Document:

LICENSE AGREEMENT WITH UNIVERSITY OF MICHIGAN

    LICENSE
      AGREEMENT

    University
      of Michigan Files 1175, 1356, 1442, 1442d1, 1442d3, 

    1543,
      1543d1, 1720, 2044 and 2115

    

    

      This
        Agreement is effective as of May 24, 2007 (the "Effective Date"), between
        Quick-Med Technologies, Inc. ("LICENSEE") having the address in Article 13
        below, and the Regents of the University of Michigan, a constitutional
        corporation of the State of Michigan ("MICHIGAN"). LICENSEE and MICHIGAN
        agree
        as follows:

    

    

    ARTICLE
      1 - DEFINITIONS 

    

    1.1 “AFFILIATE”
      means any company, corporation, association or business entity that is
      controlled by, is in control of, or is under common control with a Party. The
      term “control” shall mean a greater than fifty percent (50%) ownership of issued
      and outstanding voting interests in a corporation, limited liability company,
      partnership or other legal entity, or greater than fifty percent (50%)
ownership
      interest in a corporation, limited liability company, partnership or other
      legal
      entity, directly or indirectly.

    

    1.2
       “COMBINATION
      PRODUCT” means a combination or bundled product that is sold at a single price
      by LICENSEE, an AFFILIATE or a SUBLICENSEE and that includes: (a) a LICENSED
      PRODUCT or LICENSED PROCESS and (b) another product or process that is not
      covered by the PATENT RIGHTS.

    

    1.3 “EXCLUDED
      MOLECULES” means molecules
      that have *********** as of the Effective Date, with the exception of
      ********,
      as
      identified in Schedule 2. 

    

    1.4  “FIELD
      OF
      USE” means
      uses of
      a product or ingredient other than those that would require,
      prior to the production or marketing of such product or ingredient, receipt
      of
      marketing approval from the U.S. Food and Drug Administration (or, with respect
      to activity outside the U.S., any substantially equivalent application from
      any
      applicable regulatory authority) pursuant to one of the following:

    

    (a)
      New
      Drug Application,

    (b)
      Biologics License Application,

    (c)
      Abbreviated New Drug Application,

    (d)
      Over-the-Counter (“OTC”) New Drug Application,

    (e)
      New
      Drug Application under Section 505(b)(2) of the U.S. Food, Drug and Cosmetic
      Act, and/or

    (f)
      OTC
      drug tentative final or final monograph,

    

    any
      of
      which (a)-(f) is effective, promulgated, and/or amended after the Effective
      Date. 

    

    Further,
      notwithstanding the foregoing, the use of EXCLUDED MOLECULES is specifically
      excluded from the FIELD OF USE hereunder.

    

    

    

    1.5 “FIRST
      COMMERCIAL SALE” means the first sale, rental, or lease of any LICENSED PRODUCT
      or first commercial use of a LICENSED PROCESS by LICENSEE, an AFFILIATE or
      a
      SUBLICENSEE, other than sale of a LICENSED PRODUCT or use of a LICENSED PROCESS
      for use in trials, such as field trials, being conducted to obtain governmental
      approvals to market LICENSED PRODUCTS or otherwise commercially use LICENSED
      PROCESSES. 

    

    1.6 “LICENSED
      PROCESS(ES)” means any process or method that, but for this Agreement, comprises
      an infringement (including contributory or inducement) of an issued, unexpired
      claim or a pending claim contained in the PATENT RIGHTS. 

    

    1.7 “LICENSED
      PRODUCT(S)” means any product that, but for this Agreement:

    

    (a)
      comprises an infringement (including contributory or inducement) of an issued,
      unexpired claim or a pending claim contained in the PATENT RIGHTS;
      or

    

    (b)
      is
      manufactured by using a LICENSED PROCESS.

    

      1.8 “NET
        SALES” means the gross revenue actually received by LICENSEE or AFFILIATES from
        sale,
        rental
        or lease to a third party of LICENSED PRODUCTS and LICENSED PROCESSES covered
        by
        a VALID CLAIM of a PATENT RIGHT
        in the
        jurisdiction in which the sale, rental or lease occurs,
        less
        the following items (so
        long
        as such deductions are not obtained in view of other consideration received
        by
        LICENSEE:

    

    (a)
      cash
      discounts actually granted to customers in such invoices for sales or lease
      of
      LICENSED PRODUCTS, but only in amounts customary in the trade;

    

    (b)
      sales, tariff duties and/or use taxes separately stated in such bills or
      invoices with reference to particular sales and actually paid by LICENSEE or
      AFFILLIATES to a governmental unit;

    

    (c)
      actual freight expenses between LICENSEE or AFFILIATES and customers, to the
      extent such expenses are not charged to or reimbursed by customers;

    

    (d)
      amounts actually refunded or credited on returns; and

    

    (e)
      price
      allowances and trade discounts actually granted to customers.

    

    NET
      SALES
      shall exclude sales or transfers of LICENSED PRODUCTS and LICENSED PROCESSES
      between LICENSEE and an AFFILIATE, where the same are intended for resale to
      third parties. 

    

    Where
      LICENSEE or AFFILIATE receives any consideration other than cash for such
      transactions, fair market cash value for such consideration, to be agreed upon
      by the parties hereto, shall be included in NET SALES.

    

      1.9 “PATENT
        RIGHTS” means: 

    

      (a)
        the
        United States and foreign patents and/or patent applications, and divisionals,
        continuations, including
        continuations-in-part (but
        only
        to the extent that claims
        in
        such continuations-in-part
        are entitled to the priority date of
        another
        patent or application among
        the
        PATENT RIGHTS),
        and
        foreign counterparts of the same listed in Appendix A-1 and A-2; and 

    (b)
      United States and foreign patents issued from the applications listed in
      Appendix A-1
      and
      A-2,
      including any reissued or reexamined patents based upon the same.

    

    1.10 “ROYALTY
      PERIOD(S)” means the six-month periods ending on the last days of June and
      December each year.

    

    1.11 “SUBLICENSEE(S)”
      means any person or entity sublicensed, or granted an option for a sublicense,
      by LICENSEE under this Agreement, however, AFFILIATES and contract manufacturers
      are not SUBLICENSEES.

    

    1.12 “SUBLICENSE
      INCOME” means the amount actually received by LICENSEE from any and all
      SUBLICENSEES arising from the sublicense of the right to make, use, or sell
      LICENSED PRODUCTS or LICENSED PROCESSES. SUBLICENSE INCOME shall include
      up-front or license fees, milestone payments, royalties on sales, annual
      maintenance fees and any other direct payments in respect of the grant to such
      SUBLICENSEE of a sublicense of the right to make or sell LICENSED PRODUCTS
      or
      LICENSED PROCESSES, but only to the extent such amounts are directly
      attributable to the PATENT RIGHTS extended hereunder.

    

    1.13 “TERRITORY”
      means worldwide.

    

    1.14 “VALID
      CLAIM” means:

    

    (a)
      a
      claim within the PATENT RIGHTS that is in an issued patent and has not expired
      or been held invalid, revoked or unenforceable by a court or administrative
      agency of competent jurisdiction in a final and non-appealable
      judgment
      or in a
      judgment for which an appeal has not been filed within the time allowed for
      appeal, and which has not been disclaimed, denied or admitted to be invalid
      or
      unenforceable through reissue, reexamination or otherwise; or 

    

    (b)
      a
      claim that is in a patent application within
      the PATENT RIGHTS that has not yet issued and that is or will be under active
      prosecution and has been pending for less than four years.

    

    

    ARTICLE
      2 - GRANT OF LICENSE

    

    2.1 Subject
      to the terms and conditions of this Agreement and the sole non-exclusive license
      entered into prior to the Effective Date for the PATENT RIGHTS listed in
      APPENDIX A-2 (UM File #1442), MICHIGAN hereby grants to LICENSEE an
      exclusive license under PATENT RIGHTS with
      the
      right to grant sublicenses, both subject to the terms and conditions of this
      Agreement, in the FIELD OF USE and the TERRITORY to make, use, sell, offer
      for
      sale, import and otherwise exploit LICENSED PRODUCTS and LICENSED PROCESSES,
      and
      to have any of the foregoing done on its behalf. In
      the
      event MICHIGAN wishes to grant a license under the PATENT RIGHTS to any party
      for the EXCLUDED MOLECULES in the FIELD OF USE, MICHIGAN shall deliver a notice
      to LICENSEE stating MICHIGAN’s desire to grant a license, including a statement
      of the scope thereof. **********.

