DEVELOPMENT AGREEMENT

Research and Development Agreement

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CardioVascular BioTherapeutics, Inc | ProDerm, LP | VD-1, LLC

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Title: DEVELOPMENT AGREEMENT
Governing Law: Delaware Date: 7/18/2008
Industry: BIOTRX Sector: HEALTH

Search Research and Development Agreement by:

DEVELOPMENT AGREEMENT

BETWEEN

CARDIOVASCULAR BIOTHERAPEUTICS, INC.

AND

PRODERM, LP

Dated as of July 8, 2008

TABLE OF CONTENTS

			Page

1.	Definitions		1
	1.1	Definitions	1
	1.2	Singular and Plural	1

2.	Description of Technology / Goal of Development		1

3.	Development Services		2
	3.1	License	2
	3.2	Development	2
	3.3	Disclaimer of Warranties	3
	3.4	Rights to Property	3
	3.5	Reports and Records.	3
	3.6	Other Activities	4

4.	Development Fee		4

5.	Revenue Sharing from Product Sales		4

6.	Representations and Warranties of CVBT		5
	6.1	Organization	5
	6.2	Authorization	5
	6.3	Intellectual Property Rights	5

7.	Representations, Warranties and Covenants of PDLP		5

8.	Insurance		5

9.	Term and Termination		5
	9.1	Term	5
	9.2	Events of Termination.	6
	9.3	Effect of Termination	6

10.	Indemnification		6
	10.1	Indemnification by CVBT	6
	10.2	Indemnification by PDLP	6
	10.3	Defense of Claims	7
	10.4	Consequential Damages	7

11.	Miscellaneous		7
	11.1	No Implied Waivers; Rights Cumulative	7
	11.2	Force Majeure	7
	11.3	Relationship of the Parties	7
	11.4	Notices	8
	11.5	Successors and Assigns	8
	11.6	Amendments	9
	11.7	Governing Law	9

11.8	Taxes	9
11.9	Severability	9
11.10	Confidentiality	10
11.11	Trading Limitations	10
11.12	Counterparts	10
11.13	Entire Agreement	10

SCHEDULES

1.1		Definitions
2.1		Description of Wound Healing IP
3.1		Technology License Agreement
3.2.1		Work Plan
4		Development Fee

DEVELOPMENT AGREEMENT

This Development Agreement (the “Agreement”) is made as of July 8, 2008, by and between CardioVascular BioTherapeutics, Inc., a Delaware corporation (“CVBT”), and ProDerm, LP, a Nevada limited partnership (“PDLP”).

RECITALS

A. CVBT has developed certain intellectual property regarding a potential drug for wound healing (the “Wound Healing IP”) and is willing to license to PDLP the Wound Healing IP for the purpose of further developing the Wound Healing IP and advancing a potential wound healing drug in the FDA Process.

B. CVBT has experience in the development of pharmaceutical products and has, or has access to, the facilities, equipment, employees and other resources to accomplish development activities, on behalf of PDLP, with respect to the Wound Healing IP.

C. PDLP desires to engage CVBT to perform such services in connection with the Development, and CVBT is willing to provide such services.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce CVBT to enter into the Agreements, CVBT and PDLP hereby agree as follows:

1. Definitions .

1.1 Definitions . All capitalized terms used herein and not otherwise defined shall have the respective meanings, to the extent such terms are used herein, set forth in Schedule 1.1 attached hereto, which is incorporated by this reference as though fully set forth herein.

1.2 Singular and Plural . Singular and plural forms, as the case may be, of terms defined herein shall have correlative meanings.

2. Description of Technology / Goal of Development . The Wound Healing IP is described in Schedule 2.1 attached hereto and incorporated herein by this reference. The goal of the Development is to advance the Wound Healing IP in the FDA Process. The parties hereto understand and acknowledge that the goal of the Development conducted under this Agreement is to result in a wound healing drug that has been authorized for commercial exploitation by the FDA and further, both parties understand and acknowledge that there is no guarantee that the development conducted under this Agreement will result in a wound healing drug authorized by the FDA for commercial exploitation.

3. Development Services .

3.1 License . Pursuant to the Technology License Agreement of even date herewith, a copy of which is attached hereto as Schedule 3.1, CVBT has licensed to PDLP the Wound Healing IP on a nonexclusive basis for the purpose of permitting PDLP to participate with CVBT in the Development. PDLP acknowledges that CVBT has pledged its interest in the Wound Healing IP as collateral for a prior loan financing entered into on March 20, 2006 as further described on Form 8-K filed on March 22, 2006 with a remaining balance due as of June 3, 2008 of $2,680,000 and that the rights of such lender are superior to those of PDLP. PDLP further acknowledges and understands that CVBT may enter into future research and development arrangements to further the advancement of the Wound Healing IP and related potential drug candidate, and that the rights of such research and development partnerships will be pari passu with those of PDLP. CVBT agrees to not enter in research and development arrangements that will result in aggregating more than 50% of revenue due to these arrangements during the period of time that R&D LP is still due any royalty under this Agreement.

3.2 Development . PDLP hereby engages CVBT, and CVBT hereby accepts such engagement, to use commercially reasonable efforts to undertake the Development. Such services shall be provided as follows:

3.2.1 Work Plan . The proposed work plan is attached as Schedule 3.2.1 and incorporated herein by this reference. The work plan may be revised by CVBT upon written notice to PDLP.

3.2.2 Conduct of Development . During the term of this Agreement, CVBT shall use commercially reasonable efforts to (a) conduct the Development on behalf of PDLP in a prudent and skillful manner in accordance, in all material respects, with the work plan then in effect and applicable laws, ordinances, rules, regulations, orders, licenses and other requirements now or hereafter in effect and (b) diligently execute such work plan and report to PDLP any significant deviations therefrom in a timely manner. PDLP hereby appoints CVBT its exclusive agent, for the term of this Agreement, with the sole power and authority to file and prosecute all necessary regulatory applications and permits in CVBT’s name required to obtain FDA and other regulatory approvals for CVBT’s Development efforts. Without limiting the generality of the foregoing sentence, absent specific requirements of the FDA to the contrary, CVBT is authorized by PDLP to conduct FDA trials in CVBT’s name. Using the Available Funds provided by PDLP, CVBT shall furnish all labor, supervision, services, supplies and materials necessary to perform the Development in accordance with the work plan then in effect. In addition, CVBT agrees to use commercially reasonable efforts, on behalf of itself and PDLP, to attempt to obtain and to sublicense any patent or technology license or sublicense from any Person, including CVBT, that CVBT reasonably determines to be necessary or useful to enable CVBT to conduct the Development under this Agreement.

3.2.3 Subcontracts . PDLP acknowledges that CVBT may elect to subcontract to third parties a portion of the Development. PDLP acknowledges and agrees that in performing the Development, CVBT may, and is hereby authorized to, without the prior written consent of PDLP, engage or agree or otherwise collaborate with other Persons, including, without limitation, Affiliates of CVBT or entities performing other development activities for CVBT, to provide assistance in carrying out the Development.

3.3 Disclaimer of Warranties . CVBT cannot and does not guarantee that the Development will be successful in whole or in part or that any significant advancement in the FDA Process will occur. To the extent that CVBT has complied with Section 3.2.2 hereof, the failure of CVBT to further develop successfully the Wound Healing IP will not in and of itself constitute a breach by CVBT of any representation, warranty, covenant or other obligation under the Agreements. In addition, neither CVBT nor PDLP makes any representation or warranty or guaranty that the development fee described in Section 4 will be sufficient for the completion of the Development contemplated in the work plan. Furthermore, nothing in this Agreement shall be construed as a representation made or warranty given that any patents or other registrable technology will issue from the Development. PDLP understands that the Development shall involve technologies that have not been approved by any regulatory authority and that CVBT does not guaranty the safety, effectiveness, performance or usefulness of any drug or technology that results from the Development.

3.4 Rights to Property . All right, title and interest to the data, know-how and enhancements of the Wound Healing IP and any other intellectual property resulting from the Development acquired or developed pursuant to this Agreement (the “Program IP”) including any submissions or applications to the FDA or any foreign equivalent made by CVBT in its name on behalf of itself or PDLP shall be the exclusive property of PDLP; provided, however, that such right, title and interest shall be subject in all events to that certain exclusive license agreement of even date herewith attached hereto as Schedule 3.1 and incorporated herein by this reference; and provided further, that PDLP shall have no right to physical possession of the Program IP.

3.5 Reports and Records .

3.5.1 Progress Reports . Within 30 days after the end of each calendar quarter during the term of this Agreement, CVBT shall deliver to PDLP a report setting forth in reasonable detail a summary of the work performed pursuant to the work plan during the immediately preceding calendar quarter.

3.5.2 Financial Reports . Within five (5) business days after the filing of its Form 10-Q with the SEC for the first three calendar quarters of each calendar year during the term of this Agreement, CVBT shall provide to PDLP (a) a reasonably detailed report setting forth in respect of such quarter the revenues collected by CVBT based on the exploitation of any wound healing drug developed as a partial result of the Development, and (b) a check payable to PDLP in an amount equal to the amount calculated pursuant to Section 5 hereof for that quarterly period. Within five (5) business days after CVBT files its Form 10-K with the SEC, it shall provide to PDLP an audited report of the revenues collected by CVBT based on the exploitation of any wound healing drug developed as a partial result of the Development for the prior fiscal year of CVBT. Any adjustments to the amounts paid or payable to PDLP shall be made as a result of such audit at the time of delivery of such audit, and an appropriate payment will be made to PDLP.

