Document:

exv10w1

 

Exhibit 10.1

EXECUTION COPY

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (“Agreement and Release”) is made by and between James
M. Pusey (“Executive”) and OrthoLogic Corp. (the “Corporation”). The Executive and the Corporation
desire to amicably sever their employment relationship and, notwithstanding Section 6 of their
Employment Agreement dated March 3, 2005 (the “Employment Agreement”), agree as follows:

     1. The Employment Agreement is terminated effective April 5, 2006 (“Termination Date”) and,
except as expressly provided herein, Executive shall not have any further rights thereunder.
Executive hereby resigns as Chief Executive Officer and each other office and employment position
with the Corporation and his position as a director on the Corporation’s Board of Directors
effective on the Termination Date.

     2. The Corporation shall pay to Executive:

          a. The sum of $100,000 in six equal installments, less applicable withholdings. The first
payment shall be due within 10 days of full execution of this Agreement and the remaining five
payments shall be due on the 15th day of each of the following five months.

          b. Within 30 days of the Termination Date, (i) Executive’s reasonable documented out-of-pocket
business expenses properly incurred but not yet reimbursed prior to the Termination Date and (ii)
Executive’s documented unreimbursed expenses incurred prior to the Termination Date for travel to
and from Philadelphia, Pennsylvania which are reimbursable pursuant to paragraph 4(h)(iii) of the
Employment Agreement, including without limitation such travel on or about March 23 and April 2,
2006.

          c. The excess of (i) the proceeds delivered to the Corporation from the sale of Executive’s
restricted stock pursuant to his Rule 10b5-1 trading plan over (ii) the sum of $76,269 plus the
applicable federal and state withholding and payroll tax obligations in respect of reimbursements
under paragraph 4(h)(iii) of the Employment Agreement for expenses incurred during 2006 prior to
the Termination Date. Executive agrees to instruct in writing the broker under his Rule 10b5-1
trading plan to pay the proceeds of the sale of shares thereunder directly to the Corporation in an
amount equal to the amount set forth in clause (ii) of the immediately preceding sentence.
Executive shall in any event pay or cause to be paid to the Corporation the amount set forth in
clause (ii) of the first sentence of this paragraph. The net payment described in such clause (ii)
takes into account the $62,500 the Corporation recently agreed to provide to Executive as
additional relocation expense reimbursement and Executive shall have no further rights in respect
of such amount.

     3. The Corporation shall continue to provide to the Executive medical insurance coverage, at
the Corporation’s expense and in the same manner as now provided, through September 2006 or until
Executive becomes eligible for medical benefits through another employment relationship, whichever
comes sooner.

 - 1 -

 

     4. Except as expressly provided herein, the Corporation hereby releases the Executive from any
and all past and present causes of action, claims, rights and liabilities, known or unknown,
statutory or at common law, arising out of Executive’s employment or resignation of employment with
the Corporation or his service as an officer or director of the Corporation, including, without
limitation, his performance or failure to perform any of his duties or responsibilities as an
employee, officer or director of the Corporation or any action or failure to act in connection
therewith; provided, that the foregoing release shall not apply to the Executive’s obligations
under this Agreement.

     5. Executive hereby:

          a. (i) Except as expressly provided herein, releases the Corporation, its past and present
parent, subsidiary and affiliated corporations or business entities and its and their past and
present directors, officers, agents and employees, from any and all past and present causes of
action, claims, rights and liabilities, known or unknown, statutory or at common law, arising out
of Executive’s employment or termination of employment with the Corporation; provided, that the
foregoing release shall not apply to the Corporation’s obligations under this Agreement or to the
Corporation’s obligations to indemnify Executive in his capacity as a director or officer of the
Corporation pursuant to the Certificate of Incorporation or Bylaws of the Corporation or that
certain Indemnification Agreement between Executive and the Corporation dated April 15, 2005.

              (ii) By way of example only and without limiting the immediately preceding paragraph, this
release is applicable to any cause of action, right, claim or liability under Title VII of the 1964
Civil Rights Act, Section 1981 of the 1866 Civil Rights Act, the Family and Medical Leave Act, the
Equal Pay Act of 1963, the Americans with Disabilities Act, the Arizona Civil Rights Act, the
Arizona Employment Protection Act, and any other employment law or statute, or of wrongful
discharge, breach of implied or express contract, breach of the covenant of good faith and fair
dealing, intentional or negligent infliction of emotional distress, defamation and any other claim
in contract or tort, and for attorneys fees.

          b. Reaffirms his continuing obligation to abide by the terms of the Confidential Information
and Assignment of Inventions Agreement dated March 3, 2005 between him and the Corporation.

          c. Agrees to immediately return any and all things in his possession or control belonging to
the Corporation including, but not limited to, computers, cell phones, files and documents (whether
stored electronically or hard copy), credit cards and access cards.

     6. Executive, in his capacity as a director of the Corporation, hereby waives notice of the
meetings of the Corporation’s Board of Directors held on April 2, 3 and 4, 2006.

     7. The terms of this Agreement and Release supersede paragraph 6(a) through (d) of the
Employment Agreement. The parties acknowledge that certain paragraphs of the Employment Agreement,
by their nature, survive the termination of such agreement, including, but not limited to,
paragraphs 6(e), 9 and 10. Each party expressly affirms its or his obligations under Section 10 of
the Employment Agreement to, inter alia, not make disparaging remarks.

 - 2 -

 

Notwithstanding the terms of the Employment Agreement, the parties agree that Section 7 of the
Employment Agreement shall not survive and shall terminate upon termination of the Employment
Agreement.

     8. The parties acknowledge and agree that for purposes of Executive’s two Letters of Stock
Option Grant dated March 3, 2005, as of the Termination Date Executive has completed 13 full months
of employment and Executive’s vested stock options are as follows:

          a. Under Letter of Stock Option Grant dated March 3, 2005 as to 200,000 shares: options to
acquire 42,969 shares at $5.88 per share and options to acquire 25,782 shares at $5.31 per share
(in each case subject to adjustment in accordance with such Letter of Grant);

          b. Under Letter of Stock Option Grant dated March 3, 2005 as to 300,000 shares: options to
acquire 103,125 shares at $5.88 per share (subject to adjustment in accordance with such Letter of
Grant).

     All other outstanding or conditionally granted options to acquire shares of OrthoLogic common
stock shall lapse as of the Termination Date. In addition, the 100,000 shares of restricted stock
issued under the Letter of Restricted Stock Grant dated March 3, 2005 and not yet vested shall be
forfeited and returned to the Corporation for cancellation, and all conditional grants of
restricted stock shall lapse as of the Termination Date.

     9. No provision contained herein shall be construed as an admission by Executive or the
Corporation of improper conduct, omissions or liability.

     10. This Agreement and Release contains all the promises and understandings of the parties in
respect of the subject matter hereof. There are no other agreements and understandings in respect
of the subject matter hereof except as set forth herein and this Agreement and Release may be
amended only by a written agreement of the parties.

 - 3 -

 

     11. The parties each acknowledge that they have read this Agreement and Release and understand
and voluntarily agree to its terms.

