Document:

ex10_6.htm

  
    Exhibit
      10.6

    CONSULTING
      AGREEMENT

    

    

    THIS
      CONSULTING
      AGREEMENT (the “Agreement”) is made and entered into by and between
      VIRAL GENETICS, INC., a Delaware corporation (the “Company”), and M. Karen
      Newell, PhD, an individual residing in the city of Colorado Springs, CO
      (“Consultant”) effective the 1st day of
      July,
      2007.

    

    (the
      Company and Consultant are jointly referred to herein as the
“Parties”)

    

    WHEREAS
      the Company is
      an early-stage business engaged in the development of certain technologies,
      investigational drugs, pharmaceutical products, diagnostics, and medical
      knowledge, as well as in-licensed patents and know-how obtained under an
      Exclusive License Agreement with the University of Colorado (the “University”)
      dated November __, 2007 (the “License”) (collectively referred to herein as the
“Technology”); and

    

    WHEREAS
      Consultant has experience, knowledge, contacts, and skills which are beneficial
      to the development of the Company, the Technology, and its areas of focus;
      and

    

    WHEREAS
      the Company
      wishes to engage Consultant and to define the nature of the relationship, to
      protect certain confidential information owned or possessed by the Company,
      and
      to establish certain other representations, warranties and
      covenants.

    

    NOW
      THEREFORE, for
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the Parties agree as follows.

    

    1)
      Non-Exclusive Engagement of Consultant; Term.  The Company hereby
      engages Consultant as its non-exclusive provider of the consulting services
      described in this Agreement, for a term (the “Term”), which will commence on the
      date of this Agreement and end December 31, 2010.

    

    2)
      Consultant Services.   On the terms and conditions set forth
      in this Agreement, Consultant will provide the following services to the Company
      as directed by the Company (the “Services”):

    
      	
                       
                a)

            	
              Consultant
                will advise and assist the Company with the worldwide development,
                evaluation, analysis, testing, research, and study of the
                Technology;

            

    

    
      	
                       
                b)

            	
              Consultant
                will design, manage and analyze studies of the Technology, including
                sourcing and recommending independent facilities as necessary, which
                such
                studies are separate from the sponsored research to be carried out
                by
                Consultant pursuant to the License and the Sponsored Research Agreement
                dated November __, 2007 between the Company and the
                University;

            

    

    
      	
                       
                c)

            	
              Consultant
                will assist Company in the drafting and review of any documents necessary
                to obtain or maintain patent protection on the Technology or Consultant
                Creations (as hereinafter defined in Exhibit
                C).

            

    

    
      	
                       
                d)

            	
              Consultant
                shall advise and assist the Company with respect to the authorship,
                presentation and publication of reports, results, analyses, studies
                and
                other scientific and medical activities of the Company, in recognized
                peer-reviewed literature or industry conferences, as mutually agreed
                to,
                and review, edit and provide comment on any manuscripts or abstracts
                relating to the Technology, whether authored by Consultant or not,
                provided they relate to her areas of
                expertise;

            

    

    
      	
                       
                e)

            	
              Consultant
                shall from time to time and as requested present on behalf of the
                Company
                in the areas of its Technology, its development and scientific strategy,
                and other areas where Consultant has expertise, including, without
                limitation, to the Company’s Scientific Advisory
                Board;

            

      	
                       
                f)

            	
              Consultant
                will assist and advise the Company in the preparation, review,
                discussions, follow-up, and other areas in Company dealings with
                the FDA,
                EMEA, and other regulatory agencies in connection
                with seeking permission for clinical trials, regulatory approvals,
                drug
                and device registration, and other development
                activities;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               

            	
            

    

    
      	
                       
                g)

            	
              Consultant
                will advise and assist the Company on other medical issues with respect
                to
                the Company’s products and drug candidates;
                and

            

    

    
      	
                       
                h)

            	
              Consultant
                will assist and advise the Company in other areas in which Consultant
                has
                expertise as reasonably requested from time to time by the
                Company.

            

    

    

    Services
      shall not (i) involve any use of the facilities, space, materials or other
      resources of the University (provided that use alone by the Consultant of the
      Consultant’s office space, phone, email, computer, word processor and similar
      assets shall not be considered a prohibited use of such University resources),
      or (ii) use direct or indirect financial support from University, including
      funding from any outside source awarded to or administered by University.
      Notwithstanding anything to the contrary in this Agreement, nothing in this
      Agreement shall be construed to restrict or limit the duties Consultant is
      performing or may perform in the course of, or incidental to, Consultant’s
      appointment at University.

    

    3)
      Method of Providing Services. Consultant shall be available for a
      teleconference meeting with the management of the Company at least twice per
      month during the Term. Consultant will perform Services, and may communicate
      with the Company’s management and other parties, through personal meetings,
      correspondence, telephone or video conferences, and such other methods, and
      at
      such times, as mutually determined, subject to the reasonable convenience of
      the
      parties.  Unless requested otherwise by the Company, Consultant shall
      communicate with the Company’s management through the Company’s President.
      Acting in good faith and consistent with ordinary business practices with
      respect to advisory relationships, Consultant shall devote a reasonable amount
      of time per month to the provision of the Services described herein provided
      that this does not materially conflict with Consultant’s appointment at the
      University.

    

    4)
      Performance. Consultant agrees to at all times faithfully, industriously,
      and to the reasonable best of her abilities, experience, and talents, perform
      all of the Services that may be required of and from them pursuant to the
      express and explicit terms hereof.

    

    5)
      Independence of Parties.  Nothing contained in this Agreement
      shall constitute either party as an employee, partner, co-venturer or agent
      of
      the other, it being intended that each shall act as an independent contractor
      with respect to the other. Consultant is not authorized to speak on behalf
      of
      the Company or bind it in any manner.

    

    6)
      Compensation.

    
      	
                       
                a)

            	
              Fees.  
                For
                and in consideration of the agreement of Consultant to enter into
                and
                perform under this Agreement, the Company shall pay to Consultant
                $3,000
                per month. The Company may, but only with specific written approval
                of
                Consultant, pay such fees in shares of common stock at the rate of
                $0.06
                per share. Such shares shall be Restricted Stock Awards that vest
                on the
                one-year anniversary of their issuance. In the event of termination
                of
                this Agreement prior to the shares vesting, they shall be returned
                cancelled and void for no additional
                consideration.

            

      	
                       
                b)

            	
              Options.  For
                and in consideration of the agreement of Consultant to enter into
                this
                Agreement and as a long-term incentive for the Consultant to use
                their
                best efforts in pursuit of the Company’s business, the Company shall grant
                to Consultant the option attached hereto as Exhibit B (the “Option”). Upon
                each one-year anniversary of this Agreement, the Company shall grant
                to
                Consultant an option of similar tenor except that the exercise price
                shall
                be the closing price of the Company’s common stock as reported on that
                day.

            

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
      	
                       
                c)

            	
              Royalty.  Consultant
                shall receive Three Fourths One Percent (0.75%) of Net Sales from
                sales in
                developed countries, and One Half Percent (0.125%) from sales in
                undeveloped countries.  “Developed countries” are herein defined
                as United States of America, Canada, Western and Eastern Europe,
                Japan,
                Australia, New Zealand, Israel, Russia, and other countries of the
                former
                Soviet Union, Hong Kong, Singapore, South Korea, and
                Taiwan.  “Undeveloped countries” are herein defined as countries
                other than developed countries. “Net Sales” and associated terms are as
                defined in Exhibit D.  If any such Net Sales are due to receipts
                for sales of Licensed Products or practice of Licensed Processes
                where
                there is more than one inventor, then the amount that Consultant
                shall
                receive herunder shall be proportionately
                reduced.

            

      	
                       
                d)

            	
              Benefits,
                Other Consideration.   No
                benefits, vacation pay, or other consideration or remuneration of
                any kind
                shall be owed to Consultant by the Company, unless specifically referenced
                herein. Expenses incurred in Consultant’s provision of the Services shall
                be reimbursed by the Company provided that they are pre-approved
                in
                writing by the Company.

            

    

    
      	
                       
                e)

            	
              Reimbursement
                of Expenses.  The Company shall reimburse all expenses
                incurred by Consultant in the performance of the Services, provided
                that
                any such expenses in excess of $500 shall require the prior, written
                authorization of the Company.

