exv10w1



 





Exhibit 10.1




PATENT LICENSE AGREEMENT




     This Patent License Agreement (this “Agreement”) is made by and between
the Board of Regents (“Board”) of The University of Texas System, an agency of
the State of Texas, whose address is 201 West 7th Street, Austin, Texas 78701
(“System”), through its component institution, The University of Texas Medical
Branch at Galveston, having a business address at 301 University Blvd.,
Galveston, Texas 77555 (“University”) and Chrysalis Biotechnology, Inc., a
Delaware corporation (“Licensee”), having a principal place of business located
at 2200 Market, Suite 600, Galveston, Texas 77550.



RECITALS




     A. WHEREAS, Board owns certain Patent Rights and Technology Rights related
to Licensed Subject Matter, which were developed at University, and some of
which are jointly owned with Monsanto;



     B. WHEREAS, Monsanto exclusively licensed its joint ownership in certain
of the Patent Rights to Board on May 15, 1991 pursuant to a license agreement
as set forth in Exhibit 1 attached hereto (the “Monsanto Agreement”), Monsanto
granted Board the right to grant sublicenses to third parties pursuant to the
Monsanto Agreement, and Board has filed for recordation of the Monsanto
Agreement with the United States Patent and Trademark Office to further
associate the Monsanto Agreement with certain of the Patent Rights jointly
owned with Monsanto in the United States;



     C. WHEREAS, Board desires to have the Licensed Subject Matter developed
and used for the benefit of Licensee, Board, and the public;



     D. WHEREAS, Licensee was formed to develop and commercially exploit the
Licensed Subject Matter;



     E. WHEREAS, Licensee and Board are parties to a previous Patent License
Agreement dated November 10, 1995, (as amended on March 30, 2000 and August 30,
2000) (“Previous License Agreement”) which this Agreement replaces;



     F. WHEREAS, pursuant to the Previous License Agreement, Board also granted
Licensee a sublicense in the rights granted from Monsanto to Board pursuant to
the Monsanto Agreement; and



     G. WHEREAS, Licensee has represented to Board, to induce Board to enter
into this Agreement, that Licensee is contemplating the sale of substantially
all its assets to OrthoLogic Corp., a Delaware corporation (“OLGC”), pursuant
to an Asset Purchase Agreement and Plan of Reorganization (the “Purchase
Agreement”), by and between Licensee and OLGC.


****Text has been omitted pursuant to a confidentiality request. Omitted text has been filed
with the Securities and Exchange Commission.




 









 








     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the adequacy and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:


1. AMENDMENT. This Agreement amends and restates the Previous License
Agreement in its entirety. The Recitals set forth above are material to and
form part of this Agreement.



2. EFFECTIVE DATE. This Agreement shall be effective as of the Closing Date
(as defined in the Purchase Agreement), (the “Effective Date”).



3. DEFINITIONS. As used in this Agreement, the following terms shall have the
meanings indicated:




     "Carney” shall mean Darrell H. Carney, Ph.D.



     "Confidential Information” shall mean this Agreement, the contents of this
Agreement and all non-public or proprietary information of a party disclosed by
such party or its officers, representatives, agents, or employees to the other
party in connection with the performance of this Agreement. Subject to
exceptions set forth in Section 14.1(c) herein, such information shall be
Confidential Information if it would ordinarily be treated as confidential by
the disclosing party or would ordinarily be considered information of a
confidential nature in the industry, whether or not specifically marked as
such.



     "Effective Date” is defined in Section 2 above.



     "Licensed Field” shall mean all fields of use.



     "Licensed Process” shall mean any process which is covered in whole or in
part by an issued, unexpired valid claim contained in the Patent Rights.



     "Licensed Product” shall mean any product, component, or material which is
covered in whole or in part by an issued, unexpired, valid claim contained in
the Patent Rights.



     "Licensed Subject Matter” shall mean inventions and discoveries covered by
Patent Rights or Technology Rights within the Licensed Field.



     "Licensed Territory” shall mean the entire world.



     "Monsanto” shall mean Monsanto Company, a Delaware corporation, or the
party having legal ownership (through a merger, acquisition, or other
acquisition from Monsanto) of the Monsanto Agreement and the patent rights
described therein.



     "Net Sales” shall mean the gross revenues received by Licensee (and its
Sublicensees) from the Sale of each Licensed Product or Licensed Process, less
sales and use taxes actually paid, import and export duties actually paid,
outbound transportation prepaid or allowed,



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shipping insurance, amounts allowed or credited due to returns (not to
exceed the original billing or invoice amount), wholesale and cash discounts
actually granted and charges and portions of charges disallowed by third party
payors or care managers; provided, that if a Licensed Product is sold in
combination with other items (whether as part of the Sale of a combination
product, package, system, kit or tray or otherwise) at a unit price, whether
formulated or packaged together or separately, “Net Sales” shall mean the “Net
Sales” of such combination multiplied by (i) a fraction, A/A+B, where A is the
average selling price (“ASP”) of the Licensed Product when sold separately and
B is the ASP of the other items when sold separately, or (ii) if the ASP of the
Licensed Product or the other items are not available, a fraction determined by
the mutual agreement of the parties, which represents the proportionate
economic value of the Licensed Product relative to the proportionate economic
value contributed by the other items.




     "Patent Rights” shall mean any and all of Board’s rights in, to and under:




     (a) the patents and patent applications listed in Exhibit 2, as
updated from time to time pursuant to Section 5.4 hereof, and any and all
inventions and discoveries by University relating to TP508 Technology
conceived or reduced to practice prior to and during the two-year period
following the Effective Date, but shall not include any new technology
rights, described in Section 5.5 hereof, until such time as Licensee
elects to add such new technology rights pursuant to such Section 5.5;




     (b) all divisions, continuations, continuations-in-part,
registrations, reissues, reexaminations or extensions of any type and
corresponding foreign applications with respect to any of the
applications and patents described in the foregoing paragraph and which
relate to the manufacture, use or sale of TP508 Technology other than any
applications and patents in respect of new technology added to Licensed
Subject Matter pursuant to Section 5.5; and




     (c) the Monsanto Agreement and the licensed patent rights
thereunder.



