Document:

EXHIBIT
10.26

 

Portions Subject
to Confidential Treatment Request Under Rule 406

 

BAYLOR COLLEGE OF MEDICINE

APPLIED
VETERINARY SYSTEMS, INC.

VALENTIS,
INC.

LICENSE
AGREEMENT

 

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

 

WITNESSETH:

 

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

 

WHEREAS, VLTS is
successor in interest to GeneMedicine; and

 

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

 

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

 

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

 

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

 

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

 

 

ARTICLE 1

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE 2

GRANT OF LICENSES

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 3

CONSIDERATION

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 4

ACCOUNTING AND RECORDS

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

ARTICLE
5

OPTION TO AVS
TECHNOLOGIES

 

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

 

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

 

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

 

ARTICLE 6

WARRANTIES, REPRESENTATIONS, INDEMNITY AND INSURANCE

 

6.1                                 BAYLOR and VLTS Representations.

 

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

 

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

 

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

 

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

 

6.3                                 AVS Representations. 
AVS hereby represents and warrants that:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.6                                 Indemnification by AVS Regarding Licensed
Products.

 

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

 

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

 

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

 

6.7                                 Indemnification Procedures.

 

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

 

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

 

10

 

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

 

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

 

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

 

ARTICLE 7

PROTECTION OF PROPERTY RIGHTS

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

ARTICLE 8

RIGHTS IN
ADDITIONAL RESEARCH

 

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

 

ARTICLE 9

INFRINGEMENT

 

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

 

13

 

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

 

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

 

ARTICLE 10

INDEPENDENT
CONTRACTOR STATUS

 

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

 

ARTICLE 11

TERM AND
TERMINATION

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

ARTICLE 12

GOVERNMENTAL COMPLIANCE

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 13

ASSIGNMENT AND LICENSING

 

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

 

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

 

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

 

ARTICLE 14

PUBLICITY

 

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

 

16

 

ARTICLE 15

ADDRESSES

 

15.1                           Payments.

 

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

 

BAYLOR Tax ID #:
74-1613878

Director, Office of
Technology Administration

Baylor College of
Medicine

1709 Dryden Road, Suite 901

Houston, TX  77030

 

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

 

Valentis, Inc.

863A Mitten Road

Burlingame, CA  94010

 

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

 

	
  In the case of BAYLOR:

  	
   

  	
  With a copy to:

  
	
  Senior Vice
  President & General Counsel

  	
   

  	
  Director, Office of
  Technology Administration

  
	
  Baylor College of
  Medicine

  	
   

  	
  Baylor College of
  Medicine

  
	
  One Baylor Plaza

  	
   

  	
  1709 Dryden Road,
  Suite 901

  
	
  Houston, TX 77030

  	
   

  	
  Houston, TX 77030

  
	
   

  	
   

  	
   

  
	
  In the case of VLTS:

  	
   

  	
   

  
	
  Legal Department

  	
   

  	
   

  
	
  Valentis, Inc.

  	
   

  	
   

  
	
  863A Mitten Road

  	
   

  	
   

  
	
  Burlingame, CA 94010

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In the case of AVS:

  	
   

  	
   

  
	
  President

  	
   

  	
   

  
	
  Applied Veterinary
  Systems, Inc.

  	
   

  	
   

  
	
  1709 Dryden Road,
  Suite 901

  	
   

  	
   

  
	
  Houston,
  TX 77030

  	
   

  	
   

  

 

ARTICLE 16

MISCELLANEOUS

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

19

 

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

 

 

	
  BAYLOR COLLEGE OF
  MEDICINE

  	
  APPLIED VETERINARY
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  /s/ W. Dalton Tomlin

  	
   

  	
  Name:

  	
  /s/ William A. McMinn

  
	
   

  	
  W. Dalton Tomlin

  	
   

  	
   

  	
  William A. McMinn

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice
  President &

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
  General Counsel

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VALENTIS, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  /s/ Margaret M. Snowden

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  VP, Intellectual
  Property & Legal Affairs

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  07/14/00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5/16/00

  	
  VLTS

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

  	
   

  	
   

  
						

 

20

 

Schedule
1.6

 

BAYLOR FOUNDERS

 

1.                                       Robert Schwartz

 

2.                                       Bert W. O’Malley

 

3.                                       Ruxandra Draghia-Akli

 

4.                                       Xuyang Li

 

1

 

Schedule
3.6

 

DISTRIBUTION OF SHARES OF COMMON
STOCK

 

	
  NAME

  	
   

  	
  NUMBER
  OF COMPANY SHARES ISSUED

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Baylor College of
  Medicine

  	
   

  	
  329,999

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Robert Schwartz

  	
   

  	
  146,878

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bert W. O’Malley

  	
   

  	
  123,872

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ruxandra Draghia-Akli

  	
   

  	
  30,084

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Xuyang Li

  	
   

  	
  2,500

  	
   

  

 

1EXHIBIT 10.27

 

Portions Subject to Confidential Treatment
Request Under Rule 406

 

BAYLOR
COLLEGE OF MEDICINE

 

APPLIED
VETERINARY SYSTEMS, INC.