	 	 	 	 	 	 	 	 	 
	OrthoLogic Corp.:	 	 	 	Executive:	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ John M. Holliman, III
	 	 	 	           /s/ James M. Pusey	 	 
	 

	 	 
	 	 	 	 	 	 
	Name: John M. Holliman, III	 	 	 	Name: James M. Pusey	 	 
	Title: Chairman of the Board	 	 	 	Date: April 05, 2006	 	 
	 
	 	 	 	 	 	 	 	 
	Date: April 05, 2006	 	 	 	 	 	 

 - 4 -CONFIDENTIAL TREATMENT REQUESTED                                   EXHIBIT 10.10

CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 24(B)(2) OF THE SECURITIES AND
EXCHANGE ACT OF 1934. CONFIDENTIAL TREATMENT REQUESTED IS REQUESTED AND IS NOTED
WITH "[CONFIDENTIAL TREATMENT REQUESTED]." AN UNREDACTED VERSION OF THIS
DOCUMENT HAS BEEN PREVIOUSLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

                        PHENYLBUTYRATE CO-DEVELOPMENT AND
                              SUBLICENSE AGREEMENT
                                  BY AND AMONG
                      BRIDGE THERAPEUTIC PRODUCTS, INC AND
                         BRIDGE ONCOLOGY PRODUCTS, INC.
<PAGE>
                                                CONFIDENTIAL TREATMENT REQUESTED
Strictly Confidential

                              SUBLICENSE AGREEMENT

         THIS AGREEMENT (the "Agreement"), is made and effective as of February
16, 2005 (the "Effective Date"), by and between Bridge Therapeutic Products Inc.
("BTP") and Bridge Oncology Products Inc. ("BOP" and, together with BTP, the
"Parties").

                                    RECITALS:

         WHEREAS BTP, Inc. ("BTP") has worldwide rights to intellectual
property, commercialization rights and know how pertaining to phenylbutyrate
("PB" or the "PB Technology"), and

         WHEREAS Bridge Oncology Inc. ("BOP") wishes to enter into an exclusive
sublicense to all of BTP's PB Technology in the Territory (defined as worldwide
with the exception of the United States of America and Canada), including,
without limitation, any and all patents, patent applications, continuations,
continuations-in-part, inventions, improvements, know how, trademarks, trade
secrets, and any and all other intellectual property or proprietary information
related thereto, in each case, together with any and all commercialization
rights pertaining to the PB technology (collectively, the "Sublicensed
Technology").

         NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth in this Sublicense Agreement, and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, BTP
and BOP hereby agree as follows:

1.       Grant of Sublicense

         1.1      The intention and purpose of the Sublicense Agreement is to
                  continue to promote the on-going development programs already
                  instituted by BTP and outside clinical investigators for PB,
                  to maximize the potential therapeutic benefit of PB for the
                  treatment of certain cancers, autoimmune diseases and other
                  clinical indications, and to expedite a global strategy for
                  the development, regulatory approval and commercial
                  development of PB.

         1.2      BTP hereby grants to BOP an exclusive sub-license to all of
                  BTP's intellectual property rights, including without
                  limitation, any and all patents, patent applications,
                  continuations, continuations-in-part, inventions,
                  improvements, trademarks, trade secrets, and any and all other
                  intellectual property or proprietary information related
                  thereto, in each case, together with any and all
                  commercialization rights and all know how to PB (collectively,
                  the "Sublicense") in the Territory (defined as worldwide with
                  the exception of the United States of America and Canada). For
                  purposes of this Sublicense Agreement, the parties hereto
                  acknowledge and agree that the Sublicense shall include,
                  without limitation, all rights, title and interest to the
                  Public Health Service Patent License Agreement, dated May 25,
                  1995, between the Public Health Service and the National
                  Institute of Health and BTP, in the form attached as Exhibit 1
<PAGE>
                                                CONFIDENTIAL TREATMENT REQUESTED

                  hereto (the "PHSP License Agreement"), together with all
                  rights, title and interests conveyed thereunder.

2.       Consideration

         2.1      In consideration of the Sublicensed Technology, BOP agrees to
                  pay BTP [CONFIDENTIAL TREATMENT REQUESTED] as soon as
                  commercially reasonable after the Effective Date.

         2.2      BOP will pay royalties to BTP on all direct sales of PB or any
                  product incorporating the PB Technology within the Territory
                  of [CONFIDENTIAL TREATMENT REQUESTED]. In any country with the
                  Territory where PB or any product incorporating the PB
                  Technology is sold by a third party, such as distributor,
                  wholesaler or marketing company, any payments made by their
                  third party as part of the acquisition of rights to sell or
                  distribute PB or any product incorporating the PB Technology
                  shall be shared equally between BOP and BTP.

         2.3      BOP agrees to pay all costs and expenses of prosecuting,
                  filing and maintaining Patents and defending revocation
                  proceedings on patent and patent applications on PB in all
                  other countries within the Territory (which specifically
                  excludes the United States of America and Canada).

3.       Co-Development Plan

         3.1      The parties to this Agreement hereby agree to cooperate in the
                  development and commercialization of PB. BTP will be
                  responsible for conducting all clinical trials and the filing
                  and prosecution of all applications with applicable USA and
                  Canadian regulatory authorities, and all regulatory filings in
                  the USA and Canada will be in the name of BTP. BOP will be
                  responsible for conducting all clinical trials and the filing
                  and prosecution of all applications with applicable regulatory
                  authorities other than in the USA and Canada and all such
                  filings shall be in the name of BOP.

         3.2      The parties will promptly share all information generated
                  under this co-development program pursuant to confidentiality
                  including, without limitation, all information with respect to
                  market analysis, competitor position, pre-clinical and
                  clinical trials, the filing of any applications with the US
                  Food and Drug Administration or similar Canadian authority and
                  the manufacture and testing of different formulations and
                  preparations of PB or any product incorporating the PB
                  Technology.

         3.3      BTP shall pay all costs and expenses of any work deemed
                  necessary for the development of PB in the USA and Canada. BOP
                  shall pay all costs and expenses of any work deemed necessary
                  for the development of PB in any other countries within the
                  Territory (other than USA or Canada).

                                       2
<PAGE>
                                                CONFIDENTIAL TREATMENT REQUESTED

4.       Representations and Warranties

         4.1      The parties agree that this Agreement shall constitute a
                  binding and enforceable agreement between the parties. In this
                  regard, the parties agree to use commercially reasonable
                  efforts to work together in good faith to obtain all necessary
                  consents and approvals required from the National Institute of
                  Health's Public Health Service and any other third party or
                  governmental authority reasonably required to provide a
                  consent, if any, as soon as reasonably practicable after the
                  date hereof.

         4.2      BTP hereby represents, warrants and covenants to BOP that BTP
                  has full right, power and authority to enter into this
                  Agreement.

         4.3      BOP represents that it has full power, authority to enter into
                  this Agreement.

         4.4      BTP is unaware of any claims asserted against BTP by any third
                  parties with respect to patent infringement or any other type
                  of liability relevant to licensing or sub-licensing of the
                  Sublicensed Technology.

