EXHIBIT
10.26


 


Portions Subject
to Confidential Treatment Request Under Rule 406


 


BAYLOR COLLEGE OF MEDICINE


APPLIED
VETERINARY SYSTEMS, INC.


VALENTIS,
INC.


LICENSE
AGREEMENT


 


This
License Agreement (this “Agreement”) is made and entered into on this 26th day of June, 2000 the (“Effective Date”), by
and among Baylor College of Medicine (“BAYLOR”), a Texas non-profit corporation
having its principal place of business at One Baylor Plaza, Houston, Texas
77030, Applied Veterinary Systems, Inc., a Delaware corporation having its
principal office at 1709 Dryden, Suite 901, Houston, Texas 77030
(hereinafter referred to as “AVS”) and Valentis, Inc., a Delaware
corporation having its principal place of business at 863A Mitten Road,
Burlingame, California 94010 (hereinafter referred to as “VLTS”).


 


WITNESSETH:


 


WHEREAS, BAYLOR, and VLTS
are co-owners of the Jointly Owned Patent Rights and Joint Technology Rights as
defined below; and


 


WHEREAS, VLTS is
successor in interest to GeneMedicine; and


 


WHEREAS, VLTS has rights
(with rights to sublicense) pursuant to the First Amendment and Restatement of
License Agreement dated March 7, 1994 and effective September 16,
1992 between BAYLOR and GeneMedicine to the Sublicensed Patent Rights and
Sublicensed Technology Rights as defined below (the “BAYLOR/VLTS Agreement”);
and


 


WHEREAS, VLTS owns
individually certain rights to the VLTS Patent Rights, VLTS Technology Rights
and VLTS Improvements, as defined below, which AVS desires to license; and


 


WHEREAS, BAYLOR, and VLTS
are willing to grant to AVS and AVS desires to obtain worldwide,
royalty-bearing licenses to employ the Jointly Owned Patent Rights, Joint
Technology Rights, Sublicensed Patent Rights, Sublicensed Technology Rights,
VLTS Patent Rights, VLTS Technology Rights, VLTS Improvements and Baylor
Improvements licensed in this Agreement and to make, use, sell, have made and
otherwise market and commercialize Licensed Products and VLTS Licensed Products
as defined below; and


 


WHEREAS, BAYLOR, and VLTS
sometimes negotiate licenses for the rights to market and commercialize the
technology they develop to third parties in exchange for the receipt of equity
(such as stock or partnership interests) and accept a royalty which is reduced
from the royalty which they would receive were no such equity negotiated for
and received.


 


NOW, THEREFORE, in
consideration of the mutual promises and obligations hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto stipulate and agree as follows:


 

















 


ARTICLE 1


DEFINITIONS


 


1.1                           “Applicable Laws” shall mean all local,
state, federal and foreign governmental laws, orders, rules, decrees or
regulations.


 


1.2                           “AVS Common Stock” is as defined in Section 3.7.


 


1.3                           “AVS New Technology” shall mean any
technology reduced to practice by AVS that involves the delivery of genes or
gene products into a cell.


 


1.4                           “AVS Option” is as defined in Section 5.2.


 


1.5                           “AVS VLTS Improvements” shall mean any
modifications, variations and improvements to the VLTS Patent Rights, whether
patentable or not, that are reduced to practice by AVS and which, if
unlicensed, would infringe one or more claims of the VLTS Patent Rights.


 


1.6                           “Baylor Founders” shall mean those
individuals listed in Schedule 1.6.


 


1.7                           “Baylor Improvements” shall mean any
modifications, variations and improvements to the Joint Technology Rights,
whether patentable or not, that, during the year between the Effective Date and
the first anniversary of the Effective Date, are (i) conceived or reduced
to practice, (ii) are owned by BAYLOR or become property of BAYLOR and (iii) arise
out of work performed in a laboratory at BAYLOR that is under the direct
supervision of the Baylor Founders.


 


1.8                           “BAYLOR/VLTS Agreement” is as defined in
the third Whereas clause.


 


1.9                           “Confidential Information” shall mean any
proprietary and secret ideas, proprietary technical information, know-how and
proprietary commercial information or other similar proprietary information.


 


1.10                     “Field of Interest” shall mean the use of genes within
the Growth Hormone Axis (as defined below) for therapeutic and growth
applications in livestock and companion animals.


 


1.11                     “First Commercial Sale” shall mean the first sale of a
Licensed Product or VLTS Licensed Product, as the case may be, to a third party
for commercial use (i.e. not for review, evaluation or testing of the Licensed
Product or VLTS Licensed Product).


 


1.12                     “Funded Technology” is as defined in Section 8.1.


 


1.13                     “Growth Hormone Axis” for the purposes of this
Agreement, shall mean a gene and the corresponding gene product that directly
affects growth by influence of a growth hormone or an upstream or downstream
effector of GHRH, GH, IGF-I, somatostatin or CCK.


 


1.14                     “Indemnified Parties” is as defined in Section 6.6.


 


1.15            “Joint Technology Rights” shall mean all technology,
plasmids, biological materials, compounds, know-how, methods, documents,
materials, tests and confidential information related to the 


 


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technology, in each case
owned or controlled by BAYLOR and/or VLTS, as of the Effective Date, used in
the practice of the Jointly Owned Patent Rights.


 


1.16                           “Jointly Owned Patent Rights” shall mean
the United States Patent Application entitled “Growth Hormone Releasing Hormone
Expression System and Methods of Use, Including Use in Animals” US Patent
Application Serial No. 09/122,171, filed July 24, 1998, (owned
jointly by VLTS and BAYLOR) and any and all divisions, reissues, re-examinations,
renewals, continuations, and extensions thereof, any United States patent which
issues from any such pending applications and all other counterpart, pending or
issued patents in all other countries.


 


1.17                           “Licensed Product” shall mean any product
or service that is made, used, imported, marketed or sold using all or any part
of the Licensed Subject Matter in the Field of Interest.


 


1.18                     “Licensed Subject Matter” shall mean (i) Jointly
Owned Patent Rights, (ii) Sublicensed Patent Rights, (iii) Joint Technology
Rights, (iv) Sublicensed Technology Rights and (v) Baylor
Improvements.


 


1.19                           “Net Sales” shall mean all monies and
equivalent goods and services actually received by AVS or its sublicensees from
the manufacture, use, sale, lease or other commercial exploitation of Licensed
Products less the following:


 


(a)                                  any credits or refunds actually granted
to customers for the return of Licensed Products that were previously sold;


 


(b)                                 any separately identified sales, use,
excise or similar taxes and custom duties or other governmental charges imposed
upon the importation or sales of Licensed Products or except for taxes on
income;


 


(c)                                  any separately identified charges for
transportation, packing, insurance, shipping or handling which are directly
associated with sales of Licensed Products; and


 


(d)                                 in the event that AVS is required to pay
a royalty to an unrelated third party in order to make, use or sell a Licensed
Product, such amounts actually paid to such third party; provided, however, in
no event shall the reduction due to royalties paid to other parties exceed
****** of the “Net Sales” amount as calculated prior to such reduction.