            

    

    

    7)
      Company Representations and Warranties.   The Company
      hereby represents and warrants, knowing that Consultant is relying thereon,
      that:

    
      	
                       
                a)

            	
              The
                Company is duly organized, validly existing and in good standing
                under the
                laws of the state of Delaware.  The Company is qualified to do
                business as a foreign corporation in each state in which its business
                requires it to be so qualified.

            

    

    
      	
                       
                b)

            	
              Upon
                receipt of the full exercise price, where applicable, all Shares
                issued to
                Consultant under the Option will be duly and validly issued, fully
                paid
                and non-assessable, and will be delivered free and clear of any liens,
                claims or encumbrances, except for restrictions imposed by reference
                to
                the registration requirements of the Securities Act of
                1933.

            

    

    

    8)
      Consultant Representations.  Consultant hereby represents, knowing
      that the Company is relying thereon, that:

    
      	
                       
                a)

            	
              Consultant
                is an Accredited Investor, as that term is defined in Regulation
                D in the
                Securities Act, 1933, and Consultant has completed the attached Exhibit
                A,
                or, in lieu of this, Consultant agrees that the Option shall only
                be
                issued immediately if and when an appropriate exemption from registration
                exists or an effective registration statement is
                available;

            

    

    
      	
                       
                b)

            	
              Consultant
                has not in the past, nor will she in the future engage in any activity
                contrary to the securities laws of any jurisdiction including, without
                limitation, those of the United States of America;
                and

            

    

    
      	
                       
                c)

            	
              Consultant
                has read and accepted the Viral Genetics Intellectual Property Agreement,
                attached hereto as Exhibit C, which is part of this Agreement and
                the
                provisions of which shall survive the expiration or earlier termination
                of
                this Agreement in strict accordance with the time periods as described
                therein.

            

    

    

    9)
      Stock Certificates.    All Shares delivered to
      Consultant pursuant to exercise of the Option shall bear a restrictive legend
      in
      the form normally used by the Company for the issuance of restricted shares,
      and
      shall be deemed restricted securities under SEC Rule 144.

    

    10)
      Changes to Common Stock. In the event that the Company shall undertake a
      recapitalization, reverse stock split, forward stock split, reclassification,
      or
      other change to its common stock (a “Change in Common Stock Properties”), the
      quantity of Shares which may be acquired through exercise of any delivered
      but
      unexercised Options or undelivered Options, and the exercise price payable
      thereto shall be increased
      or decreased proportionately, in accordance with the terms of said Change in
      Common Stock Properties.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    11)
      Extension and Renewal. The Term may be extended or
      renewed, and this Agreement may be amended, only by the written agreement of
      the
      parties.

    

    12)
      Indemnification.

    

    
      	
                       
                a)

            	
              The
                Company hereby indemnifies and defends the Consultant and each of
                her
                executors, heirs, assigns, and representatives, as applicable, (each,
                an
                "Indemnitee") against, and holds each Indemnitee harmless from, any
                loss,
                liability, obligation, deficiency, damage or expense including, without
                limitation, interest, penalties, reasonable attorneys' fees and
                disbursements (collectively, "Damages"), that any Indemnitee may
                suffer or
                incur based upon, arising out of, relating to or in connection with
                (whether or not in connection with any third party
                claim):

            

    

    
      	
               

            	
              i)

            	
              any
                breach of any representation or warranty made by the Company contained
                in
                this Agreement;

            

    

    
      	
               

            	
              ii)

            	
              the
                failure of the Company to perform or to comply with any covenant
                or
                condition required to be performed or complied with in accordance
                with
                this Agreement; and

            

    

    
      	
               

            	
              iii)

            	
              the
                good faith performance of the
                Services.

            

    

    
      	
                       
                b)

            	
              Indemnification
                Procedures for Third Party Claims.

            

    

    
      	
               

            	
              i)

            	
              Promptly
                after notice to an Indemnitee of any claim or the commencement of
                any
                action or proceeding, including any actions or proceedings by a third
                party (hereafter referred to as "Proceeding" or "Proceedings"), involving
                any Damage referred to in this Section, such Indemnitee shall, if
                a claim
                for indemnification in respect thereof is to be made against an Indemnitee
                pursuant to this Section, give written notice to the Company, setting
                forth in reasonable detail the nature thereof and the basis upon
                which
                such party seeks indemnification hereunder; provided, however, that
                the
                failure of any Indemnitee to give such notice shall not relieve the
                Company of its obligations hereunder, except to the extent that the
                Company is actually prejudiced by the failure to give such
                notice.

            

    

    
      	
               

            	
              ii)

            	
              In
                the case of any Proceeding by a third party against an Indemnitee,
                the
                Company shall, upon notice as provided above, assume the defense
                thereof,
                with counsel reasonably satisfactory to the Indemnitee, and, after
                notice
                from the Company to the Indemnitee of its assumption of the defense
                thereof, the Company shall not be liable to such Indemnitee for any
                legal
                or other expenses subsequently incurred by the Indemnitee in connection
                with the defense thereof (but the Indemnitee shall have the right,
                but not
                the obligation, to participate at its own cost and expense in such
                defense
                by counsel of its own choice) or for any amounts paid or foregone
                by the
                Indemnitee as a result of any settlement or compromise thereof that
                is
                effected by the Indemnitee (without the written consent of the
                Company).

            

    

    
      	
               

            	
              iii)

            	
              Anything
                in this Section 12 notwithstanding, if both the Company and the Indemnitee
                are named as parties or subject to such Proceeding and either party
                determines with advice of counsel that there may be one or more legal
                defenses available to it that are different from or additional to
                those
                available to the other party or that a material conflict of interest
                between such parties may exist in respect of such Proceeding, then
                the
                Company may decline to assume the defense on behalf of the Indemnitee
                or
                the Indemnitee may retain the defense on its own behalf, and, in
                either
                such case, after notice to such effect is duly given hereunder to
                the
                other party, the Company shall be relieved of its obligation to assume
                the
                defense on behalf of the Indemnitee, but shall be required to pay
                any
                legal or other expenses including, without limitation, reasonable
                attorneys' fees and disbursements, incurred by the Indemnitee in
                such
                defense.

            

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              iv)

            	
              If
                the Company assumes the defense of any such Proceeding, the Indemntiee
                shall cooperate fully with the Company and shall appear and give
                testimony, produce documents and other tangible evidence, and otherwise
                assist the Company in conducting such defense.  The Company
                shall not, without the consent of the Indemnitee, consent to entry
                of any
                judgment or enter into any settlement or compromise which does not
                include
                as an unconditional term thereof the giving by the claimant or plaintiff
                to such Indemnitee of a release from all liability in respect of
                such
                claim or Proceeding. Provided that proper notice is duly given, if
                the
                Company shall fail promptly and diligently to assume the defense
                thereof,
                then the Indemnitee may respond to, contest and defend against such
                Proceeding and may make in good faith any compromise or settlement
                with
                respect thereto, and recover from the Company the entire cost and
                expense
                thereof including, without limitation, reasonable attorneys' fees
                and
                disbursements and all amounts paid or foregone as a result of such
                Proceeding, or the settlement or compromise thereof.  The
                indemnification required hereunder shall be made by periodic payments
                of
                the amount thereof during the course of the investigation or defense,
                as
                and when bills or invoices are received or loss, liability, obligation,
                damage or expense is actually suffered or
                incurred.

            

    

    

    
      	
                       
                c)

            	
              Each
                of the Company and Consultant acknowledges and agrees that (i) Consultant
                is entering into this Agreement in her individual capacity and not
                as an
                employee or agent of the University, and (ii) the University is not
                a
                party to this Agreement and has no liability or obligation whatsoever
                hereunder.  The provisions of this paragraph shall survive the
                expiration or earlier termination of this
                Agreement.

            

    

    
      	
                       
                d)

            	
              The
                provisions of this section 12 shall survive the expiration or earlier
                termination of this Agreement.

            

    

    

    13)
      Termination.

    
      	
                       
                a)

            	
              Either
                party may terminate this Agreement upon not less than 15 days notice
                in
                the event of a material breach of this Agreement or material
                non-performance by the other party, which breach is not cured within
                10
                days after the giving of written notice to the breaching party specifying
                the circumstances of such breach.

            

    

    
      	
                       
                b)

            	
              The
                Company may terminate this Agreement without further notice to Consultant
                in the event that Consultant:

            

    

    
      	
               

            	
              i)

            	
              is
                convicted a felony or a violation of any securities
                laws;

            

    

    
      	
               

            	
              ii)

            	
              declares
                bankruptcy;

            

    

    
      	
               

            	
              iii)

            	
              has
                been grossly negligent in the performance of Services at least three
                times
                in any consecutive 30-day period, and Consultant has been notified
                in
                writing within 5 days of each such occurrence;
                or

            

    

    
      	
               

            	
              iv)

            	
              has
                engaged in material and willful or gross misconduct in the performance
                of
                Services hereunder.