         4.5      The execution of this Agreement by BTP shall not contravene
                  any provision of law or any contract to which BTP is a party.
                  The execution of this Agreement by BOP shall not contravene
                  any provision of law or any contract to which BOP is a party.

5.       Other Considerations; General Provisions

         5.1      Confidentiality: In fulfilling their obligations under this
                  Sublicense Agreement, it may be desirable or necessary for BTP
                  and BOP to disclose to one another certain confidential
                  information. In the event of receipt of such confidential
                  information, the receiving party agrees to preserve such
                  information as confidential and not disclose it to third
                  parties or to use it except where legally or commercially
                  required to do so, in the reasonable opinion of counsel to the
                  disclosing party.

         5.2      Governing law: This Agreement shall be construed and enforced
                  in accordance with the substantive laws of the State of New
                  York, without regard to the principles thereof regarding the
                  choice of law.

         5.3      Severability: If any provision(s) of this Sublicense Agreement
                  shall be determined to be invalid or unenforceable, the
                  validity and effect of the other provisions of this Sublicense
                  Agreement shall not be affected thereby.

         5.4      Waiver: The waiver by either party or the failure by either
                  party to claim a breach of any provision of this Sublicense
                  Agreement shall not be deemed to constitute a waiver or
                  estoppel with respect to any subsequent breach or with respect
                  to any provision thereof.

         5.5      Successors and Assigns: This Sublicense Agreement shall be
                  binding upon and shall inure to the benefit of the Parties and
                  their respective successors and assigns.

                                       3
<PAGE>
                                                CONFIDENTIAL TREATMENT REQUESTED

         5.6      Further Assurances: Each Party covenants and agrees to use
                  commercially reasonable efforts to take, or cause to be taken,
                  all actions and to do, or cause to be done, all things
                  reasonably required, necessary or appropriate, in good faith,
                  to make effective the transactions contemplated by this
                  Sublicense Agreement, including, without limitation, the
                  conveyance of the Sublicensed Technology.

         5.7      Counterparts: This Sublicense Agreement may be executed in any
                  number of counterparts, each of which shall be deemed an
                  original but all of which together shall constitute a single
                  instrument.

         IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of February 16, 2005.

Bridge Therapeutic Products Inc.          Bridge Oncology Products Inc.

Signature: /s/ JEFFREY B. DAVIS           Signature: /s/ STEVEN H. ROUHANDEH
          ----------------------------              ----------------------------

Name:       Jeffrey B. Davis              Name:       Steven H. Rouhandeh
     ---------------------------------         ---------------------------------

Position:   Chairman                      Position:   Chairman
         -----------------------------             -----------------------------

Date:       2/16/05                       Date:       2/16/05
     ---------------------------------         ---------------------------------

                                       4
<PAGE>

CONFIDENTIAL TREATMENT REQUESTED                      EXHIBIT 1 TO EXHIBIT 10.10

CONFIDENTIAL TREATMENT REQUESTED UNDER RULE 406 THE SECURITIES ACT OF 1933
CONFIDENTIAL TREATMENT IS REQUESTED AND IS NOTED WITH "[CONFIDENTIAL TREATMENT
REQUESTED]." AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN PREVIOUSLY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.

                               PHS PATENT LICENSE
                                AGREEMENT BETWEEN
                   THE UNITED STATES PUBLIC HEALTH SERVICE AND
                          NATIONAL INSTITUTE OF HEALTH,
                                ON THE ONE HAND,
                                       AND
                    ELAN PHARMACEUTICAL RESEARCH CORPORATION,
                                ON THE OTHER HAND
                    (ASSIGNED AND NOVATED TO VECTRAMED, INC.
                              ON JUNE 27, 2003 AND
                             ASSIGNED AND NOVATED TO
                          VIRIUM PHARMACEUTICALS, INC.
                               ON JANUARY 5, 2005)

<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

                    PHS PATENT LICENSE AGREEMENT -- EXCLUSIVE
                    -----------------------------------------

                     PHS and LICENSEE agreement as follows:

                                 1. BACKGROUND
                                    ----------

         1.01     In the course of conducting biomedical and behavioral research
funded by LICENSEE, Dr. Dvorit Samid, a PHS employee, previously an investigator
with the Uniformed Services University of the Health Services ("USUHS"), made
inventions that may have commercial applicability.

         1.02     By assignment of rights from Dr. Samid and the Department of
the Army ("DOA"), DHHS, on behalf of the United States Government, owns the
intellectual property rights claimed in any United States and foreign patent
applications or patents corresponding to the assigned inventions. DHHS also owns
any tangible embodiments of these inventions actually reduced to practice by DOA
or PHS.

         1.03     The Assistant Secretary for Health of DHHS has delegated to
PHS the authority to enter into this Agreement for licensing of rights to these
inventions under 35 U.S.C. ss.ss. 200-212, the Federal Technology Transfer Act
of 1986, 15 U.S.C. ss. 3710a, and/or the regulations governing the licensing of
Government-owned inventions, 37 C.F.R. Part 404.

         1.04     PHS desires to transfer these inventions to the private sector
through commercialization licenses to facilitate the commercial development of
products and processes for public use and benefit.

         1.05     LICENSEE desires to acquire commercialization rights to
certain of these inventions in order to develop processes, methods or marketable
products for public use and benefit.

                                 2. DEFINITIONS
                                    -----------

         2.01     "Licensed Patent Rights" shall mean:

                  a)       U.S. patent applications and patents listed in
                           Appendix A, all divisions and continuations of these
                           applications, all patents issuing from such
                           applications, divisions, and continuations, and any
                           reissues, re-examinations, and extensions of all such
                           patents;

                  b)       to the extent that the following contain one or more
                           claims directed to the invention or inventions
                           claimed in a) above: 1) continuations-in-part of a)
                           above; 2) all divisions and continuations of these
                           continuations-in-part; 3) all patents issuing from
                           such continuations-in-part, divisions, and
                           continuations; and 4) any reissues, re-examinations,
                           and extensions of all such patents;

                  c)       to the extent that the following contain one or more
                           claims directed to the invention or inventions
                           claimed in a) above: all counterpart foreign
                           applications and patents to a) and b) above,
                           including those listed in Appendix A.

                                       2
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

                           Licensed Patent Rights shall not include b) or c)
                           above to the extent that they contain one or more
                           claims directed to new matter which is not the
                           subject matter of a claim in a) above.

         2.02     "Licensed Product(s)" means tangible materials which, in the
course of manufacture, use or sale would, in the absence of this Agreement,
infringe one or more claims of the Licensed Patent Rights that have not been
held invalid or unenforceable by an unappealed or unappealable judgment of a
court of competent jurisdiction.

         2.03     "Licensed Process(es)" means processes which, in the course of
being practiced would, in the absence of this Agreement, infringe one or more
claims of the Licensed Patent Rights that have not been held invalid or
unenforceable by an unappealed or unappealable judgment of a court of competent
jurisdiction.

         2.04     "Licensed Territory" means the geographical area identified in
Appendix B.