 


If Licensed Products are sold in
combination with other products or as part of a product then the Net Sales for
such combined products shall be the price paid by the third party purchaser for
the combined product times a fraction the numerator of which is the cost of
producing the License Product and the denominator of which is the cost of
producing the entire combined product.


 


Notwithstanding
the foregoing, Net Sales shall not include monies and equivalent goods and
services (“Payments”) received from a sponsor for research and development
programs for development, including testing, of new vector or gene delivery
technologies,  new products, or
refinements to AVS’ existing methodologies to deliver the GHRH gene; provided,
however, Net Sales shall include Payments for any research and development
programs if the product or results of such research and development programs
can be or is manufactured, used, sold, leased or otherwise commercially
exploited by any sponsor of such research and development programs without
making additional Payments or if any additional Payments are below the fair
market value of such product or services.


 


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1.20            “Sublicensed Patent Rights” shall mean the rights of
VLTS to:


 


(a)  US Patent
Application entitled “Method for the Identification of Synthetic Cell or
Tissue-Specific Transcriptional Regulatory Regions” US Patent Application
Serial No. 60/052,403, filed July 14, 1997;


 


(b)  US Patent
entitled “Myogenic Vector Systems” US Patent No. 5,298,422; issued March 29,
1994; and


 


(c)  and any and all
divisions, reissues, re-examinations, renewals, continuations, and extensions
thereof, any United States patent which issues from any such pending
applications and all other counterpart, pending or issued patents in all other
countries.


 


1.21            “Sublicensed Technology Rights” shall mean all
technology, plasmids, biological materials, compounds, know-how, methods,
documents, materials, tests and confidential information related to the
technology, owned or controlled by BAYLOR or VLTS, as of the Effective Date,
used in the practice of the Sublicensed Patent Rights.


 


1.22                     “VLTS Improvements” shall mean any modifications,
variations and improvements of the VLTS Patent Rights, whether patentable or
not, that are reduced to practice by VLTS and which, if unlicensed, would
infringe one or more claims of the VLTS Patent Rights.


 


1.23                     “VLTS Licensed Product” shall mean any product or
service that is made, used, marketed or sold using all or any part of the VLTS
Licensed Subject Matter in the Field of Interest; provided, however, if a
product or service is a “Licensed Product” as defined in Section 1.17
above, the product or service shall not be a “VLTS Licensed Product.”


 


1.24                     “VLTS Licensed Subject Matter” shall mean (i) VLTS
Patent Rights (ii) VLTS Technology Rights and (iii) VLTS
Improvements.


 


1.25                     “VLTS Net Sales” shall have the same meaning as “Net
Sales” except that all references therein to “Licensed Product” shall be deemed
to refer to “VLTS Licensed Products.”


 


1.26                     “VLTS Option” is as defined in Section 5.1.


 


1.27            “VLTS Patent Rights” shall mean US Patent entitled “Formulated
Nucleic Acid Composition and the Method of Administering the Same” US Patent No. 6,040,295;
issued March 21, 2000 (“the PVP Patent”), and any and all divisions,
reissues, re-examinations, renewals, continuations, and extensions thereof, any
United States patent which issues from any such pending applications and all
other counterpart, pending or issued patents in all other countries.


 


1.28                     “VLTS 
Technology Rights” shall mean all technology, plasmids, biological
materials, compounds, know-how, methods, documents, materials, tests and
confidential information related to the technology, in each case owned or
controlled by VLTS, as of the Effective Date, used in the practice of the VLTS
Patent Rights.


 


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ARTICLE 2


GRANT OF LICENSES


 


2.1                                 License
to Jointly Owned Patent Rights and Joint Technology Rights.  Subject to all of the terms and conditions of
this Agreement, effective as of the Effective Date, BAYLOR and VLTS each hereby
grant to AVS a royalty-bearing, worldwide, exclusive license in the Field of
Interest to the Jointly Owned Patent Rights and the Joint Technology Rights
with rights to develop, make and have made, use, sell, market, import,
distribute and otherwise commercially exploit Licensed Products.


 


2.2                                 License
to Sublicensed Patent Rights and Sublicensed Technology Rights.  Subject to all of the terms and conditions of
this Agreement, effective as of the Effective Date, VLTS hereby grants to AVS a
royalty-bearing, worldwide, exclusive sublicense in the Field of Interest to
the Sublicensed Patent Rights, and the Sublicensed Technology Rights, with
rights to develop, make and have made, use, sell, market, import, distribute
and otherwise commercially exploit Licensed Products.


 


2.3                                 License to VLTS Patents, VLTS Technology
and VLTS Improvements. Subject to all of the terms and conditions of this Agreement,
effective as of the Effective Date, VLTS hereby grants to AVS a
royalty-bearing, worldwide, nonexclusive license in the Field of Interest to the
VLTS Patent Rights, VLTS Technology Rights and VLTS Improvements with rights to
develop, make and have made, use, sell, market, import, distribute and
otherwise commercially exploit VLTS Licensed Products; provided that VLTS does
not need to notify AVS of any VLTS Improvements.


 


2.4                                 License
to Baylor Improvements.  Subject to all of the terms and conditions of
this Agreement, effective as of the Effective Date, BAYLOR hereby grants to AVS
a royalty-bearing, worldwide, exclusive license in the Field of Interest to the
Baylor Improvements with rights to develop, make and have made, use, sell,
market, import, distribute and otherwise commercially exploit Licensed
Products.


 


2.5                           AVS VLTS Improvements. 
Subject to all of the terms and conditions of this Agreement, effective
as of the Effective Date, AVS grants to VLTS a royalty-free, exclusive,
worldwide license outside the Field of Interest to make, have made, use and
sell AVS VLTS Improvements.  VLTS shall
not have the right to make, have made, use or sell AVS VLTS Improvements in the
Field of Interest.


 


2.6                                 Rights Reserved by BAYLOR. 
The grants in Sections 2.1, 2.2 and 2.4 shall be further subject to,
restricted by and non-exclusive with respect to:


 


(a)                                  the use of the Licensed Subject Matter by
BAYLOR for non-commercial research, patient care, teaching and other
educationally related purposes;


 


(b)                                 any
non-exclusive license to the Licensed Subject Matter that BAYLOR is required by
law or regulation to grant to the United States of America or to a foreign state
pursuant to an existing or future treaty with the United States of America; and


 


(c)                                  the use of the Joint Technology Rights
and Jointly Owned Patent Rights by the Baylor Founders for non-commercial
research purposes at academic or research institutions.


 


2.7                                 Right to Sublicense. 
Subject to all the terms and conditions of this Agreement, effective as
of the Effective Date, BAYLOR and VLTS each hereby grant to AVS the right to
enter an agreement or agreements to sublicense the license and rights granted
in Sections 2.1, 2.2 and 2.4 hereof.