            

    

    
      	
                       
                c)

            	
              Either
                party may terminate this Agreement without cause upon 90 days prior
                written notice to the other party.

            

    

    

    14)
      Consequences of Termination.   Any termination or expiration
      of this Agreement, whether or not for cause, shall not affect the obligation
      of
      the Company to pay compensation to Consultant that was earned or accrued prior
      to the date of termination or expiration, nor shall it be relieved from paying
      past, accrued, and future royalties pursuant to Section 6 c). Other than as
      specifically provided for herein, no further fees or payments of any kind shall
      be owed to Consultant upon or following Termination.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    15)
      Cooperation.  The parties shall deal with each other in good
      faith, good faith meaning honesty in fact and the observance of all commercial
      standards of fair dealing and usages of trade, which are regularly observed
      within the industry.

    

    16)
      No
      Strict Construction.  The language used in this Agreement shall be
      deemed to be the language chosen by the parties hereto to express their mutual
      intent, and no rule of strict construction shall be applied against any
      party.

    

    17)
      Arbitration.  In the event of dispute or controversy between the
      parties as to the performance hereof, this Agreement shall be and remain in
      full
      force and effect and all terms hereof shall continue to be complied with by
      both
      parties, it shall be submitted to two arbitrators, one to be appointed by each,
      and if those arbitrators do not agree, they shall select a third disinterested
      and competent person to act with them, and the decision of the three, or a
      majority of them, shall be final and conclusive.  If either party does
      not appoint an arbitrator as aforesaid within 90 days after receipt of notice
      to
      the other that it desires arbitration, which notice shall state the name and
      address of the arbitrator appointed by such other, and does not within such
      period furnish to such other party the name and address of the second
      arbitrator, then the arbitrator first named shall appoint a disinterested and
      competent arbitrator for the party thus defaulting, and the two arbitrators
      so
      appointed shall select a third to act with them as aforesaid and with like
      effect.  Cost of arbitration shall be borne by the
      Company.  Judgment upon the reward rendered may be entered in any
      court having jurisdiction thereof.

    

    18)
      Governing Law and Disputes.   This Agreement shall be
      governed by the laws of the State of California, without regard to choice of
      law
      provisions.

    

    19)
      Waiver.    Any party hereto may waive compliance by the
      other with any of the terms, provisions and conditions set forth herein;
      provided, however, that any such waiver shall be in writing specifically setting
      forth those provisions waived thereby.  No such waiver shall be deemed
      to constitute or imply waiver of any other term, provision or condition of
      this
      Agreement.

    

    20)
      Severability.  If and to the extent that any court of competent
      jurisdiction holds any provision or any part thereof of this Agreement to be
      invalid or unenforceable, such holding shall in no way affect the validity
      of
      the remainder of this Agreement.

    

    21)
      Counterpart and Headings.  This Agreement may be executed in
      two or more counterparts, each of which shall be deemed an original and all
      of
      which together shall constitute one and the same instrument.  All
      headings in this Agreement are inserted for convenience of reference and shall
      not affect its meaning or interpretation.

    

    22)
      Entire Agreement.  This Agreement is and shall be considered to be
      the only agreement or understanding between the parties hereto with respect
      to
      the engagement of Consultant by the Company.  All negotiations,
      commitments, and understandings acceptable to both parties have been
      incorporated herein.  No letter, telegram, or communication passing
      between the parties hereto shall be deemed a part of this Agreement; nor shall
      it have the effect of modifying or adding to this Agreement unless it is
      distinctly stated in such letter, telegram, or communication that it is to
      constitute a part of this Agreement and is to be attached as a rider to this
      Agreement and is signed by the parties to this Agreement.

    

    23)
      Modification of Contract.  This Agreement cannot be modified by
      tender, acceptance or endorsement of any instrument of payment, including check.
      Any words contained in an instrument of payment modifying this contract,
      including a waiver or release of any claims, or a statement referring to paying
      in full
      is
      void.  This Agreement can only be modified in a separate writing,
      other than an instrument of payment, signed by the
      parties.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    24)
      Enforcement.  Consultant
      acknowledges that any remedy at law for breach of
      Exhibit C would be inadequate, acknowledges that the Company would be
      irreparably damaged by an actual or threatened breach thereof, and agrees that
      the Company shall be entitled to an injunction restraining Consultant from
      any
      actual or threatened breach of Exhibit C as well as any further appropriate
      equitable relief without any bond or other security being
      required.  The Company may pursue enforcement of Exhibit C by
      commencing an action at law or in equity without first pursuing arbitration
      pursuant to Section 17 of this Agreement.  In addition to the
      foregoing, each of the
      parties
      hereto shall be entitled to any remedies available in equity or by statute
      with
      respect to the breach of the terms of this Agreement by the other
      party.

    

    25)
      Assignment.   The provisions of this Agreement shall be
      binding upon and inure to the benefit of the parties hereto, and their
      respective heirs, legal representatives, successors and assigns.  This
      Agreement may not be assigned without the consent of the parties;
provided,however, that nothing contained herein shall prevent
      Consultant from assigning or transferring any of the Shares or Options, or
      the
      royalties referred to in Section 6 (c) of this Agreement, to any person or
      entity in accordance with applicable securities laws and
      regulations.

    

    26)
      Notices.   All notices under this Agreement shall be in
      writing and shall be sent by certified or registered first class mail, return
      receipt requested, or shall be personally delivered, or sent by an overnight
      delivery service such as Federal Express, or shall be transmitted by telefax
      (provided such telefax message is confirmed by telephonic acknowledgment of
      receipt or by sending via other authorized means a confirmation copy of such
      notice) addressed to the parties at their respective last known business
      addresses.

    

    Agreed
      to
      effective the 1st day of
      July,
      2007

    
 

    
      	
              VIRAL
                GENETICS, INC.

               

               

              By:
                ________________________

                   
                 President

            	
              M.
                KAREN NEWELL

               

               

               __________________________

               

            

    

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    ACCREDITED
      INVESTOR QUESTIONNAIRE

    

    PERSONAL
      FINANCIAL INFORMATION.  The following information pertaining to the
      undersigned as a natural person and U.S. Persons within the meaning of
      Regulation S is being provided here in lieu of furnishing a personal
      financial statement.

    

    (a)           My
      individual net worth, or joint net worth with my spouse, exceeds
      $1,000,000.

    

    Yes  [   ]                      No  [   ]

    ________

    INITIAL

    

    (b)           My
      individual income in 2005 and 2006 exceeded $200,000 in each such year, and
      I
      reasonably expect my individual income will be in excess of $200,000 in
      2007.

    

    Yes  [   ]                      No  [   ]

    ________

    INITIAL

    

    (c)           The
      joint income of my spouse and I in 2005 and 2006 exceeded $300,000 in each
      such
      year, and I reasonably expect our joint income will be in excess of $300,000
      in
      2007.

    

    Yes  [   ]                      No  [   ]

    ________

    INITIAL

    

    (d)           Considering
      the foregoing and all other relevant factors in my financial and personal
      circumstances, I am able to bear the economic risk of an investment in the
      Company.

    

    Yes  [   ]                      No  [   ]

    ________

    INITIAL

    

    

    The
      foregoing is a true representation of my financial status:

    

    _______________________________

    M.
      Karen
      Newell

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    

    VIRAL
      GENETICS, INC.

    

    Option
      for the Purchase of 200,000

    Shares
      of Common Stock

    Par
      Value $0.001

    

    STOCK
      OPTION AGREEMENT

    

    THE
      HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH RESPECT TO THE OPTION
      AND
      COMMON STOCK ISSUABLE UPON EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES
      THAT
      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE
      SECURITIES LAWS OF ANY STATE.  THESE SECURITIES HAVE BEEN ACQUIRED FOR
      INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE
      LAWS
      OF THE APPLICABLE STATE OR A “NO ACTION” OR INTERPRETIVE LETTER FROM THE
      SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT THE SALE OR
      TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE
      STATUTES.