    

    2.2 MICHIGAN
      reserves the right to practice the PATENT RIGHTS for
      research, public service, internal (including clinical) and/or educational
      purposes,
      and the
      right to grant the same limited rights to other non-profit research
      institutions

    

    2.3 This
      Agreement shall extend until expiration of the last to expire of the licensed
      PATENT RIGHTS, unless sooner terminated as provided in another specific article
      of this Agreement.

    

    2.4 To
      the
      extent that the following grant may be required by research funding agreements
      between MICHIGAN and the United States Government, MICHIGAN reserves the right
      to grant to the United States Government nonexclusive, nontransferable,
      irrevocable, paid-up licenses to practice or have practiced for or on behalf
      of
      the United States PATENT RIGHTS throughout the world.

    

    2.5 LICENSEE
      is entitled to extend its licenses under this Article 2 to its AFFILIATES,
      consistent with all of the terms and conditions of this Agreement. If LICENSEE
      does extend its license and an AFFILIATE assumes obligations under the
      Agreement, LICENSEE guarantees performance by the AFFILIATE. If MICHIGAN has
      a
      claim arising under this Agreement against an AFFILIATE, MICHIGAN may seek
      a
      remedy directly against LICENSEE and may, but is not is not required to, seek
      a
      remedy against the AFFILIATE. Any termination of the Agreement under Article
      11
      as to LICENSEE also constitutes termination as to any
      AFFILIATES.

    

    

    ARTICLE
      3 - CONSIDERATION

    

    3.1
       
      LICENSEE
      shall pay
      royalties to MICHIGAN until the expiration date of the last to expire of PATENT
      RIGHTS or until this Agreement is terminated. 
      Royalties shall include:

    

      (a)
        A
        License Issue Fee of ***** Such License Issue Fee shall be nonrefundable
        and is
        due thirty days (30) from the complete execution of this Agreement; 

    

      (b)
        Royalties
        equal to ****** of NET SALES;

    

      (c)
        *********
        of
        SUBLICENSE INCOME;

    

    (d)
      LICENSEE shall pay to MICHIGAN an Annual License Maintenance Fee ("Annual Fee").
      This Annual Fee is accrued on June 30 of the years specified below, and is
      payable with the semi-annual report for the ROYALTY PERIOD in which the Annual
      Fee accrues. LICENSEE may credit each Annual Fee in full against all royalties
      otherwise due MICHIGAN for the prior July 1 through the June 30 on which the
      Annual Fee accrues. The annual license maintenance fees are:

    

    (1) In
      2008-2009: ******;

    

    (2) In
      2010:
      ********; and

    

    (3) In
      2011
      and in each year thereafter during the term of this Agreement: ******..

    

    Should
      this Agreement terminate or expire other than on a June 30, the Annual Fee
      for
      such portion of a year shall be determined by multiplying the amount set forth
      above for the given year by a fraction, the numerator of which shall be the
      number of days since the prior June 30 during which the Agreement is in effect
      and the denominator of which shall be three hundred and sixty-five.

    

    3.2 LICENSEE
      shall be responsible for the payment of all taxes, duties, levies, and other
      charges imposed by any taxing authority with respect to the royalties payable
      to
      MICHIGAN under this agreement. Should LICENSEE be required under any law or
      regulation of any government entity or authority to withhold or deduct any
      portion of the payments on royalties due to MICHIGAN, then the sum payable
      to
      MICHIGAN shall be increased by the amount necessary to yield to MICHIGAN an
      amount equal to the sum it would have received had no withholdings or deductions
      been made. MICHIGAN shall cooperate reasonably with LICENSEE in the event
      LICENSEE elects to assert, at its own expense, MICHIGAN’s exemption from any
      such tax or deduction.

    

    3.2 LICENSEE
      is not obligated to pay multiple royalties if any LICENSED PRODUCT or LICENSED
      PROCESS is covered by more than one claim of PATENT RIGHTS or the same LICENSED
      PRODUCT is covered by claims in two or more countries.

    

    3.3 If
      LICENSEE is obligated or reasonably deems it necessary to pay consideration
      to
      any third party that holds a patent(s) that would, in the reasonable judgment
      of
      LICENSEE be infringed by the manufacture, importation, use, offer for sale
      or
      sale of a LICENSED PRODUCT or a LICENSED PROCESS, LICENSEE may reduce the amount
      of royalties owed to MICHIGAN by an amount equal to fifty percent (50%) of
      the
      amount of royalties owed to such THIRD PARTY Licensor by LICENSEE. In no
      instance under this subsection may the royalty due to MICHIGAN be reduced below
      fifty percent (50%) of the amount that would have otherwise been owed by
      LICENSEE, however.

    

    3.4 If
      a
      LICENSED PRODUCT or LICENSED PROCESS is sold in a COMBINATION PRODUCT, then
      NET
      SALES for purposes of determining royalty payments on the COMBINATION PRODUCT
      or
      LICENSED PROCESS will be determined pro rata on a COMBINATION
      PRODUCT-by-COMBINATION PRODUCT and country-by-country basis until the date
      of
      expiration of the last to expire PATENT RIGHT covering the manufacture, use
      or
      sale of such COMBINATION PRODUCT in such country, calculated using one of the
      following methods:

    

    (a) By
      multiplying NET SALES of the COMBINATION PRODUCT by the fraction A/(A+B), where
      A is the invoice price, during the royalty-paying period in question, of the
      LICENSED PRODUCT sold separately, and B is the invoice price during the royalty
      period in question, of the other products in the COMBINATION PRODUCT when sold
      separately by LICENSEE, its AFFILIATE or SUBLICENSEE or, if not so sold, then
      the average invoice price when sold separately by third parties; or

    

    (b) If
      no
      separate sales are made of the LICENSED PRODUCT or LICENSED PROCESS or any
      of
      the other products in such COMBINATION PRODUCT during the royalty-paying period
      in question, NET SALES for the purposes of determining royalty payments must
      be
      calculated by multiplying NET SALES of the COMBINATION PRODUCT by the fraction
      A/C, where A is as previously defined and C is the invoice price of the
      COMBINATION PRODUCT sold by LICENSEE, its AFFILIATE or SUBLICENSEE. If neither
      the royalty-bearing nor the non-royalty bearing product(s) included in the
      COMBINATION PRODUCT are sold separately, or the COMBINATION PRODUCT itself,
      or
      both, are not sold separately, NET SALES shall be calculated based on mutual
      written agreement as to a reasonable allocation between the LICENSED PRODUCT
      or
      LICENSED PROCESS and the other products in the COMBINATION PRODUCT, taking
      into
      account total manufacturing costs, proprietary protection and relative
      contribution of the products.

    

    3.5 Royalty
      payments shall be paid to the "Regents of the University of Michigan" in United
      States dollars in Ann Arbor, Michigan, sent as provided in Article 13. In
      computing royalties, LICENSEE shall convert any revenues it receives in foreign
      currency into its equivalent in United States dollars at the most recent
      exchange rate published in the Wall Street Journal on the last business day
      of
      the ROYALTY PERIOD during which such payments are received by LICENSEE, or
      at
      such other exchange rate as the parties may agree to in writing.

    

    3.6 Royalty
      payments shall be made on a semi-annual basis with submission of the reports
      required by Article 4. All amounts due under this Agreement, including amounts
      due for the payment of patent expenses, shall, if overdue, be subject to a
      charge of interest compounded monthly until payment, at a per annum rate of
      five
      percent (5%) above the prime rate in effect at the JP Morgan Chase & Co. or
      its successor bank on the due date (or at the highest allowed rate if a lower
      rate is required by law) or $250, whichever is greater. The payment of such
      interest shall not foreclose MICHIGAN from exercising any other rights it may
      have resulting from any late payment. LICENSEE shall reimburse MICHIGAN for
      the
      costs, including reasonable attorney fees, for expenses paid in order to collect
      any amounts overdue more than 120 days.