 

LICENSE
AGREEMENT

 

This License Agreement (this “Agreement”) is made and entered into on
this 25th day of January, 2001 (the “Agreement Date”), by and between
Baylor College of Medicine (hereinafter called “BAYLOR”), a Texas non-profit
corporation having its principal place of business at One Baylor Plaza,  Houston,
Texas 77030, and Applied Veterinary Systems, a corporation organized under the
laws of Delaware and having a principal place of business at 1709 Dryden Road,
Suite 901, Houston, Texas 77030 and its Affiliates (hereinafter, collectively
referred to as “AVS”).

 

WITNESSETH:

 

WHEREAS, BAYLOR, AVS AND Valentis, Inc. have entered into a
License Agreement dated June 26, 2000 (the “First License Agreement”)
pursuant to which AVS has licensed from BAYLOR, and Valentis certain rights to
the technology described therein;

 

WHEREAS, BAYLOR, by virtue of its relationship with its faculty, staff
and students, and conveyances with the individuals listed on Schedule 1, and
under and pursuant to the terms and provisions of its Policy on Inventions and
Patents (the “Baylor Patent Policy”), is the owner of certain right, title and
interest in and to the Licensed Subject Matter (as defined below); and

 

WHEREAS, AVS, as per Article 5.2 of that certain Sponsored
Research Agreement between BAYLOR and AVS (dated January 14, 1998), had an
option to acquire an exclusive license to the Licensed Subject Matter with said
option period extended to June 1, 2000 via three Amendments to the
Sponsored Research Agreement; and

 

WHEREAS, AVS indicated its intention to exercise the option and acquire
an exclusive license to the Licensed Subject Matter; and

 

WHEREAS, BAYLOR desires to grant to AVS and AVS desires to obtain an
exclusive worldwide license to employ the Licensed Subject Matter and to make,
use, sell, have made and otherwise market and commercialize Licensed Products
and Licensed Patented Products; and

 

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

 

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

 

 

ARTICLE 1

 

DEFINITIONS

 

1.1           “Affiliate” shall
mean any corporation, partnership, joint venture or other entity of which the
common stock or other equity ownership thereof is twenty five percent (25%) or
more owned by AVS or BAYLOR.

 

1.2           “Baylor Patent
Policy” is as defined in the first Whereas clause.

 

1.3           “Common Stock” is as
defined in Paragraph 3.4.

 

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

 

1.5           “First Commercial
Sale” shall mean the first sale of a Licensed Product to an independent third
party for commercial use (i.e. not for review, evaluation, or testing of the
Licensed Product).

 

1.6           “Funded Technology”
is as defined in Paragraph 7.1.

 

1.7           “Indemnified Parties”
is as defined in Paragraph 5.4.

 

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

 

1.9           “Licensed Products
Net Sales” shall mean that portion of Net Sales related to Licensed Products.

 

1.10         “Licensed Subject
Matter” shall mean and include the Patent Rights, together with all
improvements, technology, plasmids, biological materials, compounds, know-how,
methods, documents, materials, tests, and confidential information, whether or
not patentable, in each case that are related to, or pertain to, the Patent
Rights and are currently, or prior to the first anniversary of the Effective
Date become, (i) owned by BAYLOR and arise out of work performed in a
laboratory at BAYLOR that is under the direct supervision of the Baylor
Founders or (ii) developed in a laboratory at BAYLOR that is under direct
supervision of the Baylor Founders. Licensed Subject Matter shall not include
know-how, discoveries and inventions developed in laboratories at BAYLOR not
under the direct supervision of the Baylor Founders.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

1.12  “Patent Rights” shall mean (i) the
United States Patent Application ******, and (ii) the United States Patent Application ******, and all corresponding foreign patent
applications and any and all divisions, reissues, re-examinations, renewals,
continuations, claims of continuation-in-part applications and patents issued
therefrom directed to subject matter specifically described in the
aforementioned patents or foreign applications, and extensions thereof, and all
other counterpart applications in all other countries and patents, inventor’s certificates, utility
models and the like issuing therefrom, which list shall be amended and updated from time to time.

 

 

1.13         “Party” shall mean
either AVS or BAYLOR, and “The Parties” shall mean AVS and BAYLOR.

 

1.14         “Sponsored Research
Agreement” shall mean the research agreement between AVS and BAYLOR, having an
effective date of January 14, 1998. The Option period in the original
agreement was extended to June I, 2000 via three Amendments to the
Sponsored Research Agreement. The Sponsored Research Agreement and Amendments
thereto are attached to this Agreement as Schedule 1.14.

 

1.15         “Sublicensing Revenue”
shall mean all (i) cash, (ii) sublicensing fees and (iii) all
other payments and the cash equivalent thereof, which are paid to AVS by the
sublicensees of its rights hereunder, other than research and development money
paid to AVS to conduct research.