         2.05     "Net Sales" means the total gross receipts for sales of
Licensed Products or practice of Licensed Processes by or on behalf of LICENSEE
or its sublicensees, and from leasing, renting, or otherwise making Licensed
Products available to others without sale or other dispositions, whether
invoiced or not, less returns and allowances actually granted, packing costs,
insurance costs, freight out, taxes or excise duties imposed on the transaction
(if separately invoiced), and wholesaler and cash discounts in amounts customary
in the trade. No deductions shall be made for commissions paid to individuals,
whether they be with independent sales agencies or regularly employed by
LICENSEE, or sublicensees, and on its payroll, or for the cost of collections.

         2.06     "First Commercial Sale" means the initial transfer by or on
behalf of LICENSEE or its sublicensees, of Licensed Products or the initial
practice of a Licensed Process by or on behalf of LICENSEE or its sublicensees
in exchange for cash or some equivalent to which value can be assigned for the
purpose of determining Net Sales.

         2.07     "Government" means the government of the United States of
America.

         2.08     "Licensed Fields of Use" means the fields of use identified in
Appendix B.

                               3. GRANT OF RIGHTS
                                  ---------------

         3.01     PHS hereby grants and LICENSEE accepts, subject to the terms
and conditions of this Agreement, an exclusive license to LICENSEE under the
Licensed Patent Rights in the Licensed Territory to make and have made, to use
and have used and to sell and have sold any Licensed Products in the Licensed
Fields of Use and to practice and have practicedany Licensed Processes in the
Licensed Fields of Use.

                                       3
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

         3.02     This Agreement confers no license or rights by implication,
estoppel or otherwise under any patent applications or patents of PHS other than
Licensed Patent Rights regardless of whether such patents are dominant or
subordinate to Licensed Patent Rights.

                                4. SUBLICENSING
                                   ------------

         4.01     Upon written approval by PHS, which approval will not be
unreasonably withheld, LICENSEE may enter into sublicensing agreements under the
Licensed Patent Rights.

         4.02     LICENSEE agrees that any sublicenses granted by it shall
provide that the obligations to PHS of Paragraphs 5.01-5.05, 8.01, 10.01, 10.02,
12.05 and 13.08-13.11 of this Agreement shall be binding upon the sublicensee as
if it were a party to this Agreement. LICENSEE further agrees to attach copies
of these Paragraphs to all sublicense agreements.

         4.03     Any sublicenses granted by LICENSEE shall provide for the
termination of the sublicense, or the conversion to a license directly between
such sublicensees and PHS, at the option of the sublicensee, upon termination of
this Agreement under Article 13. Such conversion is subject to PHS approval and
contingent upon acceptance by the sublicensee of the remaining provisions of
this Agreement.

         4.04     LICENSEE agrees to forward to PHS a copy of each fully
executed sublicense agreement postmarked within sixty (60) days of the execution
of such agreement.

                       5. STATUTORY AND PHS REQUIREMENTS
                          AND RESERVED GOVERNMENT RIGHTS
                          ------------------------------

         5.01     PHS reserves on behalf of the Government an irrevocable,
nonexclusive, nontransferable, royalty-free license for the practice of all
inventions licensed under the Licensed Patent Rights throughout the world by or
on behalf of the Government and on behalf of any foreign government or
international organization pursuant to any existing or future treaty or
agreement to which the Government is a signatory.

         5.02     LICENSEE agrees that products used or sold in the United
States embodying Licensed Products or produced through use of Licensed Processes
shall be manufactured substantially in the United States, unless a written
waiver is obtained in advance from PHS.

         5.03     LICENSEE acknowledges that PHS may enter into a future
Cooperative Research and Development Agreements ("CRADAs") under the Federal
Technology Transfer Act of 1986 that relate to the subject matter of this
Agreement. LICENSEE agrees not to unreasonably deny requests for sublicense or
cross license rights from such future collaborators with PHS when acquiring such
derivative rights is necessary in order to make a CRADA project feasible. PHS
will endeavor to give LICENSEE a reasonable opportunity to join as a party to
the proposed CRADA prior to its initiation and to obtain reciprocal patent
rights in any resultant inventions.

         5.04     In addition to the reserved license of Paragraph 5.01 above,
PHS reserves the right to grant nonexclusive licenses to make and to use the
inventions defined by the Licensed Patent Rights for purposes of research
involving the inventions themselves, and not for purposes of commercial
manufacture or in lieu of purchase if the inventions are available as commercial

                                       4
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

products for research purposes. The purpose of this research license is to
encourage basic research, whether conducted at an academic or corporate
facility. In order to safeguard the Licensed Patent Rights, however, PHS shall
obtain the consent of LICENSEE before granting to commercial entities a research
license or providing to them research samples of the materials claimed in the
Licensed Patent Rights, which consent shall not be unreasonably withheld.

                         6. ROYALTIES AND REIMBURSEMENT
                            ---------------------------

         6.01     LICENSEE agrees to pay to PHS a noncreditable, nonrefundable
license issue royalty as set forth in Appendix C within thirty (30) days from
the date that this Agreement becomes effective.

         6.02     LICENSEE agrees to pay to PHS a nonrefundable minimum annual
royalty as set forth in Appendix C. The minimum annual royalty is due and
payable on January 1 of each calendar year and may be credited against any
earned royalties due for sales made in that year. The minimum annual royalty due
the first calendar year of this Agreement may be prorated according to the
fraction of the calendar year remaining between the effective date of this
Agreement and the next subsequent January 1.

         6.03     LICENSEE agrees to pay PHS Earned Royalties as set forth in
Appendix C.

         6.04     LICENSEE agrees to pay PHS Benchmark Royalties as set forth in
Appendix C.

         6.05     A claim of a patent or patent application licensed under this
Agreement shall cease to fall within the Licensed Patent Rights for the purpose
of computing the minimum annual royalty and earned royalty payments in any given
country on the earliest of the dates that (a) the claim has been abandoned but
not continued, (b) the patent expires, (c) the patent is no longer maintained by
the Government, or (d) all claims of the Licensed Patent Rights have been held
to be invalid or unenforceable by an unappealed or unappealable decision of a
court of competent jurisdiction or administrative agency.

         6.06     No multiple royalties shall be payable because any Licensed
Products or Licensed Processes are covered by more than one of the Licensed
Patent Rights.

         6.07     On sales of Licensed Products by LICENSEE to sublicensees or
affiliated parties or on sales made in other than an arm's length transaction,
the value of the Net Sales attributed under this Article 6 to such a transaction
shall be that which would have been received in an arm's length transaction,
based on sales of like quantity and quality products on or about the time of
such transaction.

         6.08     As an additional royalty, LICENSEE agrees to pay PHS, within
sixty (60) days of PHS's submission of a statement and request for payment, an
amount equivalent to all reasonable expenses previously incurred by PHS in the
preparation, filing, prosecution and maintenance of Licensed Patent Rights.
LICENSEE further agrees to pay PHS annually, within sixty (60) days of PHS's
submission of a statement and request for payment, a royalty amount equivalent
to all future patent expenses incurred during the previous calendar year, as of
the date the statement and request for payment is sent by PHS to LICENSEE. Fifty
(50) percent of the cumulated amount of such payments may be credited against
Royalties due under Paragraph 6.03, however, the net royalty payment in any

                                       5
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

calendar year may not be lower than the minimum annual royalty specified in
Appendix C. LICENSEE may elect to surrender its rights in any country of the
Licensed Territory under any Licensed Patent Rights upon sixty (60) days written
notice to PHS and owe no payment obligation under this Paragraph for subsequent
patent-related expenses incurred in that country.