    

    ARTICLE
      4 - REPORTS

    

    4.1 Until
      the
      FIRST COMMERCIAL SALE, LICENSEE shall provide to MICHIGAN a written annual
      report on or before October
      1
      of each
      year. The annual report shall include: reports of progress on research and
      development, regulatory approvals, manufacturing, sublicensing, marketing and
      sales during the preceding twelve (12) months, and plans for the coming year.
      LICENSEE also shall report to MICHIGAN the date of first sale or lease of
      LICENSED PRODUCTS (or results of LICENSED PROCESSES) in each country within
      thirty (30) days of occurrence.

    

    4.2 After
      the
      FIRST COMMERCIAL SALE, LICENSEE shall provide semi-annual reports to MICHIGAN.
      By each October
      1
      and April 1,
      LICENSEE
      shall report to MICHIGAN for that ROYALTY PERIOD: 

    

    (a)
      number of LICENSED PRODUCTS sold, leased or distributed by LICENSEE or
      AFFILIATE.

    (b)
      NET
      SALES, excluding the deductions provided therefor, of LICENSED PRODUCTS sold
      by
      LICENSEE or AFFILIATE.

    (c)
      accounting for all LICENSED PROCESSES used or sold by LICENSEE or AFFILIATE,
      including NET SALES, excluding the deductions therefor.

    (d)
      deductions applicable as provided in the definition for NET SALES
      above.

    (e)
      total
      SUBLICENSE INCOME and royalties due under Paragraph 3.1 above, including
      supporting figures.

    (f)
      foreign currency conversion rate and calculations (if applicable) and total
      royalties due.

    (g)
      names, addresses and U.S.P.T.O. Entity Status (as discussed in Paragraph 4.5)
      of
      all SUBLICENSEES having a sublicense or option therefor any time during the
      particular ROYALTY PERIOD.

    (h)
      for
      each sublicense or amendment thereto completed in the particular ROYALTY PERIOD,
      the date of each agreement and amendment, the territory of the sublicense,
      the
      scope of the sublicense, and the nature, timing and amounts of all fees and
      royalties to be paid thereunder.

    (i)
      any
      milestone (under Article 5) that has been achieved, and any milestone that
      was
      due during the ROYALTY PERIOD but not achieved, specifying each milestone and
      whether or not it was achieved.

    

    LICENSEE
      shall include the amount of all payments due, and the various calculations
      used
      to arrive at those amounts, including the quantity, description (nomenclature
      and type designation as described in Paragraph 4.3 below), country of
      manufacture and country of sale of LICENSED PRODUCTS and LICENSED PROCESSES.
      LICENSEE shall direct its authorized representative to certify that reports
      required hereunder are correct to the best of LICENSEE's knowledge and
      information. Failure to provide reports as required under this Article 4 shall
      be considered
      a
      material breach of this Agreement.

    

    If
      no
      payment is due, LICENSEE shall so report to MICHIGAN that no payment is
      due.

    

    4.3 LICENSEE
      shall promptly establish and consistently employ a system of specific
      nomenclature and type designations for LICENSED PRODUCTS and LICENSED PROCESSES
      to permit identification and segregation of various types where necessary.
      LICENSEE shall consistently employ, and shall require SUBLICENSEES to
      consistently employ, the system when rendering invoices thereon and shall inform
      MICHIGAN, or its auditors, when requested, as to the details concerning such
      nomenclature system, all additions thereto and changes therein.

    

    4.4 LICENSEE
      shall keep, and shall require AFFILIATES and SUBLICENSEES to keep, true and
      accurate records containing data reasonably required for the computation and
      verification of payments due under this Agreement. LICENSEE shall, and it shall
      require all AFFILIATES and SUBLICENSEES to: (a) open such records for inspection
      upon reasonable notice during business hours by either MICHIGAN auditor(s)
      or an
      independent certified accountant selected by MICHIGAN, for the purpose of
      verifying the amount of payments due; and (b) retain such records for six (6)
      years from date of origination. 

    

    The
      terms
      of this Article shall survive any termination of this Agreement. MICHIGAN is
      responsible for all expenses of such inspection, except that if any inspection
      reveals an underpayment greater than five percent (5%) of royalties due
      MICHIGAN, then LICENSEE shall pay all expenses of that inspection and the amount
      of the underpayment and interest to MICHIGAN within twenty-one (21) days of
      written notice thereof. LICENSEE shall also reimburse MICHIGAN for reasonable
      expenses required to collect the amount underpaid.

    

    4.5 So
      that
      MICHIGAN may pay the proper U.S. Patent and Trademark Office fees relating
      to
      the PATENT RIGHTS, if LICENSEE, any company related to LICENSEE or SUBLICENSEE
      (including optionees) does not qualify as a “Small Entity” under U.S. patent
      laws, LICENSEE shall notify MICHIGAN immediately. The parties understand that
      the changes to LICENSEE’s, SUBLICENSEE’s, or optionees’ businesses that might
      affect entity status include: acquisitions, mergers, hiring of a total of more
      than 500 total employees, sublicense agreements, and sublicense options.

    

    

    ARTICLE
      5 - DILIGENCE

    

    5.1 
      LICENSEE
      shall use commercially reasonable efforts to bring LICENSED PRODUCTS to market
      or one or more LICENSED PROCESSES to commercial use. LICENSEE has the
      responsibility to do all that is necessary to obtain and retain any governmental
      approvals to manufacture and/or sell LICENSED PRODUCTS and/or use LICENSED
      PROCESSES for all relevant activities of LICENSEE, AFFILIATES and
      SUBLICENSEES.

    

    5.2 As
      part
      of the diligence required by Paragraph 5.1, LICENSEE agrees to reach the
      following commercialization and research and development milestones for the
      LICENSED PRODUCTS and LICENSED PROCESSES (together the “MILESTONES”) by the
      following dates: 

    

    1)
      Initiate
      communication
      with all
      Tier 1 (Largest
      - see Schedule 2) Cosmetic or Chemical Companies with Category 1 Products
      (defined at those which explicitly use ********* within their product or
      marketing literature during *****
      .

    

    2)
      Initiate communication with all Tier 2 Companies (Significant size, but not
      the
      very largest - see Schedule 3) with Category 1 products during
      ******.

    

    3)
      Complete product research on all Category 2 (defined as those products which
      are
      suspected by LICENSEE of using ******* by virtue of claimed activity or
      description of active ingredients) within ******. 

    4)
      Initiate communication
      with all
      Tier 1 Companies with Category 2 products (to be determined based on research
      completed in Milestone #3) within
      *****.

    

      5)
        Within
        ***** of the effective date of this agreement, LICENSEE will obtain at least
        **** new revenue-generating business relationship from among the Companies
        currently or prospectively identified as Tier 1 or 2 Companies. Additional
        royalties to MICHIGAN from such additional business under Section 3.1 (b)
        or (c)
        herein shall be at least ***** per year. In the event that such business
        relationships do not generate at least ***** per year in additional royalties,
        the Annual Fee due MICHIGAN (as defined in Section
        3.1
        (d)) shall be increased by the difference between ****** and the royalty
        amount
        actually incurred. 

    

    5.3 LICENSEE
      must achieve the MILESTONES on or before the deadline dates indicated. LICENSEE
      shall notify MICHIGAN within ten (10) days after each deadline as to whether
      such MILESTONE was met. If LICENSEE fails to meet any MILESTONE under this
      Article continues for forty-five (45) days after the date of any MILESTONE
      deadline, LICENSEE will be deemed to be in material breach of this Agreement,
      and MICHIGAN may terminate the Agreement as provided in section 11.3.

    

    

    ARTICLE
      6 - SUBLICENSING

    

    6.1 LICENSEE
      shall notify MICHIGAN in writing of every sublicense agreement and each
      amendment thereto within thirty (30) days after their execution, and indicate
      the name of the SUBLICENSEE and its number of employees, the territory of the
      sublicense, the scope of the sublicense, and the nature, timing and amounts
      of
      all fees and royalties to be paid thereunder. Upon request, LICENSEE shall
      provide MICHIGAN with a copy of sublicense agreements.

    

    6.2 Where
      LICENSEE receives any consideration other than cash from SUBLICENSEES,
SUBLICENSE
      INCOME for said consideration shall be the
      fair
      market cash value for such consideration.

    

    6.3 Each
      sublicense granted by LICENSEE under this Agreement shall provide for its
      termination upon termination of this Agreement. Each sublicense shall terminate
      upon termination of this Agreement unless LICENSEE has previously assigned
      its
      rights under the sublicense to MICHIGAN and MICHIGAN has agreed at its sole
      discretion in writing to such assignment.

    

    
      	
              6.4

            	
              LICENSEE
                shall require that all sublicenses:

            

    

    

    (1)
      be
      consistent with the terms and conditions of this Agreement;

    

    (2)
      contain the SUBLICENSEE'S acknowledgment of the disclaimer of warranty and
      limitation on MICHIGAN's liability, as provided by Article 9 below; and

    

    (3)
      contain provisions under which the SUBLICENSEE accepts duties at least
      equivalent to those accepted by the LICENSEE in the following Paragraphs: 4.4
      (duty to keep records); 4.5 (duty regarding Patent Office fees); 9.4 (duty
      to
      avoid improper representations or responsibilities); 10.1 (duty to defend,
      hold
      harmless, and indemnify MICHIGAN); 10.3 (duty to maintain insurance); 14.5
      (duty
      to properly mark LICENSED PRODUCTS with patent notices); 14.7 (duty to restrict
      the use of MICHIGAN's name); 14.8 (duty to control exports).

    

    

    ARTICLE
      7 - PATENT APPLICATIONS AND MAINTENANCE 

    

      7.1 MICHIGAN
        has the right to control filing, prosecuting, and maintaining all of the
        patents
        and patent applications
        that form the basis for the PATENT RIGHTS, including
        interferences
        and
        disputes regarding
        inventorship
        (including litigation based solely or primarily upon inventorship
        issued),
        with
        reasonable input from LICENSEE. LICENSEE shall fully cooperate in such
        activities.

    

      7.2 MICHIGAN
        shall notify LICENSEE of all information received by MICHIGAN relating to
        the
        filing, prosecution and maintenance of the patents and patent applications
        which
        form the basis of the PATENT RIGHTS, and shall provide LICENSEE reasonable
        time
        to review, comment, and advise upon such information. MICHIGAN agrees to
        act on
        recommendations of LICENSEE when it is reasonable to do
        so.
        LICENSEE
        agrees to hold such information confidential and to use the information provided
        by MICHIGAN only for the purpose of advancing MICHIGAN’s PATENT
        RIGHTS.
        MICHIGAN
        agrees that claims contained in a continuation-in-part application that are
        not
        entitled to the priority date of a patent among the PATENT RIGHTS will be
        segregated to the extent permitted by law into a separate patent at LICENSEE’S
        request and that LICENSEE shall have no financial obligation to MICHIGAN
        for
        such separate patent applications, although such rights shall not be included
        in
        PATENT RIGHTS. 

    

      7.3 LICENSEE
        shall reimburse MICHIGAN for fifty percent (50%) of all fees and costs
incurred
        after the Effective Date of this Agreement relating
        to the activities described in this Article and
        shall
        reimburse MICHIGAN for 
        costs
        already incurred according to the following schedule: Forty thousand dollars
        ($40,000) within ten days of the Effective Date, thirteen thousand dollars
        ($13,000) no later than December 31, 2007, thirteen thousand dollars ($13,000)
        no later than December 31, 2008 and thirteen thousand dollars ($13,000) no
        later
        than December 31, 2009. MICHIGAN shall provide LICENSEE with copies of original
        invoices setting forth such costs in detail for all costs incurred after
        the
        Effective Date of this Agreement.
        Such
        reimbursement shall be made within thirty (30) days of receipt of MICHIGAN’s
        invoice and shall be subject to the interest and other requirements specified
        in
        Paragraph 3.6 above. LICENSEE
        may, at its option and sixty (60) days prior to any outstanding action, elect
        to
        relinquish its license under any patent or application among the PATENT RIGHTS,
        in which case LICENSEE’s reimubursement obligations under this Article with
        respect to that patent or patent application shall cease.

    

    ARTICLE
      8
      - ENFORCEMENT 

    

    8.1 Each
      party shall promptly advise the other in writing of any known acts of potential
      infringement of the PATENT RIGHTS by another party in the FIELD OF USE. LICENSEE
      has the first option to police the PATENT RIGHTS against infringement by other
      parties within the TERRITORY and the FIELD OF USE, but LICENSEE shall notify
      MICHIGAN in writing thirty (30) days before filing any suit. LICENSEE shall
      not
      file any suit without a diligent investigation of the merits of such suit by
      counsel, including with respect to PATENT RIGHTS. This right to police includes
      defending any action for declaratory judgment of noninfringement or invalidity;
      and prosecuting, defending or settling all infringement and declaratory judgment
      actions at its expense and through counsel of its selection, except that
      LICENSEE shall make any such settlement only with the advice and consent of
      MICHIGAN. If LICENSEE has a reasonable basis for policing the patents, MICHIGAN
      shall provide reasonable assistance to LICENSEE with respect to such actions,
      but only if LICENSEE reimburses MICHIGAN for out-of-pocket expenses incurred
      in
      connection with any such assistance rendered at LICENSEE'S request or reasonably
      required by MICHIGAN and if LICENSEE notifies MICHIGAN in writing fourteen
      (14)
      days
      before filing any suit,
      unless
      MICHIGAN waives such notice requirement in writing.
      MICHIGAN
      retains the right to participate, with counsel of its own choosing and at its
      own expense, in any action under this Paragraph. LICENSEE shall defend,
      indemnify and hold harmless MICHIGAN with respect to any counterclaims asserted
      by an alleged infringer reasonably related to the enforcement of the PATENT
      RIGHTS under this Paragraph, including but not limited to antitrust
      counterclaims and claims for recovery of attorney fees. 

    

    If
      a
      declaratory judgment action alleging invalidity or unenforceability of any
      of
      the PATENT RIGHTS is brought against LICENSEE or MICHIGAN and the action is
      not
      brought in reaction to an assertion of or action for patent infringement brought
      by LICENSEE, then MICHIGAN, at its sole option, has the right to intervene
      and
      assume control over the defense of such action, and LICENSEE shall provide
      reasonable cooperation in the defense of such action. If a third party files
      such action as the result of acts of LICENSEE, then LICENSEE shall reimburse
      the
      reasonable costs and fees of MICHIGAN in defending such action. 

    

      8.2 
        If
        LICENSEE demonstrates to MICHIGAN that it has a reasonable basis to believe
        that
        a third party infringes the PATENT RIGHTS and undertakes to enforce and/or
        defend the PATENT RIGHTS by litigation anywhere
        in
        the
world,
        LICENSEE may withhold
        up to fifty percent (50%) of the payments otherwise thereafter due
        in the
        jurisdiction in which said PATENT RIGHTS are being enforced
        during
        the course of such litigation to MICHIGAN under Article 3 under the following
        terms. LICENSEE may apply the amounts withheld to pay up to half of LICENSEE's
        out-of-pocket litigation expenses, including reasonable attorneys’ fees, but not
        including salaries of LICENSEE’s employees. If LICENSEE recovers damages in
        patent litigation or settlement thereof, the award shall be applied first
        to
        satisfy LICENSEE’S unreimbursed expenses and legal fees for the litigation, next
        to reimburse MICHIGAN for any payments under Article
        3
        which are past due or were withheld pursuant to this Article 8, and then
        to
        reimburse MICHIGAN for any other reasonable unreimbursed expenses and legal
        fees
        for the litigation. The
        remaining balance shall be divided with 80% received by LICENSEE and 20%
        received by MICHIGAN. This provision shall control the division of revenues
        where a license is granted as part of a settlement of such litigation.

    

      8.3 If
        LICENSEE fails to take action to abate any alleged infringement of patents
        which
        form the basis for the PATENT RIGHTS within one-hundred-and-eighty (180)
        days of
        a request by MICHIGAN to do so (or within a shorter period if required to
        preserve the legal rights of MICHIGAN under any applicable laws) then MICHIGAN
        has the right to take such action (including prosecution of a suit) at its
        expense and LICENSEE shall use reasonable efforts to cooperate in such action,
        at LICENSEE's expense. Such abatement may include compensating MICHIGAN for
        some
        part of any alleged damages, as negotiated by the Parties. MICHIGAN has full
        authority to settle on such terms as MICHIGAN determines, except that MICHIGAN
        shall not reach any settlement whereby it provides a license for future
        activities to a third party under the PATENT RIGHTS in the TERRITORY and
        the
        FIELD OF USE without the consent of LICENSEE. If MICHIGAN recovers damages
        in
        patent litigation or settlement thereof, the award shall be applied first
        to
        satisfy MICHIGAN’S unreimbursed expenses and legal fees for the litigation, next
        to reimburse MICHIGAN for any payments overdue under this Agreement, and
        then to
        reimburse LICENSEE for any reasonable unreimbursed expenses and legal fees
        for
        the litigation (such payment not to exceed the recovery or settlement amounts
        MICHIGAN actually receives). The remaining balance shall be divided with 80%
        received by MICHIGAN and 20% by LICENSEE. This
        provision shall control the division of revenues where a license is granted
        as
        part of a settlement of such litigation.