     "Sale or Sold” shall mean the sale, transfer or disposition of a Licensed
Product or royalty-bearing use of a Licensed Process for value to a party other
than Licensee or a Subsidiary.



     "Sublicensee” shall mean any third party to whom Licensee has granted a
sublicense under the Patent Rights to make and sell Licensed Products or use a
Licensed Process.



     "Subsidiary” shall mean any business entity more than fifty percent (50%)
owned by Licensee, any business entity which owns more than fifty percent (50%)
of Licensee, or any business entity that is more than fifty percent (50%) owned
by a business entity that owns more than fifty percent (50%) of Licensee.



     "Technology Rights” shall mean Board’s and University’s rights in any
technical information, know-how, process, procedure, composition, method,
formula, protocol, technique, software, design, drawing or data relating to
Licensed Field, whether or not covered by Patent Rights, which relate to TP508
Technology, which are necessary to practice the inventions



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covered by the Patent Rights, and are made or developed by Carney or any
University employee working under the supervision or direction of Carney, prior
to or within two years after the Effective Date.




     "Term” shall have the meaning given to it in Section 7.1 of this
Agreement.



     “TP508 Technology” shall mean (i) any and all subject matter claimed in
Patent Rights; and (ii) peptides which bind to and/or stimulate a thrombin
receptor, compositions which contain such peptides, methods of producing such
peptides, detecting such peptides, and utilizing such peptides diagnostically
and/or therapeutically, including, but not limited to, thrombin derived
polypeptides, agonists or antagonists of the proteolytically or
non-proteolytically activated thrombin receptor or receptors or agonists and
antagonists of other cellular effects activated by proteolytic or
non-proteolytic thrombin interactions and which are made or developed by Carney
or any University employee working under the supervision or direction of
Carney.



     "University” is defined in the first paragraph of this Agreement.



4. WARRANTIES; SUPERIOR-RIGHTS; COVENANTS




     4.1 Except for the rights, if any, of the Government of the United States,
as set forth in Section 4.2, Board represents and warrants that it is the owner
of the entire right, title, and interest in and to the Licensed Subject Matter,
subject only to Monsanto’s rights under the Monsanto Agreement, and that it has
the exclusive right to grant licenses thereunder and has not granted licenses
thereunder to any other entity other than Licensee. The representations and
warranties of this Section 4.1 apply only to Patent Rights and Technology
Rights, but shall not apply to (i) any subject matter independently developed
by or rights of third parties who have no affiliation with or obligation to
assign rights or subject matter to the Board or University or (ii) any
purported assignment by Carney (or other named inventor) in violation of
his/her obligations under the University intellectual property policies.



     4.2 Licensee understands, acknowledges and agrees that: (i) the Licensed
Subject Matter may have been developed under a funding agreement with the
Government of the United States of America and, if so, that the Government may
have certain rights relative thereto; (ii) THIS AGREEMENT IS EXPLICITLY MADE
SUBJECT TO THE GOVERNMENT’S RIGHTS UNDER ANY SUCH AGREEMENT AND ANY APPLICABLE
LAW OR REGULATION; and (iii) to the extent that there is a conflict between any
such agreement, applicable law or regulation and this Agreement, the terms of
such Government agreement, applicable law or regulation shall prevail.



     4.3 Licensee understands, acknowledges and agrees that: (i) Board, by this
Agreement, makes no representation as to the operability or fitness for any
use, safety, efficacy, ability to obtain regulatory approval, patentability,
and/or breadth of the Licensed Subject Matter; and (ii) Board, by this
Agreement, also makes no representation as to whether there are any patents now
held, or which will be held, by others or by Board in the Licensed Field, nor
does Board make any representation that the inventions, products, processes, or
machines



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contained in Patent Rights do not infringe any other patents now held or
that will be held by others or by Board.




     4.4 Licensee, by execution hereof, acknowledges, covenants and agrees that
it has not been induced in any way by Board, System, University or its
employees to enter into this Agreement, and further warrants and represents
that (i) it has conducted sufficient due diligence with respect to all items
and issues pertaining to this Article 4 and all other matters pertaining to
this Agreement; and (ii) Licensee has adequate knowledge and expertise, or has
utilized knowledgeable and expert consultants, to adequately conduct the due
diligence and evaluate the risks inherent herein.



     4.5 Each of Board, acting by and through University, and University
represents, warrants and covenants that:




     (a) the Monsanto Agreement is in full force and effect and has not
been amended or modified and (i) to the knowledge of Board and
University, Board is in compliance with all its obligations thereunder in
respect of all obligations to be performed by Board and Board shall
remain in compliance with all its obligations thereunder to be performed
by Board prior to the potential assignment thereof to Licensee in
accordance with Section 6.2(c) hereof and; (ii) to the knowledge of Board
and University, each party other than Board and University is in
compliance with all its obligations thereunder and does not presently
plan to terminate or have the right to terminate such agreement; (iii)
such agreement is enforceable against Board in accordance with its terms
and, to the knowledge of Board and University, against each other party;
and (iv) Board and University shall take such action within the power of
Board and University as may be necessary to keep such agreement in full
force and effect; and




     (b) it has the power and actual authority to enter into and perform
its obligations under this Agreement, and this Agreement has been duly
authorized, executed and delivered by it and is enforceable against it in
accordance with its terms.