    

    This
      is to certify that, for value
      received, M. Karen Newell (the “Optionee”) is entitled to purchase from
VIRAL GENETICS, INC. (the “Company” or “Corporation”), on the
      terms and conditions hereinafter set forth, all or any part of 200,000 shares
      (“Option Shares”) of the Company’s common stock, par value $0.001 (the “Common
      Stock”), at the purchase price of $0.04 per share (“Option
      Price”).  Upon exercise of this option in whole or in part, a
      certificate for the Option Shares so purchased shall be issued and delivered
      to
      the Optionee.  If less than the total option is exercised, a new
      option of similar tenor shall be issued for the unexercised portion of the
      options represented by this Agreement.

    

    This
      option is granted subject to the
      following further terms and conditions:

    

    1.           This
      option shall vest immediately. The right to exercise this option with respect
      to
      any of the Option Shares shall terminate on the date that is the earlier of
      a)
      two years following termination for any reason of Optionee’s engagement under
      the Consulting Agreement between the Company and Optionee dated July 1, 2007
      (the “Consulting Agreement”) and b) December 31, 2012.  In order to
      exercise this option with respect to all or any part of the Option Shares for
      which this option is at the time exercisable, Optionee (or in the case of
      exercise after Optionee’s death, Optionee’s executor, administrator, heir or
      legatee, as the case may be) must take the following actions:

    

    (a)           Deliver
      to the Corporate Secretary of the Corporation an executed notice of exercise
      in
      substantially the form of that attached to this Agreement (the “Exercise
      Notice”) in which there is specified the number of Option Shares which are to be
      purchased under the exercised option.

    

    (b)           Pay
      the aggregate Option Price for the purchased shares either (i) through full
      payment in cash or by check made payable to the Corporation’s order, or (ii) by
      having the Company retain from the Option Shares otherwise issuable upon
      exercise of the Option, a number of shares having a fair market value equal
      as
      of the Exercise Notice to the Option Price of the Option
      Shares.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    (c)           Furnish
      to the Corporation appropriate documentation that the person or persons
      exercising the option (if other than Optionee) have the right to exercise this
      option.

    

    (d)           For
      purposes of this Agreement, the Exercise Date shall be the date on which the
      executed Exercise Notice shall have been delivered to the
      Company.  Except to the extent the sale and remittance procedure
      specified above is utilized in connection with the option exercise, payment
      of
      the Option Price for the purchased shares must accompany such Exercise
      Notice.

    

    (e)           Upon
      such exercise, the Company shall issue and cause to be delivered with all
      reasonable dispatch (and in any event within three business days of such
      exercise) to or upon the written order of the Optionee at its address, and
      in
      the name of the Optionee, a certificate or certificates for the number of full
      Option Shares issuable upon the exercise together with such other property
      (including cash) and securities as may then be deliverable upon such
      exercise.  Such certificate or certificates shall be deemed to have
      been issued and the Optionee shall be deemed to have become a holder of record
      of such Option Shares as of the Exercise Date.

    

    2.           The
      Optionee acknowledges that the shares subject to this option have not and will
      not be registered as of the date of exercise of this option under the Securities
      Act or the securities laws of any state. The Optionee acknowledges that this
      option and the shares issuable on exercise of the option, when and if issued,
      are and will be “restricted securities” as defined in Rule 144 promulgated by
      the Securities and Exchange Commission and must be held indefinitely unless
      subsequently registered under the Securities Act and any other applicable state
      registration requirements.  The Company is under no obligation to
      register the securities under the Securities Act or under applicable state
      statutes.  In the absence of such a registration or an available
      exemption from registration, sale of the Option Shares may be practicably
      impossible.  The Optionee shall confirm to the Company the
      representations set forth above in connection with the exercise of all or any
      portion of this option.

    

    3.           The
      Company, during the term of this Agreement, will obtain from the appropriate
      regulatory agencies any requisite authorization in order to issue and sell
      such
      number of shares of its Common Stock as shall be sufficient to satisfy the
      requirements of the Agreement.

    

    4.           The
      number of Option Shares purchasable upon the exercise of this option and the
      Option Price per share shall be subject to adjustment from time to time subject
      to the following terms.  If the outstanding shares of Common Stock of
      the Company are increased, decreased, changed into or exchanged for a different
      number or kind of shares of the Company through reorganization,
      recapitalization, reclassification, stock dividend, stock split or reverse
      stock
      split, the Company or its successors and assigns shall make an appropriate
      and
      proportionate adjustment in the number or kind of shares, and the per-share
      Option Price thereof, which may be issued to the Optionee under this Agreement
      upon exercise of the options granted under this Agreement.  The
      purchase rights represented by this option shall not be exercisable with respect
      to a fraction of a share of Common Stock.  Any fractional shares of
      Common Stock arising from the dilution or other adjustment in the number of
      shares subject to this option shall rounded-up to the nearest whole
      share.

    

    5.           The
      Company covenants and agrees that all Option Shares which may be delivered
      upon
      the exercise of this option will, upon delivery, be free from all taxes, liens,
      and charges with respect to the purchase thereof; provided, that the Company
      shall have no obligation with respect to any income tax liability of the
      Optionee and the Company may, in its discretion, withhold such amount or require
      the Optionee to make such provision of funds or other consideration as the
      Company deems reasonably necessary
      to satisfy any income tax withholding obligation under federal or state
      law.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    6.           The
      Company agrees at all times to reserve or hold available a sufficient number
      of
      shares of Common Stock to cover the number of Option Shares issuable upon the
      exercise of this and all other options of like tenor then
      outstanding.

    

    7.           This
      option shall not entitle the holder hereof to any voting rights or other rights
      as a shareholder of the Company, or to any other rights whatsoever, except
      the
      rights herein expressed, and no dividends shall be payable or accrue in respect
      of this option or the interest represented hereby or the Option Shares
      purchasable hereunder until or unless, and except to the extent that, this
      option shall be exercised.

    

    8.           The
      Company may deem and treat the registered owner of this option as the absolute
      owner hereof for all purposes and shall not be affected by any notice to the
      contrary.

    

    9.           In
      the event that any provision of this Agreement is found to be invalid or
      otherwise unenforceable under any applicable law, such invalidity or
      unenforceability shall not be construed as rendering any other provisions
      contained herein invalid or unenforceable, and all such other provisions shall
      be given full force and effect to the same extent as though the invalid or
      unenforceable provision were not contained herein.

    

    10.           This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the state of California, without regard to the principles of conflicts
      of law thereof.

    

    11.           Except
      as otherwise provided herein, this Agreement shall be binding on and inure
      to
      the benefit of the Company and the person to whom an option is granted
      hereunder, and such person’s heirs, executors, administrators, legatees,
      personal representatives, assignees, and transferees.

    

    IN
      WITNESS WHEREOF, the Company has
      caused this option to be executed on the __ day of November, 2007, by the
      signature of its duly authorized officer.

     

    
      	 	VIRAL
              GENETICS,
              INC.	 
	 	 	 	 
	 	 	 	 
	
               

            	
              By:
                

            	 	 
	 	 	Duly
              Authorized Officer	 

 

    The
      undersigned Optionee hereby
      acknowledges receipt of a copy of the foregoing option and acknowledges and
      agrees to the terms and conditions set forth in the option.

    

    
      	
               

            	
               

            	 	 
	 	 	M.
              Karen Newell	 

    

     

     

     

     

     

     

     

    

    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

    

    Exercise
      Notice

    (to
      be signed only upon exercise of Option)

    

    TO:         Viral
      Genetics, Inc.

    

    The
      Optionee, holder of the attached
      option, hereby irrevocable elects to exercise the purchase rights represented
      by
      the option for, and to purchase thereunder, ________________________________
      shares of common stock of Viral Genetics, Inc., and herewith makes payment
      therefor, and requests that the certificate(s) for such shares be delivered
      to
      the Optionee at:

    

    ______________________________________________________________________________

    

    ______________________________________________________________________________

    

    ______________________________________________________________________________

    

    If
      acquired without registration under
      the Securities Act of 1933, as amended (“Securities Act”), the Optionee
      represents that the Common Stock is being acquired without a view to, or for,
      resale in connection with any distribution thereof without registration or
      other
      compliance under the Securities Act and applicable state statutes, and that
      the
      Optionee has no direct or indirect participation in any such undertaking or
      in
      the underwriting of such an undertaking.  The Optionee understands
      that the Common Stock has not been registered, but is being acquired by reason
      of a specific exemption under the Securities Act as well as under certain state
      statutes for transactions by an issuer not involving any public offering and
      that any disposition of the Common Stock may, under certain circumstances,
      be
      inconsistent with these exemptions. The Optionee acknowledges that the Common
      Stock must be held and may not be sold, transferred, or otherwise disposed
      of
      for value unless subsequently registered under the Securities Act or an
      exemption from such registration is available.  The Company is under
      no obligation to register the Common Stock under the Securities Act, except
      as
      provided in the Agreement for the option.  The certificates
      representing the Common Stock will bear a legend restricting transfer, except
      in
      compliance with applicable federal and state securities statutes.