    

    ARTICLE
      9 - NO WARRANTIES; LIMITATION ON MICHIGAN'S LIABILITY

    

    9.1 MICHIGAN,
      including its Regents, fellows, officers, employees and agents, makes no
      representations or warranties that PATENT RIGHTS are or will be held valid,
      or
      that the manufacture, importation, use, offer for sale, sale or other
      distribution of any LICENSED PRODUCTS or use of LICENSED PROCESSES will not
      infringe upon any patent or other rights.

    

    9.2 MICHIGAN,
      INCLUDING ITS REGENTS, FELLOWS, OFFICERS, EMPLOYEES AND AGENTS, MAKES NO
      REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
      INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
      FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO RESPONSIBILITIES WHATEVER
      WITH
      RESPECT TO DESIGN, DEVELOPMENT, MANUFACTURE, USE, SALE OR OTHER DISPOSITION
      BY
LICENSEE
      OR
      SUBLICENSEES
      OF
LICENSED
      PRODUCTS OR
      LICENSED PROCESSES.

    

    9.3 LICENSEE
      AND
SUBLICENSEES
      ASSUME
      THE ENTIRE RISK AS TO PERFORMANCE OF LICENSED
      PRODUCTS AND
      LICENSED PROCESSES.
      In no
      event shall MICHIGAN, including its Regents, fellows, officers, employees and
      agents, be responsible or liable for any direct, indirect, special, incidental,
      or consequential damages or lost profits or other economic loss or damage with
      respect to LICENSED PRODUCTS or LICENSED PROCESSES, to LICENSEE, SUBLICENSEES
      or
      any other individual or entity regardless of legal or equitable theory. The
      above limitations on liability apply even though MICHIGAN, its Regents, fellows,
      officers, employees or agents may have been advised of the possibility of such
      damage.

    

    9.4 LICENSEE
      shall not, and shall require that its SUBLICENSEES do not, make any statements,
      representations or warranties whatsoever to any person or entity, or accept
      any
      liabilities or responsibilities whatsoever from any person or entity that are
      inconsistent with any disclaimer or limitation included in this Article
      9.

    

    

    ARTICLE
      10 - INDEMNITY; INSURANCE

    

    10.1 LICENSEE
      shall defend, indemnify and hold harmless and shall require SUBLICENSEES to
      defend, indemnify and hold harmless MICHIGAN, including its Regents, fellows,
      officers, employees, students, and agents, for and against any and all claims,
      demands, damages, losses, and expenses of any nature (including attorneys'
      fees
      and other litigation expenses), resulting from, but not limited to, death,
      personal injury, illness, property damage, economic loss or products liability
      arising from or in connection with, any of the following: (1) Any manufacture,
      use, sale or other disposition by LICENSEE, SUBLICENSEES or transferees of
      LICENSED PRODUCTS or LICENSED PROCESSES and
      (2) The
      direct or indirect use by any person of LICENSED PRODUCTS made, used, sold
      or
      otherwise distributed by LICENSEE or SUBLICENSEES 

    

    10.2 MICHIGAN
      is entitled to participate at its option and expense through counsel of its
      own
      selection, and may join in any legal actions related to any such claims,
      demands, damages, losses and expenses under Paragraph 10.1 above. LICENSEE
      shall
      not settle any such legal action with an admission of liability of MICHIGAN
      without MICHIGAN’s written approval.

    

    10.3 Prior
      to
      any distribution or commercial use of any LICENSED PRODUCT or use of any
      LICENSED PROCESS by LICENSEE, LICENSEE shall purchase and maintain in effect
      commercial general liability insurance, including product liability insurance
      and errors and omissions insurance which shall protect LICENSEE and MICHIGAN
      with respect the events covered by Paragraph 10.1. Prior to any distribution
      or
      use of any LICENSED PRODUCT or use of any LICENSED PROCESS by a SUBLICENSEE,
      LICENSEE shall require that the SUBLICENSEE purchase and maintain in effect
      commercial general liability insurance, including product liability insurance
      and errors and omissions insurance which shall protect LICENSEE, SUBLICENSEE,
      and MICHIGAN with respect to the events covered by Paragraph 10.1. Each such
      insurance policy must provide reasonable coverage for all claims with respect
      to
      any LICENSED PROCESS used and any LICENSED PRODUCTS manufactured, used, sold,
      licensed or otherwise distributed by LICENSEE -- or, in the case of a
      SUBLICENSEE's policy, by said SUBLICENSEE -- and must specify MICHIGAN,
      including its Regents, fellows, officers and employees, as an additional
      insured. LICENSEE shall furnish certificate(s) of such insurance to MICHIGAN,
      upon request.

    

    10.4 In
      no
      event shall either party hereunder be liable to the other for any special,
      indirect, or consequential damages of any kind whatsoever resulting from any
      breach or default of this Agreement.

    

    ARTICLE
      11 - TERM AND TERMINATION 

    

    11.1 If
      LICENSEE ceases to carry on its business, this Agreement shall terminate upon
      written notice by MICHIGAN attempted to be delivered to the address for notices
      provided in Article 13.

    

    11.2 Failure
      by
      LICENSEE
      to (a)
      make any Annual License Maintenance Fee due to MICHIGAN, under Section 3.1
      (d)
      or (b) submit any report under Article 4 shall
      be
      considered a material breach of this
      Agreement. If LICENSEE fails to cure such breach within thirty (30) days of
      receiving written notice of said breach by MICHIGAN, MICHIGAN
      may terminate the Agreement. LICENSEE shall be entitled to a thirty (30)
      business day extension of such period if it represents to MICHIGAN in writing
      the failure to provide any such report was due to a good faith error or
      circumstances beyond LICENSEE’s control. Such
      termination shall not foreclose MICHIGAN from collection of any amounts
      remaining unpaid or seeking other legal relief.

    

    11.3 Other
      than as provided for in Sections 11.1 and 11.2 above, in the event of any
      dispute arising from or relating to this Agreement or the breach thereof, the
      parties hereto shall use diligent efforts to settle the dispute. MICHIGAN shall
      not terminate the Agreement for breach until a dispute resolution process,
      as
      follows, is complete and LICENSEE is adjudicated to be in material breach of
      the
      Agreement. 

    

      Dispute
        Resolution Process:

    

    	(a)  	
            Negotiation:
              Senior individuals with responsibility for patent and licensing activities
              of the disputing Parties, with advice of counsel if necessary, shall
              consult and negotiate with each other in good faith and, recognizing
              their
              mutual interests, attempt to reach a just and equitable solution
              satisfactory to both parties. The parties shall diligently attempt
              to
              resolve such issue amicably with a sufficiently authorized member of
              each
              Party's management over a period of 60 days after request by either
              Party,
              which attempt shall include at least one in-person meeting of the parties
              involved in the discussions in Washtenaw County,
              Michigan.

          

    

    	(b)  	
            Mediation:
               If
              such dispute or controversy cannot be settled through the above
              activities, the Parties agree to attempt in good faith to settle the
              controversy with mediation which shall be completed 45 days after
              completion of the negotiation period provided for in Section 11.3(a).
              The
              Parties shall equally share the fees and the costs of a mutually agreeable
              mediator, with each Party also being responsible for its own expenses.
              The
              Parties shall agree upon the terms of such mediation, which shall include
              at least one in-person meeting in Washtenaw County, Michigan, involving
              senior individuals with responsibility for patent and licensing activities
              of the disputing Parties, such meeting taking place at least 21 days
              prior
              to the completion of the mediation. 

          

    

    	(c)  	
            If
              the parties do not reach such solution through formal mediation, then,
              upon written notice by one Party to the other Party, disputes shall
              be
              finally settled by binding arbitration.