 

1.16         “Valid Claim” shall
mean a pending or issued claim of an unexpired patent included within the
Patent Rights claiming an invention, which has not been revoked or held
unenforceable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been disclaimed, denied or admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise.

 

ARTICLE 2

 

GRANT OF EXCLUSIVE LICENSE

 

2.1           Grant of License.
Subject to the reservations of rights set forth in Paragraph 2.2 and effective
as of the Agreement Date and continuing through the term of this Agreement,
BAYLOR hereby grants to AVS an exclusive, worldwide right and license with
rights to sublicense the Licensed Subject Matter with rights to use, develop,
make, have made, market, sell, offer to sell and otherwise commercially exploit
Licensed Products.

 

2.2           Rights Reserved
by Baylor. The grant in Paragraph 2.1 shall be further subject to,
restricted by and non-exclusive with respect to:

 

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

 

(b)           the use of the Licensed Subject
Matter by the Baylor Founders for noncommercial research purposes at academic
or research institutions; and

 

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

 

2.3           Right to
Sublicense. Subject to all the terms and conditions of this Agreement, effective
as of the Effective Date, BAYLOR grants to AVS the right to enter into an
agreement or agreements to sublicense the license and rights granted in Section 2.1
hereof.

 

 

All sublicenses granted by AVS of its rights hereunder shall be subject
to the terms of his Agreement. AVS shall be responsible for its sublicensees
and shall not grant any rights which are inconsistent with the rights granted
to and obligations of AVS hereunder. Any act or omission of   sublicensee which would be a breach of this Agreement
if performed by AVS shall be deemed to be a breach by AVS of this Agreement. If
after receiving notice of a sublicensee’s breach from BAYLOR, AVS fails to take
appropriate action to require such sublicensee to remedy the breach related to
such act or omission, including termination of the sublicense, BAYLOR may
terminate the applicable license granted herein. Each sublicense agreement
granted by AVS shall include an audit right by BAYLOR of the same scope as
provided in Article 4 hereof with respect to AVS. No such sublicense
agreement shall contain any provision which would cause it to extend beyond the
term of this Agreement. AVS shall give BAYLOR prompt notification of the
identity and address of each sublicensee with whom it concludes a sublicense
agreement and shall supply BAYLOR with a copy of each such sublicense
agreement.

 

ARTICLE 3

 

CONSIDERATION

 

3.1           Royalty to BAYLOR.
In consideration of the grant of the exclusive licenses specified in Paragraph
2.1, and in adherence to Article 5.2 (e) of the Sponsored Research
Agreement, AVS agrees to pay BAYLQR a royalty of ****** of
Net Sales of Licensed Products.

 

3.2           Royalty Reduction
if No Patent. In the event that a sale of a Licensed Product is not covered
by patent rights within the Patent Rights during the term of this agreement,
the royalty owed hereunder pursuant to section 3.1 shall be reduced to ****** of
Net Sales of Licensed Products; provided, however, if in such case the Licensed
Products include only Technology Rights that have been publicly disclosed by
BAYLOR pursuant to Section 6.7 (f),  AVS shall not be obligated to pay
royalties on such licensed products.

 

3.3           Maximum Royalty.
Notwithstanding anything contained herein, or in the First License Agreement or
any other agreement ‘between BAYLOR and AVS, if any product that is a Licensed
Product would otherwise entitle
BAYLOR to a royalty under this Agreement and under the First License Agreement
and/or any other license between BAYLOR and AVS, in no event will the maximum
combined royalty to be paid under all agreements between BAYLOR and AVS exceed ******.

 

3.4           Stock
Consideration to BAYLOR. Since, but for the equity received hereunder,
BAYLOR would have insisted upon and received a greater royalty and, in
consideration and in exchange for (i) property constituting good and
valuable consideration, including, but not limited to, the Technology, and (ii) the
reduced royalty consideration provided in Paragraphs 3.1 and 3.2, the receipt and sufficiency of which are
hereby acknowledged by the Parties hereto, AVS shall issue to BAYLOR upon
execution of the Agreement, 100,000 shares of its common stock, $0.01  par
value (the “Common Stock”).

 

 

3.4.1        AVS may repurchase, on a pro-rated
basis, from BAYLOR and the Baylor inventors (as listed in Schedule 1),
Twenty-Five Thousand (25,000) of the shares of Common Stock issued hereunder at
a price of $0.01 per share if a patent claiming priority to the U.S. Patent
Application 09/624,268 entitled “Super-Active Porcine Growth Hormone Releasing
Hormone Analog”, is not issued within six (6) years of the Effective Date.
The issuance or receipt of notice of allowance of any divisional application, continuation-in-part
application, continuation application, reissue, re-examination, or renewal
claiming priority to U.S. Patent Application 09/624,268 or any corresponding foreign
patent application shall completely satisfy the requirement for an issued
patent and shall terminate the repurchase provision. lf AVS exercises the
repurchase provision, any and all rights associated with the Patent Rights
shall immediately revert to Baylor, with the exception of claims of
continuation-in-part applications that are developed by AVS and not disclosed
in the original patent applications licensed to the company.