    

    The
      Optionee agrees and acknowledges
      that this purported exercise of the option is conditioned on, and subject to,
      any compliance with requirements of applicable federal and state securities
      laws
      deemed necessary by the Company.

    

    DATED
      this ________ day of
      ________________________________, __________.

    

    

    

    _______________________________________

    Signature

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    

    Viral
      Genetics Intellectual Property Agreement

    

    (the
      “Viral Genetics IP Agreement”)

    

    In
      consideration of Consultant entering into that certain Consulting Agreement
      dated as of the date hereof (the “Consulting Agreement”) with Viral Genetics,
      Inc. (“Viral”), Consultant agrees as follows. Capitalized terms used herein that
      are not defined in this Viral Genetics IP Agreement shall be defined as in
      the
      Consulting Agreement.

    

    1.
      Non-Solicitation.  Consultant acknowledges that, in the
      course of performing Services (as used throughout this Viral Genetics IP
      Agreement as defined in the Consulting Agreement) for or on behalf of Viral,
      having access to Viral’s technology, reports, processes, materials, knowledge
      and know-how, data, facilities, books and records, Consultant may from time
      to
      time receive Confidential Information (as defined in Paragraph 2, below) of
      or
      with respect to Viral and hereby stipulates and agrees that such Confidential
      Information is a part of and essential to the operations and goodwill of
      Viral.  In connection and in furtherance of the foregoing, Consultant
      may not (whether directly or indirectly; as the principal or on such person’s
      own account; or solely or jointly with others as an Consultant, agent,
      independent contractor, consultant, general or limited partner, member,
      stockholder or holder of equity securities of any other person, other than
      through ownership of less than one percent of a class of publicly-traded
      securities of a company) engage in any of the conduct or activity described
      below in this Paragraph 1.

    

    (a)           Consultant
      may not, so long as Consultant is a Consultant of Viral
      pursuant to the Consulting Agreement and until the third anniversary of the
      effective date of termination of the Consulting Agreement for any reason,
      solicit, induce or influence any person that at such time is (or, during the
      six
      (6) month period ending on the effective date of termination of the Consulting
      Agreement, was) a vendor, licensor, licensee, distributor, customer, client,
      Consultant, or independent contractor of Viral, excluding the University, to
      terminate any contract or agreement with Viral or leave the service of
      Viral.  Consultant acknowledges that the restrictions in this
      subparagraph (a) of this Paragraph 1 will not impair Consultant’s ability to
      carry on Consultant’s profession or earn a living.

    

    (b)           Consultant
      may not, so long as Consultant is a Consultant of Viral and until the third
      anniversary of the effective date of termination of the Consulting Agreement
      for
      any reason, without the express prior written consent of Viral, participate
      either directly or indirectly in any discussion or negotiation with any person
      that at such time is (or, during the six month period ending on the effective
      date of termination of the Consulting Agreement, was) a vendor, licensor,
      licensee, distributor, customer, client, Consultant, or independent contractor
      of Viral the purpose of which discussion or negotiation would be materially
      adverse to the interests of Viral and the relationship existing between Viral
      and such person.  Consultant acknowledges that the restrictions in
      this subparagraph (b) of Paragraph 1 will not impair Consultant’s ability to
      carry on Consultant’s profession or earn a living.

    

    2.
      Non-Disclosure of Information.  Consultant understands that
      the covenants and agreements in this Paragraph 2 may limit Consultant’s ability
      to earn a livelihood in a business similar to the business of Viral of
      researching, developing and distributing biomedical products and technology,
      but
      nevertheless believes that Consultant has received and will receive sufficient
      consideration and other benefits from Viral so as to clearly justify such
      restrictions which, in any event (given Consultant’s education, skills and
      ability), Consultant does not believe would prevent Consultant from earning
      a
      living:

    

    (a)           Consultant
      acknowledges that, in the course of performing Services for or on behalf of
      Viral, having access to Viral’s technology, reports, processes, knowledge and
      know-how, data, facilities, books and records, or otherwise being associated
      with Viral, Consultant will have access to, and become acquainted with,
      Confidential Information of or with respect to Viral and hereby stipulates
      and
      agrees that such Confidential Information is a part of and essential to the
      operations and goodwill of Viral.  Consultant (i) hereby stipulates
      and acknowledges that the Confidential Information constitutes important,
      material, proprietary and confidential trade secrets of Viral that affect the
      successful conduct of the business and goodwill of, Viral; (ii) stipulates
      and
      acknowledges that any and all of the Confidential Information is the sole and
      exclusive property of Viral, regardless of
      whether Consultant was engaged in the development of any of such Confidential
      Information while performing Services for or on behalf of Viral; (iii) agrees
      to
      keep all such Confidential Information in strictest confidence, and not to,
      directly or indirectly, use or divulge, disclose or communicate to any person
      (other than a duly-authorized representative of Viral) any such Confidential
      Information other than in the ordinary course of business of Viral for the
      benefit of Viral; and (iv) agrees not to copy or otherwise duplicate any such
      Confidential Information or knowingly allow anyone else to copy or otherwise
      duplicate such Confidential Information, other than in the ordinary course
      of
      business of Viral for the benefit of Viral.  Upon the termination of
      the Consulting Agreement, and at any time at the request of Viral, shall
      promptly return to Viral all copies of such Confidential Information delivered
      to or obtained by Consultant or, at the election of Viral, certify that all
      copies of such Confidential Information in the possession of Consultant or
      any
      person who received such Confidential Information from Consultant have been
      destroyed or erased, except that Consultant may keep one (1) copy thereof for
      the purpose of complying with the terms of this
      Agreement.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    (b)           “Confidential
      Information” means, with respect to Viral, any technical,
      financial, or business information (including, without limitation, manuals,
      forms, memoranda, reports, journals, data, test results, correspondence,
      business plans, customer lists, pricing lists, contracts, plans or
      specifications, or the like) that may disclose (or may reasonably be expected
      to
      disclose) the customs and practices, marketing methods and data, services and
      products, methods of doing business, manner of operation, know-how, formulas,
      technical data or information, clinical study protocols, patient or biologic
      information, manufacturing information or know-how, methods, processes,
      compounds, and other confidential information, regardless of whether in written,
      oral, graphic, encoded, encrypted, tangible, or intangible forms, all of which
      the Consultant hereby acknowledges constitute “trade secrets” within the meaning
      of the Uniform Trade Secrets Act, codified at sections 3426 et seq. of
      the California Civil Code.

    

    (c)           Consultant
      shall have no obligation to preserve the confidential or proprietary nature
      of
      any information that (i) was already known to Consultant
      free of any obligation to keep such information confidential at the time of
      disclosure of such information; (ii) is or becomes publicly known through no
      wrongful act of Consultant; (iii) is rightfully received from a third person
      having no direct or indirect secrecy or confidentiality obligation to Viral;
      (iv) is disclosed to a third person by Viral without restrictions on
      confidentiality similar to those contained in this Paragraph 2; (v) is approved
      for disclosure by written authorization of Viral; (vi) is developed by
      Consultant or on Consultant’s behalf independently of the information disclosed
      to Consultant by Viral as shown by written record; or (vii) Consultant is
      obligated to produce pursuant to an order of a court of competent jurisdiction
      or a valid administrative or Congressional subpoena, provided that Consultant
      promptly notifies Viral and cooperates reasonably with Viral’s efforts to
      contest or limit the scope of such order.

    

    (d)           Except
      for the assignment provisions as provided in Section 3 of this Viral Genetics
      IP
      Agreement, the provisions of this Paragraph 2 shall apply to
      Consultant throughout the term of the Consulting Agreement and continue in
      perpetuity.

