COLLABORATION AND EXCLUSIVE LICENSE AGREEMENT

This Collaboration and Exclusive License Agreement, dated as of January 23, 2009 (this “Agreement”), is entered into between Transgenomic, Inc., a Delaware corporation (“Transgenomic”), and Power3 Medical Products, Inc., a New York corporation (“Power3”).

WHEREAS, Power3 has rights in and is developing the Licensed Technology as a diagnostic tool for the early detection of neurodegenerative diseases, including Alzheimer’s disease, Amyotrophic lateral sclerosis (ALS), and Parkinson’s disease;

WHEREAS Power3 is currently conducting clinical validation studies of the Licensed Technology in order to commercialize the Licensed Technology;

WHEREAS, Transgenomic is willing to provide certain funds to Power3 for use in the reimbursement of costs incurred by Power3 in the clinical validation studies of the Licensed Technology necessary to commercialize the Licensed Technology;

WHEREAS, Transgenomic may also desire to collaborate in the performance of clinical validation studies of the Licensed Technology; and

WHEREAS, Transgenomic desires to obtain, and Power3 is willing to grant, an exclusive license in the Licensed Technology on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the parties, intending to be legally bound, agree as follows:

For purposes of this Agreement, the terms defined in this Article 1 shall have the respective meanings set forth below:

1.1             “ Affiliate ” means with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person.  A Person shall be regarded as in control of another Person if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever.

1.2            “ First Commercial Sale ” means, with respect to a Licensed Product, the first bona fide transaction in a country in the Territory for which consideration is received for the sale, use, lease, transfer or similar disposition of such Licensed Product by Transgenomic, its Affiliate or (sub)licensee to customers who are not Affiliates in such country after all applicable marketing and pricing approvals (if any) have been granted by the applicable governing health authority of such country or, prior to any pricing approval by any applicable governing health authority, the first bona fide transaction in a country in the Territory for which consideration (revenue) is received for performing an assay of the Licensed Product by Transgenomic.

1.3             “ Improvements ” means Power3 Improvements and Transgenomic  Improvements.

1.4             “ Licensed Know-How ” means proprietary information or other know-how, whether or not patentable, and whether stored or transmitted in oral, documentary, electronic, or other form, including without limitation, ideas, concepts, formulas, methods, procedures, designs, compositions, plans, documents, data, inventions, discoveries, developments, works of authorship, biological and chemical materials, and any information relating to research and development plans, experiments, results, compounds, products, preclinical and clinical data, trade secrets, chemical synthesis, scale-up and manufacturing, toxicology, regulatory, stability, and any other information relevant to Neurodegenerative Diagnostic Tests.

1.5             “ Licensed Patent Rights ” means (a) all patents and patent applications listed on Exhibit A hereto which are owned by or licensed to Power3, and have application in connection with Neurodegenerative Diagnostic Tests; (b) all patents that have issued or in the future shall issue therefrom, including utility, model and design patents and certificates of invention; and (c) all divisionals, continuations, continuations-in-part, reissues, renewals, reexaminations, extensions or additions to any such patent applications and patents.

1.6             “ Licensed Product ” means test kits or systems for performing Neurodegenerative Diagnostic Tests using the Licensed Technology.

1.7             “ Licensed Technology ”  means, collectively, the Licensed Patent Rights, the Licensed Know-How, the Improvements and as related to the foregoing items, all laboratory notebooks, research plans, inventions, proteins and protein fragments, biomarkers, assay methodology, processes, materials and methods for production, recovery and purification of natural products, formulae, plans, specifications, characteristics, marketing surveys and plans and business plans.