          

    

    	(1)  	
            The
              arbitration shall be administered by the American Arbitration Association
              in accordance with the provisions of its Commercial Arbitration rules,
              and/or its Patent Arbitration rules, whichever is reasonably applicable,
              and Federal Arbitration Act, except where those rules conflict with
              this
              provision, in which case this provision controls. The written notice
              must
              contain a statement of the dispute in sufficiently clear detail for
              the
              arbitrators and the other party to understand it. Prior to commencement
              of
              arbitration, emergency relief is available from any court only to avoid
              irreparable harm.

          

    

    	(2)  	
            The
              arbitration shall take place before a single arbitrator in Washtenaw
              County, Michigan USA, unless in-person meetings or hearing are not
              necessary or required. Unless the Parties agree otherwise, the Parties
              shall agree upon the arbitrator within twenty business days from the
              date
              of the written notice referenced in Section 11.3 (c) above from the
              AAA’s
              National Roster of Arbitrators or through selection procedures
              administered by the AAA. The arbitrator shall not be employed by or
              affiliated in any way with either Party (including, for example, as
              an
              independent consultant or as a customer or vendor to either party,
              or an
              employee of a customer or vendor). LICENSEE shall pay the fees and
              the
              costs of the arbitrator, with each Party also being responsible for
              its
              own expenses.

          

    

    	(3)  	
            Within
              15 business days after the selection of the arbitrator, the parties
              shall
              reach agreement upon and thereafter follow procedures, including limits
              on
              discovery, assuring
              that the arbitration will be concluded and the award rendered within
              no
              more than six (6) months from selection of the arbitrator(s). In the
              absence of an agreement to the contrary or except as provided herein,
              procedures meeting such time limits will be designed by the AAA and
              adhered to by the parties. 

          

    

    	(4)  	
            The
              Federal Rules of Civil Procedure shall apply where the rules of the
              American Arbitration Association are silent, but the parties shall
              use
              their best efforts to come to agreement on limits on discovery. To
              the
              extent that depositions are permitted, unless the parties agree to
              further
              limits, each deposition of a person shall be limited to 6 hours of
              testimony, and depositions of parties shall
              be
              limited to 10 hours of testimony and each party shall be limited to
              5
              depositions. Unresolved discovery disputes shall be resolved by the
              arbitrator(s).

          

    

    	(5)  	
            The
              decision of the arbitrator(s) must be in writing and must generally
              describe the basis on which the decision was made, but a detailed written
              opinion shall not be required of the arbitrator(s). Judgment on the
              award
              rendered by the arbitrator(s) may be entered in any court having competent
              jurisdiction thereof. Each party shall bear its own costs and expenses
              and
              an equal share of the arbitrator and administrative fees of the
              arbitration. THE ARBITRATOR(S) SHALL NOT AWARD EITHER PARTY PUNITIVE,
              EXEMPLARY, MULTIPLIED OR CONSEQUENTIAL DAMAGES, OR ATTORNEYS FEES OR
              COSTS.

          

    

    	(6)  	
            This
              agreement to arbitrate is intended to be binding upon the signatories
              hereto, their principals, successors, assigns, subsidiaries, and
              affiliates. This agreement to arbitrate is also intended to include
              any
              disputes, controversy or claims against any party's employees, agents,
              representatives, or outside legal counsel arising out of or relating
              to
              matters covered by this Agreement or any agreement in which this Agreement
              is incorporated.

          

    

    

    11.4 LICENSEE
      has the right to terminate this Agreement at any time on ninety (90) days’
written notice to MICHIGAN if LICENSEE:

    

    (a)
      pays
      all amounts due MICHIGAN through the effective date of the
      termination;

    

    (b)
      submits a final report of the type described in Paragraph 4.2;

    

    (c)
      returns any patent documentation (including that exchanged under Article 7)
      and
      any other confidential or trade-secret materials provided to LICENSEE by
      MICHIGAN in connection with this Agreement, or, with prior approval by MICHIGAN,
      destroys such materials, and certifies in writing that such materials have
      all
      been returned or destroyed; and

    

    (d)
      suspends its manufacture, use and sale of the LICENSED PROCESS(ES) AND LICENSED
      PRODUCT(S) (subject to Paragraphs
      11.5
and
      11.7
      below).

    

    

      Upon
        written
        notice
        of intent to terminate, MICHIGAN may elect
        to
        immediately terminate this Agreement upon written notice. The
        effective date of such termination shall be the earlier of: (a) the date
        indicated
        by
        LICENSEE
in
        its
        written
        notice of termination, and (b) the date on which MICHIGAN provides LICENSEE
        with
        written notice
        of
        immediate termination. During the period between notice and termination MICHIGAN
        shall not initiate any new litigation or prosecution under the PATENT RIGHTS
        or
        otherwise obligate LICENSEE by incurring expenses which need not necessarily
        be
        incurred before the date
        of
        termination. However, nothing in this Paragraph shall limit LICENSEE’s
        obligations under Article 7 with respect to: (a) patent applications filed
        as of
        the date of such notice and/or (b) fees due during the notice period that
        were
        foreseeable at the time of such notice, including but not limited to patent
        maintenance fees. 

    

    11.5 Upon
      any
      termination of this Agreement, and except as provided herein to the contrary,
      all rights and obligations of the parties hereunder shall cease, except any
      previously accrued rights and obligations and further as follows:

    

    (1)
      obligations to pay (this
      needs to stay in) consideration
      accruing
      hereunder up to the day of such termination, whether or not this Agreement
      provides for a number of days before which actual payment is due and such date
      is after the day of termination; 

    

    (2)
      MICHIGAN's rights to inspect books and records as described in Article 4, and
      LICENSEE's obligations to keep such records for the required time; 

    

    (3)
      any
      cause of action or claim of LICENSEE or MICHIGAN accrued or to accrue because
      of
      any breach or default by the other party hereunder; 

    

    (4)
      the
      provisions of Articles 1, 9, 10, and 14.

    

    11.6 
      After
      the license(s) granted herein terminate, if LICENSEE has filed patent
      applications or obtained patents to any modification or improvement to LICENSED
      PRODUCTS or LICENSED PROCESSES within the scope of the PATENT RIGHTS, LICENSEE
      agrees upon request to enter into good faith negotiations with MICHIGAN or
      MICHIGAN’s future licensee (s) for
      the
      purpose of granting licensing rights to said modifications or improvements
      in a
      timely fashion and under commercially reasonable terms.

    

    11.7 After
      the
      license(s) granted herein terminate, LICENSEE shall have the right to sell
      or
      otherwise dispose of any inventory of LICENSED PRODUCTS, and shall pay MICHIGAN
      any royalties due thereon pursuant to the provisions of Article 3 herein.

    

    ARTICLE
      12 - REGISTRATION AND RECORDATION

    

    12.1 If
      the
      terms of this Agreement, or any assignment or license under this Agreement
      are
      or become such as to require that the Agreement or license or any part thereof
      be registered with or reported to a national or supranational agency, LICENSEE
      will, at its expense, undertake such registration or report. Prompt notice
      and
      appropriate verification of the act of registration or report or any agency
      ruling resulting from it will be supplied by LICENSEE to MICHIGAN upon
      request.

    

    12.2 LICENSEE
      shall also carry out, at its expense, any formal recordation of this Agreement
      or any license herein granted that the law of any country requires as a
      prerequisite to enforceability of the Agreement or license in the courts of
      any
      such country or for other reasons, and shall promptly furnish to MICHIGAN
      appropriately verified proof of recordation.

    

    

    ARTICLE
      13 - NOTICES

    

    13.1 Any
      notice, request, report or payment required or permitted to be given or made
      under this Agreement by either party is effective when mailed if sent by
      recognized overnight carrier or certified mail, electronic mail followed by
      confirmation by regular U.S. mail, or registered mail (return receipt requested)
      to the address set forth below or such other address as such party specifies
      by
      written notice given in conformity herewith. Any notice, request, report or
      payment not so given is not effective until actually received by the other
      party. 