 


All sublicenses granted
by AVS of its rights hereunder shall be subject to the terms of this
Agreement.  AVS shall be responsible for
its sublicensees and shall not grant any rights which are inconsistent with the
rights granted to and obligations of AVS hereunder.  Any act or omission of a 


 


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sublicensee which would
be a breach of this Agreement if performed by AVS shall be deemed to be a
breach by AVS of this Agreement.  If
after receiving notice of a sublicensee’s breach from BAYLOR or VLTS, AVS fails
to take appropriate action to require such sublicensee to remedy the breach
related to such act or omission, including termination of the sublicense,
BAYLOR or VLTS may terminate the applicable license granted herein.  Each sublicense agreement granted by AVS
shall include an audit right by BAYLOR and/or VLTS of the same scope as
provided in Article 4 hereof with respect to AVS.  No such sublicense agreement shall contain any
provision which would cause it to extend beyond the term of this
Agreement.  AVS shall give BAYLOR and
VLTS prompt notification of the identity and address of each sublicensee with
whom it concludes a sublicense agreement and shall supply BAYLOR and VLTS with
a copy of each such sublicense agreement.


 


ARTICLE 3


CONSIDERATION


 


3.1                                 Royalty
to BAYLOR.  As part of the consideration for BAYLOR’s
grant of the licenses specified in Article 2, AVS agrees to pay BAYLOR a
royalty of ****** of Net Sales.


 


3.2                                 Royalty
to VLTS. As part of the
consideration for VLTS’ grant of the licenses and sublicense specified in Article 2,
AVS agrees to pay VLTS a royalty of ****** of Net Sales.


 


3.3                                 Royalty to VLTS For VLTS Licensed
Products. As part
of the consideration for the grant of the licenses specified in Article 2,
AVS agrees to pay VLTS a royalty of ****** of VLTS Net Sales.


 


3.4                                 Royalty Reduction If No Patent. 
In the event that a sale of a Licensed Product is not covered by patent
rights within the Jointly Owned Patent Rights or Sublicensed Patent Rights
during the term of this Agreement, the royalty owed hereunder pursuant to each
of Sections 3.1 and 3.2 shall be reduced by ******.  Provided, however, if in such case the
Licensed Products includes only Joint Technology Rights or Sublicensed
Technology Rights that have been publicly disclosed by BAYLOR pursuant to Section 7.7(f),
AVS shall not be obligated to pay any royalties on such Licensed Products.


 


3.5                                 Exceptions to VLTS Royalty Obligations. 
VLTS shall not be obligated to pay BAYLOR a royalty pursuant to the
BAYLOR/VLTS Agreement, on revenues received by VLTS from AVS under the licenses
granted in herein.


 


3.6                                 Stock Consideration to BAYLOR. 
If BAYLOR had not received the equity interest in AVS in the form of
stock as described below, BAYLOR would have insisted upon and received a
greater royalty and, in consideration and in exchange for (i) property
constituting good and valuable consideration, including, but not limited to,
the Licensed Subject Matter, and (ii) the reduced royalty consideration
provided in Section 3.1, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, AVS has issued to BAYLOR for itself and on
behalf of the persons and entities listed on Schedule 3.6, an aggregate
of 633,333 shares of AVS common stock, $.001 par value (the “AVS Common Stock”)
as indicated on Schedule 3.6.


 


3.7                                 Stock Consideration to VLTS. 
In partial consideration of the license and sublicenses received from
VLTS, AVS has issued to VLTS 316,667 shares of the AVS Common Stock in
accordance with the Stock Issuance Agreement in Schedule 3.7.


 


3.8                                 Payment of BAYLOR Patent Costs. 
AVS shall pay all unreimbursed costs incurred by BAYLOR prior to the
Effective Date incident to the filing of the Jointly Owned Patent Rights.


 


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3.9                                 No Other Royalty or Stock Consideration. 
AVS shall not have any obligation to pay any other royalties or issue
any other stock, other than as provided in this Article 3, in consideration
of the licenses granted herein.


 


ARTICLE 4


ACCOUNTING AND RECORDS


 


4.1                                 Royalty Payment. 
At the close of each quarter of AVS’ fiscal year, the Net Sales and VLTS
Net Sales for the quarter shall be computed, and the royalties earned thereon
shall be paid to BAYLOR and VLTS within sixty (60) days after the close of the
quarter.  In the event that any payment
due hereunder is not made when due, the payment shall accrue interest beginning
on the tenth (10th) day following the due date thereof,
calculated at the annual rate of the sum of (a) ****** plus (b) the
prime interest rate quoted by The Wall Street Journal on the date said
payment is due, the interest being compounded on the last day of each calendar
quarter, provided, however, that in no event shall said annual interest rate
exceed the maximum legal interest rate for corporations.  Each such royalty payment when made shall be
accompanied by all interest so accrued. 
Said interest and the payment and acceptance thereof shall not negate or
waive the right of BAYLOR or VLTS to seek any other remedy, legal or equitable,
to which it may be entitled because of the delinquency of any payment.


 


4.2                                 Royalty Report. 
With each royalty payment, AVS shall furnish to BAYLOR and VLTS a
written accounting report relating to the quarter stating the Net Sales, and
for VLTS also the VLTS Net Sales, royalties due and royalties paid.


 


4.3                                 Written Records. 
AVS agrees to keep and maintain and to require all of its sublicensees
to keep and maintain written records with respect to its operations pursuant to
this Agreement in sufficient detail to enable BAYLOR and VLTS or its designated
accountants to compute the amount of royalties payable to BAYLOR and VLTS and
further agrees to permit the records to be examined from time to time, on
reasonable notice during normal business hours to the extent necessary to
verify the amount of royalties due hereunder. 
BAYLOR and/or VLTS shall pay the costs of the examination unless a
discrepancy of greater than five percent (5%) in royalties due is present, in
which case AVS shall reimburse BAYLOR and/or VLTS for the examination
expenses.  All the records shall be kept
for four (4) years after the royalty period to which the records relate.


 


4.4                                 Payment in U.S. Dollars. 
All payments shall be paid in United States dollars, without deduction
of exchange, collection or other charges, to BAYLOR and VLTS by check, or to
the account of BAYLOR and VLTS at such bank as BAYLOR or VLTS may from time to
time designate by notice to AVS.  All
royalty payments shall be converted from the currency of the country of sale to
United States dollars using the exchange rate quoted by The Wall Street
Journal on the last business day of the period for which the royalty is
paid.


 


4.5                                 Foreign Restrictions On Payment. 
If governmental regulations prevent remittance from any foreign country
of any amounts due in respect of Net Sales or VLTS Net Sales in that country in
United States  Dollars, AVS shall so
notify BAYLOR and VLTS in writing and, subject to the remainder of this Section 4.5,
any obligation under this Agreement to make payments in respect of Net Sales in
that country shall be suspended (but the amounts due but not paid shall
continue to accrue) without interest until such remittances are possible;
provided, however, that notwithstanding the foregoing BAYLOR and/or VLTS shall
have the right, at any time and from time to time, upon written notice to AVS,
to direct AVS either to pay such funds in any such country in the local
currency or to liquidate such currency at available rates and pay the
liquidated amounts to BAYLOR and/or VLTS. 
Any such payment by AVS in accordance herewith shall be deemed to be
payment in full of the amounts so paid or 


 


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liquidated, and AVS shall
have no further liability to BAYLOR or VLTS for any action taken in accordance
with BAYLOR and/or VLTS’ instructions pursuant to this Section 4.5.


 


4.6                                 Payment Addresses. 
All payments and reports shall be sent to the addresses listed in Section 15.1.