                     7. DOMESTIC AND FOREIGN PATENT FILING,
                           PROSECUTION AND MAINTENANCE
                           ---------------------------

         7.01     PHS agrees to take responsibility for, but to consult with the
LICENSEE in the preparation, filing, prosecution and maintenance of any and all
patent applications or patents included in the Licensed Patent Rights and shall
furnish copies of relevant patent-related documents to LICENSEE. PHS may agree
to permit LICENSEE to handle the prosecution of some or all of the Licensed
Patent Rights.

         7.02     Each party shall promptly inform the other as to all matters
that come to its attention that may affect the preparation, filing, prosecution
or maintenance of the Licensed Patent Rights and permit each other to provide
comments and suggestions with respect to the preparation, filing, and
prosecution of Licensed Patent Rights, which comments and suggestions shall be
considered by the other party.

                               8. RECORD KEEPING
                                  --------------

         8.01     LICENSEE agrees to keep accurate and correct records of
Licensed Products made, used or sold and Licensed Processes practiced under this
Agreement appropriate to determine the amount of royalties due PHS. Such records
shall be retained for at least five (5) years following a given reporting
period. They shall be available during normal business hours for inspection at
the expense of PHS by an accountant or other designated auditor selected by PHS
for the sole purpose of verifying reports and payments hereunder. The accountant
or auditor shall only disclose to PHS information relating to the accuracy of
reports and payments made under this Agreement. If an inspection shows an
underreporting or underpayment in excess of five percent (5%) for any twelve
(12) month period, then LICENSEE shall reimburse PHS for the cost of the
inspection at the time LICENSEE pays the unreported royalties, including any
late charges as required by Paragraph 9.07 of this Agreement. All payments
required under this Paragraph shall be due within thirty (30) days of the date
PHS provides LICENSEE notice of the payment due.

            9. REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS
               ----------------------------------------------------

         9.01     Prior to signing this Agreement, LICENSEE has provided to PHS
a written commercialization plan ("Commercial Development Plan") under which
LICENSEE intends to bring the subject matter of the Licensed Patent Rights into
commercial use. The Commercial Development Plan is hereby incorporated by
reference into this Agreement. Based on this plan, performance benchmarks are
determined as specified in Appendix E (Benchmarks).

         9.02     LICENSEE shall provide written annual reports on its product
development progress or efforts to commercialize under the Commercial
Development Plan for each of the Licensed Fields of Use within sixty (60) days
after December 31 of each calendar year. These progress reports shall include,

                                       6
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

but not be limited to: progress on research and development, status of
applications for regulatory approvals, manufacturing, sublicensing, marketing
and sales during the preceding calendar year, as well as plans for the present
calendar year. If reported progress differs from that projected in the
Commercial Development Plan and Benchmarks, LICENSEE shall explain the reasons
for such differences. LICENSEE may propose amendments in any such annual report
to the Commercial Development Plan, acceptance of which by PHS may not
unreasonably be denied. LICENSEE agrees to provide any additional data
reasonably required by PHS to evaluate LICENSEE's performance. LICENSEE may
amend the Benchmarks at any time upon written consent by PHS. PHS shall not
unreasonably withhold approval of any request of LICENSEE to extend the time
periods of this schedule if such request is supported by a reasonable showing by
LICENSEE of diligence in its performance under the Commercial Development Plan
and toward bringing the Licensed Products to the point of practical application
as defined in 37 C.F.R. 404.3(d). LICENSEE shall amend the Commercial
Development Plan and Benchmarks at any time and shall do so at the request of
PHS to address any Licensed Fields of Use not specifically addressed in the plan
originally submitted.

         9.03     LICENSEE shall report to PHS the date of the First Commercial
Sale in each country in the Licensed Territory within thirty (30) days of such
occurrence.

         9.04     LICENSEE shall submit to PHS within sixty (60) days after each
calendar half year ending June 30 and December 31, a royalty report setting
forth for the preceding half year period the amount of the Licensed Products
sold or Licensed Processes practiced by or on behalf of LICENSEE, in each
country within the Licensed Territory, the Net Sales, and the amount of royalty
accordingly due. With each such royalty report, LICENSEE shall submit payment of
the earned royalties due. If no earned royalties are due to PHS for any
reporting period, the written report shall so state. The royalty report shall be
certified as correct by an authorized officer of LICENSEE and shall include a
detailed listing of all deductions made under Paragraph 2.05 to determine Net
Sales or made under Article 6 to determine royalties due.

         9.05     LICENSEE agrees to forward semi-annually to PHS a copy of such
reports received by LICENSEE from its sublicensees during the preceding half
year period as shall be pertinent to a royalty accounting the PHS by LICENSEE
for activities under the sublicense.

         9.06     Royalties due under Article 6 shall be paid in U.S. dollars.
For conversion of foreign currency to U.S. dollars, the conversion rate shall be
the rate quoted in the Wall Street Journal on the day that the payment is due.
All checks and bank drafts shall be drawn on United States banks and shall be
payable to NIH/Patent Licensing at the address shown on the Signature Page
below. Any loss of exchange, value, taxes or other expenses incurred in the
transfer or conversion to U.S. dollars shall be paid entirely by LICENSEE. All
royalty payments due under this Agreement shall be mailed to the following
address: NIH, P.O. Box 360120, Pittsburgh, PA 15251-6120. The royalty report
required by paragraph 9.04 of this Agreement shall accompany each such payment
and a copy of such report shall also be mailed to PHS at its address for notices
indicated on the Signature Page of this Agreement.

         9.07     Late charges will be applied to any overdue payments as
required by the U.S. Department of Treasury in the Treasury Fiscal Requirements
Manual, Section 8025.40. The payment of such late charges shall not prevent PHS
from exercising any other rights it may have as a consequence of the lateness of
any payment.

                                       7
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

         9.08     All plans and reports required by this Article 9 and marked
"CONFIDENTIAL" by LICENSEE shall be treated by PHS as commercial and financial
information obtained from a person and as privileged and confidential and, to
the extent permitted by law, shall not be subject to disclosure under the
Freedom of Information Act ss. 522.

                                10. PERFORMANCE
                                    -----------

         10.01    LICENSEE shall use its reasonable best efforts to introduce
the Licensed Products into the commercial market or apply the Licensed Processes
to commercial use as soon as practicable. "Reasonable best efforts" for the
purpose of this provision shall include, but not be limited to, adherence to the
Commercial Development Plan and performance of the Benchmarks. The efforts of a
sublicensee shall be considered the efforts of LICENSEE.

         10.02    Upon the First Commercial Sale of Licensed Products, until the
expiration of this Agreement, LICENSEE shall use its reasonable best efforts to
keep Licensed Products and Licensed Processes reasonably accessible to the
public.