    

     

    To
      MICHIGAN:     To
      LICENSEE:

    

    The
      University of Michigan    Quick-Med
      Technologies, Inc 

    Office
      of
      Technology Transfer  3427
      SW
      42nd
      Way

    Wolverine
      Tower, Room 2071  Gainesville,
      Florida 32608

    3003
      S.
      State Street    

    Ann
      Arbor, MI 48109-1280   

    

    Attn:
      File No. 1175, 1356, 1442,  
      Attn: Michael
      Granito

    1442d1,
      1442d3, 1543, 1543d1, 

    1720,
      2044 and 2115

    

    

    ARTICLE
      14 - MISCELLANEOUS PROVISIONS

    

    14.1
       This
      Agreement shall be construed, governed, interpreted and applied according to
      United States and State of Michigan law, except that questions affecting the
      construction and effect of any patent shall be determined by the law of the
      country in which the patent was granted.

    

    14.2 The
      parties hereby consent to the jurisdiction of the courts in the State of
      Michigan over any dispute concerning this Agreement or the relationship between
      the parties. Should LICENSEE bring any claim, demand or other action against
      MICHIGAN, its Regents, fellows, officers, employees or agents, arising out
      of
      this Agreement or the relationship between the parties, LICENSEE agrees to
      bring
      said action only in the Michigan Court of Claims.

    

    14.3 MICHIGAN
      and LICENSEE agree that this Agreement sets forth their entire understanding
      concerning the subject matter of this Agreement. The parties may amend this
      Agreement from time to time, but no modification will be effective unless both
      MICHIGAN and LICENSEE agree to it in writing.

    

    14.4
       If
      a
      court of competent jurisdiction finds any term of this Agreement invalid,
      illegal or unenforceable, that term will be curtailed, limited or deleted,
      but
      only to the extent necessary to remove the invalidity, illegality or
      unenforceability, and without in any way affecting or impairing the remaining
      terms.

    

    14.5 LICENSEE
      agrees to mark the LICENSED PRODUCTS sold in the United States with all
      applicable United States patent numbers. All LICENSED PRODUCTS shipped to or
      sold in other countries shall be marked to comply with the patent laws and
      practices of the countries of manufacture, use and sale.

    

    14.6 No
      waiver
      by either party of any breach of this Agreement, no matter how long continuing
      or how often repeated, is a waiver of any subsequent breach thereof, nor is
      any
      delay or omission on the part of either party to exercise or insist on any
      right, power, or privilege hereunder a waiver of such right, power or
      privilege.

    

    14.7 LICENSEE
      agrees to refrain from using and to require SUBLICENSEES to refrain from using
      the name of MICHIGAN in publicity or advertising without the prior written
      approval of MICHIGAN. Reports in scientific literature and presentations of
      joint research and development work are not publicity. Notwithstanding this
      provision, without prior written approval of MICHIGAN, LICENSEE and SUBLICENSEES
      may state publicly that LICENSED PRODUCTS and PROCESSES were developed by
      LICENSEE based upon an invention(s) developed at the University of Michigan
      and/or that the PATENT RIGHTS were licensed from the University of Michigan.
      

    

    14.8 LICENSEE
      agrees to comply with all applicable laws and regulations. In particular,
      LICENSEE understands and acknowledges that the transfer of certain commodities
      and technical data is subject to United States laws and regulations controlling
      the export of such commodities and technical data, including all Export
      Administration Regulations of the United States Department of Commerce. These
      laws and regulations prohibit or require a license for the export of certain
      types of technical data to certain specified countries. LICENSEE agrees to
      comply with all United States laws and regulations controlling the export of
      commodities and technical data, to be solely responsible for any violation
      of
      such laws and regulations by LICENSEE or its SUBLICENSEES, and to defend,
      indemnify and hold harmless MICHIGAN and its Regents, fellows, officers,
      employees and agents if any legal action of any nature results from the
      violation.

    

    14.9 The
      relationship between the parties is that of independent contractor and
      contractee. Neither party is an agent of the other in connection with the
      exercise of any rights hereunder, and neither has any right or authority to
      assume or create any obligation or responsibility on behalf of the
      other.

    

    14.10 LICENSEE
      may, without MICHIGAN’s consent, assign its rights under this Agreement to a
      purchaser of all or substantially all of LICENSEE’s business relating to the
      subject matter of this Agreement, so long as such assignee provides a statement
      in writing to MICHIGAN that it agrees to accept all the terms and conditions
      of
      this Agreement in the place of LICENSEE. LICENSEE may not assign this Agreement
      otherwise without the prior written consent of MICHIGAN,
      such
      permission not to be unreasonably withheld or delayed. No
      assignment by LICENSEE will be effective until the intended assignee agrees
      in
      writing to accept all of the terms and conditions of this Agreement, and such
      writing is provided to MICHIGAN.

    

    14.11 MICHIGAN
      represents that it has, and will in the future, disclose to LICENSEE all
      licenses it has granted or may grant to third parties under PATENT RIGHTS and
      the scope of rights granted thereunder. 

    

    14.12 This
      Agreement supercedes all other previous agreements between MICHIGAN and LICENSEE
      concerning the PATENT RIGHTS.

    

    THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
      originals by their duly authorized officers or representatives.

    

    

    FOR
      LICENSEE    FOR
      THE
      REGENTS OF THE

    UNIVERSITY
      OF MICHIGAN

    

    

    By /s/
      David Lerner   By /s/
      Kenneth J. Nisbet     

    (authorized
      representative)    
      Kenneth
      J. Nisbet

    Executive
      Director, UM Technology Transfer

    Typed
      Name David Lerner

    

    TitlePresident     

    

    Date June
      1, 2007     Date May
      23,2007   

    

    

    

    *******
      This
      material has been omitted pursuant to a request for confidential treatment
      and
      filed separately with the Securities and Exchange Commission. 

    APPENDIX
      A-1 

    Page
      1

    
      	
              OTT
                File 1543 

              US
                6,683,069 

              CA
                2326507

              JP2000-541991

              MX
                009651

              KR
                7011003

              US
                7,141,238

            	
              OTT
                File 2115 

              US
                7,078,048

              US
                11/290,109 

              CA
                2446356

              MX
                2003/009995

            
	
              OTT
                File 1720 

              US
                10/167,040 (2003/0021816)

              US
                11/168,017 (2006/0009494)

              US
                11/169,072 (2005/0277695)

              EP
                1284721

            	
              OTT
                File 1175

              US
                5,837,224 

              JP
                3705820

              AU
                701132 

              CA
                2241981 

              MX
                208066 

              NZ
                330860 

              EP
                97903847.8

            
	
              OTT
                File 1967 

              US
                11/208,947 (2005/0281764)

              AU
                2001272028

              MX
                000089

              JP
                2002-504965

              HK
                03106899.6

            	
              OTT
                File 1356 

              US
                6,630,516 

              AU
                737376 

              EP
                1 005 333 

              US
                6,919,072

              MX
                997883

              IL
                131543

              JP
                537021/98

              CA
                2281944

              CN
                98803970.2

              FR/DE/GB
                1005333

               

            
	
              OTT
                File 2044 

              US
                09/740,242(2002/0119107)

              EP
                01985574.1

              AU
                2002235215

              CA
                2432265

              JP
                2002-550947

              MX
                005421

            	 

    

    

    

    

    

    

    

    

    

    

    

    

    APPENDIX
      A-2

    

    

    

    OTT
      File 1442 

    US
      6,130,254 

    IL
      133194MX 9911052

    JP
      3554339

    CA
      2292600

    NZ
      501634

    NZ
      513045

    AU
      2002301116

    IN
      1184/MAS/98

    ZA
      98/4791 

    TW
      1234467

    US
      6,365,630 

    US
      6,942,870

    US
      10/948,002 (2005/0058709)================================================================================

Exhibit 10.1

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS EMPLOYMENT AGREEMENT (this "Agreement") executed and effective the
28th day of June, 2007 (the "Effective Date"), by and between DYNATRONICS
CORPORATION, a Utah corporation having its principal place of business in Salt
Lake City, Utah (the "Company"), and KELVYN H. CULLIMORE, JR., a resident of
Utah (the "Executive").

                                R E C I T A L S :

         A. The Company desires to retain the services of the Executive,
presently a shareholder, officer and director of the Company, and the Executive
desires to render such services, upon the terms and conditions contained herein.

         B. The Board of Directors of the Company (the "Board"), by appropriate
resolutions, authorized the employment of the Executive as provided for in this
Agreement.