 

3.4.2        AVS may repurchase,
on a pro-rated basis, from BAYLOR and the Baylor inventors (as listed in
Schedule 1), Twenty-Five Thousand (25,000) of the shares of Common Stock issued
hereunder at a price of $0.01 per share if a patent claiming priority to the
U.S. Patent Application entitled “Increasing Growth In Offspring through Administration
of Growth Hormone Releasing Hormone to Pregnant Mothers,” filed December 13,
2000, is not issued within six (6) years of the Effective Date. The
issuance or receipt of notice of allowance of any divisional application,
continuation-in-part application, continuation application, reissue,
re-examination, or renewal claiming priority the U.S. Patent Application
entitled “Increasing Growth in Offspring through Administration of Growth Hormone
to Pregnant Mothers” or any corresponding foreign patent application shall
completely satisfy’ the requirement for an issued patent and shall terminate
the repurchase provision. If AVS exercises the repurchase provision, any and all
rights associated with the Patent Rights shall immediately revert to Baylor,
with the exception of claims of continuation-in-part applications that are
developed by AVS and not disclosed in the original patent applications licensed
to the company.

 

3.4.3        The Company shall exercise
its repurchase rights only after meeting with BAYLOR to discuss the state of
prosecution of the Patent Rights, then by giving written notice of exercise and
delivering the repurchase price to BAYLOR within six (6) months of the
seventh anniversary of the Effective Date.

 

3.4.4        The repurchase
provisions of articles 3.4.1 and 3.4.2 shall terminate upon the initial public
offering of common stock or upon the sale or disposition of all or substantially
all of the assets of AVS pursuant to a liquidation not approved in writing by BAYLOR.

 

3.4.5        The stock certificates issued by AVS pursuant
to this agreement shall contain a legend referencing the repurchase provision.
Upon termination of the repurchase provisions by patent issuance or notice of
allowance (as specified in articles 3.4.1 and 3.4.2) or by a liquidity event
(as specified in article 3.4.4), AVS will reissue stock certificates that no
longer bear a legend referencing the repurchase provision.

 

 

3.5           Common Stock Issuance. The Common Stock shall be divided
and issued as described in Schedule 1.

 

3.6           Patent Costs. AVS shall pay all unreimbursed costs
incurred by BAYLOR prior to the Agreement Date incident to the filing of the
United States patents and corresponding foreign patent applications listed in Section 1.12.

 

ARTICLE 4

 

ACCOUNTING AND RECORDS

 

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

 

4.2           Payment in U.S.
Dollars. All payments due hereunder are expressed in and shall be paid in
United States of America currency, without deduction of exchange, collection or
other charges, to BAYLOR by check, or to the account of BAYLOR at such bank as
BAYLOR may from time to time designate by notice to AVS.

 

4.3           Foreign
Restrictions On Payment. If governmental regulations prevent remittance
from any foreign country of any amounts due in respect of Net Sales in that
country in United States Dollars, AVS shall so notify BAYLOR in writing and,
subject to the remainder of this Section 4.3, any obligation under this
Agreement to make payments in respect of Net Sales in that country shall be
suspended (but the amounts due but not paid shall continue to accrue) without
interest until such remittances are possible; provided, however, that
notwithstanding the foregoing BAYLOR shall have the right, at any time and from
time to time, upon written notice to AVS, to direct AVS either to pay such
funds in any such country in the local currency or to liquidate such currency
at available rates and pay the liquidated amounts to BAYLOR. Any such payment
by AVS in accordance herewith shall be deemed to be payment in full of the
amounts so paid or liquidated, and AVS shall have no further liability to
BAYLOR for any action taken in accordance with BAYLOR’s instructions pursuant
to this Section 4.3.

 

4.4           Royalty Report.
With each royalty payment, AVS shall furnish to BAYLOR a written accounting
report related to said quarter stating the Net Sales, royalties due and
royalties paid.

 

 

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

 

4.6           Due Diligence.
Once per calendar year on the anniversary of the Agreement Date and thereafter
throughout the term of this Agreement, or at such time as an annual report to
shareholders is delivered, AVS shall deliver to BAYLOR a written annual report
as to: (i) the efforts and accomplishments of AVS and each of its
sublicensees during the preceding year in developing and commercializing’
Licensed Products in every country in which it or its sublicensees shall have
developed and/or sold Licensed Products; (ii) the status of scientific
trials, if any, on Licensed Products; (iii) the activities of AVS, if any,
with respect to the filing, prosecution, obtaining, and maintenance of patents
in the United States and any foreign countries in which such protection has
been sought on the Patent Rights, as provided in Article 6; and (iv) the
obtaining of regulatory approvals in the United States and foreign countries
for the advertising, use and sale of Licensed Products.

 

4.7           Reports and
Payments Address. All payments and reports shall be sent to the address
listed in Paragraph 14.1.