                    11. INFRINGEMENT AND PATENT ENFORCEMENT
                        -----------------------------------

         11.01    PHS and LICENSEE agree to notify each other promptly of each
infringement or possible infringement, as well as any facts which may affect the
validity, scope or enforceability of the Licensed Patent Rights of which either
Party becomes aware.

         11.02    Pursuant to this Agreement and the provisions of Chapter 29 of
Title 35, United States Code, LICENSEE may (a) bring suit in its own name, at
its own expense, and on its own behalf for infringement of presumably valid
claims in a Licensed Patent; (b) in any such suit, enjoin infringement and
collect for its use, damages, profits and awards of whatever nature recoverable
for such infringement; and (c) settle any claim or suit for infringement of the
Licensed Patent Rights -- provided, however, that PHS and appropriate Government
authorities shall have the first right to take such actions and shall have a
continuing right to intervene in such suit at its own expense. LICENSEE shall
take no action to compel the Government either to initiate or to join in any
such suit for patent infringement unless such action is ultimately necessary to
avoid dismissal of the suit. Should the Government be made a party to any such
suit, LICENSEE shall reimburse the Government for any costs, expenses or fees
which the Government incurs as a result of such motion or other action,
including any and all costs incurred by the Government in opposing any such
motion or other action. Upon LICENSEE's payment of all costs incurred by the
Government as a result of LICENSEE's joinder motion or other action, these
actions by LICENSEE will not be considered a default in the performance of any
material obligation under this Agreement. In all cases, LICENSEE agrees to keep
PHS reasonably apprised of the status and progress of any litigation. Before
LICENSEE commences an infringement action, LICENSEE shall notify PHS and give
careful consideration to the views of PHS and to any potential effects of the
litigation on the public health in deciding whether to bring suit.

                                       8
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

         11.03    In any infringement action commenced by LICENSEE under
Paragraph 11.02, the expenses including costs, fees, attorney fees and
disbursements, shall be paid by LICENSEE. Up to fifty (50) percent of such
expenses may be credited against the royalties payable to PHS under Paragraph
6.03 under the Licensed Patent Rights in the country in which such a suit is
filed. In the event that fifty (50) percent of such expenses exceed the amount
of royalties payable by LICENSEE in any calendar year, the expenses in excess
may be carried over as a credit on the same basis into succeeding calendar
years. A credit against litigation expenses, however, may not reduce the
royalties due in any calendar year to less than the minimum annual royalty. Any
recovery made by LICENSEE, through court judgment or settlement, first shall be
applied to reimburse PHS for royalties withheld as a credit against litigation
expenses and then to reimburse LICENSEE for its litigation expense. Any
remaining recoveries shall be payable to LICENSEE.

         11.04    PHS shall cooperate fully with LICENSEE in connection with an
infringement action initiated under Paragraph 11.02. PHS agrees promptly to
provide access to all necessary documents and to render reasonable assistance in
response to a request by LICENSEE.

         11.05    In the event that a declaratory judgment action alleging
invalidity or non-infringement of any of the Licensed Patent Rights shall be
brought against LICENSEE or raised by way of counterclaim or affirmative defense
in an infringement suit brought by LICENSEE under Paragraph 11.02, pursuant to
this Agreement and the provisions of Chapter 29 of Title 35, United States Code
or other statutes, LICENSEE may: (a) defend the suit in its own name, at its own
expense, and on its own behalf for presumably valid claims in the Licensed
Patent Rights; (b) in any such suit, ultimately to enjoin infringement and to
collect for its use, damages, profits and awards of whatever nature recoverable
for such infringement; and (c) settle any claim or suit for declaratory judgment
involving the Licensed Patent Rights -- provided, however, that PHS and
appropriate Government authorities shall have continuing right to intervene in
such suit. LICENSEE shall take no action to compel the Government either to
initiate or to join in any such declaratory judgment action unless such action
is ultimately necessary to avoid dismissal of its suit. Should the Government be
made a party to any such suit by motion or any other action of LICENSEE,
LICENSEE shall reimburse the Government for any costs, expenses or fees which
the Government incurs as a result of such motion or other action. Upon
LICENSEE's payment of all costs incurred by the Government as a result of
LICENSEE's joinder motion or other action, these actions by LICENSEE will not be
considered a default in the performance of any material obligation under this
Agreement. If LICENSEE elects not to defend against such declaratory judgment
action, PHS, at its option, may do so at its own expense. In all cases, LICENSEE
agrees to keep PHS reasonably apprised of the status and progress of any
litigation. Before LICENSEE commences an infringement action, LICENSEE shall
notify PHS and give careful consideration to the views of PHS and to any
potential effects of the litigation on the public health in deciding whether to
bring suit.

                 12. NEGATION OF WARRANTIES AND INDEMNIFICATION
                     ------------------------------------------

         12.01    PHS offers no warranties other than those specified in Article
1.

         12.02    PHS does not warrant the validity of the Licensed Patent
Rights, and makes no representations whatsoever with regard to the scope of the
Licensed Patent Rights, or that the Licensed Patent Rights may be exploited
without infringing other patents or other intellectual property rights of third
parties.

                                       9
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

         12.03    PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANT
ABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE
CLAIMS OF THE LICENSED PATENT RIGHTS.

         12.04    PHS does not represent that they will commence legal actions
against third parties infringing the Licensed Patent Rights.

         12.05    LICENSEE shall indemnify and hold PHS and its employees,
students, fellows, agents and consultants harmless from and against all
liability, demands, damages, expenses and losses, including but not limited to
death, personal injury, illness or property damage in connection with or arising
out of (a) the use by LICENSEE, its Affiliates and sublicensees, directors,
employees or third parties of any Licensed Patent Rights, or (b) the design,
manufacture, distribution or use of any Licensed Products, Licensed Processes or
materials, or other products or processes developed in connection or arising out
of the Licensed Patent Rights. LICENSEE agrees to maintain a liability insurance
program consistent with sound business practice.

                13. TERM, TERMINATION AND MODIFICATION OF RIGHTS
                    --------------------------------------------

         13.01    This Agreement is effective when signed by all parties and
shall extend to the expiration of the last to expire of the licensed patent
rights unless sooner terminated as provided in this Article 13.

         13.02    In the event that LICENSEE is in default in the performance of
any material obligations under this Agreement, and if the default has not been
remedied within ninety (90) days after the date of notice in writing of such
default, PHS may terminate this Agreement by written notice.

         13.03    At least 30 days prior to filing a petition in bankruptcy
LICENSEE must inform PHS of its intention to file the petition in bankruptcy or
of a third party's intention to file an involuntary petition in bankruptcy.

         13.04    In the event that LICENSEE becomes insolvent, files a petition
in bankruptcy, has such a petition filed against it, determines to file a
petition in bankruptcy, or receives notice of a third party's intention to file
an involuntary petition in bankruptcy, LICENSEE shall immediately notify PHS in
writing. Furthermore, PHS shall have the right to terminate this Agreement by
giving LICENSEE written notice. Termination of this Agreement is effective upon
LICENSEE's receipt of the written notice.

         13.05    LICENSEE shall have a unilateral right to terminate this
Agreement and/or any licenses in any country by giving PHS sixty (60) days
written notice to that effect.