1.8             “ Net Sales ” means, with respect to any Licensed Product or Reference Laboratory Service, the gross sales price of such Licensed Product or Reference Laboratory Service invoiced by Transgenomic, its Affiliate, or its (sub)licensee to customers who are not Affiliates (or are Affiliates but are the end users of such Licensed Product) less, to the extent actually paid or accrued by Transgenomic or its Affiliate (as applicable), (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such customers for spoiled, damaged, out-dated or returned Licensed Product or for Reference Laboratory Services erroneously performed; (b) freight and insurance costs incurred by Transgenomic or its Affiliate (as applicable) in transporting such Licensed Product; (c) cash, quantity and trade discounts, rebates and other price reductions for such Licensed Product or Reference Laboratory Service given to customers under price reduction programs that are consistent with industry practices; (d) sales, use, value-added and other direct taxes incurred on the sale of such Licensed Product and Reference Laboratory Service; (e) customs duties, surcharges and other governmental charges incurred in exporting or importing such Licensed Product and (f) reimbursement decreases from list price due to insurance company, hospital or government reimbursement price reductions.  Notwithstanding anything to the contrary in this Agreement, if any reusable instrument (that is itself a Licensed Product) is used in combination with a separate diagnostic device (that is itself a Licensed Product) to detect or measure one or more analytes from a patient sample on or in such device, then for purposes of calculating Net Sales, such diagnostic device shall constitute a Licensed Product, but such instrument shall not constitute a Licensed Product.

1.9            “ Neurodegenerative Diagnostic Tests ” means proteomic neurodegenerative diagnostic screening tests performed as a series of blood serum tests designed to diagnose motor neuron, cognitive, and other neurodegenerative disorders including, but not limited to, Alzheimer’s, Parkinson’s, Lou Gehrig’s disease (ALS), psychiatric diseases or movement disorders in individuals. The test monitors the concentration of selected biomarkers residing in a panel of blood serum protein biomarkers to distinguish normal patients from those with neurodegenerative diseases, by applying a statistical model that evaluates the quantitative information of the protein biomarkers and automatically assigning a probability score for the individual.

1.10           “ Person ” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

1.11           “ Power3 ” means Power3 Medical, Inc., a New York corporation, and its Affiliates.

1.12           “ Power3 Improvement ” means any and all intellectual property developed, created, reduced to practice, conceived, or otherwise made by Power3, its employees, agents or independent contractors that are derived from or based upon the Licensed Technology.

1.13           “ Publications ” means the publicly available information describing Power3´s work with respect to Neurodegenerative Diagnostic Tests, including but not limited to published patents and patent applications listed in Exhibit A , conference presentations and peer-reviewed publications.

1.14           “ Reference Laboratory Services ” shall mean use of a laboratory developed and laboratory validated test service that (a) is offered or sold by reference laboratories and/or service laboratories and (b) is developed and validated in accordance with regulations promulgated under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) (or under an equivalent subsequent legislation) for the evaluation of a Neurodegenerative Diagnostic Test performed using a Licensed Product.

1.15           “ Territory ” means the entire world except for those territories listed on Exhibit B hereto.

1.16           “ Third Party ”  means any Person other than Power3 and Transgenomic and their respective Affiliates.

1.17           “ Transgenomic ” means Transgenomic, Inc., a Delaware corporation.

1.18           “ Transgenomic Common Stock ” means  the Common Stock, par value $0.01, of Transgenomic.

1.19           “ Transgenomic Improvements ” means any and all intellectual property developed, created, reduced to practice, conceived, or otherwise made by employees or independent contractors of Transgenomic, in the course of performing any activities pursuant to this Agreement or under the license granted thereunder, and that are specific to the Licensed Technology.

Power3 hereby represents and warrants to Transgenomic as follows:

2.1             Corporate Existence and Power .  Power3 (a) is a corporation duly organized, validly existing and in good standing under the laws of New York  (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of Power3 and would not materially adversely affect its ability to perform its obligations under this Agreement.

2.2             Authorization and Enforcement of Obligations .  Power3 (a) has the corporate power and authority to enter into this Agreement and to perform its obligations hereunder and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of Power3, and constitutes a legal, valid, binding obligation, enforceable against Power3 in accordance with its terms.

2.3             No Consents .  All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by Power3 in connection with this Agreement have been obtained.

2.4             Rights in Licensed Technology .  Power3 is the legal and beneficial owner of all right, title and interest in and to the Licensed Technology or has sufficient rights thereto (including, without limitation, the rights under that certain license agreement referred to in the next succeeding sentence), having good title or a valid license thereto, free and clear of any and all mortgages, liens, and security interests created by Power3. Power3 previously has delivered to Transgenomic a full and complete copy, together with all amendments thereto, of the BCM License (defined in Section 4.7 of this Agreement). The BCM License is in full force and effect and neither party thereto is in default under the BCM License. Power3 shall comply with all applicable laws, rules, and regulations of any governmental authority in the performance of its obligations under this Agreement.

