalf of the other party, except as expressly
authorized under this Agreement or in writing by such other party in its sole
discretion.

29.   WAIVER

      No waiver by either party of any default or breach shall be deemed as a
waiver of prior or subsequent default or breach of the same or other provisions
of this Agreement.

30.   ENTIRE AGREEMENT

      This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof. No amendment, modification, extension or
cancellation of this Agreement shall be binding on the parties unless mutually
agreed to and executed in writing by each of the parties.


UNIVERSITY OF SOUTHERN CALIFORNIA           BIOKEYS, INC.


/s/ DENNIS F. DOUGHERTY                     /s/ FRANCIS E. O'DONNELL, JR.
---------------------------------           ------------------------------------
Signature                                   Signature

Dennis F. Dougherty                         Francis E. O'Donnell, Jr.
Sr. V.P. Admin                              Chairman
1/20/98                                     1/23/98


                                       15