         13.06    PHS shall specifically have the right to terminate or modify
at its option this Agreement if PHS determines that the LICENSEE: (1) is not
executing the Commercial Development Plan submitted with its request for a
license and the LICENSEE cannot otherwise demonstrate to PHS's satisfaction that

                                       10
<PAGE>
                        CONFIDENTIAL TREATMENT REQUESTED

the LICENSEE has taken, or can be expected to take within a reasonable time,
effective steps to achieve practical application of the Licensed Products or
Licensed Processes; (2) has not achieved the Benchmarks as may be modified under
Paragraph 9.02; (3) has willfully made a false statement of, or willfully
omitted, a material fact in the license application or in any report required by
the license agreement; (4) has committed a substantial breach of the covenant or
agreement contained in the license; (5) is not keeping Licensed Products or
Licensed Process reasonably available to the public after commercial use
commences; (6) cannot reasonably satisfy unmet health and safety needs; or (7)
cannot reasonably justify a failure to comply with the domestic production
requirement of Paragraph 5.01 unless waived. In making this determination, PHS
will take into account the normal course of such commercial development programs
conducted with sound and reasonable business practices and judgment and the
annual reports submitted by LICENSEE under Paragraph 9.02. Prior to invoking
this right, PHS shall give written notice to LICENSEE providing LICENSEE
specific notice of and a ninety (90) day opportunity to respond to PHS's
concerns as to the previous items (1) to (7). If LICENSEE fails to alleviate to
PHS's concerns as to the previous items (1) to (7) or fails to initiate
corrective action to PHS's satisfaction. PHS may terminate or modify this
Agreement. Modification of this Agreement may include rendering this Agreement
non-exclusive to any Licensed Fields of Use.

         13.07    When the public health and safety so require, and after
written notice to LICENSEE providing LICENSEE a sixty (60) day opportunity to
respond, PHS shall have the right to require LICENSEE to grant sublicenses to
responsible applicants, on reasonable terms, in any Licensed Fields of Use under
the Licensed Patent Rights unless LICENSEE can reasonably demonstrate that the
granting of the sublicense would not materially increase the availability to the
public of the subject matter of the Licensed Patent Rights. PHS will not require
the granting of a sublicense unless the responsible applicant has first
negotiated in good faith with LICENSEE.

         13.08    PHS reserves the right according to 35 U.S.C.ss. 209 (f) (4)
to terminate or modify this Agreement if it is determined that such action is
necessary to meet requirements for public use specified by Federal regulations
issued after the date of the license and such requirements are not reasonably
satisfied by LICENSEE.

         13.09    Within thirty (30) days of receipt of written notice of PHS's
unilateral decision to modify or terminate this Agreement, LICENSEE may,
consistent with the provisions of 37 C.F.R. ss. 404.11, appeal the decision by
written submission to the Director of NIH or designee. The decision of the NIH
Director or designee shall be the final agency decision. LICENSEE may thereafter
exercise any and all administrative or judicial remedies that may be available.

         13.10    Within ninety (90) days of termination of this AGREEMENT under
this Article 13 or expiration under Paragraph 3.02, a final report shall be
submitted by LICENSEE. Any royalty payments, including those related to, patent
expenses due to PHS shall become immediately due and payable upon termination or
expiration. If terminated under this Article 13, sublicensees may elect to
convert their sublicenses to direct licenses with PHS pursuant to Paragraph
4.03.

                                       11
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                        CONFIDENTIAL TREATMENT REQUESTED

                             14. GENERAL PROVISIONS
                                 ------------------

         14.01    Neither Party may waive or release any of its rights or
interests in this Agreement except in writing. The failure of either Party to
assert a right hereunder or to insist upon compliance with any term or condition
of this Agreement shall not constitute a waiver of that right or excuse a
similar subsequent failure to perform any such term or condition by the other
party.

         14.02    This Agreement constitutes the entire agreement between the
parties relating to the subject matter of the Licensed Patent Rights, and all
prior negotiations, representations, agreements and understandings are merged
into, extinguished by and completely expressed by this Agreement.

         14.03    The provisions of this Agreement are severable, and in the
event that any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such determination shall not in
any way affect the validity or enforceability of the remaining provisions of
this Agreement.

         14.04    If either Party desires a modification to this Agreement, the
Parties shall, upon reasonable notice of the proposed modification by the Party
desiring the change, confer in good faith to determine the desirability of such
modification. No modification will be effective until a written amendment is
signed by the signatories to this Agreement or their designees.

         14.05    The construction, validity, performance and effect of this
Agreement shall be governed by Federal law as applied by the Federal Courts in
the District of Columbia.

         14.06    All notices required or permitted by this Agreement shall be
given by prepaid, first class, registered or certified mail properly addressed
to the other Party at the address designated on the following signature page, or
to such other address as may be designated in writing by such other Party and
shall be effective as of the date of the postmark of such notice.

         14.07    This Agreement shall not be assigned by LICENSEE except (a)
with the prior written consent of PHS, such consent to be reasonably given; or
(b) as part of a sale or transfer of substantially the entire business of
LICENSEE relating to operations which concern this Agreement. LICENSEE shall
notify PHS within ten (10) days of any assignment of this Agreement by LICENSEE.

         14.08    LICENSEE agrees in its use of any PHS-supplied materials to
comply with all applicable statutes, regulations, and guidelines, including
Public Health Service and National Institutes of Health regulations and
guidelines. LICENSEE agrees not to use the materials for research involving
human subjects or clinical trials to the United States without complying with 21
C.F.R. Part 50 and 45 C.F.R. Part 46. LICENSEE agrees not to use the materials
for research involving human subjects or clinical trials outside of the United
States without notifying PHS, in writing, of such research or trials and
complying with the applicable regulations of the appropriate national control
authorities. Written notification to PHS of research involving human subjects or
clinical trials outside of the United States shall be given no later than sixty
(60) days prior to commencement of such research or trials.

                                       12
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                        CONFIDENTIAL TREATMENT REQUESTED

         14.09    LICENSEE acknowledges that it is subject to and agrees to
abide by the United States laws and regulations (including the Export
Administration Act of 1979 and Arms Export Control Act) controlling the export
of technical data, computer software, laboratory prototypes, biological material
and other commodities. The transfer of such items may require a license from the
cognizant agency of the U.S. Government or written assurances by LICENSEE that
it shall not export such items to certain foreign countries without prior
approval of such agency. PHS neither represents that a license is or is not
required or that, if required, it shall be issued.

         14.10    LICENSEE agrees to mark the Licensed Products or their
packaging sold in the United States with all applicable U.S. patent numbers and
similarly to indicate "Patent Pending" status. All Licensed Products
manufactured in, shipped to or sold in other countries shall be marked in such a
manner as to preserve PHS patent rights in such countries.

         14.11    By entering into this Agreement, PHS does not directly or
indirectly endorse any product or service provided, or to be provided, by
LICENSEE whether directly or indirectly related to this Agreement. LICENSEE
shall not state or imply that this Agreement is an endorsement by the
Government, PHS, any other Government organizational unit, or any Government
employee. Additionally, LICENSEE shall not use the names of NIH, CDC or PHS or
their employees in any advertising, promotional or sales literature without the
prior written consent of PHS.

