**Exhibit 10.4**

 

Confidential Treatment Requested.  *** indicates material has been omittedpursuant to a Confidential Treatment Request filed with the Securities andExchange Commission. A complete copy of this agreement has been filedseparately with the Securities and Exchange Commission.

 

**EXCLUSIVE LICENSE AGREEMENT**

 

Re:Baylor OTA # 04-107 Entitled “Serum Proteomic Methods and Biomarkers forDiagnosis of Neurodegenerative Disease and Differential Diagnosis of Alzheimer’s,Parkinson’s Lou Gehrig’s (ALS) Diseases, and other Motor Neuron andNeurological Disorders”

 

This Exclusive LicenseAgreement (hereinafter called “Agreement”), to be effective as of the 28th dayof June, 2004 (hereinafter called “Agreement Date”), is by and between BaylorCollege of Medicine (hereinafter called “BAYLOR”), a Texas nonprofitcorporation having its principal place of business at One Baylor Plaza,Houston, Texas 77030, and Power3 Medical Products, Inc., a corporationorganized under the laws of New York and having a principal place of businessat 3400 Research Forest Drive, Suite B2-3, The Woodlands, Texas 77381, andits Affiliates (hereinafter, collectively referred to as “LICENSEE”).

 

WITNESSETH:

 

WHEREAS,BAYLOR and LICENSEE each own an undivided interest in and to the Patent Rightsas defined below; and

 

WHEREAS,BAYLOR is willing to grant a royalty bearing, worldwide, exclusive license tothe Patent Rights to LICENSEE on the terms set forth herein; and

 

WHEREAS,LICENSEE desires to obtain said exclusive license under the Patent Rights.

 

NOW,THEREFORE, for and in consideration of the premises and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the Parties hereto expressly agree as follows:

 

1.                                       DEFINITIONSAS USED HEREIN

 

1.1  The term “Affiliates” shall mean anycorporation, partnership, joint venture or other entity of which the commonstock or other equity ownership thereof is twenty five percent (25%) or moreowned by LICENSEE.

 

1.2  The term “Confidential Information” shallmean all information relating to the business of a Party that is not availableto the general public, including but not limited to its technical and businessinformation, products, assets, inventions, know-how, research programs,biological materials, software, trade secrets, designs, personnel, financialcondition, business plans or prospects, protocols, clinical parameters ormarkers and other information associated with this Agreement, whether or notpatentable or copyrightable, delivered or communicated to the other Party.

 

ConfidentialInformation includes not only written information, but information transferredorally, visually, electronically or by any other means, that is designated asbeing confidential.  ConfidentialInformation also includes any copies, notes or summaries prepared from theConfidential Information provided by either Party.

 

1

----

 

1.3  The term “Field” shall mean all fields.

 

1.4  The term “Inventors”shall mean Stanley Appel, Ericka Simpson and Albert Yen, employees of BAYLOR,and Ira Goldknopf and Essam Sheta, employees of LICENSEE.

 

1.5  The term “LegalCosts” shall mean all legal fees and expenses, filing or maintenance fees,assessments and all other costs and expenses related to prosecuting, obtainingand maintaining patent protection on the Patent Rights in the United States andforeign countries.

 

1.6  The term “Licensed Product(s)” shall mean anyproduct, process or service that incorporates, utilizes or is made with the useof the Patent Rights.

 

1.7  The term “Net Sales” shall mean the grossamount of monies or cash equivalent or other consideration which is paid byunrelated third parties to LICENSEE or sublicensees for the Licensed Productsby sale or other mode of transfer, less all trade, quantity and cash discountsactually allowed, credits, and allowances actually granted on account ofrejections, returns or billing errors, duties, transportation and insurance,taxes and other governmental charges actually paid.  The term “Net Sales” in the case of non-cashsales, shall mean the fair market value of all equivalent or otherconsideration received by LICENSEE for the Licensed Products.

 

1.8  The term “Party” shall mean either LICENSEEor BAYLOR, and “Parties” shall mean LICENSEE and BAYLOR.

 

1.9  The term “Patent Rights” shall mean UnitedStates Patent Application Serial No. TBA, entitled “Biomarkers forNeurodegenerative Disease,” filed TBA, which was developed by the Inventors,the inventions described and claimed therein, and all other pending UnitedStates patent applications or parts thereof and any United States patent whichissues from any such pending applications and any and all divisions, reissues,re-examinations, renewals, continuations, continuations-in-part to the extentthe claims are directed to subject matter specifically described in theaforementioned patent application and are dominated by the claims of theexisting Patent Rights, and extensions thereof, and all other counterpart,pending or issued patents in all other countries.

 

1.10  The term “Sublicensing Revenue” shall meanall (i) cash, (ii) sublicensing fees and (iii) all otherpayments and the cash equivalent thereof, which are paid to LICENSEE by thesublicensees of its rights hereunder, other than research and development moneypaid to LICENSEE to conduct research.

 

2.                                       GRANTOF LICENSE

 

2.1  Subject to the reservations of rights setforth in Paragraph 2.2, BAYLOR hereby grants to LICENSEE an exclusive,worldwide, sublicensable license under the Patent Rights to make, have made,use, market, sell, offer to sell, lease and import Licensed Products in theField.