     4.6 The Board acknowledges that all material conditions of the Previous
License Agreement have been either satisfied by Licensee or are waived by Board
and that Licensee is not in breach of any term therein. Licensee acknowledges
that all material conditions of the Previous License Agreement have been either
satisfied by Board or are waived by Licensee and that Board is not in breach of
any term therein. Notwithstanding the foregoing, nothing in this Section 4.4
shall be construed as a waiver or modification by any party of any conditions,
rights or obligations set forth in this Agreement.



     4.7 Upon written request by either party, Licensee and Board shall
promptly update Exhibit 2 attached hereto to include all patent applications
and patents that are then within the Patent Rights.



5. LICENSE




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     5.1 Board hereby grants and agrees to grant to Licensee a royalty-bearing,
exclusive license under Licensed Subject Matter to manufacture, have
manufactured, sell, offer for Sale, import and use Licensed Product and
Licensed Process within the Licensed Territory within the Licensed Field;
provided, however:




     (a) Board and University and their respective employees, agents and
representatives may publish their own scientific findings from research
related to Licensed Subject Matter, but only in accordance with the
procedures set forth in Section 14.2; and




     (b) Board may use any information contained in the Licensed Subject
Matter generated by the University, other than Confidential Information,
for non-commercial research, including care of University patients,
teaching, applying for funding and other educational purposes.



     5.2 Licensee shall have the right to extend the license granted herein to
any Subsidiary provided that such Subsidiary consents to be bound by this
Agreement to the same extent as Licensee, including, but not limited to, the
provisions set forth under Article 6 hereof, and Licensee provides notification
to the Board of any such extension of the license herein to a Subsidiary. Any
such extension shall not be deemed to be a sublicense hereunder and shall not
be subject to the sublicense royalty payment obligations under Section 6.1(b).



     5.3 Licensee shall have the right to grant sublicenses consistent with
this Agreement provided that Licensee shall at all times be responsible for the
operations of its Sublicensees pursuant to such sublicense as if such
operations were carried out by Licensee, including the timely payment of
royalties to Board whether or not Sublicensee has timely paid royalties owed to
Licensee pursuant to such sublicense. Within thirty (30) days of execution,
modification, or termination of a sublicense by Licensee, Licensee further
agrees to deliver to Board a true and correct copy of such sublicense granted
by Licensee, and any modification or termination thereof.



     5.4 Licensee shall have sole discretion whether to file and over the
filing and prosecution of patent applications relating to the Licensed Subject
Matter, and shall be responsible for all costs related to filing, prosecuting,
and maintaining the Patent Rights. Licensee shall update Exhibit 2 to include
patent applications relating to TP 508 technology that are filed by Licensee
pursuant to this Section 5.4 within the two-year period following the Effective
Date. In addition, with respect to any patent within the Patent Rights, Board
hereby designates Licensee or its designee as its agent for the limited purpose
of obtaining an extension of such patent or governmental equivalent thereof
which extends the exclusivity of any of the Patent Rights where available in
any country in the world and, if reasonably necessary, Board hereby authorizes
Licensee to file in Board’s name or, at Licensee’s option, Board shall use
reasonable efforts to obtain such extension for Licensee or its Sublicensees,
at Licensee’s expense. In the event that Licensee fails to cure any breach in
this Agreement as set forth in Section 7.4, then such designation by Board of
Licensee as its agent for the limited purpose of obtaining any extension of
such Patent Rights is hereby revoked. Furthermore, Board and



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University shall provide reasonable assistance to facilitate Licensee’s or
its Sublicensees’ efforts to obtain any such extension.




     5.5 Licensee shall have the right to add to Licensed Subject Matter
University’s rights in any new technology applications that are not then
included in Patent Rights that are developed at University, provided that the
new technology applications: (i) whether or not Carney is named as an inventor
of such new technology applications consist of new or novel uses of (x) a
composition disclosed or claimed in a prior patent application or (y) a new
composition based on thrombin peptide technology developed at University; or
(ii) relate to TP508 Technology after the two-year period from the Effective
Date. Board may offer a license in any such new technology rights to third
parties, but only if (i) Board gives written notice of its intent to do so to
Licensee and (ii) Licensee does not elect within 90 days of such written notice
to add such new technology rights to Licensed Subject Matter pursuant to this
Section 5.5.



     5.6 Licensee and its successors in interest may record with the various
patent and trademark offices in which Patent Rights are pending or have issued,
a memorandum of exclusive license as provided in Exhibit 3, which University on
behalf of Board will sign upon request of Licensee.



     5.7 Board shall promptly, and in any event, within ten (10) business days
of any of the following occurrences, deliver to Licensee: (i) evidence of each
payment made by Board pursuant to Article 4 of the Monsanto Agreement, unless
Licensee shall have agreed to make such payments to Monsanto directly on
Board’s behalf; and (ii) true and complete copies of each notice, report or
other document delivered or received by Board pursuant to Articles 5 or 6 of
the Monsanto Agreement.



6. PAYMENTS AND REPORTS




     6.1 In consideration of rights granted by Board to Licensee under this
Agreement, Licensee agrees to pay Board the following:




     (a) Running royalties in an amount equal to two and a half percent
(2.5%) of Net Sales of each Licensed Product and each Licensed Process
manufactured, imported, exported, used, leased, or Sold by and/or for
Licensee and/or its Subsidiary and/or its Sublicensees, provided,
however, that the minimum annual running royalties payable to the Board
shall be $20,000 per calendar year, prorated for the first calendar year
following the Effective Date, and any amounts paid under any section of
this Agreement or the Patent Assignment Agreement to University or Board
by Licensee in a given year after the Effective Date shall count against
the minimum annual running royalties. Notwithstanding the foregoing, (i)
the running royalty rate shall be 3.3% in respect of Net Sales of
Licensed Products and Licensed Processes to the extent that such Licensed
Products or Licensed Processes arise from new technology rights that
Licensee elects to add to Licensed Subject Matter after the Effective
Date pursuant to Section 5.5 and such royalty rate shall not be subject
to increase pursuant to Section 6.2 and (ii) to the extent that a Sale
gives rise to the accrual of a running royalty under Section 5.a of the
Patent



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Assignment Agreement (or, but for the second paragraph of such
Section 5.a, would have given rise to such accrual) it shall not give
rise to the accrual of a running royalty under this 6.1(a).