    

    3.
      Assignment of Inventions.  Consultant shall promptly disclose
      any Consultant Creations (as defined below) to Viral and any such Consultant
      Creations shall be Viral’s sole property.  All original works of
      authorship that are made by Consultant (in whole or in part, either alone or
      jointly with others) during and in the performance of the Services and that
      are
      protectable by copyright are “works made for hire” as defined in the United
      States Copyright Act (17 U.S.C.A. section 101).  “Consultant
      Creation(s)” means any idea, concept, discovery, development, device, design,
      apparatus, use, machine, practice, process, method, product, composition of
      matter, improvement, formula, algorithm, literary or graphical or audiovisual
      work or sound recording, mask work, or computer program of any kind (whether
      or
      not subject to patent, copyright, trademark, trade secret, mask work right,
      or
      similar protection) that relate(s) in any way to any of Viral’s biological or
      pharmaceutical products under investigation or development from time to time,
      or
      any manufacturing or production know-how, scientific know-how, processes, or
      procedures pertaining thereto that are made by Consultant, in whole or in part,
      either solely or jointly with others, during and in the performance of the
      Services, provided, however, that Consultant does not have a pre-existing
      obligation to assign any such Consultant Creation to the University. Consultant
      shall promptly notify Viral in advance or at the earliest reasonable time if
      any
      work being performed or proposed by Viral to be performed by Consultant under
      this Agreement may give rise to Consultant Creations that may be assignable
      to
      University under any agreements.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    (a)           Consultant
      hereby assigns to Viral, and agrees to assign to Viral in the future where
      appropriate, any and all such Consultant Creations, and agrees to cooperate
      with
      Viral in the execution of appropriate instruments assigning and evidencing
      such
      assignment and ownership rights of Viral, to the maximum extent permitted by
      section 2870 of the California Labor Code.  In order that Viral may
      perfect and protect its rights to Consultant Creations as provided hereunder,
      Consultant agrees that Consultant’s obligations regarding assignment of such
      Consultant Creations to Viral shall survive termination of Consultant’s
      engagement with Viral for a term of three years following the date of
      termination of the Consulting Agreement for any reason.

    

    4.
      Enforcement.  Consultant acknowledges that the covenants and
      the restrictions contained in this Agreement are necessary and required for
      the
      adequate protection of Viral and are necessary to preserve the goodwill of
      Viral
      and the value of its existing Confidential Information, inventions, contracts
      and relationships; such covenants relate to matters that are of a special,
      unique and extraordinary character that give each of such covenants or
      restrictions a special, unique and extraordinary value; and, a breach of any
      such covenant or restriction will result in loss of goodwill, invasion of
      property rights of Viral, unfair competition by the breaching party, and other
      irreparable harm and damages to Viral, which cannot be adequately compensated
      by
      a monetary award. It
      is
      accordingly agreed that Viral or any of its subsidiaries shall be entitled
      to an
      injunction or injunctions to prevent breaches of this Agreement and to enforce
      specifically the terms and provisions of this Agreement. 
      Nothing in this Agreement shall be construed as prohibiting Viral from pursuing
      any other legal or equitable remedies available to Viral for such breach or
      threatened breach of any of the provisions of this Agreement (including, without
      limitation, recovery of all damages from Consultant and an equitable accounting
      of all earnings, profits and other benefits arising from such
      violation).

    

    5.
      Conflict.  In the event of any conflict between any provision
      in this Agreement and any provision in the Consulting Agreement, the
      provision(s) in the Consulting Agreement shall govern.

    

    
      	
              AGREED:

              CONSULTANT

               

              __________________________________

              M.
                Karen Newell

               

               

              VIRAL
                GENETICS, INC.

               

              __________________________________

              Haig
                Keledjian,
                President

               

            	
               

               

               

              DATED:_________________________

               

               

               

               

               

              DATED:_________________________

               

            

    

     

     

     

    
 

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    EXHIBIT
      D

    

    Definitions
      for Net Sales

    

    “Net
      Sales” shall mean the total gross receipts for sales of Licensed Products or
      practice of Licensed Processes by or on behalf of Viral Genetics or its
      Affiliates, and from leasing, renting, or otherwise making Licensed Products
      available to others without sale or other dispositions, whether invoiced or
      not,
      less returns and allowances, packing costs, insurance costs, freight out, taxes
      or excise duties imposed on the transaction (if separately invoiced and paid),
      and wholesaler and cash discounts in amounts customary in the trade to the
      extent actually granted.  No deductions shall be made for commissions,
      or for the costs of collections.  Net Sales shall also include the
      fair market value of any non-cash consideration received by Licensee or its
      Affiliates for the sale, lease, or transfer of Licensed Products or Licensed
      Processes.

    

    “Patent
      Rights” shall mean all of the following intellectual property:

    a)
      the
      United States and foreign patents and/or patent
      applications,  provisional patent applications, and invention
      disclosures referred to in section 3 of Exhibit C;

    b)
      United
      States and foreign patents issued from the applications referred to in section
      3
      of Exhibit C and from divisionals and continuations of these
      applications;

    c)
      claims
      of U.S. and foreign continuation-in-part applications, and of the resulting
      patents, that are directed to subject matter specifically described in the
      U.S.
      and foreign applications referred to in section 3 of Exhibit C;

    d)
      claims
      of all foreign patent applications, and of the resulting patents, that are
      directed to subject matter specifically described in the United States patents
      and/or patent applications described in this Exhibit; and any reissues of United
      States patents described in this Exhibit

    

    “Licensed
      Process(es)” shall mean any process, art, or method that is covered in whole or
      in part by an issued, unexpired claim or a pending claim contained in the Patent
      Rights.

    

    “Licensed
      Product(s)” shall mean any:

    a)
      product or part thereof that is covered in whole or in part by an issued,
      unexpired claim or a pending claim contained in the Patent Rights in the country
      in which any such product or part thereof is made, used or sold;
      and

    b)
      product, apparatus, or part thereof that is manufactured by using a process
      covered in whole or in part by an issued, unexpired claim or a pending claim
      contained in the Patent Rights in the country in which any Licensed Processes
      is
      used.

    

    “Affiliate(s)”
      shall mean every corporation, or entity, which, directly or indirectly, or
      through one or more intermediaries, controls, is controlled by, or is under
      common control with Viral.  For the purposes of this definition, the
      term “control” means (a) beneficial ownership of at least fifty percent (50%) of
      the voting securities of a business organization with voting securities, or
      (b)
      a fifty percent (50%) or greater interest in the net assets or profits of a
      partnership or business organization without voting securities.

     

     

     

     

     

    
 

    16Exhibit
        10.01

         

        
        SECOND AMENDMENT

        
        TO

        
        3-YEAR REVOLVING CREDIT
        AGREEMENT

        
        dated as of

        
        December 18, 2007

        
        among

         

        NUSTAR
        GP HOLDINGS, LLC,

        as
        Borrower,

         

        
        JPMORGAN CHASE BANK, N.A.,

        as
        Administrative Agent,

         

        
        and

        The
        Lenders Party Hereto

         

         

        
        

        

        

        
            	
                        
                         

                    	
                        
                        SECOND AMENDMENT TO 3-YEAR REVOLVING CREDIT
                        AGREEMENT

                    

        

         

        
        THIS SECOND AMENDMENT TO 3-YEAR REVOLVING CREDIT AGREEMENT
        (this “Second
        Amendment”) dated as of December 18, 2007, is among
        NUSTAR GP HOLDINGS, LLC, a
        Delaware limited liability company (the
        “Borrower”);
        JPMORGAN CHASE BANK, N.A., as administrative
        agent (in such capacity, together with its successors in such capacity, the
        “Administrative Agent”) for
        the lenders party to the Credit Agreement referred to below (collectively, the
        “Lenders”); and the
        undersigned Lenders.

        R
        E C I T A L S

        
        A.           
        The Borrower, the Administrative Agent and the Lenders are parties to that
        certain 3-Year Revolving Credit Agreement dated as of July 19, 2006 (as amended by the
        First Amendment to 3-Year Revolving Credit Agreement dated as of November 30, 2006, the
        “Credit Agreement”),
        pursuant to which the Lenders have made certain extensions of credit available to the
        Borrower.

        
        B.           
        The Borrower has requested and the Lenders have agreed to amend certain
        provisions of the Credit Agreement.

        
        C.           
        NOW, THEREFORE, in consideration of the premises and the mutual covenants
        herein contained, for good and valuable consideration, the receipt and sufficiency of which
        are hereby acknowledged, the parties hereto agree as follows:

        
        Section 1.         
        Defined Terms. Each capitalized term used
        herein but not otherwise defined herein has the meaning given such term in the Credit
        Agreement. Unless otherwise indicated, all references to Sections and Schedules in this
        Second Amendment refer to Sections of, and Schedules to, the Credit Agreement.

        
            	
                         

                    	
                        
                        Section 2.