         14.12    The Parties agree to attempt to settle amicably any
controversy or claim arising under this Agreement or a breach of the Agreement,
except for appeals of modification or termination decisions provided for in
Article 13. LICENSEE agrees first to appeal any such unsettled claims or
controversies to the Director of NTH, or designee, whose decision shall be
considered the final agency decision. Thereafter, LICENSEE may exercise any
administrative or judicial remedies that may be available.

         14.13    Nothing relating to the grant of a license, nor the grant
itself, shall be construed to confer upon any person any immunity from or
defenses under the antitrust laws or from a charge of patent misuse, and the
acquisition and use of rights pursuant to 37 C.F.R. Part 404 shall not be
immunized from the operation of state or Federal law by reason of the source of
the grant.

         14.14    Paragraphs 4.03, 8.01, 9.06, 9.07, 12.01-12.05, 13.09, 13.10,
and 14.12 of the Agreement shall survive the termination of this Agreement.

                          SIGNATURES BEGIN ON NEXT PAGE

                                       13
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                        CONFIDENTIAL TREATMENT REQUESTED

                    PHS PATENT LICENSE AGREEMENT - EXCLUSIVE
                    ----------------------------------------

                                 SIGNATURE PAGE
                                 --------------

FOR PHS:

----------------------------------                    --------------------------
Barbara McGarey, J.D.                                 Date
Deputy Director, Office of Technology Transfer
National Institutes of Health

Mailing Address for Notices:

Office of Technology Transfer
National Institutes of Health
Box OTT
Bethesda, Maryland 20892

FOR LICENSEE (The undersigned expressly certifies or affirms that the contents
of any statements of LICENSEE made or referred to in this document are truthful
and accurate.)

/s/ KENNETH W. MEVEY
----------------------------------

Kenneth W. Mevey                                      May 25, 1995
----------------------------------                    --------------------------
Name                                                  Date

Executive Vice President
----------------------------------
Title

Mailing Address for Notices:

Elan Pharmaceutical Research Corporation
----------------------------------------
1300 Gould Drive, Gainsville GA, 30504
----------------------------------------
Attention: Marla J. Church, Esq.
----------------------------------------

                                       14
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                        CONFIDENTIAL TREATMENT REQUESTED

                   APPENDIX A - Patents or Patent Applications
                   -------------------------------------------

Patents or Patent Applications:  U.S. Patent Application Serial No. 07/779,744

                                 U.S. Patent Application Serial No. 08/135,661

                                 U.S. Patent Application Serial No. 08/207,601

                                 All divisionals, continuations and foreign
                                 counterparts of the above patent applications,
                                 all patents issuing from the above applications
                                 and any reissues, reexaminations and extensions
                                 of all such patents.

                                       15
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                        CONFIDENTIAL TREATMENT REQUESTED

                APPENDIX B - Licensed Fields of Use and Territory
                -------------------------------------------------

Licensed Territory: Worldwide

Licensed Fields of Use: All fields of use identified in U.S. Patent Application
Serial Nos. 07/779,744, 08/135,661 and 08/207,601, including but not limited to,
the following:

                        1) therapy and prevention of cancer

                        2) therapy and prevention of anemia

                        3) therapy and prevention of AIDS

                                       16
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                        CONFIDENTIAL TREATMENT REQUESTED

                             APPENDIX C - Royalties
                             ----------------------

Royalties:

         LICENSEE agrees to pay to PHS a noncreditable, nonrefundable license
issue royalty in the amount of [CONFIDENTIAL TREATMENT REQUESTED].

         LICENSEE agrees to pay to PHS a nonrefundable minimum annual royalty in
the amount of [CONFIDENTIAL TREATMENT REQUESTED].

         LICENSEE shall pay PHS earned royalties at the rate of [CONFIDENTIAL
TREATMENT REQUESTED] % on NET SALES of up to [CONFIDENTIAL TREATMENT REQUESTED]
per annum and [CONFIDENTIAL TREATMENT REQUESTED] % on said NET SALES over
[CONFIDENTIAL TREATMENT REQUESTED] per annum of LICENSED PRODUCTS made, used, or
sold by LICENSEE and/or its SUBLICENSEES.

         LICENSEE agrees to pay PHS benchmark royalties as follows:

                                    ONCOLOGY
                                    --------

         [CONFIDENTIAL TREATMENT REQUESTED] at the completion of Phase 1
phenylbutyrate studies. Expected completion date - early 1996.

         [CONFIDENTIAL TREATMENT REQUESTED] at the completion of Phase II
studies for either phenylbutyrate or phenylacetate. Expected completion date -
late 1997 to early 1998.

         [CONFIDENTIAL TREATMENT REQUESTED] at the completion of Phase III
studies for either phenylacetate or phenylbutyrate (whichever compound is found
to be more efficacious) and filing of NDA. Expected completion date - late 2000.

         [CONFIDENTIAL TREATMENT REQUESTED] upon approval for the commercial
sale of a Licensed Product, by the FDA or foreign functional equivalent, this
royalty to apply only in the first country approved, if that country is the
United States, Japan, or the first country in Europe.

         [CONFIDENTIAL TREATMENT REQUESTED] upon approval for the commercial
sale of a Licensed Product by the FDA or foreign functional equivalent in
subsequent countries approved, this royalty to apply only in the United States,
in Japan, and the first country in Europe.

                                       17
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                        CONFIDENTIAL TREATMENT REQUESTED

                           APPENDIX D - Modifications
                           --------------------------

PHS and LICENSEE agree to the following modifications to the Articles and
Paragraphs of this Agreement:

                                       18
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                        CONFIDENTIAL TREATMENT REQUESTED

                             APPENDIX E - Benchmarks
                             -----------------------

      LICENSEE agrees to the following Benchmarks for its performance under this
Agreement and, within ten (10) days of achieving a Benchmark, shall notify PHS
that the Benchmark has been achieved.

                                    ONCOLOGY
                                    --------

      Completion of phase I phenylbutyrate studies - expected early 1996.

      Completion of phase II phenylbutyrate studies - expected early 1998.

      Completion of phase II phenylacetate studies - expected late 1997.

      Completion of phase III studies for phenylacetate and/or phenylbutyrate
and filing of corresponding NDA(s) - expected late 2000.

                                      AIDS
                                      ----

      Preliminary investigative research is ongoing at present to establish an
in vitro model for the efficacy of either phenylacetate or phenylbutyrate for
inhibiting the replication of the AIDS virus. Estimated research time to develop
model is approximately three years.

                                     ANEMIAS
                                     -------

      We have established that phenylacetate and phenylbutyrate stimulate HbF
production in cultured erythroid progenitor derived from normal donors and
patients with sickle cell anemia or a-thalassemia. Subsequently, others have
shown that patients with urea-cycle disorders treated with phenylbutyrate were
shown to have significantly increased HbF levels and a higher percentage of F
cells compared with normal subjects. The results of the phase I phenylbutyrate
will determine the feasibility of proceeding with phase II phenylbutyrate
studies in sickle cell anemia and thalassemia.

                                       19

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