 

2.2  The grant in Section 2.1 shall befurther subject to, restricted by and non-exclusive with respect to:

 

(i)   themaking or use of the Patent Rights by BAYLOR for non-commercial research,patient care, teaching and other educationally related purposes;

 

(ii)   themaking or use of the Patent Rights by the BAYLOR Inventors for non-commercialresearch purposes at academic or research institutions;

 

2

----

 

(iii)   anynon-exclusive license of the Patent Rights that BAYLOR grants to other academicor research institutions for non-commercial research purposes; and

 

(iv)   anynon exclusive license of the Patent Rights that BAYLOR is required by law orregulation to grant to the United States of America or to a foreign statepursuant to an existing or future treaty with the United States of America.

 

2.3  Government Reservation.  Rights under this Agreement are subject torights required to be granted to the Government of the United States of Americapursuant to 35 USC Section 200-212, including a nonexclusive,nontransferable, irrevocable, paid-up license to practice or have practiced foror on behalf of the United States the subject inventions throughout the world.

 

3.                                       MARKETINGEFFORTS

 

LICENSEEshall use reasonable efforts, as defined herein, to effect assiduously theintroduction of Licensed Products into the commercial market as soon aspracticable.  Such efforts shall include,but not be limited to: (i) diligence in the patent filings and prosecutionas described in Section 8 and (ii) working with Dr. Stan Appelto increase the clinical data and relevance of the diagnostic processes.

 

4.                                       PAYMENTS

 

4.1   Aspartial consideration for the rights conveyed by BAYLOR under this Agreement,LICENSEE shall pay BAYLOR a license fee of  *** upon execution of this Agreement.

 

4.2   In addition to the foregoing, LICENSEE shall payBAYLOR a royalty of  ***.  Such royalties shall be payable as providedin Section 5.

 

4.3   Afterthe first commercial sale, if the royalties paid in any calendar year do notreach the minimum amount of  *** ,LICENSEE shall pay an additional amount with the payment due for the period endingDecember 31 of such year, so that the total amount paid for such yearshall reach such minimum amount.

 

4.4   LICENSEEshall also pay BAYLOR the following milestone payment set forth below:

 

(i)  First FDAapproval in the United States            ***

 

LICENSEE shall notify BAYLOR in writing within thirty(30) days upon the achievement of the milestone, such notice to be accompaniedby payment of the appropriate milestone payment.  Milestones are to be paid regardless of whetherLICENSEE or LICENSEE’s sublicensee attains such milestone.

 

4.5   Inaddition to the foregoing fees and royalties, LICENSEE agrees to pay toBAYLOR  *** .

 

4.6   LICENSEEwill be responsible for all Legal Costs incurred after the Agreement Date.

 

4.7   ShouldLICENSEE fail to make any payment whatsoever due and payable to BAYLORhereunder, BAYLOR may, at its sole option, terminate this Agreement as providedin Section 10.

 

3

----

 

5.                                       REPORTING

 

5.1   Nolater than sixty (60) days after December 31 of each calendar year,LICENSEE shall provide to BAYLOR a written annual Progress Report describingprogress on research and development, regulatory approvals, manufacturing,sublicensing, marketing and sales during the most recent twelve (12) monthperiod ending December 31 and plans for the forthcoming year.  If multiple technologies are covered by thelicense granted hereunder, the Progress Report shall provide the informationset forth above for each technology. LICENSEE shall also provide any reasonable additional data BAYLORrequires to evaluate LICENSEE’s performance.

 

5.2   LICENSEEshall report to BAYLOR the date of first sale of Licensed Products in eachcountry within thirty (30) days of occurrence.

 

5.3   LICENSEEshall submit to BAYLOR within thirty (30) days after March 31, June 30,September 30 and December 31, a Royalty Report setting forth for suchcalendar quarter at least the following information:

 

(i)             the number ofLicensed Products sold by LICENSEE and sublicensees in each country;

 

(ii)          total billings for suchLicensed Products;

 

(iii)       deductions applicable todetermine the Net Sales thereof;

 

(iv)      the amount of SublicensingRevenue received by LICENSEE;

 

(v)         the amount of royalty duethereon, or, if no royalties are due to BAYLOR for any reporting period, thestatement that no royalties are due; and

 

(vi)      the amount of other paymentsdue BAYLOR, including but not limited to, milestone payments and minimumroyalty payments.

 

Such report shall becertified as correct by an officer of LICENSEE and shall include a detailedlisting of all deductions from royalties and other payments.  After termination or expiration of thisAgreement, a final payment shall be made by LICENSEE covering the whole orpartial calendar quarter.

 

5.4   LICENSEE shall pay to BAYLOR witheach such Royalty Report the amount of royalties and other payments due withrespect to such calendar quarter.  Ifmultiple technologies are covered by the license granted hereunder, LICENSEEshall specify which Patent Rights are utilized for each Licensed Productincluded in the Royalty Report by citing the applicable **OTA number** listed on the front page ofthe Agreement.

 

5.5   Allpayments due hereunder shall be deemed received when funds are credited toBAYLOR’s bank account and shall be payable by check or wire transfer in UnitedStates dollars.  For sales of LicensedProducts in currencies other than the United States, LICENSEE shall useexchange rates published in The Wall Street Journal on the last businessday of the calendar quarter that such payment is due.  No transfer, exchange, collection or othercharges, **including any wire transfer fees**,shall be deducted from such payments.