                    	
                        
                        Amendments to Credit
                        Agreement.

                    

        

        
            	
                         

                    	
                        
                        2.1

                    	
                        
                        Amendments to Section
                        1.01.

                    

        

        
        (a)          
        The definition of
        “Agreement” is hereby
        amended in its entirety to read as follows:

        
        “Agreement”
        means this 3-Year Revolving Credit Agreement, as amended by the First Amendment and the
        Second Amendment, as the same may be amended, modified, supplemented or restated from time
        to time in accordance herewith.

        
        (b)          
        The definition of
        “Borrower” is hereby amended
        in its entirety to read as follows:

        
        “Borrower”
        means NuStar GP Holdings, LLC, a Delaware limited liability company (formerly known as
        Valero GP Holdings, LLC).

        
         

        
        (c)          
        The definition of “Consolidated Debt Coverage
        Ratio” is hereby amended in its entirety to read as
        follows:

         

        
        

        

        

        
        “Consolidated Debt Coverage
        Ratio” means, for any day, the ratio of (a) all
        Indebtedness of the MLP and its subsidiaries (excluding the principal amount of Hybrid
        Equity Securities in an aggregate amount not to exceed 15% of Total Capitalization), on a
        consolidated basis, as of the last day of the then most recent Rolling Period over
        (b) Consolidated EBITDA of the MLP and its subsidiaries for such Rolling
        Period.

        
        (d)          
        The definition of “Consolidated
        EBITDA” is hereby amended in its entirety to read as
        follows:

        
        “Consolidated
        EBITDA” means, without duplication, as to the MLP and its
        subsidiaries, on a consolidated basis for each Rolling Period, the amount equal to
        Consolidated Operating Income for such period (a) plus the following to the extent deducted
        from Consolidated Operating Income in such period: (i) depreciation, amortization and other
        non-cash charges for such period (including any non-cash losses or negative adjustments
        under Statement of Financial Accounting Standards 133 (and any statements replacing,
        modifying or superseding such statement) as the result of changes in the fair market value
        of derivatives) and (ii) cash distributions received by the MLP and its subsidiaries from
        Skelly-Belvieu Pipeline Company, and similar joint ventures, during such period; (b) minus
        all non-cash income added to Consolidated Operating Income in such period (including any
        non-cash gains or positive adjustments under Statement of Financial Accounting Standards
        133 (and any statements replacing, modifying or superseding such statement) as the result
        of changes in the fair market value of derivatives); and (c) plus any Material Project
        EBITDA Adjustments for such period; provided
        that Consolidated EBITDA shall be adjusted from time to time as necessary to
        give pro forma effect to acquisitions or Investments (other than Joint Venture Interests)
        or sales of property by the MLP and its subsidiaries permitted by the NuStar Logistics
        Credit Agreement.

        
        (e)          
        The definition of “Consolidated Operating
        Income” is hereby amended in its entirety to read as
        follows:

        
        “Consolidated Operating
        Income” means, as to the MLP and its subsidiaries on a
        consolidated basis for each Rolling Period, the amount equal to gross margin (including any
        proceeds received from business interruption insurance provided that such proceeds are
        received during any Rolling Period with respect to an event or events that occurred during
        such Rolling Period) minus operating
        expenses, general and administrative expenses, depreciation and amortization, and taxes
        other than income taxes, in each case for such period.

        
        (f)           
        The definition of “Material
        Agreements” is hereby amended in its entirety to read as
        follows:

        
        “Material
        Agreements” means the Limited Liability Company Agreement
        (Borrower) and the Partnership Agreement (MLP), as each such agreement may be amended,
        supplemented or otherwise modified from time to time as permitted

        
         

        
        2

        
         

        
        

        

        

        
        hereby.

        
        (g)          
        The definition of
        “MLP” is hereby amended in
        its entirety to read as follows:

        
        “MLP” means
        NuStar Energy L.P., a Delaware limited partnership.

        
        (h)          
        The definition of “Permitted
        Holder” is hereby amended in its entirety to read as
        follows:

        
        “Permitted
        Holder” means any Investment Grade Person.

         

        
        (i)           
        The definition of
        “subsidiary” is hereby
        amended in its entirety to read as follows:

        
        “subsidiary”
        means, with respect to any Person (the
        “parent”) at any date, any
        corporation, limited liability company, partnership, association or other entity the
        accounts of which would be consolidated with those of the parent in the parent’s
        consolidated financial statements if such financial statements were prepared in accordance
        with GAAP as of such date, as well as any other corporation, limited liability company,
        partnership, association or other entity (a) of which securities or other ownership
        interests representing more than 50% of the equity or more than 50% of the ordinary voting
        power or, in the case of a partnership, more than 50% of the general partnership interests
        are, as of such date, owned, controlled or held, or (b) that is, as of such date,
        otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the
        parent and one or more subsidiaries of the parent. Unless otherwise expressly indicated
        herein, as used herein, the words “the MLP and its subsidiaries” (or any
        correlative thereof) shall be deemed to mean the MLP and its “Restricted
        Subsidiaries” (as defined in the NuStar Logistics Credit Agreement) (or any
        correlative thereof).

        
        (j)           
        The defined term “Valero
        Logistics” is hereby amended to read
        “NuStar Logistics” and the
        definition thereof is amended in its entirety to read as follows:

        
        “NuStar
        Logistics” means NuStar Logistics, L.P., a Delaware limited
        partnership (formerly known as Valero Logistics Operations, L.P.)

        
        (k)          
        The defined term “Valero Logistics Credit
        Agreement” is hereby amended to read
        “NuStar Logistics Credit
        Agreement” and the definition thereof is amended in its
        entirety to read as follows:

        
        “NuStar Logistics Credit
        Agreement” means that certain 5-Year Revolving Credit
        Agreement dated as of December 10, 2007 among NuStar Logistics, the MLP, JPMorgan Chase
        Bank, N.A., as administrative agent, and the lenders and other agents party thereto, as the
        same may from time to time be amended, modified, supplemented or restated.

         

        
        3

         

        
        

        

        

        
        (l)           
        The following definitions are hereby added where alphabetically appropriate
        to read as follows:

        
        “Consolidated Net
        Worth” means, at any time, an amount equal to the
        consolidated partners’ equity of the MLP and its subsidiaries.

        
        “Second
        Amendment” means the Second Amendment to 3-Year Revolving
        Credit Agreement dated as of December 18, 2007 among the Borrower, the Administrative Agent
        and the Lenders party thereto.

        
        “Standard
        Ratio” has the meaning given such term in Section
        6.11(a).

        
        “Total
        Capitalization” means, at the date of any determination
        thereof, the sum of (a) all Indebtedness of the MLP and its subsidiaries, determined on a
        consolidated basis in accordance with GAAP plus
        (b) Consolidated Net Worth.

        
            	
                         

                    	
                        
                        (m)

                    	
                        
                        The following definitions are hereby deleted in their
                        entirety:

                    

        

        
        “Acquisition”

        
        “Acquisition
        Documents”

        
        “Hybrid Equity
        Credit”

        
            	
                        
                         

                    	
                        
                        “Valero
                        Energy”

                    

        

         

        
            	
                         

                    	
                        
                        2.2

                    	
                        
                        Amendments to Section
                        5.01.

                    

        

        
        (a)          
        Section 5.01(e) is hereby renumbered to be Section 5.01(f) and a new Section
        5.01(e) is hereby added to read as follows:

        
        “(e)        
        if, at any time, any of the consolidated subsidiaries of the MLP are
        “Unrestricted Subsidiaries” (as defined in the NuStar Logistics Credit
        Agreement), then concurrently with any delivery of financial statements under Section
        5.01(a) or Section 5.01(b), a certificate of a Financial Officer setting forth
        consolidating spreadsheets that show all consolidated “Unrestricted
        Subsidiaries” (as defined in the NuStar Logistics Credit Agreement) and the
        eliminating entries, in such form as would be presentable to the auditors of the MLP;
        and”         

        
        (b)          
        Section 5.01 is hereby amended by adding the following at the end
        thereof:

        
        “Documents required to be delivered pursuant to Section 5.01(a) or
        Section 5.01(b) (to the extent any such documents are included in materials otherwise filed
        with the Securities and Exchange Commission) may be delivered electronically and if so
        delivered, shall be deemed to have been delivered on the date (i) on which the Borrower or
        the MLP posts such documents, or provides a link thereto on the MLP’s website on the
        Internet at www.nustarenergy.com; or

        
         

        
        4

        
         

        
        

        

        

        
        (ii) on which such documents are posted on the Borrower’s or the
        MLP’s behalf on an Internet or intranet website, if any, to which each Lender and the
        Administrative Agent have access (whether a commercial, third-party website or whether
        sponsored by the Administrative Agent); provided
        that the Borrower shall notify the Administrative Agent and each Lender (by
        telecopier or electronic mail) of the posting of any such documents and provide to the
        Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such
        documents. Notwithstanding anything contained herein, in every instance the Borrower shall
        be required to provide paper copies of the compliance certificate required by Section
        5.01(c) to the Administrative Agent and the Lenders. Except for such compliance
        certificates, the Administrative Agent shall have no obligation to request the delivery or
        to maintain copies of the documents referred to above, and in any event shall have no
        responsibility to monitor compliance by the Borrower with any such request for delivery,
        and each Lender shall be solely responsible for requesting delivery to it or maintaining
        its copies of such documents.”