 


ARTICLE
5


OPTION TO AVS
TECHNOLOGIES


 


5.1                                 New Technology Option. 
AVS hereby grants to VLTS an option to negotiate a non-exclusive,
royalty bearing, worldwide license to make, have made, use and sell the AVS New
Technology (the “VLTS Option”) in the field of human therapeutics.  The VLTS Option shall expire twenty-four (24)
months after the Effective Date.


 


5.2                                 Gene Switch Technology. 
VLTS hereby grants to AVS an option to negotiate a non-exclusive,
royalty bearing, worldwide license to make, have made, use and sell VLTS’
proprietary “GeneSwitch technology” (the “AVS Option”) for the use of genes
within the Growth Hormone Axis in the Field of Interest.  The AVS Option shall expire twenty-four (24)
months after the Effective Date.


 


5.3                                 Option
Exercise Procedures.  To exercise either of the options in Sections
5.1 and 5.2, the option holder must give written notice to the party granting
the option prior to the option’s expiration. 
Upon such exercise the parties shall diligently and in good faith
negotiate the terms of the license.  The
terms shall include a commercially reasonable royalty and such other terms as
are customarily included in such a license.


 


ARTICLE 6


WARRANTIES, REPRESENTATIONS, INDEMNITY AND INSURANCE


 


6.1                                 BAYLOR and VLTS Representations.


 


(a)  BAYLOR hereby represents and warrants that, (i) it
is the owner of or has the right to license the Licensed Subject Matter,
existing as of the Effective Date; (ii) it has the right to license the
Licensed Subject Matter as contemplated herein; and (iii) other than the
grants set forth herein, including, without limitation, for or to the United
States of America, or for or to a foreign state, it has not encumbered,
restricted, transferred or otherwise burdened its rights to the Licensed
Subject Matter in the Field of Interest; and


 


(b)  VLTS hereby represents and warrants that, (i) it
is the owner of or has the right to license the Licensed Subject Matter and the
VLTS Licensed Subject Matter, existing as of the Effective Date; (ii) it
has the right to license the Licensed Subject Matter and the VLTS Licensed
Subject Matter as contemplated herein; and (iii) it has not encumbered,
restricted, transferred or otherwise burdened its rights to the Licensed
Subject Matter and the VLTS Licensed Subject Matter in the Field of Interest.


 


6.2                                 DISCLAIMER OF WARRANTY.  WITH THE EXCEPTION OF SECTION 6.1,
BAYLOR AND VLTS EACH MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF FITNESS OR MERCHANTABILITY,
REGARDING OR WITH RESPECT TO THE LICENSED SUBJECT MATTER, THE VLTS LICENSED
SUBJECT MATTER, LICENSED PRODUCTS, VLTS LICENSED PRODUCTS OR OTHER RIGHTS
TRANSFERRED HEREUNDER.  BAYLOR AND VLTS
EACH MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OF THE 


 


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PATENTABILITY, USE OR
OTHER APPLICATION OF THE LICENSED SUBJECT MATTER, THE VLTS LICENSED SUBJECT
MATTER, LICENSED PRODUCTS, VLTS LICENSED PRODUCTS OR  OTHER RIGHTS TRANSFERRED HEREUNDER IN
THE FIELD OF INTEREST OR OF THE VALIDITY OR ENFORCEABILITY OF ANY PATENTS
ISSUING THEREUPON, IF ANY, OR THAT THE LICENSED SUBJECT MATTER, THE VLTS
LICENSED SUBJECT MATTER, LICENSED PRODUCTS, VLTS LICENSED PRODUCTS OR OTHER
RIGHTS TRANSFERRED HEREUNDER ARE OR SHALL BE FREE FROM INFRINGEMENT OF ANY
PATENT OR OTHER RIGHTS OF THIRD PARTIES. 
BAYLOR AND VLTS EACH MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, AS TO THE LIKELIHOOD OF THE SUCCESS OF ANY RESEARCH, DEVELOPMENT,
TESTING, MARKETING OR OTHER UTILIZATION OF THE LICENSED SUBJECT MATTER, THE
VLTS LICENSED SUBJECT MATTER, LICENSED PRODUCTS, VLTS LICENSED PRODUCTS OR
OTHER RIGHTS TRANSFERRED HEREUNDER.


 


6.3                                 AVS Representations. 
AVS hereby represents and warrants that:


 


(a)  it is a
corporation duly organized and in good standing under the laws of the State of
Delaware;


 


(b)  it is qualified
to do business and in good standing in the State of Texas and elsewhere as the
nature of its business and properties so require;


 


(c)                                  the
execution, delivery and performance of this Agreement by AVS and the
consideration provided for herein has been duly authorized by all necessary
corporate action;


 


(d)                                 it has the full power and authority to
enter into and carryout its obligations under this Agreement; and


 


(e)                                  the AVS Common Stock to be issued
pursuant to this Agreement has been duly authorized and upon issuance, pursuant
to the terms hereof and for the consideration herein set forth, will be validly
issued, fully paid and non-assessable.


 


6.4                                 Indemnification by VLTS. 
VLTS agrees to indemnify and hold AVS and its officers, employees,
agents and representatives, harmless from any liabilities, costs and expenses
(including attorneys’ fees and expenses), obligations or causes of action
arising out of or related to any breach of the representations and warranties
made by VLTS herein.


 


6.5                                 Indemnification by AVS Regarding
Representations.  AVS agrees to indemnify and hold BAYLOR and
VLTS and each of their respective officers, trustees, faculty, employees,
agents and representatives, harmless from any liabilities, costs and expenses
(including attorneys’ fees and expenses), obligations or causes of action
arising out of or related to any breach of the representations and warranties
made by AVS herein.


 


6.6                                 Indemnification by AVS Regarding Licensed
Products.


 


(a)                                  AVS agrees to protect, defend, indemnify
and hold BAYLOR, each of the entities with which it is or will be in the future
affiliated with respect to the invention or development of Licensed Subject
Matter or VLTS Licensed Subject Matter and each of BAYLOR’s officers,
directors, trustees, faculty, employees, agents and representatives (“Baylor
Indemnified Parties”) harmless from and against, and to pay any and all losses,
liabilities, claims, demands, causes of action, lawsuits, or other proceedings
(whether in contract, tort, strict liability or otherwise), fines, assessments,
damages or any other amounts 


 


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of whatever nature that
any of the Baylor Indemnified Parties may sustain or incur, including all
attorneys’ fees and court costs, as a consequence of any third party’s
(including, but not limited to, AVS’ officers, directors, employees, agents,
consultants, representatives or servants) claims and demands arising from any
use, testing, operation, sale or manufacture, by AVS or its sublicensees, of
the Licensed Subject Matter, VLTS Licensed Subject Matter, the Licensed
Products, the VLTS Licensed Products or products derived therefrom, except as
to the extent such claims, causes of action, law suits or other proceedings and
the costs (including attorneys’ fees) related thereto arise from the gross
negligence or intentional misconduct of any of the Baylor Indemnified Parties.