 

5.6   Late paymentsshall be subject to a charge of one and one-half percent (1.5%) per month, the interestbeing compounded annually, or two hundred fifty dollars ($250.00), whichever isgreater.  LICENSEE shall calculate thecorrect late payment charge, and shall add it to each such late payment.

 

4

----

 

Said late payment charge andthe payment and acceptance thereof shall not negate or waive the right ofBAYLOR to seek any other remedy, legal or equitable, to which it may beentitled because of the delinquency of any payment.

 

5.7   Ifpayments are sent by check, they shall be sent to the address listed inParagraph 14.1.  If payments are sent bywire transfer, they shall be sent using the wiring instructions sent by BAYLOR.

 

5.8   Inthe event of acquisition, merger, change of corporate name, or change of make-up,organization, or identity, LICENSEE shall notify BAYLOR in writing withinthirty (30) days of such event.

 

5.9   IfLICENSEE or sublicensee (or optionee) does not qualify as a “small entity” asprovided by the United States Patent and Trademark Office, LICENSEE must notifyBAYLOR immediately.

 

6.                                       RECORDSAND INSPECTION

 

LICENSEEshall maintain or cause to be maintained a true and correct set of recordspertaining to the Net Sales of Licensed Products by LICENSEE under thisAgreement.  During the term of thisAgreement and for a period of two (2) years thereafter, LICENSEE agrees topermit an accountant selected and paid by BAYLOR and reasonably acceptable toLICENSEE to have access during ordinary business hours to such records as aremaintained by LICENSEE as may be necessary, in the opinion of such accountant,to determine the correctness of any report and/or payment made under thisAgreement.  In the event that the auditreveals an underpayment of royalty by more than five percent (5%), the cost of theaudit shall be paid by LICENSEE.  If theunderpayment is less than five percent (5%) but more than two percent (2%),LICENSEE and BAYLOR shall each pay fifty percent (50%) of the cost of theindependent audit.  Such accountant shallmaintain in confidence, and shall not disclose to BAYLOR, any informationconcerning LICENSEE or its operations or properties other than informationdirectly relating to the correctness of such reports and payments.  BAYLOR will be entitled**to nomore than one examination per year without LICENSEE’s written consent.

 

7.                                       SUBLICENSES

 

Allsublicenses granted by LICENSEE of its rights hereunder shall be subject to theterms of this Agreement.  LICENSEE shallbe responsible for its sublicensees and shall not grant any rights which areinconsistent with the rights granted to and obligations of LICENSEEhereunder.  Any act or omission of asublicensee which would be a breach of this Agreement if performed by LICENSEEshall be deemed to be a breach by LICENSEE of this Agreement.  Each sublicense agreement granted by LICENSEEshall include an audit right by BAYLOR of the same scope as provided in Section 6hereof with respect to LICENSEE.  No suchsublicense agreement shall contain any provision which would cause it to extendbeyond the term of this Agreement. LICENSEE shall give BAYLOR prompt notification of the identity andaddress of each sublicensee with whom it concludes a sublicense agreement andshall supply BAYLOR with a copy of each such sublicense agreement.

 

8.                                       PATENTSAND INFRINGEMENT

 

8.1   Fromthe Agreement Date and for the term of this Agreement, LICENSEE shall haveprimary responsibility usingpatent counsel of its choice reasonably acceptable to BAYLOR for filing, prosecuting and maintaining allpatent applications and patents included in the Patent Rights licensedhereunder, except that BAYLOR may assume responsibility at its sole expense forpursuing any protection which LICENSEE declines to prosecute pursuant toParagraph 8.2 of this Agreement.

 

5

----

 

8.2   Duringthe term of this Agreement, if LICENSEE decides not to file any or all UnitedStates and foreign applications or to continue prosecution of a patentapplication to issuance or maintain any United States or foreign patentapplication or patent, LICENSEE shall timely notify BAYLOR in writing in orderthat BAYLOR may file the United States and foreign applications and continuethe prosecution or maintenance of such patent applications at its own expense.  If LICENSEE fails to notify BAYLOR insufficient time for BAYLOR to assume the cost, LICENSEE shall be considered indefault of this Agreement.

 

8.3   Duringthe term of this Agreement, LICENSEE agrees to prosecute with good faith anddue diligence all such patent applications and to take all actions reasonablynecessary to maintain and enforce the patents and proprietary rights in and tothe Patent Rights.

 

8.4   Duringthe term of this Agreement LICENSEE shall instruct counsel for LICENSEE to keepBAYLOR reasonably informed, at LICENSEE’s expense, of prosecutions pursuant tothis Section 8 including submitting to BAYLOR copies of all officialactions and responses thereto.

 

8.5   BAYLORagrees to cooperate with LICENSEE to whatever extent is necessary to procurepatent protection of any rights, including fully agreeing to execute any andall documents to give LICENSEE the full benefit of the licenses granted herein.

 

8.6   Duringthe term of this Agreement, each Party shall promptly inform the other of anysuspected infringement of any claims in the Patent Rights or the misuse,misappropriation, theft or breach of confidence of other proprietary rights inthe Patent Rights by a third party, and with respect to such activities as aresuspected.  Any action or proceeding againstsuch third party shall be instituted as following:

 

(i)             BAYLOR and LICENSEEmay agree to jointly institute an action for infringement, misuse,misappropriation, theft or breach of confidence of the proprietary rightsagainst such third party.  Such jointaction shall be brought in the names of both BAYLOR and LICENSEE.  If BAYLOR or LICENSEE decide to jointlyprosecute an action or proceeding after it has been instituted by one Party,the action shall be continued in the name or names they both agree is expedientfor efficient prosecution of such action. LICENSEE and BAYLOR shall agree to the manner in which they shallexercise control over any joint action or proceeding, providing however that ifthey cannot agree BAYLOR shall have the right to unilaterally decide oncontrol.  In such joint action orproceeding, the out-of-pocket costs shall be borne equally, and any recovery orsettlement shall be shared equally.

 

(ii)          If LICENSEE does notagree to participate in a joint action or proceeding then BAYLOR shall have theright, but not the obligation, to institute an action for infringement, misuse,misappropriation, theft or breach of confidence of the proprietary rightsagainst such third party.  If BAYLOR electsto institute action, it does so at its own cost.  If BAYLOR fails to bring such an action orproceeding within a period of three (3) months after receiving notice orotherwise having knowledge of such infringement, then LICENSEE shall have theright, but not the obligation, to prosecute the same at its own expense.  Should either BAYLOR or LICENSEE commencesuit under the provisions of this Paragraph 8.6 and thereafter elect to abandonthe same, it shall give timely notice to the other Party who may, if it sodesires, continue prosecution of such action or proceeding.  All recoveries, whether by judgment, award,decree or settlement, from infringement or misuse of Patent Rights shall beapportioned as follows: (a) the Party bringing the action or proceedingshall first recover an amount equal the costs and expenses incurred by suchParty directly related to the prosecution of such action or proceeding, (b) theParty cooperating in such action or proceeding shall then recover costs andexpenses incurred by such Party directly related to its cooperation in theprosecution of such action or proceeding and (c) the remainder shall bedivided equally between LICENSEE and BAYLOR.

 

6

----

 

8.7   NeitherBAYLOR nor LICENSEE shall settle any action covered by Paragraph 8.6 withoutfirst obtaining the consent of the other Party, which consent will not beunreasonably withheld.

 

8.8   BAYLORshall not be liable for any losses incurred as the result of an action forinfringement brought against LICENSEE as the result of LICENSEE’s exercise ofany right granted under this Agreement. The decision to defend or not defend shall be in LICENSEE’s solediscretion.

 

9.                                       TERMAND EXPIRATION

 

Unlesssooner terminated as otherwise provided in Section 10, the license toemploy Patent Rights granted herein as part of Section 2 shall expire on acountry-by-country basis, on the later of (i) the date of expiration ofthe last of the Patent Rights to expire or (ii) in the event no patentsincluded within the Patent Rights issue in such country, the first datefollowing the tenth (10th) anniversary of the first commercial saleof Licensed Products by LICENSEE in such country.  After such expiration, LICENSEE shall have aperpetual, paid-in-full (i.e., royalty free) license in such country.

 

10.                                 TERMINATION

 

10.1   Inthe event of default or failure by LICENSEE to perform any of the terms,covenants or provisions of this Agreement, LICENSEE shall have thirty (30) daysafter the giving of written notice of such default by BAYLOR to correct suchdefault.  If such default is notcorrected within the said thirty (30) day period, BAYLOR shall have the right,at its option, to cancel and terminate this Agreement.  The failure of BAYLOR to exercise such rightof termination, for non-payment of royalties/ fees or otherwise, shall not bedeemed to be a waiver of any right BAYLOR might have, nor shall such failurepreclude BAYLOR from exercising or enforcing said right upon any subsequentfailure by LICENSEE.

 

10.2   BAYLORshall have the right, at its option, to cancel and terminate this Agreement inthe event that LICENSEE shall (i) become involved in insolvency,dissolution, bankruptcy or receivership proceedings affecting the operation ofits business or (ii) make an assignment of all or substantially all of itsassets for the benefit of creditors, or in the event that (iii) a receiveror trustee is appointed for LICENSEE and LICENSEE shall, after the expirationof thirty (30) days following any of the events enumerated above, have beenunable to secure a dismissal, stay or other suspension of such proceedings.

 

10.3   LICENSEEshall have the right in its sole discretion to terminate this Agreement uponsixty (60) days’ written notice to BAYLOR.

 

10.4   Inthe event of termination of this Agreement, all rights in the Patent Rightsconveyed by BAYLOR to LICENSEE shall automatically revert to BAYLOR, and BAYLORshall be free to license such rights to third parties.

 

10.5   LICENSEE shall provide, in allsublicenses granted by it under this Agreement, that LICENSEE’s interest insuch sublicenses shall, at BAYLOR’s option, terminate or be assigned to BAYLORupon termination of this Agreement.

 

10.6   In the event this Agreement isterminated pursuant to this Section 10, or expires as provided for in Section 9,BAYLOR is under no obligation to refund any payments made by LICENSEE toBAYLOR, as set forth in Section 4, prior to the effective date of suchtermination or expiration.

 

7

----

 

10.7   Notermination of this Agreement shall constitute a termination or a waiver of anyrights of either Party against the other Party accruing at or prior to the timeof such termination.  The obligations ofSections 6, 7, 13, 15 and 16 shall survive termination of this Agreement.

 

11.                                 ASSIGNABILITY

 

LICENSEE may assign thisAgreement as part of:

 

(i)             Asale or other transfer of LICENSEE’s entire business; or

 

(ii)          A sale or othertransfer of that part of LICENSEE’s business to which the license grantedhereby relates;

 

and upon payment by LICENSEEto BAYLOR of an assignment fee of ***..  LICENSEE shall give BAYLOR thirty (30) days prior written notice of such assignment, including thenew contact information of assignee.  BAYLOR, however, shall not be deemed to have approved such assignment andtransfer unless and until such assignee has agreed in writing to BAYLOR to be bound by all the terms and provisions of this Agreement and BAYLOR has received the assignment fee as specified above, in which eventLICENSEE shall be released of liability hereunder.  Upon such assignment of this Agreement bysuch assignee, the term “ LICENSEE” as used herein shall include such assignee.

 

12.                                 GOVERNMENTALCOMPLIANCE

 

12.1   LICENSEEshall at all times during the term of this Agreement and for so long as itshall use the Patent Rights, or sell Licensed Products, comply and cause itssublicensees to comply with all laws that may control the import, export,manufacture, use, sale, marketing, distribution and other commercialexploitation of the Patent Rights, Licensed Products or any other activityundertaken pursuant to this Agreement.

 

12.2   LICENSEEagrees that Licensed Products leased or sold in the United States shall bemanufactured substantially in the United States.

 

13.                                 ARBITRATION

 

13.1   AmicableResolution.  The Parties shallattempt to settle any controversy between them amicably.  To this end, a senior executive from eachParty shall consult and negotiate to reach a solution.  The Parties agree that the period of amicableresolution shall toll any otherwise applicable statute of limitations.  However, nothing in this clause shallpreclude any Party from commencing mediation if said negotiations do not resultin a signed written settlement agreement within thirty (30) days after writtennotice that these amicable resolution negotiations have commenced.

 

13.2.   Mediation.  If a controversy arises out of or relates tothis agreement, or the breach thereof, and if the controversy cannot be settledthrough amicable resolution, the Parties agree to try in good faith to settlethe controversy by mediation before resorting to final and bindingarbitration.  The Party seeking mediationshall propose five mediators, each of whom shall be a lawyer licensed to practiceby the state of Texas, having practiced actively in the field of commercial lawfor at least fifteen (15) years, to the other Party who shall select themediator from the list. The Parties shall split the cost of the mediatorequally.  The Parties agree that theperiod of mediation shall toll any otherwise applicable statute oflimitations.  However, nothing in thisclause shall preclude any Party from commencing arbitration if saidnegotiations do not result in a signed written settlement agreement withinsixty (60) days after written notice that amicable resolution negotiations havecommenced.

 

8

----

 

13.3   Arbitration.  Any dispute, controversy, or claim arisingout of or relating to this Agreement, or the breach, termination or invaliditythereof, including claims for tortious interference or other tortious orstatutory claims arising before, during or after termination, providing onlythat such claim touches upon matters covered by this Agreement shall be finallysettled by arbitration administered by the American Arbitration Associationpursuant to the Commercial Arbitration Rules in force at the time of thecommencement of the arbitration, except as modified by the specific provisionsof this Agreement. It is the specific intent of the Parties that thisarbitration provision is intended to be the broadest form allowed by law.

 

13.4   Partiesto Arbitration.  This agreement toarbitrate is intended to be binding upon the signatories hereto, theirprincipals, successors, assigns, subsidiaries and affiliates. This agreement toarbitrate is also intended to include any disputes, controversy or claimsagainst any Party’s employees, agents, representatives, or outside legalcounsel arising out of or relating to matters covered by this Agreement or anyagreement in which this Agreement is incorporated.

 

13.5   ConsolidationPermitted.  The Parties expresslyagree that any court with jurisdiction may order the consolidation of anyarbitrable controversy under this Agreement with any related arbitrable controversynot arising under this Agreement, as the court may deem necessary in theinterests of justice or efficiency or on such other grounds as the court maydeem appropriate.

 

13.6   Entryof Judgment.  The Parties agree thata final judgment on the arbitration award may be entered by any court havingjurisdiction thereof.

 

13.7   AppointingArbitrators.   The AmericanArbitration Association shall appoint the arbitrator(s) from its Large, ComplexClaims Panel. If such appointment cannot be made from the Large, Complex ClaimsPanel, then from its Commercial Panel. The Parties hereby agree to andacquiesce in any appointment of an arbitrator or arbitrators that may be madeby such appointing authority.

 

13.8   Qualificationsof the Arbitrator(s).  The arbitrator(s)must be a lawyer, having practiced actively in the field of commercial law forat least fifteen (15) years.

 

13.9   GoverningSubstantive Law.   The arbitrator(s)shall determine the rights and obligations of the Parties according to thesubstantive laws of the State of Texas (excluding conflicts of law principles)as though acting as a court of the State of Texas.

 

13.10   GoverningArbitration Law.  The law applicableto the validity of the arbitration clause, the conduct of the arbitration, includingany resort to a court for provisional remedies, the enforcement of any awardand any other question of arbitration law or procedure shall be the FederalArbitration Act.