2.5            Non-Infringement .  To the  best knowledge of Power3, the Licensed Technology does not infringe upon or unlawfully or wrongfully use any proprietary rights, including but not limited to patent rights, owned or claimed by a Third Party. Power3 has not received any notice of any claim of infringement relating to the Licensed Technology.

Transgenomic hereby represents and warrants to Power3 as follows:

3.1             Corporate Existence and Power .  Transgenomic (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of Transgenomic and would not materially adversely affect its ability to perform its obligations under this Agreement.

3.2             Authorization and Enforcement of Obligations .  Transgenomic (a) has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of Transgenomic, and constitutes a legal, valid, binding obligation, enforceable against Transgenomic in accordance with its terms.

3.3             No Consents .  All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by Transgenomic in connection with this Agreement have been obtained.

3.4             Compliance with Laws .  Transgenomic shall comply with all applicable laws, rules, and regulations of any governmental authority in the performance of its obligations under this Agreement.

4.1             Exclusive License . On the terms and subject to the conditions of this Agreement, Power3 hereby grants to Transgenomic an exclusive, royalty-bearing license for the Territory (together with the right to grant sublicenses) to research, develop, obtain regulatory approval for, commercialize, make, have made, use, have used, offer for sale and sell the Licensed Technology, the Licensed Products, and the Reference Laboratory Services in connection with performing or having performed Neurodegenerative Diagnostic Tests. On the terms and subject to the conditions of this Agreement, the exclusive license granted (i) with respect to Licensed Patent Rights, continues until the earlier of the expiration of such patents or the expiration or termination of this Agreement (provided that upon the expiration of any such patent Transgenomic shall have a perpetual license in the technology covered by such patent in the Territory) and (ii) with respect to unpatented Licensed Technology, continues until the expiration or termination of this Agreement.

4.2             Trademark Licensed .  Power3 hereby grants to Transgenomic a license to use Power3’s NuroPro® trademark registered with the United States Patent and Trademark Office in connection with the license granted in Section 4.1 and shall execute a license agreement for such trademark in the form of Exhibit C to this Agreement.

4.3.             Licensed Know How .  After the effective date of this Agreement, Power3 will make available to Transgenomic all relevant Licensed Know How relating to the Licensed Patent Rights.

4.4             Reservation of Rights .  Power3 retains all right, title and interest in and to the Licensed Technology other than those expressly granted in this Agreement.

4.5             365(n) of Bankruptcy Code .   All rights and licenses now or hereafter granted under or pursuant to any Section of this Agreement, are rights to “intellectual property” (as defined in Section 101(35A) of Title 11 of the United States Code, as amended (such Title 11, the “Bankruptcy Code”)).  Power3 grants to Transgenomic and its Affiliates a right of access and to obtain possession of, and to benefit from copies of, (i) pre-clinical and clinical research data and results, (ii) laboratory and compound samples required to be delivered to Transgenomic to the extent not previously delivered, all of which ((i) and (ii)) constitute “embodiments” of intellectual property pursuant to Section 365(n) of the Bankruptcy Code), and (iii) all other embodiments of such intellectual property, whether any of the foregoing are in Power3’s  possession or control or in the possession and control of Third Parties.

4.6             Sublicenses . The right of Transgenomic to sublicense under this Agreement is subject to the following conditions: (a) in each such sublicense, the sublicensee shall be prohibited from granting further sublicenses and shall be subject to the applicable terms and conditions of the license granted to Transgenomic under this Agreement; (b) in each such sublicense, Transgenomic shall use its best efforts to obtain limitations of liability and indemnity protection for Power3 that are at least as comprehensive as that granted to Transgenomic; (c) Transgenomic shall forward to Power3, within thirty (30) days following execution, a complete and accurate copy written in the English language of each sublicense granted hereunder;  and (d) notwithstanding any such sublicense, Transgenomic shall remain primarily liable to Power3 for all of the duties and obligations of Transgenomic contained in this Agreement.