 

ARTICLE 5

 

WARRANTIES,
REPRESENTATIONS, INDEMNITY AND INSURANCE

 

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

 

(b) DISCLAIMER OF WARRANTY. WITH THE EXCEPTION OF PARAGRAPH
5.I(a), BAYLOR MAKES NO WARRANTIES OR REPRESENTATIONS. EXPRESS OR IMPLIED.
INCLUDING. BUT NOT LIMITED TO, WARRANTIES OF FITNESS ORMERCHANTABILITY.
REGARDING OR WITH RESPECT TO THE LICENSED SUBJECT  MATTER OR LICENSED PRODUCTS. AND BAYLOR MAKES
NO WARRANTIES OR REPRESENTATIONS. EXPRESS OR IMPLIED, OF THE PATENTABILITY. USE
OR OTHER APPLICATION OF THE LICENSED SUBJECT MATTER OR LICENSED PRODUCTS OR OF
THE ENFORCEABILITY OF ANY 

 

 

PATENTS
ISSUING THEREUPON. IF ANY, OR THAT THE LICENSED SUBJECT MATTER OR LICENSED
PRODUCTS ARE OR SI-IALL BE FREE FROM INFRINGEMENT OF ANY PATENT OR OTHER RIGHTS
OF THIRD PARTIES AND BAYLOR MAKES NO WARRANTIES OR REPRESENTATIONS. EXPRESS OR
IMPLIED. AS TO THE LIKELIHOOD OF THE SUCCESS OF ANY RESEARCH. DEVELOPMENT,
TESTING, MARKETING OR OTHER UTILIZATION OF THE TECHNOLOGY.

 

5.2           AVS
Representations. AVS hereby represents and warrants that:

 

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

 

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

 

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

 

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

 

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

 

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

 

5.4           Indemnification
by AVS Regarding Licensed Products. AVS agrees to protect, defend.
Indemnify and hold BAYLOR. Each of the entities with which it is or will be in
the future affiliated with respect to the invention or development of the
Licensed Subject Matter. And each of BAYLOR’s, officers, trustees. Faculty,
employees, agents, representatives, and each of them (“the Indemnified Parties”)
harmless from and against. and to pay any and all losses, liabilities, claims,
demands. Causes of action. Lawsuits. or other proceedings (whether in contract,
tort strict liability or otherwise), fines, assessments, damages or any other
amounts of whatever nature that any of the Indemnified Parties may sustain or
incur. Including all reasonable attorneys’ fees and court costs, as a
consequence of any third party’s (including, but not limited to, AVS’ officers,
directors, employees, agents, consultants, representatives or servants) claims
and demands arising from the use, testing, operation, sale or manufacture of
the Licensed Subject Matter, or the Licensed Products by AVS or its
sublicensees, except as to the extent such claims, causes of action, lawsuits
or other proceedings and the costs (including attorney’s fees) related thereto
arise from the cross negligence or intentional misconduct of any of the
Indemnified Parties.

 

 

5.5           Indemnification
Procedures. BAYLOR will promptly notify AVS in writing of notice of any
claims or the commencement of any action, if a claim in respect thereof is to
be made under Paragraph 5.4. BAYLOR’s failure to notify AVS will not relieve
AVS from any liability to BAYLOR except to the extent any BAYLOR delay in
notifying AVS causes such damages. After receiving notice of said action, AVS
is entitled to participate in the defense therein, and may elect to assume the
defense thereof by promptly notifying the Indemnified Party in writing and by
selecting counsel reasonably satisfactory to such Indemnified Party. After
BAYLOR has received notice of AVS’ election to assume the defense of said
action and has approved AVS’ counsel, AVS will not be liable to BAYLOR under
Paragraph 5.4 for any legal or other expenses subsequently incurred by BAYLOR
in connection with the defense thereof unless (i) BAYLOR has reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to AVS, in which case such BAYLOR shall
have the right to select separate counsel to assume said legal defenses and to
otherwise participate in the defense of said action on behalf of BAYLOR, (ii) AVS
shall not have employed counsel reasonably satisfactory to BAYLOR to represent
BAYLOR within a reasonable time after notice of commencement of the action or (iii) AVS
has authorized the employment of counsel for BAYLOR at the expense of AVS.

 

(a)           Neither BAYLOR nor AVS shall settle
any action covered by Paragraph 5.4 without first obtaining the consent of the
other Party, which consent will not be unreasonably withheld.

 

(b)           AVS’ indemnity
obligations under this Agreement shall survive the termination of this
Agreement, regardless of how this Agreement is terminated.

 

5.6           Insurance.
AVS shall, for so long as AVS manufactures, uses or sells any Licensed
Product(s), maintain in full force and effect policies of (i) worker’s
compensation insurance within statutory limits, (ii) employers’ liability
insurance with limits of not less than one million dollars ($1,000,000) per
occurrence, (iii) general liability insurance (with Broad Form General
Liability endorsement) with limits of not less than one million dollars
($1,000,000) per occurrence with an annual aggregate of two million dollars
($2,000,000) and, upon the introduction of Licensed Product(s), (iv) products
liability insurance with limits of not less than one million dollars
($1,000,000) per occurrence with an annual aggregate of five million dollars
($5,000000). Such coverage(s) shall be purchased from a carrier or
carriers reasonably deemed acceptable to BAYLOR and shall name BAYLOR as an
additional insured. Upon request by BAYLOR, AVS shall provide to BAYLOR copies
of said policies of insurance.