 

13.11   GoverningConvention.  The Parties elect tohave the New York Convention on the Recognition and Enforcement of ForeignArbitral Awards of June 10, 1958 (instead of the Inter-American New YorkConvention on International Commercial Arbitration of August 15, 1990)govern any and all disputes that may be the subject of arbitration pursuant tothis Agreement.

 

13.12   PreliminaryIssues of Law.  The arbitrator(s)shall hear and determine any preliminary issue of law asserted by a Party to bedispositive of any claim, in whole or part, in the manner of a court hearing amotion to dismiss for failure to state a claim or for summary judgment,pursuant to such terms and procedures as the arbitrator(s) deems appropriate.

 

13.13   Confidentiality.  The Parties and the arbitrator(s) shall treatall aspects of the arbitration proceedings, including without limitationdiscovery, testimony and other evidence, briefs and the award,

 

9

----

 

as strictlyconfidential.  Further, except as may berequired by law, neither Party nor the arbitrator(s) may disclose theexistence, content, or results of any arbitration hereunder without the priorwritten consent of both Parties.

 

13.14   Placeof Arbitration.  The seat ofarbitration shall be Houston, Texas, USA.

 

13.15   Language.  The arbitration shall be conducted in theEnglish language. All submissions shall be made in English or with an Englishtranslation. Witnesses may provide testimony in a language other than English,provided that a simultaneous English translation is provided. Each Party shallbear its own translation costs.

 

13.16   PunitiveDamages Prohibited.  The Partieshereby waive any claim to any damages in the nature of punitive, exemplary, orstatutory damages in excess of compensatory damages, or any form of damages inexcess of compensatory damages, and the arbitrator(s) is/are specially divestedof any power to award any damages in the nature of punitive, exemplary, orstatutory damages in excess of compensatory damages, or any form of damages inexcess of compensatory damages.

 

13.17   Costs.  The Party prevailing on substantially all ofits claims shall be entitled to recover its costs, including attorneys’ fees,for the arbitration proceedings, as well as for any ancillary proceeding,including a proceeding to compel or enjoin arbitration, to request interimmeasures or to confirm or set aside an award.

 

13.18   Survival.  The provisions of this Section 13 shallsurvive expiration or termination of this Agreement.

 

14.                                 ADDRESSES

 

14.1   Allpayments shall be made payable to “Baylor College of Medicine” and shall besent to the address below, and shall reference **OTA # 04-107**.

 

BAYLORTax ID #: 74-1613878

Director,Baylor Licensing Group

BaylorCollege of Medicine

OneBaylor Plaza, BCM210-600D

Houston,TX  77030

 

14.2   Allnotices, reports or other communication pursuant to this Agreement shall besent to such Party via (i) United States Postal Service postage prepaid, (ii) overnightcourier, or (iii) facsimile transmission, addressed to it at its addressset forth below or as it shall designate by written notice given to the otherParty.  Notice shall be sufficientlymade, or given and received (a) on the date of mailing or (b) when afacsimile printer reflects transmission.

 

10

----

 

In the case of BAYLOR:

PatrickTurley

AssociateGeneral Counsel

BaylorCollege of Medicine

OneBaylor Plaza, BCM210-600D

Houston,TX  77030

 

FacsimileNo. 713-798-1252

 

In thecase of LICENSEE:

Power3 Medical Products, Inc.

3400 Research ForestDrive, Suite B2-3

The Woodlands, TX  77381

 

Facsimile No. 281-395-0881

 

14.3   Eachsuch report, notice or other communication shall reference **OTA # 04-107**.

 

15.                                 INDEMNITY,INSURANCE & WARRANTIES

 

**15.1   INDEMNITY.  EACH PARTY SHALL NOTIFY THE OTHER OF ANYCLAIM, LAWSUIT OR OTHER PROCEEDING RELATED TO THE PATENT RIGHTS.  LICENSEE AGREES THAT IT WILL DEFEND,INDEMNIFY AND HOLD HARMLESS BAYLOR, ITS FACULTY MEMBERS, SCIENTISTS,RESEARCHERS, EMPLOYEES, OFFICERS, TRUSTEES AND AGENTS AND EACH OF THEM (THE “INDEMNIFIEDPARTIES”), FROM AND AGAINST ANY AND ALL CLAIMS, CAUSES OF ACTION, LAWSUITS OROTHER PROCEEDINGS (THE “BAYLOR CLAIMS”) FILED OR OTHERWISE INSTITUTED AGAINSTANY OF THE INDEMNIFIED PARTIES RELATED DIRECTLY OR INDIRECTLY TO OR ARISING OUTOF THE DESIGN, PROCESS, MANUFACTURE OR USE BY ANY PERSON OR PARTY OF THE PATENTRIGHTS, LICENSED PRODUCTS OR ANY OTHER EMBODIMENT OF THE PATENT RIGHTS EVENTHOUGH SUCH BAYLOR CLAIMS AND THE COSTS (INCLUDING, BUT NOT LIMITED TO, THEPAYMENT OF ALL REASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION OR OTHERDEFENSE) RELATED THERETO RESULT IN WHOLE OR IN PART FROM THE NEGLIGENCE OFANY OF THE INDEMNIFIED PARTIES OR ARE BASED UPON DOCTRINES OF STRICT LIABILITYOR PRODUCT LIABILITY; PROVIDED, HOWEVER, THAT SUCH INDEMNITY SHALL NOT APPLY TOANY BAYLOR CLAIMS ARISING FROM THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCTOF ANY INDEMNIFIED PARTY.  LICENSEE WILLALSO ASSUME RESPONSIBILITY FOR ALL COSTS AND EXPENSES RELATED TO SUCH BAYLORCLAIMS FOR WHICH IT IS OBLIGATED TO INDEMNIFY THE INDEMNIFIED PARTIES PURSUANTTO THIS PARAGRAPH 15.1, INCLUDING, BUT NOT LIMITED TO, THE PAYMENT OF ALLREASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION OR OTHER DEFENSE.**