        
        2.3          
        Amendment to Section 5.02(b). Section 5.02(b)
        is hereby amended by deleting the words “(other than Valero Energy)” in the
        third line thereof.

        
        2.4          
        Amendments to Section 6.11(a). Section 6.11(a)
        is hereby amended in its entirety to read as follows:

        
        “(a)        
        The Borrower will not permit at any time the Consolidated Debt Coverage
        Ratio to be in excess of 5.00 to 1.00 (the “Standard
        Ratio”) for any Rolling Period;
        provided that if at any time the MLP or any of
        its subsidiaries consummates an acquisition for which the MLP or any of its subsidiaries
        has paid aggregate net consideration of at least $100,000,000, then, for the two Rolling
        Periods the last day of which immediately follow the date on which such acquisition is
        consummated, the numerator of the maximum Consolidated Debt Coverage Ratio otherwise
        permitted above shall be increased by 0.5; thereafter, compliance shall be determined by
        reverting back to the Standard Ratio.

        
            	
                         

                    	
                        
                        2.5

                    	
                        
                        Amendments to Article VII.
                        Article VII is hereby amended as follows:

                    

        

        
        (a)          
        Clause (k) of Article VII is hereby amended in its entirety to read as
        follows:

        
        “(k)        
        an ERISA Event shall have occurred that, in the opinion of the Required
        Lenders, when taken together with all other ERISA Events that have occurred, could
        reasonably be expected to result in a Material Adverse Effect;”

        
        (b)          
        Clause (l) of Article VII is hereby amended in its entirety to read as
        follows:

        
        “(l)         
        the MLP or any Subsidiary shall incur an Environmental Liability or
        Environmental Liabilities that could reasonably be expected to have a Material Adverse
        Effect;”

         

        
        5

         

        
        

        

        

        
        2.6          
        Amendment to Section 10.01(a)(i). Section
        10.01(a)(i) is hereby amended in its entirety to read as follows:

        
        “(i)         
        if to the Borrower, to it at 2330 N. Loop West, San Antonio, Texas 78248,
        Attention of Senior Vice President, Chief Financial Officer and Treasurer (Telecopy No.
        (210) 918-5055);”

        
            	
                         

                    	
                        
                        2.7

                    	
                        
                        Global Changes.

                    

        

        
        (a)          
        References to “Valero GP, LLC” wherever they appear in the
        Credit Agreement are hereby amended to read “NuStar GP, LLC”.

        
        (b)          
        References to “Valero Logistics Credit Agreement” wherever they
        appear in the Credit Agreement are hereby amended to read “NuStar Logistics Credit
        Agreement”.

        
        2.8          
        Amendments to Schedules. Schedule 3.06 and
        Schedule 6.07 are hereby amended and restated in their entirety to read as set forth on the
        attached Schedule 3.06 and Schedule 6.07, respectively.

        
        Section
        3.           
        Conditions Precedent. This Second Amendment
        shall not become effective until the date on which each of the following conditions is
        satisfied (or waived in accordance with Section 10.02 of the Credit Agreement) (the
        “Effective
        Date”):

        
        3.1          
        The Administrative Agent and the Lenders shall have received all fees and
        other amounts due and payable, if any, in connection with this Second Amendment on or prior
        to the Effective Date.

        
        3.2          
        The Administrative Agent shall have received from the Required Lenders and
        the Borrower, counterparts (in such number as may be requested by the Administrative Agent)
        of this Second Amendment signed on behalf of such Persons.

        
        3.3          
        The Administrative Agent shall have received such other documents as the
        Administrative Agent or special counsel to the Administrative Agent may reasonably
        request.

        
        3.4          
        No Default shall have occurred and be continuing, after giving effect to the
        terms of this Second Amendment.

        
            	
                         

                    	
                        
                        Section 4.

                    	
                        
                        Miscellaneous.

                    

        

        
        4.1          
        Confirmation. The provisions of the Credit
        Agreement, as amended by this Second Amendment, shall remain in full force and effect
        following the effectiveness of this Second Amendment.

        
        4.2          
        Ratification and Affirmation; Representations and
        Warranties. The Borrower hereby (a) acknowledges the terms of
        this Second Amendment; (b) ratifies and affirms its obligations under, and acknowledges,
        renews and extends its continued liability under, each Loan Document to which it is a party
        and agrees that each Loan Document to which it is a party

         

        
        6

         

        
        

        

        

        remains
        in full force and effect, except as expressly amended hereby, notwithstanding the
        amendments contained herein; and (c) represents and warrants to the Lenders that as of the
        date hereof, after giving effect to the terms of this Second Amendment: (i) all of the
        representations and warranties contained in each Loan Document to which it is a party are
        true and correct, unless such representations and warranties are stated to relate to a
        specific earlier date, in which case, such representations and warranties shall continue to
        be true and correct as of such earlier date and (ii) no Default has occurred and is
        continuing.

        
        4.3          
        Loan Document. This Second Amendment is a
        “Loan Document” as defined and described in the Credit Agreement and all of the
        terms and provisions of the Credit Agreement relating to Loan Documents shall apply
        hereto.

        
        4.4          
        Counterparts. This Second Amendment may be
        executed by one or more of the parties hereto in any number of separate counterparts, and
        all of such counterparts taken together shall be deemed to constitute one and the same
        instrument. Delivery of this Second Amendment by facsimile transmission shall be effective
        as delivery of a manually executed counterpart hereof.

        
        4.5          
        NO ORAL AGREEMENT. THIS SECOND AMENDMENT, THE
        CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH
        REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
        PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
        AGREEMENTS BETWEEN THE PARTIES.

        
        4.6          
        GOVERNING LAW. THIS SECOND AMENDMENT
        (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED
        BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         

        
        [SIGNATURES BEGIN NEXT PAGE]

         

        
        7

         

        
        

        

        

        
        IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
        be duly executed as of the date first written above.

         

         

        
            	
                        
                         

                    	
                        
                        NUSTAR GP HOLDINGS, LLC

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        By

                    	
                        
                        /s/ Steven A. Blank

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                        Steven A. Blank

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                        Senior Vice President, Chief Financial Officer

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                        and Treasurer

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    

        

         

        

        Second
        Amendment to

        3-Year
        Revolving Credit Agreement

         

        
        S-1

         

        
        

        

        

         

        
            	
                         

                    	
                        JPMORGAN CHASE BANK, N.A., individually

                    
	
                         

                    	
                        and as Administrative Agent

                    
	
                         

                    	
                         

                    	
                         

                    
	
                         

                    	
                         

                    	
                         

                    
	
                         

                    	
                        By

                    	
                        /s/ Robert Traband

                    
	
                         

                    	
                         

                    	
                        Robert Traband

                    
	
                         

                    	
                         

                    	
                        Executive Director

                    

        

         

        
         

        Second
        Amendment to

        3-Year
        Revolving Credit Agreement

         

        
        S-2

         

        
        

        

        

        

        
            	
                         

                    	
                        SUNTRUST BANK, individually and as

                    
	
                         

                    	
                        Syndication Agent

                    
	
                         

                    	
                         

                    	
                         

                    
	
                         

                    	
                         

                    	
                         

                    
	
                         

                    	
                        By

                    	
                        /s/ Carmin J. Malizia

                    
	
                         

                    	
                         

                    	
                        Carmin J. Malizia

                    
	
                         

                    	
                         

                    	
                        Vice President

                    

        

         

        
         

        Second
        Amendment to

        3-Year
        Revolving Credit Agreement

         

        
        S-3

         

        
        

        

        

         

        Schedule
        6.07

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