It is understood and agreed by the parties that the payment of royalties
pursuant to this Section 6.1(a) shall be made only on the first Sale of a
Licensed Product or Licensed Process by Licensee, a Subsidiary or a
Sublicensee, and that subsequent Sales of the same Licensed Product or
Licensed Process for which royalties have been accrued pursuant to this
Section 6.1(a) shall not be subject to any additional accrual of
royalties (for example, and for illustration purposes only, if a royalty
accrues due to a Sale by Licensee of a Licensed Product to a Sublicensee
or a pharmaceutical distributor, a subsequent Sale by such Sublicensee or
such pharmaceutical distributor shall not generate a royalty payable to
Board).




     (b) **** of all cash and the fair market value (determined in
accordance with Section 6.6) of non-cash consideration received by
Licensee from a Sublicensee as a result of a sublicense for Licensed
Products or Licensed Processes including but not limited to licensing or
option fees, marketing fees, milestone payments, bonus payments and the
like, but excluding (i) payments received by Licensee for research
development pursuant to research grants; (ii) royalty payments received
by Licensee calculated on the basis of Net Sales of the Sublicensee;
(iii) payments received by Licensee as consideration for an assignment of
substantially all of the assets of Licensee or a controlling majority of
the stock of Licensee; and (iv) payments subject to the payment of
royalties under Section 5.b of the Patent Assignment Agreement. .




     (c) A fee of $75,000 plus all reasonable legal costs and fees
incurred by Board for filing, prosecuting, obtaining and maintaining
patents for each new patent application relating to new technology
applications Licensee elects to add to this Agreement as Licensed Subject
Matter pursuant to Section 5.5. This fee is not applicable to the Patent
Rights or to intellectual property relating to derivatives, new
formulations or methods of delivery of compositions, claimed or disclosed
in prior applications, or new compositions for uses that are already
disclosed or claimed, and other modifications or improvements of TP508
Technology. Fees paid to Board under this Section 6.1(c) shall count
against minimum annual running royalties payable pursuant to Section
6.1(a).



     6.2 Assignment Bonus. Licensee hereby acknowledges and agrees that Board
and University are under no obligation whatsoever herein to make any assignment
of the Patent Rights. University shall use reasonable efforts during the first
year after the Effective Date to attempt to obtain necessary approvals and
authorizations of, and to execute and deliver, or cause to be executed and
delivered, the Patent Assignment Agreement in substantially the form attached
hereto as Exhibit 4, pursuant to which, if approved by Board at a subsequent
date during the first year after the Effective Date, Board will assign to
Licensee all its right, title and interest in and to the Patent Rights, other
than new technology rights as set forth in Section 5.5 hereof, that are added
to Exhibit 2 in the two-year period following the Effective Date (but not its
obligations under the Monsanto Agreement), subject to continued royalty
payments and other



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obligations of Licensee set forth in the Patent Assignment Agreement, and
pursuant to which, among other things:





     (a) Licensee shall pay to the Board a cash assignment payment of
**** upon execution and delivery of the Patent Assignment Agreement, if
the Patent Assignment Agreement is executed and delivered by Board prior
to ****;




     (b) The running royalties payable by Licensee to the Board pursuant
to Section 6.1(a) shall be increased by 0.5% of Net Sales, except that
this increase shall not apply to the running royalties payable at the
rate of 3.3% relating to new technology applications that Licensee elects
to add to Licensed Subject Matter pursuant to Section 5.5; and




     (c) If Monsanto assigns its joint ownership interest in the Patent
Rights to Licensee prior to the date which is **** after the Effective
Date, then Licensee shall pay to the Board a cash assignment payment of
**** and the running royalties payable by Licensee to the Board pursuant
to Section 6.1(a) shall be increased by an additional 0.3% of Net Sales,
except that this increase shall not apply to the running royalties
payable at the rate of 3.3% relating to new technology applications that
Licensee elects to add to Licensed Subject Matter pursuant to Section
5.5.



     6.3 During the Term of this Agreement and for one (1) year thereafter,
Licensee shall keep complete and accurate records of its and its Sublicensees’
Sales and Net Sales of each Licensed Product and each Licensed Process under
the license granted in this Agreement in sufficient detail to enable the
royalties payable to Board hereunder to be determined. Licensee shall permit
Board or its representatives, at Board’s expense, to periodically examine its
books, ledgers, and records during regular business hours solely for the
purpose of and to the extent necessary to verify any report required under this
Agreement. In the event that the amounts due to Board are determined to have
been underpaid, Licensee shall immediately pay the Board the difference,
together with interest thereon at a per annum rate equal to the prime rate of
interest, as published by the Wall Street Journal, plus three percentage points
and if the amount underpaid is greater than two percent (2%) of the total
royalty, Licensee shall reimburse Board for all costs of such examination.



     6.4 Within thirty (30) days after each March 31, June 30, September 30,
and December 31, Licensee shall deliver to Board a true and accurate report,
giving such particulars of the business conducted by Licensee and its
Sublicensee(s), if any exist, during the preceding three (3) calendar months
under this Agreement as are pertinent to an account for payments hereunder.
Such report shall include at least: (a) the total Sales of Licensed Product and
Licensed Process by Licensee and by Sublicensees; (b) the total Net Sales; (c)
the calculation of royalties thereon; and (d) the total royalties so computed
and due Board. Licensee will report royalties to the University in categories
(specified by the University) based on the University intellectual property for
which the royalties are attributed. Simultaneously with the delivery of each
such report, Licensee shall pay to Board the amount, if any, due for the period
of such report. If no payments are due, it shall be so reported. Minimum
royalties, however, will be due and payable with the September 30 report to the
extent not covered by other payments hereunder



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during the preceding year. It is understood and agreed that if multiple
patents of the Patent Rights cover a single Licensed Product or Licensed
Process, only a single royalty as provided in Section 6.1 shall be paid.




     6.5 All amounts payable hereunder by Licensee shall be payable in United
States funds without deductions for taxes, assessments, fees, wire transfer
charges, or charges of any kind and shall be payable by either checks made
payable to The University of Texas Medical Branch and mailed to The University
of Texas Medical Branch at Galveston, Research Development Services, P.O. Box
4786-750, Houston, TX 77210-4786, or pursuant to wire transfer information or
as otherwise designated by Board within thirty (30) days written notice to
Licensee.



     6.6 Noncash payments received by Licensee which are subject to royalty
payments under this Agreement shall be valued at the fair market value (“FMV”)
thereof, determined in accordance with this Section 6.6. FMV shall be
determined as follows:




     (a) By mutual agreement between the parties if possible;




     (b) If the parties cannot reach a mutual agreement on FMV, then the
parties shall agree on an impartial third party mediator having at least
ten (10) years of accounting experience to assist the parties in
determining FMV, and the parties shall share equally in the fees and
costs of any such mediator; and




     (c) In the event the parties fail to reach an agreement on FMV
pursuant to mediation, then either party may submit the determination of
FMV to binding arbitration by a panel of three (3) arbitrators each
having at least ten (10) years of accounting experience and providing
each party an opportunity to present evidence of FMV to the arbitration
panel. Unless otherwise agreed by the parties, each of the University
and Licensee shall select one (1) arbitrator for the panel and the third
arbitrator shall be selected by the two other arbitrators designated by
the University and Licensee. The decision of the arbitrators in
determining FMV shall be final and binding on University and Licensee.



7. TERM AND TERMINATION; BREACH




     7.1 The term of this Agreement, unless terminated in accordance with this
Agreement (the “Term”), shall extend until the last patent included in the
Patent Rights has expired or has been found to be invalid or unenforceable by a
court of competent jurisdiction from which no appeal is available. Licensee
acknowledges and agrees that in no event shall Licensee take any action or omit
to take any action that causes any of the Patent Rights to lapse or fees not be
paid to avoid royalties hereunder or without providing University or Board the
opportunity to assume Licensee’s rights therein, including all right, title and
interest in any such Patent Rights thereafter.



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     7.2 Except in the cases of fraud in the inducement, mutual agreement of
the Board and Licensee, or any circumstance associated with Section 7.5 herein,
this Agreement is not terminable by the parties or by action at law or equity
for any reason.



     7.3 Except in the case of fraud in the inducement or circumstances
associated with Section 7.5 herein, Board’s sole remedy for default by Licensee
or breach of this Agreement by Licensee shall be an action for monetary damages
and not termination of this Agreement.



     7.4 Prior to the commencement of any action to enforce any breach of this
Agreement by Licensee, Board shall give Licensee written notice of any breach
hereof, and Licensee shall have 30 days to cure any payment breach and, if
curable, 90 days to cure any other breach. In any such action in which Board
is the prevailing party, Board shall be entitled to recover from Licensee its
reasonable attorneys fees and other direct out-of-pocket costs incurred in
connection therewith, and, in the case of the enforcement of any failure to pay
amounts due under Section 6.1 hereof, Licensee shall pay to Board a late fee
equal to the greater of $10,000 ($20,000 if such $10,000 fee has become payable
hereunder at least twice) or 10% of the payment amount for each such payment
not made within the applicable cure period, plus interest on such unpaid
amounts from the due date thereof until paid at a per annum rate equal to the
prime rate of interest, as published by the Wall Street Journal, plus three
percentage points.



     7.5 If at any time after an assignment of this Agreement by Licensee to an
entity not affiliated with OLGC the Licensee shall breach its payment
obligations hereunder and shall not cure such breach pursuant to Section 7.4
within 30 days from Board’s written notice thereof to Licensee, Licensee agrees
and acknowledges that Licensor immediately shall receive a vested security
interest in Licensee’s interests in this Agreement and Licensee will
immediately execute, in a form Board can record, a Security Agreement
substantially similar to the Security Agreement attached hereto as Exhibit 5 to
secure the payment of all such Licensee’s payment obligations hereunder.



8. INFRINGEMENT BY THIRD PARTIES




     8.1 Licensee shall have the first right of refusal to enforce at its
expense any of the Patent Rights against infringement by third parties and
shall be entitled to retain any recovery from such enforcement. Board shall
not communicate directly with any putative infringers, but shall notify
Licensee of all suspected infringement. Licensee shall pay Board a royalty in
the amount of five percent (5%) on any monetary recovery after deduction of all
attorney’s fees and costs. If required by a court pursuant to a court order,
Board consents to be joined as a party in any lawsuit by Licensee for patent
infringement relating to the Patent Rights. If the Board is so joined,
Licensee shall represent Board (at Licensee’s sole cost) in such proceedings
for all claims and issues relating to the Patent Rights and shall use
reasonable best efforts to cause to be dismissed or severed any counterclaim
against Board not related to the Patent Rights. To the extent such
counterclaims or other claims not relating to the Patent Rights are brought and
not dismissed or severed, Licensee shall not be required to assume the defense
thereof, but Licensee shall reasonably cooperate with the Board and its counsel
in connection with the defense thereof. Licensee shall retain sole control of
any litigation, subject to the statutory duties of the Attorney



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General of the State of Texas (other than litigation commenced by Board
pursuant to Section 8.2 hereof) relating to the Patent Rights, including choice
of legal counsel, venue, claims, counterclaims, and all related strategies,
issues, timing, and settlements. Licensee shall hold Board harmless and
indemnify Board for all reasonable attorneys fees and costs directly related to
any such enforcement of Patent Rights by Licensee and for all settlements,
awards and judgments against Board for all counterclaims against Board relating
to the Patent Rights and arising by virtue of the Board’s joinder as a party,
except to the extent based on intentional acts or omissions or willful
malfeasance by the Board, or its directors, officers, employees and agents.




     8.2 If Licensee shall fail to commence an action or take other appropriate
steps to enforce the Patent Rights within six months after Licensee receives
notice of a possible infringement by a third party, Board shall have the right
to enforce the Patent Rights upon 30 days prior written notice to Licensee
reasonably describing the circumstances underlying the claim of infringement.
Board shall be entitled to retain all recovery from any such enforcement by
Board, and Licensee shall fully cooperate with Board in any enforcement by
Board of the Patent Rights, provided Board pays Licensee’s reasonable direct
out-of-pocket expenses, excluding, but not limited to, attorneys’ fees, advisor
fees or fees relating to operations in the ordinary course of business.



     8.3 In any suit or dispute involving an infringer of the Licensed Subject
Matter, the Board and University shall cooperate fully with the Licensee,
subject to the statutory duties of the Attorney General of the State of Texas.
Licensee shall cooperate fully with the Board and University, and upon the
request and at the expense of the Board or University bringing suit, the
Licensee shall make available to the party bringing suit at reasonable times
and under appropriate conditions all relevant personnel, records, papers,
information, samples, specimens, and the like, during regular business hours,
which are in Licensee’s possession. Licensee shall give at least 60 days
advance written notice to Board or University prior to commencing enforcement
actions against an infringing party, unless a temporary or preliminary
injunction is being sought, in which case Licensee shall give at least 10 days
advance written notice; provided that, should there be exigent circumstances
and Licensee determines in good faith that immediate action is necessary
through a temporary restraining order or other ex parte proceeding, Licensee
shall give advance written notice thereof to Board or University as soon as
practicable under the circumstances.



9. ASSIGNMENT




     Licensee (and its successors and assigns) may assign this Agreement
without the prior written consent of Board in the event of a merger with a
third party (where Licensee (or its successors or assigns) is not the surviving
party), in the event of an acquisition of Licensee (or its successors or
assigns) by a third party, or in connection with the sale of substantially all
of Licensee’s (or its successors’ or assigns’) assets relating to this
Agreement to a third party, provided such third party in each incident assumes
all obligations owed to Board and University in this Agreement, agrees to
comply in all respects with the terms, conditions, and provisions of this
Agreement, and provides prompt notice thereof, in no event not more than ten
(10) business



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days from the occurrence thereof, to the Board. In addition, Licensee
(and its successors and assigns) may assign this Agreement with the prior
written consent of the Board, which shall not unreasonably be withheld. Without
limiting this Section 9, Board and University expressly agree that Licensee may
assign this Agreement to OLGC. In the event of any such permitted assignment,
the term, “Licensee” shall mean the successor by assignment of the assigning
Licensee’s rights and obligations hereunder.




10. PATENT MARKING




     Licensee shall mark permanently and legibly all Licensed Products
manufactured or Sold by it under this Agreement with such patent notice as may
be permitted or required under Title 35, United States Code.



11. INDEMNIFICATION




     11.1 Licensee shall hold harmless and indemnify Board, members of Board
(Regents), System and University, and their respective officers, employees,
agents and representatives (each, a “Licensee Indemnified Party”) from and
against any and all losses, damages, costs, expenses, liabilities, obligations,
claims, demands or causes of action (including without limitation those arising
on account of any infringement, injury or death of persons, or damage to
property) (“Losses”) caused by, or arising out of, or resulting from the
exercise or practice of the license granted hereunder by Licensee its
Subsidiaries or their officers, employees, agents or representatives, except to
the extent any such Losses arise from the grossly negligent acts or omissions
of any Licensee Indemnified Party. Licensee shall not be liable for any type
of indirect, special, consequential, exemplary or punitive damages (including,
without limitation, damages for loss of profits or expected savings) whatsoever
arising out of or in connection with this Agreement or its subject matter,
regardless of whether Licensee knows or should know of the possibility of such
damages.



     11.2 Board Indemnification.




     (a) To the extent authorized under the Constitution and laws of the
State of Texas, Board shall hold harmless and indemnify Licensee, its
officers, employees, agents and representatives, from and against any
Losses related to University’s obligation to pay royalties to Monsanto
under the Monsanto Agreement occurring or existing at any time before or
on the date that Monsanto assigns its joint ownership interest in the
Patent Rights to Licensee under Section 6.2(b) hereof. Board’s aggregate
liability under this Section 11.2(a) shall not exceed the amounts paid by
Licensee to Board under Section 6.1(a) and 6.1(b) hereof during the
one-year period preceding the date of the event that gave rise to such
liability.




     (b) To the extent authorized under the Constitution and laws of the
State of Texas, Board shall hold harmless and indemnify Licensee, its
officers, employees, agents and representatives from and against any
Losses caused by, or arising out of, or resulting



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from any breach, amendment, termination or other modification of the
Monsanto Agreement by Board, including any termination of the Monsanto
Agreement arising from any failure to pay royalties thereunder, except to
the extent such Losses arise from the negligent acts or omissions of any
Licensee.