 

11

----

 

15.2  Insurance.

 

(i)                           LICENSEEshall, for so long as LICENSEE manufactures, uses or sells any LicensedProduct(s) for research applications, maintain in full force and effectpolicies of (a) worker’s compensation insurance within statutory limits, (b) employers’liability insurance with limits of not less than one million dollars($1,000,000) per occurrence and (c) general liability insurance withlimits of not less than two million dollars ($2,000,000) per occurrence with anannual aggregate of two million dollars ($2,000,000).

 

(ii)                        During anyperiod in which LICENSEE manufactures, uses or sells any Licensed Product(s)for clinical applications, LICENSEE shall immediately notify BAYLOR in writing,and LICENSEE shall maintain in full force and effect policies of (i) worker’scompensation insurance within statutory limits, (b) employers’ liabilityinsurance with limits of not less than one million dollars ($1,000,000) peroccurrence, (c) general liability insurance (with Broad Form GeneralLiability endorsement) with limits of not less than five million dollars($5,000,000) per occurrence with an annual aggregate of ten million dollars($10,000,000) and (d) products liability insurance, with limits of notless than ten million dollars ($10,000,000) per occurrence with an annualaggregate of twenty million dollars ($20,000000).

 

(iii)                     During anyperiod in which LICENSEE manufactures or uses any Licensed Product(s) inclinical trials, LICENSEE shall immediately notify BAYLOR in writing, andLICENSEE shall maintain in full force and effect a clinical trial insurancepolicy with limits of not less than five million dollars ($5,000,000) peroccurrence with an annual aggregate of ten million dollars ($10,000,000).

 

(iv)                    Suchcoverage(s) shall be purchased from a carrier or carriers having an A. M. Bestrating of at least A- (A minus) and shall name BAYLOR as an additionalinsured.  LICENSEE shall provide toBAYLOR copies of certificates of insurance within thirty (30) days afterexecution of this Agreement.  Uponrequest by BAYLOR, LICENSEE shall provide to BAYLOR copies of said policies ofinsurance.  It is the intention of theParties hereto that LICENSEE shall, throughout the term of this Agreement,continuously and without interruption, maintain in force the required insurancecoverages set forth in this Paragraph 15.2. Failure of LICENSEE to comply with this requirement shall constitute adefault of LICENSEE allowing BAYLOR, at its option, to immediately terminatethis Agreement.

 

(v)                       BAYLORreserves the right to request additional policies of insurance where appropriateand reasonable in light of LICENSEE’s business operations and availability ofcoverage.

 

15.3   DISCLAIMEROF WARRANTY.  BAYLOR AND LICENSEEMAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOTLIMITED TO, WARRANTIES OF FITNESS OR MERCHANTABILITY, REGARDING OR WITH RESPECTTO THE PATENT RIGHTS OR LICENSED PRODUCTS AND BAYLOR AND LICENSEE MAKE NOWARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OF THE PATENTABILITY OF THEPATENT RIGHTS OR LICENSED PRODUCTS OR OF THE ENFORCEABILITY OF ANY PATENTSISSUING THEREUPON, IF ANY, OR THAT THE PATENT RIGHTS OR LICENSED PRODUCTS AREOR SHALL BE FREE FROM INFRINGEMENT OF ANY PATENT OR OTHER RIGHTS OF THIRDPARTIES.  NOTHING IN THIS AGREEMENT SHALLBE CONSTRUED AS CONFERRING BY IMPLICATION, ESTOPPEL OR OTHERWISE ANY LICENSE ORRIGHTS UNDER ANY PATENTS OF BAYLOR OTHER THAN THE PATENT RIGHTS, REGARDLESS OFWHETHER SUCH PATENTS ARE DOMINANT OR SUBORDINATE TO THE PATENT RIGHTS.

 

12

----

 

16.                                 ADDITIONALPROVISIONS

 

16.1   Useof BAYLOR Name.  LICENSEE agrees thatit shall not use in any way the name of “Baylor College of Medicine” or anylogotypes or symbols associated with BAYLOR or the names of any of thescientists or other researchers at BAYLOR without the prior written consent ofBAYLOR.

 

16.2   Confidentiality.

 

(i)   Because BAYLOR and LICENSEE willbe cooperating with each other, and because each may reveal to the othercertain Confidential Information, BAYLOR and LICENSEE agree to hold any ConfidentialInformation that is obtained in connection with this Agreement as confidential.