 


(b)                                 AVS agrees to protect, defend, indemnify
and hold VLTS and each of VLTS’ officers, directors, trustees, faculty,
employees, agents and representatives (“VLTS Indemnified Parties”) harmless
from and against, and to pay any and all losses, liabilities, claims, demands,
causes of action, lawsuits, or other proceedings (whether in contract, tort,
strict liability or otherwise), fines, assessments, damages or any other
amounts of whatever nature that any of the VLTS Indemnified Parties may sustain
or incur, including all attorneys’ fees and court costs, as a consequence of
any third party’s (including, but not limited to, AVS’ officers, directors,
employees, agents, consultants, representatives or servants) claims and demands
arising from any use, testing, operation, sale or manufacture, by AVS or its
sublicensees, of the Licensed Subject Matter, VLTS Licensed Subject Matter, the
Licensed Products, the VLTS Licensed Products or products derived therefrom,
except as to the extent such claims, causes of action, law suits or other
proceedings and the costs (including attorneys’ fees) related thereto arise
from the gross negligence or intentional misconduct of any of the VLTS
Indemnified Parties.


 


6.7                                 Indemnification Procedures.


 


(a)                                  A Baylor Indemnified Party or VLTS
Indemnified Party will promptly notify AVS in writing of notice of any claims
or the commencement of any action, if a claim in respect thereof is to be made
against AVS under Section 6.6.  The
Baylor Indemnified Party’s or VLTS Indemnified Party’s failure to notify AVS
will not relieve AVS from any liability to such Baylor Indemnified Party or
VLTS Indemnified Party other than any liability directly resulting from the
delay. After receiving notice of said action, AVS is entitled to participate in
the defense therein, and may elect to assume the defense thereof by promptly
notifying the Baylor Indemnified Party and VLTS Indemnified Party in writing
and by selecting counsel reasonably satisfactory to such Baylor Indemnified
Party and VLTS Indemnified Party.  After
the Baylor Indemnified Party and VLTS Indemnified Party has received notice of
AVS’ election to assume the defense of said action and has approved AVS’
counsel, AVS will not be liable to such Baylor Indemnified Party and VLTS
Indemnified Party under Section 6.6 for any legal or other expenses
subsequently incurred by the Baylor Indemnified Party or VLTS Indemnified Party
in connection with the defense thereof unless (i) such Baylor Indemnified
Party or VLTS Indemnified Party in any action has reasonably concluded that
there may be legal defenses available to it that are different from or
additional to those available to AVS, in which case such Baylor Indemnified
Party or VLTS Indemnified Party shall have the right to select separate counsel
to assume said legal defenses and to otherwise participate in the defense of
said action on behalf of such Baylor Indemnified Party or VLTS Indemnified
Party, (ii) AVS shall not have employed counsel reasonably satisfactory to
the Baylor Indemnified Party or VLTS Indemnified Party to represent such Baylor
Indemnified Party or VLTS Indemnified Party within a reasonable time after
notice of commencement of the action or (iii) AVS has authorized the
employment of counsel for such Baylor Indemnified Party or VLTS Indemnified
Party at the expense of AVS.


 


(b)                                 Neither a Baylor Indemnified Party nor
VLTS Indemnified Party nor AVS shall settle any action covered by Section 6.6
without first obtaining the consent of the other parties, which consent will
not be unreasonably withheld.


 


10














 


(c)                                  Each Party’s indemnity obligations under
this Agreement shall survive the termination of this Agreement, regardless of
how this Agreement is terminated.


 


6.8                                 Insurance.  AVS shall, for
so long as AVS manufactures, uses or sells any Licensed Products or VLTS
Licensed Products, maintain in full force and effect policies of (i) worker’s
compensation insurance within statutory limits, (ii) employers’ liability
insurance with limits of not less than one million dollars ($1,000,000) per
occurrence, (iii) general liability insurance (with Broad Form General
Liability endorsement) with limits of not less than one million dollars
($1,000,000) per occurrence with an annual aggregate of two million dollars
($2,000,000) and (iv) at the appropriate time, products liability
insurance, with limits of not less than one million dollars ($1,000,000) per
occurrence with an annual aggregate of five million dollars ($5,000,000).  Such coverage(s) shall be purchased from
a carrier or carriers reasonably deemed acceptable to BAYLOR and shall name
BAYLOR as an additional insured.  Upon
request by BAYLOR and VLTS, AVS shall provide to BAYLOR and VLTS, as the case
may be, copies of said policies of insurance.


 


6.9                                 AVS Acknowledgment. 
AVS understands that there is no assurance that any patents included in
the Jointly Owned Patent Rights, Sublicensed Patent Rights or the VLTS Patent
Rights or any patent application subsequently filed on the Licensed Subject
Matter or VLTS Licensed Subject Matter will actually be issued or, if issued,
will be held not invalid by a court of competent jurisdiction.


 


ARTICLE 7


PROTECTION OF PROPERTY RIGHTS


 


7.1                                 VLTS
Determination to File.  VLTS shall decide whether to file United
States and foreign patent applications, continue prosecution of any patent applications
or to maintain any patent application or patent regarding the VLTS Licensed
Subject Matter or Licensed Subject Matter; provided that such Licensed Subject
Matter does not include Baylor Improvements.  VLTS will notify AVS of its decisions regarding
the patent applications and patents.


 


7.2                                 BAYLOR
Determination to File.  In cases where Licensed Subject Matter
includes Baylor Improvements, BAYLOR shall decide whether to file United States
and foreign patent applications, continue prosecution of any patent
applications or to maintain any patent application or patent regarding such
Licensed Subject Matter.  BAYLOR will
notify AVS of its decisions regarding such patent applications and patents.


 


7.2                                 Patent Costs. 
VLTS and AVS (in the case of Baylor Improvements) agree to pay all
costs, incident to the United States and foreign applications, patents and like
protection that it elects to pursue at its sole discretion, including all costs
incurred for filing, prosecution, issuance and maintenance fees as well as any
costs incurred in filing continuations, continuations in-part, divisionals or
related applications and any re-examination or reissue proceedings.


 


7.3                                 AVS and BAYLOR Right to Assume Filing. 
For the Licensed Subject Matter that does not contain Baylor
Improvements, if VLTS decides not to continue prosecution of a patent
application to issuance or maintain any United States or foreign patent
application or patent on technology within such Licensed Subject Matter, VLTS
shall timely notify AVS in writing in order that AVS may file United States and
appropriate foreign applications and continue prosecution or maintenance of
such patent applications at its own expense. 
Notwithstanding AVS’ assumption of the patent prosecution or
maintenance, VLTS retains the right to practice the invention that is the
subject of the applicable patent.  If AVS
also decides not to continue prosecution of a patent application to issuance or
maintain any 


 


11

















 


United States or
foreign patent application or patent within such Licensed Subject Matter, AVS
shall timely notify BAYLOR in writing in order that BAYLOR may file United
States and foreign applications and continue prosecution or maintenance of such
patent applications at its own expense. 
Whether or not AVS decides to assume the prosecution of any application,
AVS shall retain right to use the rights licensed hereunder subject to the
terms hereof.


 


7.4                                 AVS Right to Assume Filing. 
In those cases that Licensed Subject Matter includes Baylor
Improvements, if BAYLOR decides not to continue prosecution of a patent
application to issuance or maintain any United States or foreign patent
application or patent on technology within such Licensed Subject Matter, BAYLOR
shall timely notify AVS in writing in order that AVS may file United States and
appropriate foreign applications and continue prosecution or maintenance of
such patent applications at its own expense. 
Whether or not AVS decides to assume the prosecution of any application,
AVS shall retain right to use the rights licensed hereunder subject to the
terms hereof.