     (c) Board shall, to the extent authorized under the Constitution and
laws of the State of Texas, indemnify and hold Licensee harmless from any
Losses resulting from the negligent acts or omissions of Board, its
agents or employees pertaining to the activities to be carried out
pursuant to this Agreement; provided, that (i) Board shall not hold
Licensee harmless from claims arising out of the negligent acts or
omissions, or willful malfeasance of Licensee, its officers, agents, or
employees, or any person or entity not subject to the University’s
supervision or control and (ii) Board shall not be liable for any type of
indirect, special, consequential, exemplary or punitive damages
(including, without limitation, damages for loss of profits or expected
savings) whatsoever arising out of or in connection with this Agreement
or its subject matter or the Monsanto Agreement, regardless of whether
Board knows or should know of the possibility of such damages.



12. INSURANCE




     12.1 Commencing no later than the Effective Date, or the date on which any
Licensed Subject Matter is distributed or Sold (including for the purpose of
obtaining regulatory approvals) by Licensee or by a Sublicensee, whichever
comes later, Licensee shall, at its sole cost and expense, procure and maintain
commercial general liability insurance in amounts not less than $3,000,000 per
incident and $3,000,000 annual aggregate, and Licensee shall use reasonable
efforts to have the Board, System, University, its Regents, officers, employees
and agents named as additional insured parties. Such commercial general
liability insurance shall provide (i) product liability coverage; (ii) broad
form contractual liability coverage for Licensee’s indemnification obligations
under this Agreement; and (iii) coverage for litigation costs. In no event
shall the minimum amounts of insurance coverage required herein be construed to
create a limit of Licensee’s liability with respect to its indemnification
obligations under this Agreement.



     12.2 Within fifteen (15) days of obtaining the insurance coverage required
under this Agreement, Licensee shall provide Board with written evidence of
such insurance coverage. Licensee shall provide Board with at least fifteen
(15) days prior written notice of the cancellation, non-renewal or material
change in such insurance.



     12.3 Licensee shall maintain such commercial general liability insurance
beyond the expiration or termination of this Agreement during (i) the period
that any Licensed Subject Matter developed pursuant to this Agreement is being
commercially distributed or Sold by Licensee or by a Sublicensee or agent of
Licensee; and (ii) the five (5) year period immediately following such period.



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13. USE OF BOARD AND COMPONENT’S NAME




     Licensee shall not use the name of University, System, or Board in
relation to the Licensed Subject Matter without express written consent, except
for the clauses listed in Exhibit 6 attached hereto.



14. CONFIDENTIAL INFORMATION; PUBLICATION




     14.1 Confidential Information.




     (a) Each of the parties to this Agreement shall use at least the
same degree of care it uses to prevent the disclosure of its own
confidential information to prevent the disclosure of Confidential
Information disclosed to it by the other party. Each party warrants to
the other that such care is reasonably calculated to prevent the
disclosure of Confidential Information.




     (b) Confidential Information will be used by the parties solely as
needed to fulfill the business transactions described in this Agreement
(the “Authorized Purpose”). Each party agrees to limit circulation and
disclosure of the Confidential Information to its employees, agents,
advisors, and representatives who (i) have a need to know such
Confidential Information in order to accomplish the Authorized Purpose,
(ii) have been informed of the confidential and proprietary nature of the
Confidential Information, and (iii) have agreed not to disclose the
Confidential Information in contravention of this Agreement. Each party
will cause its employees, agents, advisors, and representatives to whom
Confidential Information is disclosed or transferred to maintain the
Confidential Information in accordance with the terms and conditions of
this Section 14.1 as though such employees, agents, advisors, and
representatives were parties to this Agreement.




     (c) Notwithstanding this Section 14.1, neither party shall have
liability to the other with regard to any Confidential Information of the
other which: (i) was in the public domain at the time it was disclosed
by the receiver or comes into the public domain through no fault of the
receiver; (ii) was independently developed by the receiver prior to the
receipt of the Confidential Information; (iii) becomes known to the
receiver from another source without breach of this Agreement by the
receiver and otherwise not in violation of the disclosing party’s rights;
or (iv) is disclosed pursuant to the order or requirement of a court,
internal reporting, administrative agency or other governmental body
including disclosure pursuant to federal and state law and regulations.
In no event shall Confidential Information of Licensee be imputed to any
other component institution of System, other than University, that did
not have access to the Confidential Information of Licensee. Also, after
the Effective Date, Licensee hereby agrees that it will provide
reasonable cooperation to University in University’s attempt to
effectuate the assignment of Monsanto’s rights pursuant to Section
6.2(c), including but not limited to, the disclosure of the existence of
this Agreement, non-Confidential Information related to this Agreement
and the consummation of the transactions hereunder, limited confidential
information related to this Agreement after either consent from Licensee
or Monsanto’s



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execution of a Nondisclosure, Non-Use Agreement, in form and
substance reasonably satisfactory to Licensee, with University or Board.
The parties’ obligations pursuant to this paragraph shall survive for a
period of three (3) years after the termination of this Agreement.



     14.2 Board and University and their respective employees, agents and
representatives may publish their own scientific findings (but not Confidential
Information provided by Licensee to Board or University after the Effective
Date unless written waiver thereof is obtained from Licensee) from research
related to Licensed Subject Matter, only in accordance with the following
procedures:




     (a) prior to any publication relating to TP508 Technology, whether
orally, in the form of an abstract or manuscript or otherwise, such
information shall first be submitted to Licensee in writing for review
and comment;




     (b) after receiving such information for review and comment,
Licensee shall have 30 days to notify the entity or person which
submitted such information for review and comment (the “Requestor”) (i)
whether Licensee intends to apply for a patent for the subject matter of
the information and (ii) whether there is any Confidential Information of
Licensee contained therein, specifying such information that cannot be
published pursuant to this Section 14.2;




     (c) if within such 30-day period Licensee notifies Requestor that
Licensee will not file a patent application on the subject matter of the
information, Requestor may publish the information other than any
Confidential Information of Licensee identified by Licensee pursuant to
Section 14.2(b)(ii) hereof within the 30-day period;




     (d) if Licensee fails to communicate any decision to the Requestor
within such 30-day period, Requestor may publish the information; and




     (e) if within such 30-day period, Licensee notifies Requestor that
Licensee intends to file a patent application on the subject matter of
the information, Requestor may publish the information, other than any
Confidential Information of Licensee identified by Licensee pursuant to
Section 14.2(b)(ii) above, 60 days after the date Requestor receives such
notification or, if earlier, upon the filing by Licensee of a patent
application thereon.



15. GENERAL




     15.1 Except as provided in Section 6.6(c) hereof, any dispute or
controversy arising out of or relating to this Agreement, its construction or
its actual or alleged breach will be decided by mediation with the use of a
qualified mediator acceptable to each party. If the mediation does not result
in a resolution of such dispute or controversy, it will be finally decided by
an appropriate method of alternate dispute resolution, including without
limitation, arbitration, conducted in the city of Galveston, Texas in
accordance with the Commercial Dispute



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Resolution Procedures of the American Arbitration Association. The
arbitration panel will include members knowledgeable in the evaluation of
biotechnology. Judgment upon the award rendered may be entered in the highest
court or forum having jurisdiction, state or federal. The provisions of this
Article 15 will not apply to decisions on the validity of patent claims or to
any dispute or controversy as to which any treaty or law prohibits such
arbitration. The decision of the arbitration must be sanctioned by a court of
law having jurisdiction to be binding upon and enforceable by the parties




     15.2 This Agreement constitutes the entire and only agreement between the
parties for Licensed Subject Matter and all other prior negotiations,
representations, agreements, and understandings for Licensed Subject Matter are
superseded hereby. No agreements altering or supplementing the terms hereof
may be made except by means of a written document signed by the duly authorized
representatives of the parties.



     15.3 Any notice required by this License Agreement shall be given by
personal delivery or prepaid, first class, certified mail, return receipt
requested, addressed in the case of Board to:



	 	 	 
	

	 	Board of Regents
	

	 	The University of Texas System
	

	 	201 West 7th Street
	

	 	Austin, Texas 78701
	

	 	ATTENTION: Office of General Counsel
	

	 	FAX: (512) 499-4523
	

	 	PHONE: (512) 499-4462
	 
	 	 
	with copies to:

	 	University of Texas Medical Branch
	

	 	301 University Blvd., Route 0663
	

	 	Galveston, Texas 77555-0663
	

	 	ATTENTION: Director, Technology
	

	 	Development
Center

	

	 	FAX: (409) 747-1441
	

	 	PHONE: (409) 747-0551
	 
	 	 
	or in the case of Licensee (before

	 	Chrysalis BioTechnology, Inc.
	assignment of this Agreement to

	 	2200 Market, Suite 600
	OLGC) to:

	 	Galveston, Texas 77550
	

	 	ATTENTION: Director or President
	

	 	FAX: (409) 750-9253
	

	 	PHONE: (409) 750-9251
	 
	 	 
	or, in the case of Licensee (after

	 	OrthoLogic Corp.
	assignment of this Agreement to

	 	1275 West Washington Street
	OLGC) to:

	 	Tempe, AZ 85281-1210
	

	 	ATTENTION: President and CEO
	

	 	FAX: 602-286-2808







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	 	PHONE: 602-286-5500
	 
	 	 
	with a copy to:

	 	Quarles & Brady LLP
	

	 	One Renaissance Square
	

	 	Two North Central Avenue
	

	 	Phoenix, AZ 85004
	

	 	ATTENTION: Steven P. Emerick
	

	 	FAX: 602-417-2980
	

	 	PHONE: 602-230-5517






or such other addresses as may be given from time to time under the terms of
this notice provision. Notice shall be deemed given upon actual receipt.




     15.4 Licensee shall comply with all applicable federal, state and local
laws and regulations in the United States of America and all applicable laws of
countries other than the United States of America in connection with its
activities pursuant to this Agreement.



     15.5 This License Agreement shall be construed and enforced in accordance
with the laws of the United States of America and of the State of Texas.



     15.6 Failure of either party to enforce a right that under this Agreement
shall not act as a waiver of that right or the ability to later assert that
right relative to the particular situation.



     15.7 Headings included herein are for convenience only and shall not be
used to construe this Agreement.



     15.8 If any provision of this Agreement shall be found by a court to be
void, invalid or unenforceable, the same shall be reformed to comply with
applicable law or stricken if not so conformable, so as not to affect the
validity or enforceability of this Agreement.



[SIGNATURE PAGE FOLLOWS]




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     IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement.



	 	 	 
	THE UNIVERSITY OF TEXAS MEDICAL

BRANCH, for itself and on behalf of
	 	 
	 
	 	 
	THE BOARD OF REGENTS OF THE

	 	 
	UNIVERSITY OF TEXAS SYSTEM

	 	CHRYSALIS BIOTECHNOLOGY, INC







	 	 	 	 	 	 	 
	By:

	 	/s/ John D. Stobo
	 	By:
	 	/s/ Dennis L. McWilliams
	

	 	
 
	 	 	 	
 
	Name:

	 	John D. Stobo
	 	Name:
	 	Dennis L. McWilliams
	Title:

	 	President
	 	Title:
	 	Chief Operating Officer
	Date:

	 	April 27, 2004
	 	Date:
	 	April 26, 2004







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