 

(ii)   A Party receiving ConfidentialInformation shall use its best efforts to ensure that all ConfidentialInformation of the disclosing Party is kept confidential.  Thus, for example, neither Party willdisclose Confidential Information to any third party without the expresswritten consent of the disclosing Party and no receiving Party will use suchConfidential Information except pursuant to this Agreement.  A receiving Party also agrees to notify thedisclosing Party immediately upon discovery of any unauthorized use ordisclosure of Confidential Information and, in every reasonable way, tocooperate and to assist the disclosing Party to regain possession of the ConfidentialInformation and to prevent its further unauthorized use.

 

(iii)   EachParty’s confidentiality obligations and the limitations upon the right to usethe Confidential Information shall not apply to the extent that the receivingParty can demonstrate that the same:  (a) wasalready known by the receiving Party prior to the disclosure by the disclosingParty; (b) becomes patented, published or otherwise part of the publicdomain through no fault or omission of the receiving Party; (c) isdisclosed to the receiving Party by a third party that has the right to makesuch disclosure; (d) is independently developed by the receiving Partywithout any use of the Confidential Information and otherwise in a manner notinconsistent with this Agreement; (e) is authorized to be disclosed by thedisclosing Party in writing; or (f) is required to be disclosed byapplicable law, rule or regulation, by order of governmental or judicialauthority; provided that the receiving Party shall use reasonable efforts toobtain confidential treatment of such information and notifies the disclosingParty prior to making such disclosure.

 

16.3   BAYLOR’sDisclaimers.  Neither BAYLOR, nor anyof its faculty members, scientists, researchers, employees, officers, trusteesor agents assume any responsibility for the manufacture, productspecifications, sale or use of the Patent Rights or Licensed Products which aremanufactured by or sold by LICENSEE.

 

16.4   IndependentContractors.  The Parties herebyacknowledge and agree that each is an independent contractor and that neitherParty shall be considered to be the agent, representative, master or servant ofthe other Party for any purpose whatsoever, and that neither Party has anyauthority to enter into a contract, to assume any obligation or to givewarranties or representations on behalf of the other Party.  Nothing in this relationship shall beconstrued to create a relationship of joint venture, partnership, fiduciary orother similar relationship between the Parties.

 

16.5   Non-Waiver.  The Parties covenant and agree that if aParty fails or neglects for any reason to take advantage of any of the termsprovided for the termination of this Agreement or if a Party, having the rightto declare this Agreement terminated, shall fail to do so, any such failure orneglect by such Party shall not be a waiver or be deemed or be construed to bea waiver of any cause for the termination of this Agreement subsequentlyarising, or as a waiver of any of the terms, covenants or conditions of this

 

13

----

 

Agreement or of theperformance thereof.  None of the terms,covenants and conditions of this Agreement may be waived by a Party except byits written consent.

 

16.6   Reformation.  The Parties hereby agree that neither Partyintends to violate any public policy, statutory or common law, rule,regulation, treaty or decision of any government agency or executive bodythereof of any country or community or association of countries, and that ifany word, sentence, paragraph or clause or combination thereof of thisAgreement is found, by a court or executive body with judicial powers havingjurisdiction over this Agreement or any of the Parties hereto, in a final,unappealable order to be in violation of any such provision in any country orcommunity or association of countries, such words, sentences, paragraphs orclauses or combination shall be inoperative in such country or community orassociation of countries, and the remainder of this Agreement shall remainbinding upon the Parties hereto.

 

16.7   ForceMajeure.  No liability hereundershall result to a Party by reason of delay in performance caused by forcemajeure, that is circumstances beyond the reasonable control of the Party,including, without limitation, acts of God, fire, flood, war, terrorism, civilunrest, labor unrest, or shortage of or inability to obtain material orequipment.

 

16.8   EntireAgreement.  The terms and conditionsherein constitute the entire agreement between the Parties and shall supersedeall previous agreements, either oral or written, between the Parties heretowith respect to the subject matter hereof. No agreement of understanding bearing on this Agreement shall be bindingupon either Party hereto unless it shall be in writing and signed by the dulyauthorized officer or representative of each of the Parties and shall expresslyrefer to this Agreement.

 

INWITNESS WHEREOF, the Parties hereto have executed and delivered this Agreementin multiple originals by their duly authorized officers and representatives onthe respective dates shown below, but effective as of the Agreement Date.

 

 
| POWER3 MEDICAL  PRODUCTS, INC. | BAYLOR COLLEGE  OF MEDICINE     |
|--------------------------------|---------------------------------|
|                           |                            |
|                           |                            |
| Name:                          |   /s/  Steven B. Rash |   | Name: |  /s/ W.  Dalton Tomlin |   |
|                           |                            |   |  W. Dalton  Tomlin |
|                           |                            |   |   |
| Title:                         | Chairman/CEO                    | Title: |  Senior  Vice President & |
|                           |                            |   |  General  Counsel |
|                           |                            |   |   |
|                           |                            |   |   |
| Date:                          | 6-28-04                         |   | Date: | 6/21/04 |   |
|                                |                                 |  |  |  |  |  |  |

 

 
| 6/11/04 | LICENSEE | OTA # 04-107 |   |   |   |
|---------|----------|--------------|--------|--------|--------|

 

14

----