 


7.5                                 Information Regarding Filings.  (i) VLTS
agrees to keep AVS and BAYLOR fully informed, at VLTS’ expense, of prosecutions
of Licensed Subject Matter that does not contain Baylor Improvements
pursuant to this Article 7 including submitting to AVS and BAYLOR copies
of all official actions and responses thereto; provided, however, AVS and
BAYLOR shall be responsible for any of their expenses including attorneys’ fees
that AVS or BAYLOR incurs in reviewing and commenting on the information AVS or
BAYLOR receives from VLTS.  As per Section 7.3,
VLTS shall notify AVS and BAYLOR regarding any abandonment of the prosecution
of the patents and (ii) in those cases that Licensed Subject Matter
includes Baylor Improvements, BAYLOR agrees to keep AVS fully informed, at AVS’
expense, of prosecutions of such Licensed Subject Matter pursuant to this Article 7
including submitting to AVS copies of all official actions and responses
thereto.  As per Section 7.4, BAYLOR
shall notify AVS regarding any abandonment of the prosecution of such patents.


 


7.6                                 Cooperation. 
AVS, VLTS and BAYLOR agree to reasonably cooperate with the other
parties to whatever extent is reasonably necessary to procure patent protection
of any rights, including fully agreeing to execute any and all documents to
provide AVS the full benefit of the licenses granted herein.


 


7.7                                 Confidentiality. 
Each party shall use its best efforts to maintain and assure the
confidentiality of the Confidential Information disclosed to it by the other
parties; provided, however, none of the parties shall have an obligation of
confidentiality with respect to Confidential Information that:


 


(a)                                  at the time of its disclosure or
thereafter is disclosed in a publicly available document through no fault of
the receiving party;


 


(b)                                 at the time of its disclosure is, or
thereafter becomes without fault of the receiving party, part of the public
domain;


 


(c)                                  was in the possession of the receiving
party prior to disclosure by the disclosing party hereunder, except if received
in conjunction with the transactions contemplated under this Agreement, and was
not acquired directly or indirectly from any third party under obligation of confidentiality
to the disclosing party;


 


(d)                                 subsequent to its disclosure, is obtained
from a third party not subject to a contractual or fiduciary obligation for
confidentiality to the disclosing party;


 


12

















 


(e)                                  is required by court or governmental
order, law or regulation to be disclosed; or


 


(f)                                    if BAYLOR Confidential Information is
disclosed pursuant to any research grant relating to the Licensed Subject
Matter from a non-commercial granting entity, such as grants from the United
States Department of Health and Human Services and other governmental and
private non-profit agencies; provided, however, that AVS be notified of the
terms of such research grant applications within sixty (60) days after
submission of such research grant.


 


7.7                                 Permitted
Disclosure.  Notwithstanding the foregoing, the parties
understand and agree that AVS may, to the extent it deems necessary or
appropriate, disclose the Licensed Subject Matter and VLTS Licensed Subject
Matter to potential licensees, purchasers, investors, joint ventures and the
like, but AVS agrees to make such disclosures subject to a satisfactory
confidentiality agreement.


 


ARTICLE 8


RIGHTS IN
ADDITIONAL RESEARCH


 


8.1                                 The parties acknowledge that AVS may support research
on the Licensed Subject Matter in laboratories and facilities at BAYLOR that
are under the direct personal supervision of the Baylor Founders and that said
research may result in discoveries or inventions (“Funded Technology”) that are
not included within the definition of Licensed Subject Matter transferred by
this Agreement.  Nothing in this
Agreement shall be deemed to allocate rights or ownership of any Funded
Technology, and any rights to Funded Technology shall be determined by a
separate written agreement.


 


ARTICLE 9


INFRINGEMENT


 


                                                9.1                                 Notice and Right To Bring Suit. 
Each party shall promptly inform the other of any suspected infringement
of any  Licensed Subject Matter rights or
misuse, misappropriation, theft or breach of confidence of other Licensed
Subject Matter licensed hereunder in the Field of Interest by a third
party.  With respect to such activities
as are suspected, VLTS shall have the right, but not the obligation, to
institute an action for infringement, misuse, misappropriation, theft or breach
of confidence of the proprietary rights against such third party.  If VLTS fails to bring such action
proceedings within a period of three (3) months after receiving notice or
otherwise having knowledge of such infringement, then AVS shall have the right,
but not the obligation, to prosecute at its own expense any such claim. If AVS
fails to bring such action  within a
period of three (3) months after receiving notice or otherwise having
knowledge of such infringement, then BAYLOR shall have the right, but not the
obligation, to prosecute at its own expense any such claim.  Should any of BAYLOR, VLTS or AVS commence
suit under the provisions of this Article 9 and thereafter elect to
abandon the same, it shall give timely notice to the other parties who may, if
they so desire, continue prosecution of such suit.  All recoveries, whether by judgment, award,
decree or settlements, from infringement or misuse of Licensed Subject Matter
shall be apportioned as follows: the party bringing the suit shall first
recover an amount equal to two (2) times the costs and expenses incurred
by such party directly related to the prosecution of such action.  The remainder, if concerning Licensed Subject
Matter, shall be divided equally among AVS, VLTS and BAYLOR.  Each party agrees to cooperate with any party
bringing suit, at the expense of the party bringing suit, including being
joined as a party to such suit if necessary to prosecute such action; provided,
however that BAYLOR shall have the right, but not the obligation, to join in
such an action.  No party shall settle
any action under this Section 9.1 without the consent of BAYLOR and VLTS,
such consent not to be unreasonably withheld, where such settlement may affect
patent validity, enforceability, infringement or interpretation.


 


13

















 


9.2                                 Disclaimer of Liability. 
Neither BAYLOR nor VLTS shall be liable for any losses incurred as the
result of an action for infringement brought against AVS as the result of AVS’
exercise of any right granted under this Agreement.


 


9.3                                 Enforcement of VLTS Licensed Subject
Matter.  VLTS shall have no obligation to prosecute or
enforce any patent rights or any misuse, misappropriation or theft of breach of
confidence claims with respect to VLTS Licensed Subject Matter.  All such enforcement or prosecution
activities shall be within VLTS’ sole discretion.


 


ARTICLE 10


INDEPENDENT
CONTRACTOR STATUS


 


10.1  The parties hereby acknowledge and agree that
each is an independent contractor and that none of the parties shall be
considered to be the agent, representative, master or servant of the other
party for any purpose whatsoever, and that none of the parties has any
authority to enter into a contract, to assume any obligation or to give warranties
or representations on behalf of the other party. Nothing in this relationship
shall be construed to create a relationship of joint ventures, partnerships,
fiduciary or other similar relationships among the parties.


 


ARTICLE 11


TERM AND
TERMINATION


 


11.1                           Term.  Unless sooner terminated as otherwise
provided herein, the licenses granted herein pursuant to Article 2 shall
terminate on the later of (i) the date of expiration of the last of the
Jointly Owned Patent Rights, Sublicensed Patent Rights or VLTS Patent Rights
licensed hereunder to expire and (ii) in the event no patents included
within the Licensed Subject Matter or VLTS Licensed Subject Matter issue, the
first date following the twelfth (12th)
anniversary of the First Commercial Sale.