 

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

 

 

ARTICLE 6

 

PROTECTION
OF PROPERTY RIGHTS

 

6.1                                 Patent Costs.

 

(a)                                  As stated in Paragraph 3.6, AVS shall pay all
costs incurred prior to the      Effective Date incident to the filing of the
United States Patent Applications and corresponding foreign patent applications
listed in Article 1.12.

 

(b)                                 During the term of this Agreement, AVS agrees
to pay all costs reasonably incurred by it after the Effective Date incident to
the United States and foreign applications, patents and like protection,
including all costs incurred for filing, prosecution, issuance and maintenance
fees as well as any costs reasonably incurred in filing continuations,
continuations-in-part, divisionals or related applications and any reexamination
or reissue proceedings.

 

6.2                                 Patent Prosecution Responsibility. From the Effective Date and for the term of
this Agreement, AVS shall have primary responsibility for deciding whether to
file United States and foreign patent applications, continue prosecution of any
patent applications or maintain any patent application or patent regarding the
Licensed Subject Matter hereunder, except that BAYLOR may assume responsibility
at its sole expense for pursuing any protection which AVS declines to prosecute
pursuant to Paragraph 6.4 of this Agreement.

 

6.3                                 Patent Prosecution Due Diligence. During the term of this Agreement, AVS
agrees to prosecute with good faith and due diligence all such patent
applications and to take all actions reasonably necessary to maintain and
enforce the patents and proprietary rights in and to the Licensed Subject
Matter.

 

6.4                                 Baylor Right to Assume Filing. During the term of this Agreement, in the
event that AVS decides not to file any or all United States and foreign
applications or to continue prosecution of a patent application to issuance or
maintain any United States or foreign patent application or patent, AVS shall
timely notify BAYLOR in writing in order that BAYLOR may file said United
States and foreign applications and continue said prosecution or maintenance of
such patent applications at its own expense. Notwithstanding AVS’ election to
not file for any patent or to not continue prosecution of any application, AVS
shall retain the right to use the rights licensed hereunder, subject to the
terms hereof. If AVS fails to notify BAYLOR in sufficient time for BAYLOR to
assume the cost, AVS shall be considered in default of this Agreement.

 

6.5                                 Information Regarding Filings. During the term of this Agreement AVS shall
instruct counsel for AVS to keep BAYLOR reasonably informed, at AVS’ expense,
of prosecutions pursuant to this Article 6 including submitting to BAYLOR
copies of all official actions and responses thereto. As per Paragraph 6.4, AVS
shall consult BAYLOR prior to any abandonment of the prosecution of the
patents.

 

6.6                                 Cooperation. BAYLOR agrees to cooperate with AVS to whatever extent is necessary
to procure patent protection of any rights, including fully agreeing to execute
any and all documents to give AVS the full benefit of the licenses granted
herein.

 

 

6.7                                 Confidentiality. Each Party shall use its best efforts to
maintain and assure the confidentiality of the Confidential Information
disclosed to it by the other Party hereto; provided, however, neither Party
shall have an obligation of confidentiality with respect to Confidential
Information that:

 

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

 

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

 

(c)                                  was in the possession of the receiving Party
prior to disclosure by the disclosing Party hereunder and was not acquired
directly or indirectly from any third party under obligation of confidentiality
to the disclosing Party;

 

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

 

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

 

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

 

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

 

ARTICLE 7

 

RIGHTS IN
ADDITIONAL RESEARCH

 

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

 

 

ARTICLES 8

 

INFRINGEMENT

 

8.1                                 Notice and Right to Bring Suit. Each Party shall promptly inform the other
of any suspected infringement of any licensed Patent Rights or misuse,
misappropriation, theft or breach of confidence of other proprietary rights in
the Licensed Subject Matter by a third party, and with respect to such
activities as are suspected, BAYLOR and AVS each shall have the right to
institute an action for infringement, misuse, misappropriation, theft or breach
of confidence of the proprietary rights against such third party in accordance
with the following:

 

(a)                                  If BAYLOR and AVS agree to institute suit
jointly, the suit shall be brought in both their names and all of the out-of-pocket
costs and legal fees relative to such procedures shall be borne by AVS. AVS
shall exercise control over such action; provided, however, that BAYLOR may, if
it so desires, be represented by counsel of its own selection and at its own
cost.

 

(b)                                 If BAYLOR or AVS, as the case may be, decides
not to take action, then the other Party may do so in its own name and at its
own cost.

 

(c)                                  Should either BAYLOR or AVS commence suit
under the provisions of this Article 8 and thereafter elect to abandon the
same, it shall give timely notice to the other Party who may, if it so desires,
continue prosecution of such suit at such continuing Party’s sole expense.

 

(d)                                 All recoveries, whether by judgment, award,
decree or settlements, from infringement or misuse of the Licensed Subject
Matter shall belong first to the Party or Parties paying the costs of the suit,
in such amount, then to AVS subject to any royalties due BAYLOR. All
recoveries, whether by judgment, award, decree or settlement that result from
recovery for technologies owned by BAYLOR and not licensed to AVS, shall belong
to BAYLOR and those that result from recovery for technologies not issued by BAYLOR
shall belong to AVS.

 

8.2                                 Consent. Neither BAYLOR nor AVS shall settle any action covered by this Article 8
without first obtaining the consent of the other Party, which consent will not
be unreasonably withheld.

 

8.3                                 Disclaimer of Liability. BAYLOR shall not be liable for any losses
incurred as the result of an action for infringement brought against AVS as the
result of AVS’ exercise of any right granted under this Agreement. The decision
to defend or not defend shall be in AVS’ sole discretion.

 

 

ARTICLE 9

 

INDEPENDENT CONTRACTOR STATUS

 

9.1                                 The Parties hereby acknowledge and agree that
each is an independent contractor and that neither Party shall be considered to
be the agent, representative, master or servant of the other party for any
purpose whatsoever, and that neither Party has any authority to enter into a
contract, to assume any obligation or to give warranties or representations on
behalf of the other Party. Nothing in this relationship shall be construed to
create a relationship of joint ventures, partnerships, fiduciary or other
similar relationships between the Parties.

 

ARTICLE 10

 

TERM AND TERMINATION

 

10.1                           Term. Unless sooner terminated as otherwise provided herein, the license to
employ Patent Rights granted herein as part of Article 2 shall terminate
on the later of (i) the date of expiration of the last of the Patent
Rights to expire and (ii) in the event no patents included within the
Patent Rights issue, the first date following the twelfth (12th) anniversary of
the First Commercial Sale.

 

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

 

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

 

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

 

(c)                                  a breach of Section 12.1 or 12.2.

 

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

 

10.4                           AVS Right to Terminate. AVS, upon one hundred eighty (180) days
prior written notice to BAYLOR, may terminate this Agreement with or without
cause.

 

 

10.5                           Effect of Termination. In the event that this Agreement is
terminated for whatever reason:

 

(a)                                  any and all rights in and to the Licensed
Subject Matter shall revert to BAYLOR;

 

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

 

(c)                                  AVS will deliver to BAYLOR within ten (10) days
of terminate all copies in its possession or control of all documents and other
tangible information that contain the Licensed Subject Matter;

 

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

 

(e)                                  AVS, subject to Article 6.8, shall have
an obligation to maintain the confidentiality of all Licensed Subject Matter;

 

(f)                                    AVS will not use any Confidential Information
owned by BAYLOR regarding non-patented Licensed Subject Matter for a period of
five (5) years after termination of this Agreement; provided, however, AVS
shall be entitled to use the non-patented Licensed Subject Matter royalty free
after the termination of this Agreement so long as it has paid twelve (12)
years of royalties as specified in Article 3 and Paragraph 10.6;

 

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

 

10.6                           Obligation to Pay Accrued Royalties. AVS’ obligation to pay royalties, keep
records and allow a final audit shall survive termination;

 

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

 

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

 

10.9                           Survival of Sublicenses. Upon termination of this License Agreement,
BAYLOR agrees to accept as successor to AVS, existing sublicenses in good
standing at the date of

 

 

termination;
provided that such sublicensees consent in writing to be bound by all the terms
and conditions of this Agreement.

 

ARTICLE 11

 

GOVERNMENTAL
COMPLIANCE

 

11.1                           Obligation to Comply with Laws. AVS shall at all times during the term of
this Agreement and for so long as it shall sell Licensed Products comply and
cause its sublicensees to comply with all local, state, federal and foreign
formalities, laws, orders, rules, decrees or regulations that may control the
import, export, manufacture, use or sale of Licensed Products or any other
activity undertaken pursuant to this Agreement.

 

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

 

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

 

11.4                           Compliance Costs. During the term of this Agreement, AVS
shall be responsible for any and all expenses, costs, fees, duties or taxes
reasonably necessary to comply with government orders, formalities, rules,
regulations and laws.

 

ARTICLE 12

 

ASSIGNMENT
AND LICENSING

 

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

 

12.2                           AVS Right to License. Except as expressly permitted by the
Agreement, AVS may not license or attempt to license any rights under this
Agreement prior to the written consent of BAYLOR, which consent shall not be
unreasonably withheld.

 

 

12.3                           AVS Sublicensing Rights. All sublicenses granted by AVS of its
rights hereunder shall be subject to the terms of this Agreement, as per Article 2.3.

 

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

 

12.5                           BAYLOR Assignment of Rights. BAYLOR may assign its rights hereunder, including
the right to receive the consideration (equity and monetary) for the licenses
herein granted, to its Affiliates, or to such other parties as may be entitled
to receive or exercise same under the Baylor Patent Policy.

 

ARTICLE 13

 

PUBLICITY

 

13.1                           Use of Name. Neither Party shall use the name, logotypes or symbols of the other
Party or the name of any emploY’1e, faculty, staff, affiliate or associate of
the other Party for publication or advertising pUf1Joses, except with the
written consent of the other Party.

 

ARTICLE 14

 

ADDRESSES

 

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

 

	
   

  	
  BAYLOR Tax ID #: 74-1613878

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Director, Office of Technology Administration

  	
   

  
	
   

  	
  Baylor College of Medicine

  	
   

  
	
   

  	
  One Baylor Plaza, BCMD 600D

  	
   

  
	
   

  	
  Houston, TX 77030

  	
   

  

 

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

 

	
   

  	
  In the case of BAYLOR:

  	
   

  
	
   

  	
  Senior Vice President & General Counsel

  	
   

  
	
   

  	
  Baylor College of Medicine

  	
   

  
	
   

  	
  One Baylor Plaza

  	
   

  
	
   

  	
  Houston, TX 77030

  	
   

  

 

 

In the case of AVS:

 

	
   

  	
  Douglas Kern, D.V.M.

  	
   

  
	
   

  	
  Applied Veterinary Systems, Inc.

  	
   

  
	
   

  	
  c/o

  	
   

  
	
   

  	
  BCM Technologies, Inc.

  	
   

  
	
   

  	
  1709 Dryden Road, Suite 901

  	
   

  
	
   

  	
  Houston, TX 77030

  	
   

  

 

With a copy to:

 

	
  Director, Office of Technology Administration

  
	
  Baylor College of Medicine

  
	
  One Baylor Plaza, BCMD 600D

  
	
  Houston, TX 77030

  

 

ARTICLE 15

 

MISCELLANEOUS

 

15.1                           Further Acts. Without further consideration, BAYLOR
hereby agrees to execute and deliver, and BAYLOR agrees to cause its officers,
trustees, employees, and agents to execute and deliver, such other instruments,
and to take such other action as AVS hereunder may reasonably request to more
effectively convey and transfer to and vest in AVS, and to put AVS in
possession of, the rights granted hereunder, and to assist AVS in the
recordation of same as necessary, all in such form and substance as AVS may
reasonably request and at AVS’ expense.

 

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

 

15.3                           Governing Law. This Agreement shall be deemed to have been
made under, and shall be construed and interpreted in accordance with the laws
of the State of Texas. This Agreement is expressly acknowledged to be subject
to the Export Administration Act of the United States of America. No
conflict-of-laws rule or law that might refer such construction and
interpretation to the laws of another state, republic, or country shall be
considered.

 

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

 

 

15.5                           Severability. The Parties hereby agree that neither Party
intends to violate any public policy, statutory or common law, rule,
regulation, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries, and that if
any word, sentence, paragraph or clause or combination thereof of this
Agreement is found, by a court or executive body with judicial powers having
jurisdiction oyer this Agreement or any of the Parties hereto, in a final,
unappeasable order to be in violation of any such provision in any country or
community or association of countries, such words, sentences, paragraphs or
clauses or combination shall be inoperative in such country or community or
association of countries, and the remainder of this Agreement shall remain
binding upon the Parties hereto,

 

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

 

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

 

15.8                           Survival. The provisions, rights and obligations set forth in Articles 1, 3, 4,
5, 6, 7, 8, 9, 11, 12, 13, 14 and 15, and Paragraphs 2.1 (insofar as Paragraph
2.1 pertains to Licensed Products), 10.5, 10.6, 10.8, and 10.9 along with any
other obligations that by their terms survive termination, shall survive the
termination of this Agreement.

 

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

 

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

 

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

 

 

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

 

 

	
  APPLIED
  VETERINARY SYSTEMS, INC.

  	
   

  	
  BAYLOR
  COLLEGE OF MEDICINE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  /s/ William
  A. McMinn

  	
   

  	
  Name:

  	
  /s/ W.
  Dalton Tomlin

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  William A.
  McMinn

  	
   

  	
   

  	
  W. Dalton
  Tomlin

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  	
  Title:

  	
  Senior Vice
  President &

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  General
  Counsel

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  01/25/01

  	
   

  	
  Date:

  	
  01/17/01

  

 

 

Schedule 1: Distribution of AVS Common Stock

 

	
  Party

  	
   

  	
  Number of AVS Shares Issued

  	
   

  
	
  Baylor College of Medicine

  	
   

  	
  57,500

  	
   

  
	
  Robert
  J. Schwartz, Ph.D.

  	
   

  	
  17,709

  	
   

  
	
  Ruxandra Draghia-Akli, Ph.D.

  	
   

  	
  17,709

  	
   

  
	
  Roy G. Smith, Ph.D.

  	
   

  	
  7, 083

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