4.7             Sublicense of Baylor College of Medicine License .  For the avoidance of doubt, as a part of the Licensed Patent Rights included in the Licensed Technology, Power3 sublicenses to Transgenomic all technology licensed by Power3 as licensee under that certain Exclusive License Agreement between Baylor College of Medicine (“BCM”) and Power 3, dated June 28, 2004, attached hereto as a part of Exhibit A (the “BCM License”), subject to and in accordance with the terms and provisions of the BCM License. Transgenomic agrees to comply with the requirements of the BCM License as applicable to sublicensees; provided that in the event that Power3 breaches any provision of the BCM License or receives any notice of default from BCM relating to a possible termination of the BCM License, Power3 shall immediately notify Transgenomic of such breach or notice and Transgenomic shall have the right, but not the obligation, to cure such default or to perform an act or duty of Power3 under the BCM License necessary to cure such default, and the cost of such performance by Transgenomic, including but not limited to reasonable attorneys’ fees, shall be deducted from any payments otherwise due to Power3 under this Agreement. In the event of the termination of the BCM License as a result of any insolvency, dissolution, bankruptcy or receivership proceedings of Power3, Power3 acknowledges that Transgenomic shall have the right, but not the obligation, to seek to enter into a new license agreement for all patents and technology covered by the BCM License, directly with BCM, but subject to BCM’s consent and the payment by Transgenomic of any additional fees required by BMC; provided that Transgenomic shall continue to comply with its obligations to Power3 under this Agreement, subject to its right to deduct the cost of any payments or performance required under the new license with BCM from any payments otherwise due to Power3 under this Agreement.  Power3 shall not take any action to amend or terminate the BCM License without the express advance written consent of Transgenomic. Power3 covenants to Transgenomic to duly and faithfully observe all terms and restrictions and perform all of the obligations imposed on Power3 under the BCM License, including without limitation payment of all royalties, license fees and other payments. Power3 shall neither do nor permit anything to be done which would cause the BCM License to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in BCM under the BCM License.

5.1             Royalties .  In partial consideration for the license granted hereunder, during the term of this Agreement, Transgenomic shall pay to Power3 royalties as follows:

  5.1.1          Transgenomic shall pay to Power3 royalties for the license granted in Section 4.1 at a rate (the “Royalty Rate”) of 20% of Net Sales, but not to exceed 25% of the gross profit (as calculated pursuant to U.S. generally accepted accounting principles) derived by Transgenomic from such Net Sales; provided, however, such royalties shall in no case be less than 10% of Net Sales.  Such royalties shall be due and payable on a calendar quarterly basis and shall be submitted by Transgenomic along with the report as specified in Section 6.1 below.

5.2             Third Party Licenses .  If Transgenomic is reasonably required to take a license under any Third Party patents to use the Licensed Technology as reasonably determined by Transgenomic, and Transgenomic’s total royalty burden for Net Sales exceeds the applicable Royalty Rate plus four percent  (4%) (in sum, the “Royalty Cap”), the Royalty Rate payable hereunder shall be reduced proportionally in accordance with the following formula:

R2 = R1 x (Royalty Cap/T)

Where:

R1 is the Royalty Rate

R2 is the adjusted reduced Royalty Rate hereunder

T is the total royalty rates (on a percentage basis) due to all licensors

By way of example, if the Royalty Rate owed under Section 5.1.1. is 20% (R1) and two additional patent licenses are needed from two Third Parties and these two other royalty rates are 3% and 3.25% (total of 6.25%), the value of T is 26.25 %, the Royalty Cap is 24%  and the Royalty Rate due under this Agreement, as adjusted (R2), is 20 x (24 % /26.25%) or 18.29 %.

Notwithstanding the foregoing, in no event will the Royalty Rate due under this Agreement be reduced to less than ten percent (10%) of Net Sales.

5.3           License Execution Fee .

 5.3.1          Within three (3) days following execution of this Agreement Transgenomic shall deliver to Power3 via wire transfer the amount of $100,000.

 5.3.2          Within thirty (30) days following execution of this Agreement Transgenomic shall create an account for funding Power3’s clinical validation efforts. These funds, referred to in Section 8.1 of this Agreement, shall be disbursed in the manner and subject to the conditions set forth in Section 8.1 and the Disbursement Control Agreement referred to therein.

5.4            Milestone Fees .  Transgenomic shall pay to Power3 the following milestone fees within thirty (30) days of the occurrence of the applicable milestone event: