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Exhibit 10.11

SETTLEMENT AND LICENSE AGREEMENT

Parties

This Settlement and License Agreement (the “Agreement”), is entered into between CYTOMEDIX, INC. (“Cytomedix”), a Delaware corporation, having a principal place of business at 416 Hungerford Drive, Suite 300, Rockville, Maryland 20850 and SAFEBLOOD TECHNOLOGIES, INC. (“SafeBlood”), an Arkansas corporation, having a principal place of business at 1100 N. University Ave., Suite 109, Little Rock, Arkansas 72207. Each of Cytomedix and SafeBlood are referred to in this Agreement as a “Party” and collectively as the “Parties.”  Capitalized terms used herein and not otherwise defined shall have the meaning set forth in Article 1 hereof.

Recitals

WHEREAS, Cytomedix filed an action against SafeBlood (the “Arkansas Action”), Civil Action No. 4-03-CV-422, in the United States District Court for the Eastern District of Arkansas, Western Division,  relating to a controversy between the Parties based upon SafeBlood’s manufacture, use, marketing, offer to sell, and/or sale of products alleged to infringe U.S. Patent No. 5,165,938.

WHEREAS, SafeBlood is presently in the business of supplying products and services for conducting Activated Platelet Gel Therapies, among other things;

WHEREAS, SafeBlood desires to acquire from Cytomedix on the terms and conditions contained herein the non-exclusive right to practice the inventions under the Licensed Patent for all fields of use, and to settle all disputes between and among the Parties;

NOW, THEREFORE, in consideration of the following terms, covenants and conditions, Cytomedix and SafeBlood hereby agree as follows:

Terms of Agreement

1.

Definitions.

1.1.

“Affiliate” shall mean:

1.1.1.

any individual who or Entity that, in whatever country organized or resident, directly or indirectly through one or more intermediaries, is controlled by, or is under common control with, or controls, a Party or Entity; or

1.1.2.

any Entity in which any individual or Entity recited in the preceding sub-paragraph (a) directly or indirectly through one or more intermediaries has at least a forty percent (40%) ownership or voting rights interest (whether through stock ownership, stock power, voting proxy, or otherwise).

1.2.

“Entity” shall mean any corporation, firm, partnership, proprietorship, or other form of business organization.

1.3.

“Distributor” means an entity which contracts with SafeBlood to either a) provide promotion, sales and distribution services of Platelet Products, or b) buy Platelet Products from SafeBlood for resale under a SafeBlood Brand.

1.4.

“Licensed Patent” means U.S. Patent No. 5,165,938 and any related patent application (including, without limitation, any continuation, continued prosecution, continuation-in-part, divisional or substitution thereof) and any U.S. patent (including, without limitation, any reissue or reexamination thereof), granted from, or claiming priority to, or for the benefit of any of the aforementioned patent applications or patents, as well as rights in any third-party patent acquired as a result of an interference action involving any of the foregoing.

1.5.

“SafeBlood” means (i) SafeBlood Technologies, Inc. and its Affiliates.

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1.6.

“Activated Platelet Gel Therapies” are defined as methods of treating damaged tissues and/or wounds using topical compositions containing platelets activated by adding thrombin or another biologic release agent, or containing substances released from platelets after activation by adding thrombin or another biologic release agent.

1.7.

“Experimental Platelet Gel Therapies” are defined as methods of treating damaged tissues and/or wounds using topical compositions containing platelets activated by locally present thrombin or another biologic release agent, or containing substances released from platelets after activation by locally present thrombin or another biologic release agent, i.e., without adding thrombin or another biologic release agent.

1.8.

“Activated Platelet Gel Services” means all services rendered by SafeBlood in practicing Activated Platelet Gel Therapies and/or assisting others to practice Activated Platelet Gel Therapies, but does not include General Services.

1.9.

“General Services” means consulting, training, or educational services related to the field of wound care generally, or for training, educational, and setup services unrelated to performing an Activated Platelet Gel Therapy on a given patient. By way of example only, General Services include training and educational services provided to a hospital, clinic, other institution, or physician to assist the care provider in developing standard procedures or protocols for wound care.

1.10.

“SafeBlood Branded Single Use Disposable Kits” shall mean, collectively, the single-use disposable components, applicators, reagents and other items manufactured, marketed, promoted, offered to be sold, or sold by or for SafeBlood as a kit for use by others in practicing a single Activated Platelet Gel Therapy, and having or bearing any trademark, trade name or brand name owned by SafeBlood, including the Disposable Kit items listed in the attached Exhibit A, and all successor products. SafeBlood shall update Exhibit A to include any additional or successor SafeBlood Branded Single Use Disposable Kit products, and provide a copy of same to Cytomedix, within thirty (30) days of the first sale of such products. Each SafeBlood Branded Single Use Disposable Kit shall be designed in such manner that a separate kit is required for each Activated Platelet Gel Therapy administered.

1.11.

“Single Use Disposable Components” means individual disposable items (such as applicator tips) sold separately from SafeBlood Branded Single Use Disposable Kits for use in practicing Activated Platelet Gel Therapies and not otherwise related to or sold by SafeBlood as part of a SafeBlood Branded Single Use Disposable Kit. Single Use Disposable Components are limited to those components identified as such in the attached Exhibit A, and any other items which satisfy the definition stated herein and for which SafeBlood has provided notice to Cytomedix. SafeBlood shall update Exhibit A to include any additional or successor Single Use Disposable Components, and provide notice of same to Cytomedix, within thirty (30) days of the first sale of such products.

1.12.

“SafeBlood Branded Capital Equipment Products” mean equipment, devices or other items having more than a single use manufactured, marketed, promoted, used, offered to be sold, or sold by or for SafeBlood for use in practicing Activated Platelet Gel Therapies, and having or bearing any trademark, trade name or brand name owned by SafeBlood, including the SafeBlood Branded Capital Equipment items listed in the attached Exhibit A, and all successor products. SafeBlood shall update Exhibit A to include any additional or successor SafeBlood Branded Capital Equipment Products, and provide a copy of same to Cytomedix, within thirty (30) days of the first sale of such products.

1.13.

“Gross Sales” means, applying generally accepted accounting principles, actual gross sales revenues earned by SafeBlood until the expiration of the Licensed Patent.

1.14.

“Third Party Licensed Product” means any medical device of whatsoever kind or nature that is covered by an existing or future license between Cytomedix and the seller or distributor of such device. Examples of current medical devices that would be deemed “Third Party Licensed Products” for purposes of this Agreement are devices sold by Harvest Technologies, Inc., under the brand name SmartPRePTM; the devices sold by Medtronic, Inc., under the brand name MagellanTM; the devices sold by DePuy Acromed under the brand name SymphonyTM; and devices sold by PPAI under the brand names SecquireTM or ThrombograftTM.

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1.15.

“Platelet Products” means, collectively, SafeBlood Branded Single Use Disposable Kits, Single Use Disposable Components and SafeBlood Branded Capital Equipment Products.

1.16.

“Effective Date” means October 1, 2005.

2.

Settlements. The parties agree that within two (2) business days after the execution of this Agreement, they will execute, through attorneys of record, and cause to be filed with the United States District Court for Eastern District of Arkansas, a stipulated dismissal, with prejudice, of the Arkansas Action, the form of which is attached hereto as Exhibit B (hereinafter, the “Stipulated Dismissal”). This Agreement shall be of no force and effect unless the Arkansas Action is dismissed with prejudice.

3.

License Grant.

3.1.

Licensed Patent Rights. Cytomedix hereby grants to SafeBlood for the term specified in Section 6.1 hereof, a non-exclusive, royalty-bearing license to manufacture, have made, use, import, sell, promote, market, offer for sale, or otherwise transfer Platelet Products, Activated Platelet Gel Services and Experimental Platelet Gel Therapies for use in practicing or involving the practice of processes covered by one or more claims of the Licensed Patent in any field of use. This grant includes the right for any customers or Distributors (ultimate or in privity or otherwise) of SafeBlood to use import, market, offer for sale, and/or sell (for further use or resale) Platelet Products purchased directly or indirectly from SafeBlood without payment of any additional royalty or amount to Cytomedix. This license grant “runs with the Platelet Product sold “ and the Licensed Patent shall be exhausted with respect to every Platelet Product as to which the required royalty hereunder is paid. For purposes of this Agreement, the limited license grant set forth in this Section 3.1 is hereinafter referred to as the “Licensed Patent Rights.”

3.2.

Grant of Immunity. Cytomedix (for itself and on behalf of its predecessors, successors, assigns, and each of its and their respective Affiliates and sublicensees, officers, directors, employees and agents) (collectively, the “Cytomedix Parties”) hereby irrevocably grants immunity to SafeBlood, its respective predecessors, successors and assigns, and each of its respective officers, directors, employees, agents, shareholders, partners, representatives, and all other persons acting by or on their behalf) (collectively, the “SafeBlood Releasees”) against any and all actions for or claims of infringement (whether based on a direct or contributory infringement, inducement to infringe, or other theory) relating to the use of Platelet Products or Activated Platelet Gel Services or Experimental Platelet Gel Therapies whether sold, used, or disposed of before or after the Effective Date of this Agreement.

3.3.

No Implied Licenses. No rights or licenses, other than those expressly granted herein with respect to the Licensed Patent or any other intellectual property owned or controlled by Cytomedix, are granted or shall be deemed granted to SafeBlood or any other Entity (including any purchaser of Activated Platelet Gel Services or Platelet Products). SafeBlood shall have no right to sublicense the license rights granted hereunder to any third party.

3.4.

Taxes and Authorizations. SafeBlood shall be solely responsible for the payment and discharge of any taxes, duties, or withholdings relating to any transaction in connection with the manufacture, use, sale, or other commercialization of any of the Activated Platelet Gel Services or Platelet Products. SafeBlood shall, at its own expense, be responsible for applying for and obtaining any approvals, authorizations, or validations relative to this Agreement under the appropriate federal, state, or local laws.

4.

Royalties, Reports and Payments.

4.1

Royalties.

4.1.1.

SafeBlood shall pay monthly royalties to Cytomedix for the Licensed Patent Rights in an amount equal to nine percent (9%) of the combined monthly Gross Sales of SafeBlood Branded Single Use Disposable Kits, SafeBlood Branded Capital Equipment Products, and Activated Platelet Gel Services from the Effective Date until November 24, 2009. Except as otherwise specified herein, SafeBlood shall pay minimum royalties as follows: (i) $30 for each SafeBlood Branded Single Use Disposable Kit or Activated Platelet Gel Service 

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sold by SafeBlood through January 31, 2006 (whether to or through a Distributor, other intermediary, or end-user); (ii) $35 for each SafeBlood Branded Single Use Disposable Kit or Activated Platelet Gel Service sold by SafeBlood between (and including) February 1 and July 31, 2006; and (iii) $40 for each SafeBlood Branded Single Use Disposable Kit or Activated Platelet Gel Service sold by SafeBlood between (and including) August 1, 2006 and November 24, 2009.

4.1.2.

In addition to the royalties payable under Section 4.1.1, SafeBlood shall pay monthly royalties to Cytomedix for the Licensed Patent Rights in an amount equal to eight percent (8%) of monthly Gross Sales of Single Use Disposable Components from the Effective Date until November 24, 2009. No minimum royalty shall apply to sales of Single Use Disposable Components.

4.1.3.

Notwithstanding anything in Sections 4.1.1 and 4.1.2, SafeBlood shall not be required to pay any royalty to Cytomedix on sales of General Services.

4.1.4.

Notwithstanding anything in Sections 4.1.1 and 4.1.2, SafeBlood shall not be required to pay any royalty to Cytomedix for sales of Third Party Licensed Products or Activated Platelet Gel Services provided using solely Third Party Licensed Products.

4.1.5.

Notwithstanding anything in Sections 4.1.1 and 4.1.2, SafeBlood shall not be required to pay any royalty to Cytomedix for practice of the Licensed Patent solely in connection with research and/or development of Experimental Platelet Gel Therapies. In the event that SafeBlood commercializes any such Experimental Platelet Gel Therapy, SafeBlood shall pay a monthly royalty of five percent (5%) of only those monthly Gross Sales that exceed two million dollars ($2,000,000) in a given calendar year of products and services manufactured, marketed, promoted, used, offered to be sold, or sold by or for SafeBlood solely for use in practicing Experimental Platelet Gel Therapies (regardless of whether such sales are for services rendered, disposable products sold or capital equipment sold, but excluding sales of Third Party Licensed Products.)

4.2

Notwithstanding anything in Section 4.1, when a royalty bearing Activated Platelet Gel Service is provided by SafeBlood, it shall become obligated to pay a royalty equal to nine percent (9%) of the combined revenue earned for the Activated Platelet Gel Service and the revenue earned for any Platelet Product used in providing that service, regardless of whether SafeBlood separately invoices the customer for the sale or use of the Platelet Product in connection with that service; provided, however, that SafeBlood shall not be required to pay Cytomedix an additional minimum royalty for having used a Platelet Product in providing that service.

4.3.

Royalty Reports and Records. Within fifteen (15) days following the end of each calendar month of this Agreement, SafeBlood shall deliver to Cytomedix a written report showing in reasonably specific detail the number of SafeBlood Branded Single Use Disposable Kits, Single Use Disposable Components, SafeBlood Branded Capital Equipment Products, and Third Party Licensed Products sold, sales of any Activated Platelet Gel Services sold, the aggregate Gross Sales proceeds received in respect to each royalty bearing product or service, and the aggregate royalties owing in respect thereof (the “Royalty Report”). Such report shall separately identify sales and royalties owing for Platelet Products sold through Distributors. SafeBlood shall maintain for a period of three years following delivery of a Royalty Report complete and accurate records in sufficient detail to enable the royalty payable thereunder to be determined. SafeBlood shall keep accurate records of all operations affecting payments hereunder.

4.4.

Audits. Upon written notice by Cytomedix, SafeBlood shall permit inspection of all records required to be maintained under this Agreement (but only to the extent necessary to verify the amount of royalties payable hereunder) once annually during normal business hours by a certified public accountant or firm of certified public accountants reasonably acceptable to SafeBlood and appointed by Cytomedix at Cytomedix’s expense. The accountants making such inspection shall report to Cytomedix only the amount of royalties due and payable and shall sign a confidentiality agreement with SafeBlood, in form and substance reasonably acceptable to Cytomedix. The accountants shall further agree to be bound by the limitations described in this Section. SafeBlood further shall use its best efforts, as reasonably required by Cytomedix, to cause any supplier or 

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distributor of Platelet Products to provide the accountants with copies of records reasonably necessary to verify the Platelet Products sold to SafeBlood for any period covered by this Agreement. If Cytomedix’s auditor demonstrates by way of written report that additional royalties were owed during an audited period, SafeBlood shall pay said additional royalties due within ten (10) days of the date Cytomedix delivers such report to SafeBlood, unless SafeBlood delivers a written dispute notice within ten (10) days in accordance with Section 9.1; any such dispute notice shall set forth a good faith basis for the dispute with reasonable specificity. The fees charged by such accountant shall be paid by Cytomedix, unless the report concludes that the royalties payable by SafeBlood for the audited period are more than one hundred five percent (105%) of the royalties actually paid for such audited period and SafeBlood does not deliver a written dispute notice within ten (10) days, in which case SafeBlood shall pay all fees charged by such accountant.

4.5.

Payment Terms. Royalties shown to be owing in any Royalty Report shall be paid on or before the fifteenth (15th) day following the close of each calendar month, and shall be submitted to Cytomedix contemporaneous with the submission of each monthly Royalty Report required to be submitted by SafeBlood. If the royalty payable remains unpaid at the time due, then interest shall accrue on such unpaid amount, until paid, at ten percent (10%) per annum.

4.6.

Lump-Sum Payment. In addition to the payment of royalties specified in Section 4.1, SafeBlood shall become absolutely and unconditionally liable to Cytomedix in the amount of Fifty Thousand Dollars ($50,000). The liability created under this Section 4.6 shall be reflected in a promissory note bearing a principal amount of Fifty Thousand Dollars ($50,000), executed by SafeBlood and dated as of October 1, 2005. The promissory note shall bear an eight percent (8.0%) annual rate of interest. Payments on the note in the amount of $1,566.82 shall be made monthly over 36 months, with the first payment to be made on November 15, 2005, and the final payment made on October 15, 2008.

5.

Representations and Warranties.

5.1.

Authorization. Each party hereby represents and warrants that it (a) has the power and authority and the legal right to enter into this Agreement on behalf of itself and all affiliated entities and to perform its obligations hereunder, and (b) has taken all necessary 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 such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms.

5.2.

Limitation of Warranties. Nothing in this Agreement shall be construed as: (a) a warranty or representation by Cytomedix as to the validity or scope of the Licensed Patent; (b) a representation or admission by SafeBlood as to any alleged infringement or as to the validity or scope of the Licensed Patent; (c) a warranty or representation that anything made, used, sold, or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patent or from suits by third parties for infringement of patent; (d) conferring the right to use in advertising, publicity or otherwise any trademark, trade name, or names, or any contraction, abbreviation, simulation or adaptation thereof, of either party; or (e) an obligation to furnish any know-how associated with the Patents.

5.3.

Disclaimer. Cytomedix makes no representations other than those expressly set forth in this Article 5. Cytomedix expressly disclaims all other representations, warranties and conditions, express, implied, statutory, or otherwise, regarding the Licensed Patent Rights, including without limitation, any warranty of merchantability, fitness for a particular purpose, or non-infringement.

5.4.

No Challenge to Patents. SafeBlood agrees not to challenge or cause to be challenged, directly or indirectly, the validity and/or enforceability of the Licensed Patent in any court or other tribunal, including the United States Patent and Trademark Office. Notwithstanding the foregoing, if a court of competent jurisdiction enters judgment from which no appeal can be taken declaring each of the claims of the Licensed Patent to be invalid, then the obligations of SafeBlood to make any further payments to Cytomedix shall cease, but SafeBlood shall not be entitled to recover any payments made prior to entry of said final, non-appealable judgment.

5.5.

SafeBlood shall be entitled to discontinue any royalty payments under this Agreement immediately upon the occurrence of the following with respect to all claims of the Licensed Patent:

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5.5.1

In any reexamination, reissue or court proceeding of the Licensed Patent, entry of a judgment, order, decree or decision to the effect that: (A) all of the claims of the Licensed Patent are invalid or otherwise unenforceable; or (B) the use of activated platelet gel therapies (or the manufacture, sale, offer for sale, or use of products substantially equivalent to the royalty-bearing products) to facilitate healing of human wounds or human tissue infringes none of the claims of the Licensed Patent, or

5.5.2.

Cytomedix expressly and in writing disclaims or abandons any independent claim of the Licensed Patent, or

5.5.3.

Claims in the Licensed Patent are disallowed or so substantially narrowed in any reexamination proceeding, such that the royalty-bearing products would be rendered non-infringing.

5.6.

In the event Cytomedix obtains reversal of any adverse determination in Section 5.5.1. or 5.5.3. hereof that enabled SafeBlood to discontinue any royalty payments, then SafeBlood shall resume royalty payments affected thereby, and pay Cytomedix any royalties that accrued between suspension and resumption of royalty payments. Under no circumstances shall SafeBlood’s obligation to Cytomedix to make royalty payments extend to sales made beyond November 24, 2009.

6.

Termination.

6.1.

Expiration/Termination. This Agreement shall commence on the Effective Date and shall expire on the earlier of (i) November 24, 2009, or (ii) if there has been a breach of any material provision of this Agreement, thirty (30) days following the sending of written notice of such breach by Cytomedix if such breach has not been completely cured within said thirty (30) days. Notwithstanding the immediately foregoing, in the event that Cytomedix alleges a breach of this Agreement and SafeBlood disputes that a breach has occurred, this Agreement shall not terminate so long as SafeBlood follows the procedure for dispute resolution set forth in Section 9.1, until and unless a material breach is determined to have occurred by the arbitrator(s).

6.2.

Effect of Expiration or Termination. Expiration or termination of this Agreement shall not relieve SafeBlood or Cytomedix of any obligation accruing prior to such expiration or termination. Notwithstanding the foregoing, all rights and licenses granted to SafeBlood hereunder shall terminate upon any termination or expiration of this Agreement. The provisions of Articles 4, 5, 7, 8, 9 and 10 shall survive the expiration or termination of this Agreement. Termination of this Agreement shall not limit any party from pursuing any other remedies otherwise available to it, including without limitation, injunctive relief.

7.

Indemnification and Insurance.

7.1.

Indemnification by SafeBlood. SafeBlood shall indemnify and hold Cytomedix, its directors, officers, employees, and agents harmless from and against all losses, liabilities, damages and expenses, including those for death, personal injury, illness, or property damage, arising from SafeBlood’s use of the Licensed Patent Rights.

7.2.

Insurance. During the term of this Agreement, SafeBlood shall maintain liability insurance in the minimum amount of $3 million in the aggregate and $1 million per occurrence.

8.

Releases.

8.1.

With the exception of the obligations and promises of the parties to each other under this Agreement, and subject to Section 8.2 hereof, Cytomedix, on behalf of itself, its predecessors and successors, and each of their affiliates, officers, directors, employees and agents, hereby irrevocably and unconditionally release and forever discharge SafeBlood, and each of its officers, directors, employees, agents, shareholders, representatives, parent companies, subsidiaries, Affiliates, partners, predecessors, and all other persons acting by or on their behalf (collectively, the “SafeBlood Releasees”), of and from any claims that Cytomedix has ever had or may now or in the future have, known or unknown, against SafeBlood Releasees related to the claims that were asserted in the Arkansas Action.

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8.2.

Notwithstanding the terms of Section 8.1, Cytomedix does not release customers or agents of SafeBlood or suppliers of any processes or products that are covered by the claims of the Licensed Patent; provided, however, that such customers, agents, or suppliers shall be released from any claims that Cytomedix has ever had or may now have against them based on their practice, performance, manufacture, use, or sale of Activated Platelet Gel Therapies using Platelet Services or Platelet Products supplied by SafeBlood.

8.3.

With the exception of the obligations and promises of the parties to each other under this Agreement, SafeBlood, on behalf of itself and all other SafeBlood Releasees, and all predecessors and successors, and each of their shareholders, affiliates, members, officers, directors, employees and agents, hereby irrevocably and unconditionally release and forever discharge Cytomedix, its officers, directors, employees, agents, shareholders, representatives, parent companies, subsidiaries, affiliated companies, predecessors, and all other persons acting by or on behalf of Cytomedix (collectively, the “Cytomedix Releasees”), of and from any claims that SafeBlood has ever had or may now or in the future have, known or unknown, against Cytomedix or any of the other Cytomedix Releasees related to the counterclaims and affirmative defenses that were asserted in the Arkansas Action.

9.

Disputes and Dispute Resolution.

9.1.

Except as specified elsewhere in the Agreement, any dispute arising out of or relating to the formation or performance of this Agreement (including, without limitation, the breach, termination, or validity of this Agreement, a dispute regarding a royalty audit, or the characterization of a product or service under any of definitions 1.6 through 1.12) which has not been resolved by good faith negotiation between representatives of SafeBlood and Cytomedix who have authority to fully and finally resolve the dispute within thirty (30) days after the delivery of a dispute notice by one Party to the other, shall be finally resolved by binding arbitration in a mutually agreeable location by three arbitrators in accordance with the American Arbitration Association (“AAA”) Commercial Arbitration Rules then currently in effect (the “Rules”); provided, however, that if one Party fails to participate in the negotiation as agreed herein, the other Party can commence binding arbitration prior to the expiration of the time period set forth above. The three arbitrators’ award shall be binding on the Parties. One arbitrator shall be selected by each Party. The third arbitrator shall be chosen by agreement of the Parties. If, within thirty (30) days after a Party notifies the other that arbitration must be commenced, either Party has not selected its arbitrator or if the Parties fail within such time to agree upon the third arbitrator, such arbitrator(s) shall be appointed by AAA in accordance with its Rules. The arbitrators shall have no jurisdiction or authority to award treble, punitive or exemplary damages against either Party. The prevailing Party in any arbitration hereunder shall be awarded its reasonable attorneys fees and costs (including auditor’s fees in connection with section 4.4) in addition to any other relief to which it may be entitled under this Agreement, but such attorney fees and costs shall not exceed fifty percent (50%) of the amount in dispute. The binding arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§1-16, and judgment upon the award rendered by the arbitrators, or a majority thereof, may be entered by any court having jurisdiction thereof. If a Party is forced into court to enforce an arbitration award, it shall be entitled to recover its reasonable attorney fees and costs. In any arbitration, the parties shall be entitled following initiation of the action to the same discovery that they would be allowed under the Federal Rules of Civil Procedure; provided, however, that the parties shall cooperate in good faith to cause such discovery to be completed within ninety (90) days following initiation of the arbitration action.

9.2.

Damages. SafeBlood and Cytomedix each agree to waive any right to receive treble, punitive, consequential, special or indirect damages relating in any way to this Agreement.

10.

Miscellaneous.

10.1.

Confidentiality. Neither Party shall disclose any of the specific financial terms of this Agreement without the express written consent of the other party, unless required for legitimate business purpose or pursuant to a binding legal requirement of disclosure.

10.2.

Notices. Any consent, notice or report required or permitted to be given or made under this Agreement by one of the parties hereto to the other party shall be in writing and delivered to such 

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other party at its address indicated below, or to such other address as the addressee shall have last furnished in writing to the addressor. Said notice shall be deemed to have been given on the date of its receipt by the addressee.

	If to SafeBlood:

	          

	SafeBlood Technologies, Inc.

	 	 	1100 N. University Ave., Ste. 109

	 	 	Little Rock, Arkansas 72207

	 	 	Attention: Jim G. Limbird, President

	                                  

	 	 
	If to Cytomedix:

	 	Cytomedix, Inc.

	 	 	416 Hungerford Drive, Suite 300

	 	 	Rockville, Maryland 20850

	 	 	Attention: Dr. Kshitij Mohan, CEO

10.3.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Arkansas, without regard to the conflicts of law principles thereof. In the event legal action is brought by any party to enforce its rights under this Agreement, the losing party shall pay all of the prevailing party’s reasonable attorneys’ fees and legal fees incurred in such matter. The parties hereto agree that the District Court for the Eastern District of Arkansas shall be the exclusive venue in which any litigation arising under or related to this Agreement may proceed.

10.4.

Assignment. SafeBlood may not assign any of their respective rights or obligations under this Agreement to any person or entity without prior written consent of Cytomedix, which may not be unreasonably withheld. Cytomedix may assign its rights under this Agreement in its sole and absolute discretion.

10.5.

Waiver. Failure by any party to insist upon strict compliance with any of the terms, covenants, or conditions of this Agreement shall not be deemed a continuing waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of any right or power herein at any time be deemed a waiver or relinquishment of the same or any other right or power, whether or not similar. Waiver of a breach hereunder may be effected only by a writing signed by the waiving party and shall not constitute a waiver of any other breach.

10.6.

Entire Agreement. This Agreement embodies the entire agreement between the parties and supersedes any prior representations, understandings and agreements between the parties regarding the subject matter hereof. There are no representations, understandings or agreements, oral or written, between the parties regarding the subject matter hereof that are not fully expressed herein.

10.7.

Severability. The parties agree that if any part, term, or provision of this Agreement shall be found illegal or in conflict with any valid controlling law, the validity of the remaining provisions shall not be affected thereby. Additionally, in the event the legality of any provision of this Agreement is brought into question because of a decision by a court of competent jurisdiction, the Parties agree to cooperate in good faith to revise the provision in question or delete it entirely so as to comply with the decision of said court.

10.8.

Independence of the Parties. This Agreement shall not constitute the designation of any party as the representative or agent of the other, nor shall any party by this Agreement have the right or authority to make any promise, guarantee, warranty, or representation, or to assume, create, or incur any liability or other obligation of any kind, express or implied, against or in the name of, or on behalf of, the other, except as expressly provided herein.

10.9.

Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated below.

	CYTOMEDIX, INC.

	     

	SAFEBLOOD TECHNOLOGIES, INC.

	 	 	 	 	 
	By:

	/s/Kshitij Mohan

	 	By:

	/s/Jim G. Limbird

	 	Dr. Kshitij Mohan, CEO

	 	 	Jim G. Limbird, President

	 	 	 	 	 
	 	Date: October 31, 2005

	 	 	Date: October 28, 2005

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EXHIBIT A

Schedule of SafeBlood Branded Single Use Disposable Kit Products

	Item Description

	 	Manufacturer Number

	 	 	 
	SafeBlood Graft Kit

	                     

	SBG Kit:SB101 / W

	SafeBlood Graft Kit

	 	SBG Kit:SB101 / W 1

	SafeBlood Graft Kit

	 	SBG Kit:SB102 / W

	SafeBlood Graft Kit

	 	SBG Kit:SB201 / W

	SafeBlood Graft Kit

	 	SBG Kit: SB 103

	SafeBlood Graft Kit 800-1001A(1)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A(2)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A(3)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A(4)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A(5)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A(6)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A(7)

	 	BIOMET:GPS 800-1001A 

	SafeBlood Graft Kit 800-1001A

	 	BIOMET:GPS 800-1001A 

	GPS Counter Balance

	 	BIOMET:GPS 800-0508

Schedule of SafeBlood Branded Single Use Disposable Component Products

	Item Description

	 	Manufacturer Number

	 	 	 
	SBG Graft Activator

	     

	CD SBG-1005

	Ratio Procedure kit

	 	Micromedics SA-4400

	Blending Connector

	 	Micromedics SA-3674

	Single Spray Tip

	 	Micromedics SA-3671

	Dual Spray Applicator Tip

	 	Micromedics SA-3660

	Dual Tip 

	 	Micromedics SA-0205

Schedule of SafeBlood Branded Capital Equipment Products

	Item Description

	 	Manufacturer Number

	 	 	 
	GPS Centrifuge 120 Volt 50-60HZ

	     

	GPS - 7426 

EXHIBIT B

In The United States District Court

For The Eastern District of Arkansas

Western Division

	CYTOMEDIX, INC.,

	     

	)

	Civil Action No. 4-03-CV-422

	 	 	)

	 
	Plaintiff,

	 	)

	Judge James M. Moody

	 	 	)

	 
	v.

	 	)

	 
	 	 	)

	 
	SAFEBLOOD TECHNOLOGIES, INC., ET AL.,

	 	)

	 
	 	 	)

	 
	Defendant.

	 	)

	 

Stipulated Dismissal With Prejudice

The parties have agreed to settle the above-captioned matter and jointly request entry of this Stipulated Dismissal With Prejudice. It is, therefore

ORDERED, ADJUDGED, AND DECREED as follows:

1.

The above-captioned action is hereby dismissed, with prejudice, in its entirety.

2.

Each party shall bear its own costs and attorneys’ fees.

	Date:

	                                                    ,

	2005

	     

	 
	 	 	 	 	UNITED STATES DISTRICT COURT JUDGE

The Parties hereto, through counsel, consent to entry of the above Stipulated Dismissal With Prejudice.

	CYTOMEDIX, INC.

	     

	SAFEBLOOD TECHNOLOGIES, INC.

	 	 	 
	By its attorneys,

	 	By its attorneys,

	 	 	 
	Stephen Schroer, Esq.

John F. Flannery, Esq.

Karl R. Fink, Esq.

Timothy P. Maloney, Esq.

Rudy I. Kratz, Esq.

FITCH, EVEN, TABIN & FLANNERY

120 South LaSalle Street, Suite 1600

Chicago, Illinois 60603-3406

Telephone: (312) 577-7000

Facsimile: (312) 577-7007

	 	G. Alan Perkins, Esq.

Kelly McQueen, Esq.

PERKINS & TROTTER, PLLC

P.O. Box 251618

Little Rock, Arkansas 72225-1618

Telephone: (501) 603-9000

Facsimile: (501) 603-0556

	 	 	 
	H. William Allen

ALLEN LAW FIRM

Ninth Floor

212 Center Street

Little Rock, Arkansas 72201

Chicago, Illinois 60601

Telephone: (501) 374-7100

Facsimile: (501) 374-1611

	 	 
	 	 	 
	Robert F. Coleman, Esq.

Steven R. Jakubowski, Esq.

ROBERT F. COLEMAN & ASSOCIATES

77 West Wacker Drive, Suite 4800

Chicago, Illinois 60601

Telephone: (312) 444-1000

Facsimile: (312) 444-1028

	 	 
	 	 	 
	Dated: October     , 2005

	 	 

2EXHIBIT
      10.7

    

     

    

      TALBOT
        BANK OF EASTON, MARYLAND

      SUPPLEMENTAL
        DEFERRED COMPENSATION
        PLAN

       

      Effective
        as of December 11, 1996

      

      

      
        
           

        

        
          
          

          
            

          

        

        
          Table
            of Contents

          
          

        

      

      THE
        TALBOT BANK OF EASTON, MARYLAND

      SUPPLEMENTAL
        DEFERRED COMPENSATION PLAN 

       

      Effective
        as of December 11, 1996

       

      TABLE
        OF CONTENTS

      

      
        
          	
                  ARTICLE
                    1

                
	
                  DEFINITIONS

                

        

         

        
          	
                  1.1

                	
                  ACCOUNT

                	
                  1

                
	
                  1.2

                	
                  BENEFICIARY

                	
                  1

                
	
                  1.3

                	
                  CODE

                	
                  1

                
	
                  1.4

                	
                  DESIGNATION
                    DATE

                	
                  1

                
	
                  1.5

                	
                  EFFECTIVE
                    DATE

                	
                  1

                
	
                  1.6

                	
                  EMPLOYER

                	
                  1

                
	
                  1.7

                	
                  EMPLOYER
                    CONTRIBUTION CREDITS

                	
                  2

                
	
                  1.8

                	
                  PARTICIPANT

                	
                  2

                
	
                  1.9

                	
                  PLAN

                	
                  2

                
	
                  1.10

                	
                  PLAN
                    YEAR

                	
                  2

                
	
                  1.11

                	
                  TRUST

                	
                  2

                
	
                  1.12

                	
                  TRUSTEE

                	
                  2

                
	
                  1.13

                	
                  VALUATION
                    DATE

                	
                  2

                

        

         

        
          
            	
                    ARTICLE
                      2

                  
	
                    ELIGIBILITY
                      AND
                      PARTICIPATION

                  

          

           

          
            
              	
                      2.1

                    	
                      REQUIREMENTS

                    	
                      2

                    

            

             

            
              
                	
                        ARTICLE
                          3

                      
	
                        CONTRIBUTIONS
                          AND
                          CREDITS

                      

              

               

              
                
                  	
                          3.1

                        	
                          EMPLOYER
                            CONTRIBUTION CREDITS

                        	
                          2

                        
	
                          3.2

                        	
                          CONTRIBUTIONS
                            TO THE TRUST

                        	
                          2

                        

                

                 

                
                  
                    	
                            ARTICLE
                              4

                          
	
                            ALLOCATION
                              OF
                              FUNDS

                          

                  

                   

                  
                    
                      	
                              4.1

                            	
                              ALLOCATION
                                OF DEEMED EARNINGS OR LOSSES ON
                                ACCOUNTS

                            	
                              3

                            
	
                              4.2

                            	
                              DEEMED
                                INVESTMENT DIRECTIONS OF
                                PARTICIPANTS

                            	
                              3

                            
	
                              4.3

                            	
                              EXPENSES

                            	
                              4

                            

                    

                     

                    
                      
                        	
                                ARTICLE
                                  5

                              
	
                                ENTITLEMENT
                                  TO
                                  BENEFITS

                              

                      

                       

                      
                        
                          	
                                  5.1

                                	
                                  TERMINATION
                                    OF EMPLOYMENT

                                	
                                  4

                                

                        

                         

                        
                          	
                                  ARTICLE
                                    6 

                                
	
                                  DISTRIBUTION
                                    OF
                                    BENEFITS

                                

                        

                         

                        
                          
                            	
                                    6.1

                                  	
                                    AMOUNT

                                  	
                                    4

                                  
	
                                    6.2

                                  	
                                    METHOD
                                      OF PAYMENT

                                  	
                                    4

                                  
	
                                    6.3

                                  	
                                    DEATH
                                      BENEFITS

                                  	
                                    4

                                  

                          

                           

                          
                            
                              	
                                      ARTICLE
                                        7

                                    
	
                                      BENEFICIARIES:
                                        PARTICIPANT DATA

                                    
	 	 	 

                            

                             

                            
                              
                                	
                                        7.1

                                      	
                                        DESIGNATION
                                          OF BENEFICIARIES

                                      	
                                        5

                                      

                              

                               

                              
                                
                                  	
                                          ARTICLE
                                            8

                                        
	
                                          AMENDMENT

                                        
	 	 	 

                                

                                 

                                
                                  
                                    	
                                            8.1

                                          	
                                            RIGHT
                                              TO AMEND

                                          	
                                            5

                                          

                                  

                                   

                                  
                                    	
                                            ARTICLE
                                              9

                                          
	
                                            TERMINATION

                                          

                                  

                                   

                                  
                                    
                                      	
                                              9.1

                                            	
                                              EMPLOYER'S
                                                RIGHT TO TERMINATE OR SUSPEND
                                                PLAN

                                            	
                                              
                                                5

                                              

                                            
	
                                              9.2

                                            	
                                              AUTOMATIC
                                                TERMINATION OF PLAN

                                            	
                                              6

                                            
	
                                              9.3

                                            	
                                              SUSPENSION
                                                OF DEFERRALS

                                            	
                                              
                                                6

                                              

                                            
	
                                              9.4

                                            	
                                              SUCCESSOR
                                                TO EMPLOYER

                                            	
                                              6

                                            

                                    

                                     

                                    
                                      
                                        	
                                                ARTICLE
                                                  10

                                              
	
                                                THE
                                                  TRUST

                                              

                                      

                                       

                                      
                                        
                                          	
                                                  10.1

                                                	
                                                  ESTABLISHMENT
                                                    OF TRUST

                                                	
                                                  6

                                                

                                        

                                         

                                        
                                          
                                            	
                                                    ARTICLE
                                                      11

                                                  
	
                                                    MISCELLANEOUS

                                                  

                                          

                                           

                                          
                                            	
                                                    11.1

                                                  	
                                                    LIMITATIONS
                                                      ON LIABILITY OF EMPLOYER

                                                  	
                                                    6

                                                  
	
                                                    11.2

                                                  	
                                                    CONSTRUCTION

                                                  	
                                                    7

                                                  
	
                                                    11.3

                                                  	
                                                    SPENDTHRIFT
                                                      PROVISION

                                                  	
                                                    7

                                                  

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

       

      
        
           

        

        
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          Table
            of Contents

          
          

        

      

      THE
        TALBOT BANK OF EASTON, MARYLAND

      SUPPLEMENTAL
        DEFERRED COMPENSATION PLAN

       

      Effective
        as of December 11, 1996

       

      RECITALS

       

      The
        Talbot Bank of Easton, Maryland Supplemental Deferred Compensation Plan (the
        “Plan”) is adopted by The Talbot Bank of Easton, Maryland (the “Employer”) for
        its President and Chief Executive Officer. The purpose of the Plan is to
        provide
        its President and Chief Executive Officer with supplemental retirement benefits
        taxable pursuant to section 451 of the Internal Revenue Code of 1986, as
        amended
        (the “Code”). The Plan is intended to be a “top-hat” plan (i.e., an unfunded
        deferred compensation plan maintained for the Employer's President and Chief
        Executive Officer under sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
        Retirement Income Security Act of 1974 (“ERISA”). 

       

      Accordingly,
        the following Plan is adopted. 

       

      ARTICLE
        1

       

      DEFINITIONS

       

      1.1  ACCOUNT 
        means
        the
        balance credited to the Participant's or Beneficiary's Account under the
        Plan,
        including contribution credits and deemed income, gains, losses and expenses
        (as
        determined by the Employer, in its discretion) credited thereto. The
        Participant's or Beneficiary's Account shall be determined as of the date
        of
        reference. 

       

      1.2  BENEFICIARY 
        means
        any
        person or person so designated in accordance with the provisions of Article
        7.

       

      1.3  CODE 
        means the Internal Revenue Code of 1986 and the regulations thereunder, as
        amended from time to time. 

       

      1.4  DESIGNATION
        DATE 
        means the date or dates as of which a designation of deemed investment
        directions by an individual pursuant to Section 4.5, or any change in a prior
        designation of deemed investment directions by an individual pursuant to
        Section
        4.5, shall become effective. The Designation Date(s) in any Plan Year shall
        be
        designated by the Employer and shall include each January 1 during which
        the
        Plan is in effect. 

       

      1.5  EFFECTIVE
        DATE 
        means the effective date of the Plan, which shall be December 12, 1996.

       

      1.6  EMPLOYER 
        means The Talbot Bank of Easton, Maryland and its successors and assigns
        unless
        otherwise herein provided, or any other corporation or business organization
        which, with the consent of The Talbot Bank of Easton, Maryland, or its
        successors or assigns, assumes the Employer's obligations hereunder, or any
        other corporation or business organization which agrees, with the consent
        of The
        Talbot Bank of Easton, Maryland, to become a party to the Plan.

       

      
        
           

        

        
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          Table
            of Contents

        

      

       

      1.7  EMPLOYER
        CONTRIBUTION CREDITS 
        is
        defined in Section 3.1. 

       

      1.8  PARTICIPANT 
        means the Employer’s President and Chief Executive Officer, W. Moorhead
        Vermilye. 

       

      1.9  PLAN 
        means this The Talbot Bank Of Easton, Maryland Supplemental Deferred
        Compensation Plan, as amended from time to time. 

       

      1.10  PLAN
        YEAR 
        means the twelve (12) (or, in the case of the Plan's first Plan Year, twenty
        (20) day period ending on the December 31) of each year during which the
        Plan is
        in effect. 

       

      1.11  TRUST 
        means the Trust established pursuant to Article 11. 

       

      1.12  TRUSTEE 
        means the trustee of the Trust established pursuant to Article 11.

       

      1.13  VALUATION
        DATE 
        means the last day of each Plan Year and any other date that the Employer,
        in
        its sole discretion, designates as a Valuation Date. 

       

      ARTICLE
        2

       

      ELIGIBILITY
        AND PARTICIPATION

       

      2.1  REQUIREMENTS.
        The
        Employer's President and Chief Executive Officer shall be eligible to become
        a
        Participant on the Effective Date. 

       

      ARTICLE
        3

       

      CONTRIBUTIONS
        AND CREDITS

       

      3.1  EMPLOYER
        CONTRIBUTION CREDITS.
        There
        shall be established and maintained a separate Account in the name of the
        Participant to which there shall be credited to the Participant Account for
        each
        Plan Year the sum of Twenty Thousand Dollars ($20,000). 

       

      The
        Participant's Account shall be credited or debited, as applicable, as of
        each
        Valuation Date, with deemed earnings or losses, as applicable. The amount
        of
        deemed earnings or losses shall be as determined by the Employer. 

       

      The
        Participant shall be one hundred percent (100%) vested in amounts credited
        to
        his Account. 

       

      3.2  CONTRIBUTIONS
        TO THE TRUST.
        An
        amount shall be contributed by the Employer to the Trust maintained under
        Section 11.1 equal to the amount required to be credited to the Participant's
        Account under Section 3.1. The Employer shall make a good faith effort to
        contribute these amounts to the Trust by December 31, of each plan
        year.

       

      
        
           

        

        
          -2-

          
            

          

        

        
          Table
            of Contents

        

      

       

      ARTICLE
        4

       

      ALLOCATION
        OF FUNDS

       

      4.1  ALLOCATION
        OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS.
        Subject
        to Section 4.5, the Participant shall have the right to direct the Employer
        as
        to how amounts in his Plan Account shall be deemed to be invested. The Employer
        shall direct the Trustee to invest the account maintained in the Trust on
        behalf
        of the Participant pursuant to the deemed investment directions the Employer
        properly has received from the Participant. The value of the Participant's
        Account shall be equal to the value of the account maintained under the Trust
        on
        behalf of the Participant. As of each Valuation Date of the Trust, the
        Participant's Account will be credited or debited to reflect the Participant's
        deemed investments of the Trust. 

       

      4.2  DEEMED
        INVESTMENT DIRECTIONS OF PARTICIPANTS.
        Subject
        to such limitations as may from time to time be required by law, imposed
        by the
        Employer or the Trustee or contained elsewhere in the Plan, and subject to
        such
        operating rules and procedures as may be imposed from time to time by the
        Employer, prior to and effective for each Designation Date, the Participant
        may
        communicate to the Employer a direction as to how his Plan Account should
        be
        deemed to be invested among such categories of deemed investments as may
        be made
        available by the Employer hereunder. Such direction shall designate the
        percentage (in any whole percent multiples) of each portion of the Participant's
        Plan Accounts which is requested to be deemed to be invested in such categories
        of deemed investments, and shall be subject to the following rules:

       

      (a)  Any
        initial or subsequent deemed investment direction shall be in writing, on
        a form
        supplied by and filed with the Employer, and shall be effective as of the
        next
        Designation Date which is at least thirty (30) business days after such filing
        (or such shorter period as is provided by the Employer). 

       

      (b)  All
        amounts credited to the Participant's Account shall be deemed to be invested
        in
        accordance with the then effective deemed investment direction, and as of
        the
        effective date of any new deemed investment direction, all or a portion of
        the
        Participant's Account at that date shall be reallocated among the designated
        deemed investment funds according to the percentages specified in the new
        deemed
        investment direction unless and until a subsequent deemed investment direction
        shall be filed and become effective. An election concerning deemed investment
        choices shall continue indefinitely as provided in the Participant's most
        recent
        Participant Enrollment and Election Form, or other form specified by the
        Employer. 

       

      (c)  If
        the
        Employer receives an initial or revised deemed investment direction which
        it
        deems to be incomplete, unclear or improper, the Participant's investment
        direction then in effect shall remain in effect (or, in the case of a deficiency
        in an initial deemed investment direction, the Participant shall be deemed
        to
        have filed no deemed investment direction) until the next Designation date,
        unless the Employer provides for, and permits the application of, corrective
        action prior thereto.

       

      
        
           

        

        
          -3-

          
            

          

        

        
          Table
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      (d)  If
        the
        Employer possesses (or is deemed to possess as provided in (c), above) at
        any
        time directions as to the deemed investment of less than all of a Participant’s
        Account, the Participant shall be deemed to have directed that the undesignated
        portion of the Account be deemed to be invested in a money market, fixed
        income
        or similar fund made available under the Plan as determined by the Employer
        in
        its discretion.

       

      (e)  Each
        reference in this Section to a Participant shall be deemed to include, where
        applicable, a reference to a Beneficiary.

       

      4.3  EXPENSES.
        Expenses, including Trustee fees, allocable to the administration or operation
        of an Account maintained under the Plan shall be charged against the assets
        in
        the Trust.

       

      ARTICLE
        5

       

      ENTITLEMENT
        TO BENEFITS

       

      5.1  TERMINATION
        OF EMPLOYMENT.
        The
        Participant shall receive payment of his Account at his termination of
        employment with the Employer and the Participant’s Account at the date of such
        termination shall be valued and payable at such termination according to
        the
        provisions of Article 6.

       

      ARTICLE
        6

       

      DISTRIBUTION
        OF BENEFITS

       

      6.1  AMOUNT.
        The
        Participant (or his Beneficiary) shall become entitled to receive, on or
        about
        the date of the Participant’s termination of employment with the Employer, a
        distribution in an aggregate amount equal to the Participant’s Account. Any
        payment due hereunder from the Trust which is not paid by the Trust for any
        reason will be paid by the Employer from its general assets.

       

      6.2  METHOD
        OF PAYMENT.

       

      (a)  Cash
        Payments.
        Payments under the Plan shall be made in cash.

       

      (b)  Timing
        and Manner of Payment.
        In the
        case of distributions to the Participant or his Beneficiary by virtue of
        an
        entitlement pursuant to Section 5.1, an aggregate amount equal to the
        Participant’s Account will be paid by the Trust or the Employer, as provided by
        Section 6.1, in a lump sum.

       

      6.3  DEATH
        BENEFITS.
        If the
        Participant dies before terminating his employment with the Employer and
        before
        the commencement of payments to the Participant hereunder, the entire value
        of
        the Participant's Account shall be paid, as provided in Section 6.2, to the
        person or persons designated in accordance with Section 7.1.

       

      
        
           

        

        
          -4-

          
            

          

        

        
          Table
            of Contents

        

      

       

      Upon
        the
        death of the Participant after payments hereunder have begun but before he
        has
        received all payments to which he is entitled under the Plan, the remaining
        benefit payments shall be paid to the person or persons designated in accordance
        with Section 7.1, in the manner in which such benefits were payable to the
        Participant as provided in Section 6.2. 

       

      ARTICLE
        7

       

      BENEFICIARIES:
        PARTICIPANT DATA

       

      7.1  DESIGNATION
        OF BENEFICIARIES.
        The
        Participant from time to time may designate any person or persons (who may
        be
        named contingently or successively) to receive such benefits as may be payable
        under the Plan upon or after the Participant's death, and such designation
        may
        be changed from time to time by the Participant by filing a new designation.
        Each designation will revoke all prior designations by the Participant, shall
        be
        in a form prescribed by the Employer, and will be effective only when filed
        in
        writing with the Employer during the Participant's lifetime. 

       

      In
        the
        absence of a valid Beneficiary designation, or if, at the time any benefit
        payment is due to a Beneficiary, there is no living Beneficiary validly named
        by
        the Participant, the Employer pay any such benefit payment to the Participant's
        spouse, if then living, but otherwise to the Participant's then living
        descendants, if any, per stirpes,
        but, if
        none, to the Participant's estate. In determining the existence or identity
        of
        anyone entitled to a benefit payment, the Employer may rely conclusively
        upon
        information supplied by the Participant's personal representative, executor
        or
        administrator. If a question arises as to the existence or identity of anyone
        entitled to receive a benefit payment as aforesaid, or if a dispute arises
        with
        respect to any such payment, then, notwithstanding the foregoing, the Employer
        in its sole discretion, may distribute such payment to the Participant's
        estate
        without liability for any tax or other consequences which might flow therefrom,
        or may take such other action as the Employer deems to be appropriate.

       

      ARTICLE
        8

       

      AMENDMENT

       

      8.1  RIGHT
        TO AMEND.
        The
        Employer, by written instrument executed by the Employer, shall have the
        right
        to amend the Plan, at any time and with respect to any provisions hereof,
        and
        all parties hereto or claiming any interest hereunder shall be bound by such
        amendment; provided, however, that no such amendment shall deprive the
        Participant or a Beneficiary of a right accrued hereunder prior to the date
        of
        the amendment. 

       

      ARTICLE
        9

       

      TERMINATION

       

      9.1  EMPLOYER'S
        RIGHT TO TERMINATE OR SUSPEND PLAN.
        The
        Employer reserves the right to terminate the Plan and/or its obligation to
        make
        further credits to the Participant's Account. The Employer also reserves
        the
        right to suspend the operation of the Plan for a fixed or indeterminate period
        of time.

       

      
        
           

        

        
          -5-

          
            

          

        

        
          Table
            of Contents

        

      

       

      9.2  AUTOMATIC
        TERMINATION OF PLAN.
        The
        Plan automatically shall terminate upon the dissolution of the Employer,
        or upon
        its merger into or consolidation with any other corporation or business
        organization if there is a failure by the surviving corporation or business
        organization to adopt specifically and agree to continue the Plan.

       

      9.3  SUSPENSION
        OF DEFERRALS.
        In the
        event of a suspension of the Plan, the Employer shall continue all aspects
        of
        the Plan, other than Employer Contribution Credits, during the period of
        the
        suspension, in which event payments hereunder will continue to be made during
        the period of the suspension in accordance with Articles 5 and 6.

       

      9.4  SUCCESSOR
        TO EMPLOYER.
        Any
        corporation or other business organization which is a successor to the Employer
        by reason of a consolidation, merger or purchase of substantially all of
        the
        assets of the Employer shall have the right to become a party to the Plan
        by
        adopting the same by resolution of the entity's board of directors or other
        appropriate governing body. If, within ninety (90) days from the effective
        date
        of such consolidation, merger or sale of assets, such new entity does not
        become
        a party hereto, as above provided, the Plan automatically shall be terminated.
        

       

      ARTICLE
        10

       

      THE
        TRUST

       

      10.1  ESTABLISHMENT
        OF TRUST.
        The
        Employer shall establish the Trust with the Trustee pursuant to such terms
        and
        conditions as are set forth in the Trust agreement to be entered into between
        the Employer and the Trustee. The Trust is intended to be treated as a “grantor”
        trust under the Code and the establishment of the Trust is not intended to
        cause
        the Participant to realize current income on amounts contributed thereto,
        and
        the Trust shall be so interpreted. 

       

      ARTICLE
        11

       

      MISCELLANEOUS

       

      11.1  LIMITATIONS
        ON LIABILITY OF EMPLOYER.
        Neither
        the establishment of the Plan nor any modification thereof, nor the creation
        of
        any account under the Plan, nor the payment of any benefits under the Plan
        shall
        be construed as giving to the Participant or other person any legal or equitable
        right against the Employer, or any officer or employer thereof except as
        provided by law or by any Plan provision. The Employer does not in any way
        guarantee the Participant's Account from loss or depreciation, whether caused
        by
        poor investment performance of a deemed investment or the inability to realize
        upon an investment due to an insolvency affecting an investment vehicle or
        any
        other reason. In no event shall the Employer, or any successor, employee,
        officer, director, agent or stockholder of the Employer, be liable to any
        person
        on account of any claim arising by reason of the provisions of the Plan or
        of
        any instrument or instruments implementing its provisions, or for the failure
        of
        the Participant, a Beneficiary or other person to be entitled to any particular
        tax consequences with respect to the Plan, or any credit or distribution
        hereunder.

       

      
        
           

        

        
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      11.2  CONSTRUCTION.
        If any
        provision of the Plan is held to be illegal or void, such illegality or
        invalidity shall not affect the remaining provisions of the Plan, but shall
        be
        fully severable, and the Plan shall be construed and enforced as if said
        illegal
        or invalid provision had never been inserted herein. For all purposes of
        the
        Plan, where the context admits, the singular shall include the plural, and
        the
        plural shall include the singular. Headings of Articles and Sections herein
        are
        inserted only for convenience of reference and are not be considered in the
        construction of the Plan. The laws of the State of Maryland shall govern,
        control and determine all questions of law arising with respect to the Plan
        and
        the interpretation and validity of its respective provisions, except where
        those
        laws are pre-empted by the laws of the United States. Participation under
        the
        Plan will not give the Participant the right to be retained in the service
        of
        the Employer nor any right or claim to any benefit under the Plan unless
        such
        right or claim has specifically accrued hereunder. 

       

      The
        Plan
        is intended to be and at all times shall be interpreted and administered
        so as
        to qualify as an unfunded deferred compensation plan, and no provision of
        the
        Plan shall be interpreted so as to give any individual any right in any assets
        of the Employer which right is greater than the rights of a general unsecured
        creditor of the Employer. 

       

      11.3  SPENDTHRIFT
        PROVISION.
        No
        amount payable to the Participant or a Beneficiary under the Plan will, except
        as otherwise specifically provided by law, be subject in any manner to
        anticipation, alienation, attachment, garnishment, sale, transfer, assignment
        (either at law or in equity), levy, execution, pledge, encumbrance, charge
        or
        any other legal or equitable process, and any attempt to do so will be void;
        nor
        will any benefit be in any manner liable for or subject to the debts,
        liabilities, engagements or torts of the person entitled thereto. Further,
        (i)
        the withholding of taxes from Plan benefit payments, (ii) the recovery under
        the
        Plan of overpayments of benefits previously made to the Participant or
        Beneficiary, (iii) if applicable, the transfer of benefit rights from the
        Pan to
        another plan, or (iv) the direct deposit of benefit payments to an account
        in a
        banking institution (if not actually part of any arrangement constituting
        an
        assignment or alienation) shall not be construed as an assignment or alienation.
        

       

      In
        the
        event that the Participant's or Beneficiary's benefits hereunder are garnished
        or attached by order of any court, the Employer or Trustee may bring an action
        or a declaratory judgment in a court of competent jurisdiction to determine
        the
        proper recipient of the benefits to be paid under the Plan. During the pendency
        of said action, any benefits that become payable shall be held as credits
        to the
        Participant's or Beneficiary's Account or, if the Employer or Trustee prefers,
        paid into the court as they become payable, to be distributed by the court
        to
        the recipient as the court deems proper at the close of said
        action.

       

      
        
           

        

        
          -7-

          
            

          

        

        
          Table
            of Contents

        

      

       

      IN
        WITNESS WHEREOF, the
        Employer has caused the Plan to be executed and its seal to be affixed hereto,
        effective as of the _____ day of ______________, 1996. 

       

       

      
        
          	ATTEST/WITNESS 	 	
                  THE
                    TALBOT BANK OF EASTON, MARYLAND

                
	 	 	 	 
	 	 	 	 
	/s/ 	 	
                  By:

                	/s/ 
	
                  

                	 	 	
                  
                    

                  

                
	Print:	 	 	Print
                  Name:  Jerome M. McConnell
Date:	
                  (SEAL)

                

        

       

    

    

    
      
        
        

      

        -8-

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