3.5.3 Final Report . CVBT shall prepare a final report, within 90 days after the expiration or termination of this Agreement, setting forth in reasonable detail a summary of the work performed since the last report provided to PDLP hereunder and the material developments with respect thereto and containing a final statement of, and payment based on, all applicable collected revenues upon which payment to PDLP pursuant to Section 5 hereof are based and deliver such report to PDLP.

3.5.4 Records/Review of Records . CVBT shall keep and maintain proper and complete records and books of account documenting all of its collected revenues based on the exploitation of any wound healing drug developed as a partial result of the Development. At PDLP’s request and expense, CVBT shall permit a certified independent public accountant selected by PDLP to have access, no more than once in each calendar year during the term of this Agreement and each year for three calendar years following the termination hereof, during regular business hours and upon reasonable notice to CVBT, to such records and books for the sole purpose of determining the accuracy of the collected revenues reports. If such certified independent public accountant reasonably determines that the collected revenues reported have been, for any calendar year understated by CVBT by an amount equal to or greater than five percent, CVBT shall promptly forward any such underpayment to PDLP and pay all reasonable fees and disbursements of such certified independent public accountant incurred in the course of making such determination. If such accountant reports an underpayment by CVBT of less than five percent, CVBT shall forward such underpayment to PDLP and PDLP shall pay all fees and expenses of such accountant. If such accountant reports an overpayment by CVBT, PDLP will repay such overpayment and bear all fees and expenses of such accountant.

3.6 Other Activities . During the term of this Agreement, CVBT shall devote such time and effort to the performance of services pursuant to this Agreement as may be necessary or appropriate to fulfill its duties under this Agreement; provided, however, it is specifically understood and agreed by PDLP that CVBT shall not be required to devote itself, on a full-time basis, to the provision of such services and that CVBT shall have the right to engage in its own development activities for other drug candidates and in other business activities with other Persons, and PDLP shall not, by virtue of this Agreement, have any right, title or interest in or to such independent activities or to the income or profits derived therefrom and, without limiting CVBT’s obligation to use commercially reasonable efforts to provide certain services hereunder, nothing set forth in this Agreement shall limit or reduce the ability of CVBT to carry on such other activities.

4. Development Fee . The nonrefundable fee for the Development contemplated herein is set forth on Schedule 4 hereto which is incorporated herein by this reference. PDLP hereby acknowledges that CVBT has in no way guaranteed any particular results from the Development; that, indeed, there may be no positive results from the Development; and that, as a consequence, it may receive no return of, or on, the Investment.

5. Revenue Sharing from Product Sales . If, as a result of the Development, as well as additional and subsequent development of the Wound Healing IP, CVBT is able to commercialize or in any other way exploit value from the Wound Healing IP, PDLP will be entitled to ten percent (10%) of the gross cash actually collected by CVBT based on CVBT’s exploitation of the wound healing drug (the participation). Such exploitation may include, without limitation, direct marketing by CVBT or its Affiliates and/or marketing, licensing, and/or partnering arrangements with other pharmaceutical companies. Payment of such amounts shall be made contemporaneously with the quarterly and annual revenue reports described in Section 3.5 hereof up to a maximum amount of the total Investment multiplied by twenty (20).

6. Representations and Warranties of CVBT . CVBT represents and warrants to PDLP as follows:

6.1 Organization . CVBT is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority adequate for executing, delivering and performing its obligations under the Agreements.

6.2 Authorization . The execution, delivery and performance of the Agreements have been duly authorized by all necessary corporate action on the party of CVBT and the Agreements shall constitute legal, valid and binding obligations of CVBT, enforceable against CVBT in accordance with its terms, subject to laws of general application related to bankruptcy, insolvency and the relief of debtors.

6.3 Intellectual Property Rights . To the best of its knowledge, CVBT believes it has sufficient legal and/or beneficial title and ownership to the technology described on Schedule 2.1 hereof to license to PDLP the Wound Healing IP as contemplated by this Agreement in Section 3.1 and in the Technology Agreement. CVBT is not aware of, and has not received any communications alleging that, it has violated, or that PDLP, by participating in the development of the Wound Healing IP as contemplated in this Agreement, would violate, any intellectual property rights of any third party. To the best of CVBT’s knowledge, there is no material unauthorized use, infringement or misappropriation of any of the technology described in Schedule 2.1 hereto. CVBT is not aware of, nor has it received any communications challenging, the ownership, validity or effectiveness of the technology in Schedule 2.1.

7. Representations, Warranties and Covenants of PDLP . The representations, warranties and covenants of PDLP set forth in Section 3.2 o