 


11.2                           Automatic Termination. 
This Agreement shall be terminated automatically in any one or more of
the following circumstances:


 


(a)                                  the assets of AVS are seized or attached,
in conjunction with any action against them by any third party, and such
seizure or attachment is not abated within ninety (90) days;


 


(b)                                 AVS is dissolved, or a sale of all or
substantially all of the assets of AVS pursuant to a liquidation not approved
in writing by BAYLOR and VLTS is made; or


 


(c)                                  a breach of Section 13.1 or Section 13.2.


 


11.3                           Termination
Upon Breach.  Each of BAYLOR and VLTS may terminate this
Agreement with respect to their respective grants hereunder if AVS fails to
perform any of its material obligations under this Agreement and fails to
remedy the default within thirty (30) days after being given written notice of
the specific failure or default and termination by BAYLOR or VLTS; however, if
the default is susceptible of being cured but the cure cannot be reasonably
completed within the thirty-day (30-day) period, this Agreement may only be
terminated if AVS fails to promptly commence and thereafter diligently
prosecute actions to cure the default.


 


11.4                           Termination Upon Failure to Obtain
Financing.  Each of BAYLOR and VLTS may terminate this
Agreement with respect to their respective grants hereunder if AVS fails to
secure, in the 


 


14

















 


aggregate, at least two
million five hundred thousand dollars ($2,500,000) in financing within two (2) years
of the Effective Date.


 


11.5                           AVS Right to Terminate. 
AVS, upon  one hundred eighty
(180) days prior written notice to BAYLOR and VLTS, may terminate this
Agreement with respect to any of their respective grants hereunder with or
without cause.


 


11.6                           Effect of Termination. If this Agreement is terminated
pursuant to Sections 11.2, 11.3 or 11.4, then:


 


(a)                                  any
and all rights in and to the Licensed Subject Matter shall revert to BAYLOR and
VLTS in the case of Jointly Owned Patent Rights, to VLTS in the case of
Sublicensed Patent Rights or to BAYLOR in the case of Baylor Improvements;


 


(b)                                 any
and all rights in and to the VLTS Licensed Subject Matter shall revert to VLTS;


 


(c)                                  all grants and licenses made by BAYLOR
and VLTS to AVS pursuant to this Agreement shall automatically terminate;


 


(d)                                 AVS will deliver to BAYLOR and VLTS, as
the case may be, within ten (10) days of termination all copies in its
possession or control of all documents and other tangible information that
contain the Licensed Subject Matter and/or VLTS Licensed Subject Matter;


 


(e)                                  AVS agrees to execute all instruments as
BAYLOR may reasonably request that are necessary to reinvest any licensed
rights in BAYLOR;


 


(f)                                    AVS, subject to Article 7, shall
have an obligation to maintain the confidentiality of all Licensed Subject
Matter and VLTS Licensed Subject Matter;


 


(g)                                 AVS shall have thirty (30) days to
complete the manufacture and ninety (90) days to complete the sale or license
of any Licensed Products and VLTS Licensed Products in stock or in the course
of manufacture at the time of termination, all subject, however, to payments of
royalty and accounting as provided herein, even if such royalty obligations
arise from transactions subsequent to the effective date of termination.


 


11.7                           Obligation
to Pay Accrued Royalties.  AVS’ obligation to pay royalties accruing
before the termination date, keep records and allow a final audit shall survive
termination.


 


11.8                           Stock
Remains Outstanding.  The AVS Common Stock issued or other
consideration paid pursuant to this Agreement or the ownership thereof shall
not be affected by any termination hereof, regardless of the reason for, or the
timing of, such termination.


 


11.9                           Survival of Accrued Liabilities. 
Except as expressly provided herein, no party hereunder shall be
discharged or relieved from any liability or obligation existing prior to such
termination.


 


11.10                     Survival of Sublicenses. 
In the event that the license granted to AVS under this Agreement is
terminated, any granted sublicenses shall remain in full force and effect as direct
license from BAYLOR and VLTS to each sublicensee(s); provide, however, that
such sublicensee(s) agree to abide by all of the terms of this Agreement.


 


15

















 


ARTICLE 12


GOVERNMENTAL COMPLIANCE


 


12.1                           Compliance With Laws. 
AVS shall at all times during the term of this Agreement and for so long
as it shall sell Licensed Products or VLTS Licensed Products comply and cause
its sublicensees to comply with all Applicable Laws that may control the
import, export, manufacture, use, sale, marketing, distribution and other
commercial exploitation of Licensed Products, VLTS Licensed Products or any
other activity undertaken pursuant to this Agreement.


 


12.2                           Required Letter of Assurance. 
AVS understands and agrees that before BAYLOR and VLTS shall be required
to perform any obligation hereunder that shall be subject to Applicable Laws,
AVS shall first provide BAYLOR and VLTS with any letter of assurance or other
certification that may be required to comply with the Applicable Laws of any
agency or instrumentality having jurisdiction. For example and not by
limitation, this includes United States import and export regulations, Food &
Drug Administration regulations, Department of Agriculture regulations,
environmental regulations and recombinant DNA regulations.


 


12.3                           Further Acts. 
Each party shall reasonably assist the other, execute any required
documentation and take such other action as may be reasonably necessary to
allow a party to perform its obligations under this Agreement in accordance
with all Applicable Laws.


 


12.4                           Failure to Obtain Governmental Approvals. 
Inability or failure, if any, of AVS to secure any necessary government
license or approval shall not entitle AVS to terminate this Agreement or to
obtain any form of relief, credit, rebate or recovery from BAYLOR or VLTS.


 


12.5                           Compliance Costs. 
AVS shall be responsible for any and all expenses, costs, fees, duties
or taxes necessary to comply with government orders, formalities, rules,
regulations and laws.


 


ARTICLE 13


ASSIGNMENT AND LICENSING


 


13.1                           Assignment.  AVS may not assign or attempt to assign any
rights under this Agreement, except in connection with the sale of
substantially all of its assets, without the prior written consent of both
BAYLOR and VLTS, which consent shall not be unreasonably withheld.


 


13.2                           License.  Except as expressly permitted by the
Agreement, AVS may not license or attempt to license any rights under this
Agreement without the prior written consent of both BAYLOR and VLTS, which
consent shall not be unreasonably withhold.


 


13.3                           Preexisting Agreements. 
This Agreement shall not supersede any preexisting agreement BAYLOR and
VLTS have with a third party in the event that this Agreement is assigned by
AVS to that third party, even if BAYLOR and VLTS have consented to the
assignment.


 


ARTICLE 14


PUBLICITY


 


14.1                           No party shall use the name, logotypes or
symbols of the other parties or the name of any employee, faculty, staff,
director, trustee, officer, affiliate or associate of the other parties for
publication or advertising purposes, except with the written consent of the
applicable party.


 


16

















 


ARTICLE 15


ADDRESSES


 


15.1                           Payments.


 


(a)                                  All payments to BAYLOR shall be made
payable to “Baylor College of Medicine” and all payments and reports to BAYLOR
shall be sent to the address below:


 


BAYLOR Tax ID #:
74-1613878


Director, Office of
Technology Administration


Baylor College of
Medicine


1709 Dryden Road, Suite 901


Houston, TX  77030


 


(b)                                 All payments to VLTS shall be made
payable to “Valentis, Inc.” and all payments and reports to VLTS shall be
sent to the address below:


 


Valentis, Inc.


863A Mitten Road


Burlingame, CA  94010


 


15.2                           Notices.  All notices or other communication pursuant
to this Agreement shall be sufficiently made or given on the date of mailing if
sent to such party by United States Postal Service certified mail, return
receipt requested, postage prepaid, or via overnight courier, addressed to it
at its address below or as it shall designate by written notice given to the
other party:


 


	
  In the case of BAYLOR:

  	
   

  	
  With a copy to:

  
	
  Senior Vice
  President & General Counsel

  	
   

  	
  Director, Office of
  Technology Administration

  
	
  Baylor College of
  Medicine

  	
   

  	
  Baylor College of
  Medicine

  
	
  One Baylor Plaza

  	
   

  	
  1709 Dryden Road,
  Suite 901

  
	
  Houston, TX 77030

  	
   

  	
  Houston, TX 77030

  
	
   

  	
   

  	
   

  
	
  In the case of VLTS:

  	
   

  	
   

  
	
  Legal Department

  	
   

  	
   

  
	
  Valentis, Inc.

  	
   

  	
   

  
	
  863A Mitten Road

  	
   

  	
   

  
	
  Burlingame, CA 94010

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In the case of AVS:

  	
   

  	
   

  
	
  President

  	
   

  	
   

  
	
  Applied Veterinary
  Systems, Inc.

  	
   

  	
   

  
	
  1709 Dryden Road,
  Suite 901

  	
   

  	
   

  
	
  Houston,
  TX 77030

  	
   

  	
   

  



 


ARTICLE 16


MISCELLANEOUS


 


16.1                           Further
Acts.  Without further consideration, BAYLOR and
VLTS each hereby agree to execute and deliver, and BAYLOR agrees to cause its
officers, trustees, employees, and agents to execute and deliver, such other
instruments, and to take such other action as AVS hereunder may reasonably 


 


17

















 


request
to more effectively convey and transfer to and vest in AVS, and to put AVS in
possession of, the rights granted hereunder, and to assist AVS in the
recordation of same as necessary, all in such form and substance as AVS may
reasonably request and at AVS’ expense.


 


16.2                           Binding On Successors. 
This Agreement shall be binding upon and shall inure to the benefit of
the legal representatives, administrators, successors, permitted assigns and
licensees of the parties hereto.


 


16.3                           Governing Law. 
This Agreement shall be deemed to be subject to, and have been made
under, and shall be construed and interpreted in accordance with the laws of
the State of Texas. This Agreement is expressly acknowledged to be subject to
all federal laws including but not limited to the Export Administration Act of
the United States of America. No conflict-of-laws rule or law that might
refer such construction and interpretation to the laws of another state,
republic, or country shall be considered.


 


16.4                           Consent to Jurisdiction. 
This Agreement is performable in part in Harris County, Texas, and the
parties mutually agree that personal jurisdiction and venue shall be proper in
the state and federal courts situated in Harris County, Texas, and agree that
any litigated dispute will be conducted solely in such courts.


 


16.5                           Severability. 
If any word, sentence, paragraph or clause or combination thereof of
this Agreement is found, by a court or executive body with judicial powers
having jurisdiction over this Agreement or any of its parties hereto, in a
final unappealed order to be in violation of any law, rule or regulation
in any country or community or association of countries, such words, sentences,
paragraphs or clauses or combination shall be inoperative in such country or
community or association of countries, and the remainder of this Agreement
shall remain binding upon the parties hereto.


 


16.6                           Entire Agreement. 
The terms and conditions herein contained, including all the schedules
hereto, and all the agreements referenced herein, or contemplated by any of
such agreements constitute the entire agreement between the parties and
supersede all previous communications whether oral or written between the
parties hereto with respect to the Licensed Subject Matter and VLTS Licensed
Subject Matter hereof, and no previous agreement or understanding varying or extending
the same shall be binding upon any of the 
parties hereto.


 


16.7                           No Waiver.  The parties
covenant and agree that if a party fails or neglects for any reason to take
advantage of any of the terms herein or if a party, having the right to declare
this Agreement terminated, shall fail to do so, any such failure or neglect by
such party shall not be a waiver or be deemed or be construed to be a waiver of
any cause for the termination of this Agreement subsequently arising, or as a
waiver of any of the terms, covenants or conditions of this Agreement or of the
performance thereof.  None of the terms,
covenants and conditions of this Agreement may be waived by a party except by
its written consent.


 


16.8                           Survival.  The
provisions, rights and obligations set forth in Articles 1, 3, 4, 5, 6, 7, 8,
9, 10, 12, 13, 14, 15 and 16, and Sections 2.1, 2.2 and 2.3 (insofar as Section 2.1,
2.2 and 2.3 pertain to Licensed Products or VLTS Licensed Products), and 11.6,
along with any other obligations and rights that by their terms survive
termination, shall survive the termination of this Agreement.


 


16.9                           Amendment.  No amendment
or modification to this Agreement shall be effective unless it is in writing
and signed by duly authorized representatives of both parties.


 


18

















 


16.10                     Construction. 
The parties acknowledge that each party has received and reviewed this
Agreement and that normal rules of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or exhibits thereto.


 


19

















 


IN WITNESS WHEREOF, the
Parties hereto have executed and delivered this Agreement in multiple originals
by their duly authorized officers and representatives on the respective dates
shown below, but effective as of the Effective Date.


 


 


	
  BAYLOR COLLEGE OF
  MEDICINE

  	
  APPLIED VETERINARY
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  /s/ W. Dalton Tomlin

  	
   

  	
  Name:

  	
  /s/ William A. McMinn

  
	
   

  	
  W. Dalton Tomlin

  	
   

  	
   

  	
  William A. McMinn

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice
  President &

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
  General Counsel

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VALENTIS, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  /s/ Margaret M. Snowden

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  VP, Intellectual
  Property & Legal Affairs

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  07/14/00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5/16/00

  	
  VLTS

  	
  OTA 98-24, 98-25, 98-36

  	
   

  	
   

  
						



 


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Schedule
1.6


 


BAYLOR FOUNDERS


 


1.                                       Robert Schwartz


 


2.                                       Bert W. O’Malley


 


3.                                       Ruxandra Draghia-Akli


 


4.                                       Xuyang Li


 


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Schedule
3.6


 


DISTRIBUTION OF SHARES OF COMMON
STOCK


 


	
  NAME

  	
   

  	
  NUMBER
  OF COMPANY SHARES ISSUED

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Baylor College of
  Medicine

  	
   

  	
  329,999

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Robert Schwartz

  	
   

  	
  146,878

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bert W. O’Malley

  	
   

  	
  123,872

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ruxandra Draghia-Akli

  	
   

  	
  30,084

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Xuyang Li

  	
   

  	
  2,500

  	
   

  



 


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