                               A G R E E M E N T :

         NOW, THEREFORE, in consideration of the covenants contained herein, the
above recitals and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

                                    ARTICLE I
                                     DUTIES

         1.01 Duties. The Company hereby employs the Executive, and the
Executive hereby accepts employment, as the Company's Chairman of the Board,
President and CEO upon the terms and conditions contained herein. The Executive
will exercise the authority and assume the responsibilities: (i) specified in
the Company's Bylaws; (ii) of a Chairman, President and CEO of a corporation of
the size and nature of the Company; and (iii) prescribed by the Board from time
to time, with the current description set forth in Exhibit A, attached hereto
and by reference made a part hereof. The Board shall use its reasonable best
efforts to cause the Executive to remain as Chairman of the Board of Directors
during the entire Contract Term, as such term is defined under Article II.

         1.02 Other Business. During the Contract Term, and excluding any
periods of vacation, sick leave or disability to which the Executive is
entitled, the Executive agrees to devote the Executive's full attention and time
to the business and affairs of the Company and, to the extent necessary to
discharge the duties assigned to the Executive hereunder, to use the Executive's
best efforts to perform faithfully and efficiently such duties. Notwithstanding
the foregoing, but subject to (i) the advance approval of the Board of
Directors, and (ii) the provisions of Article VI hereof, the Executive shall be
entitled to serve on the board of directors of up to two (2) publicly held
companies other than the Company and a reasonable number of privately held
companies including companies operated or controlled by the Executive or a

                                       1
<PAGE>

relative or family member of the Executive. It is also acknowledged that
Executive was granted permission from the Board to serve as Mayor of Cottonwood
Heights and to fulfill responsibilities of that office as they may arise
according to his sole discretion.

                                   ARTICLE II
                                TERM OF AGREEMENT
                                -----------------

         The initial term of this Agreement shall commence on the Effective Date
and shall terminate at 11:59 p.m. Mountain Standard Time on June 30, 2009 (the
"Initial Contract Term") unless sooner terminated hereunder. Thereafter, the
term of this Agreement shall be automatically renewed for successive one-year
terms (each a "Renewal Contract Term") without action by either party; provided,
however, that either party may terminate its obligations hereunder at the end of
any Renewal Contract Term by giving the other party written notice of
termination at least 60 days and no more than 180 days before the end of said
Renewal Contract Term. The Initial Contract Term and any Renewal Contract Terms
are hereinafter collectively referred to as the "Contract Term."

                                   ARTICLE III
                                  COMPENSATION
                                  ------------

         During the Contract Term, the Company shall pay, or cause to be paid to
the Executive in cash in accordance with the normal payroll practices of the
Company for senior executive officers (including deductions, withholdings and
collections as required by law), the following:

         3.01 Annual Base Salary. Executive's current annual base salary
("Annual Base Salary") is equal to One Hundred and Fifty Four Thousand Dollars
($154,000) as of the Effective Date. Thereafter, the Compensation Committee will
determine Executive's salary hereunder in the Committee's sole discretion.
Notwithstanding the foregoing, in the event of a Change of Control (as defined
in Article V, below), the annual increase to the Annual Base Salary hereunder
will be an amount equal to the greater of 5 percent of the Annual Base Salary in
the preceding year or the amount determined by the Compensation Committee, with
such increase to become effective July 1st each year.

         3.02 Annual Bonus. A cash bonus (the "Annual Bonus") shall be paid each
year in an amount determined by the Compensation Committee, from the pre-tax
operating profits of the Company. The current Annual Bonus level for Executive
is 4 percent of pre-tax operating profits. Operating profits shall exclude
extraordinary items such as the sale of assets or the recognition of gains or
losses not associated with operations. The Compensation Committee of the Board
of Directors shall have sole discretion in determining whether an amount in
question shall be included in calculating operating profit. Notwithstanding
anything set forth above, the Compensation Committee may make adjustments as
deemed appropriate to the structure of the Annual Bonus program from time to
time. Bonuses shall be calculated and paid on a quarterly basis. All accrued
bonuses shall be paid to Executive within 45 days from the end of a quarter
except for the quarter ended June 30th for which any accrued bonus shall be paid
within 60 days. Notwithstanding the foregoing, in the event of a Change in
Control (as defined in Article V, below), the minimum Annual Bonus will be an
amount equal to 4 percent (or such greater amount as the Compensation Committee
may determine) of the Company's pre-tax operating profits annually prior to
payment of any other bonuses based on pre-tax operating profits.

                                       2
<PAGE>

                                   ARTICLE IV
                                 OTHER BENEFITS
                                 --------------

         4.01 Incentive Savings and Retirement Plans. The Executive shall be
entitled to participate, during the Contract Term, in all incentive (including
annual and long-term incentives), savings and retirement plans, practices,
policies and programs available to other senior executives of the Company.

         4.02 Welfare Benefits. Immediately upon the Effective Date and
throughout the Contract Term, the Executive and/or the Executive's family, as
the case may be, shall be entitled to participate in, and shall receive all
benefits under, all welfare benefit plans, practices, policies and programs
provided by the Company (including without limitation, medical, prescription,
dental, disability, employee life, group life, dependent life, accidental death
and travel accident insurance plans and programs) at a level that is equal to
other senior executives of the Company.

         4.03 Fringe Benefits. Immediately upon the Effective Date and
throughout the Contract Term, the Executive shall be entitled to participate in
all fringe benefit programs provided by the Company to its senior executives. As
of the Effective Date, those fringe benefits include (i) use of a luxury class
Company vehicle or a corresponding automobile allowance, including the payment
of gas, oil, maintenance and insurance in connection with such vehicle or
allowance, as the case may be, (ii) life insurance benefit with a minimum face
value of $100,000, with premiums paid by the Company, (iii) additional
disability insurance benefits paid by the Company at levels not less than
currently provided by group and individual policies in effect as of the date
hereof, and (iv) participation in a salary continuation plan as set forth in
that certain Salary Continuation Agreement (the "Salary Continuation Agreement")
between the Company and the Executive and entered into in July 1989, as the same
may be hereafter modified or amended, or any successor plan provided by the
Company.

         4.04 Expenses. During the Contract Term, the Executive shall be
entitled to receive prompt reimbursement for all reasonable employment-related
expenses which are incurred by the Executive. The Executive shall be reimbursed
upon the Company's receipt of accountings in accordance with practices, policies
and procedures applicable to senior executives of the Company.

         4.05 Office and Support Staff. During the Contract Term, the Executive
shall be entitled to an office, furnishings, other appointments, commensurate
with the position occupied by Executive, all of which shall be adequate for the
performance of the Executive's duties. Executive may hire staff to assist
Executive in his duties.

         4.06 Vacation. The Executive shall be entitled to up to five (5) weeks
paid vacation per calendar year commencing with the Effective Date. Such paid
vacation days shall accrue without cancellation, expiration or forfeiture,
subject however to the policy of the Company that no vacation days may be
carried over from any prior year.

                                       3
<PAGE>

         4.07 Stock Options. The Executive has previously been granted options
to purchase 170,000 shares (the "Options") of the Company's common voting stock
par value $.001 per share (the "Common Stock"). Subject to (i) the terms of the
Company's 1992 Amended and Restated Stock Option Plan, (ii) the terms of the
Company's 2005 Equity Incentive Plan or any successor plan thereto (the "Stock
Plan") and (ii) Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Options shall be qualified Incentive Stock Options under
Section 422 of the Code.

                                    ARTICLE V
                                CHANGE OF CONTROL
                                -----------------

         5.01 Definitions. The following terms shall have the meaning set forth
below:

         (a) The term "Company Acquisition" shall mean an acquisition of another
corporation, limited liability company, limited partnership, partnership or
similar entity by the Company by any means, including, without limitation, by
means of a merger, acquisition of assets or acquisition of ownership interests.

         (b) The term "Continuing Directors" shall mean those members of the
Board at any relevant time (i) who were directors on the Effective Date or (ii)
who subsequently were approved for nomination, election or appointment to the
Board by at least two-thirds of the Continuing Directors on the Board at the
time of such approval (the directors described in subsection (ii) are referred
to herein as the "Approved Directors"). "Approved Directors" shall not include
those appointed to the board as a term of a negotiated merger or acquisition.

         (c) The term "Change in Control" shall mean a change in control of
beneficial ownership of the Company's voting securities of a nature that would
be required to be reported pursuant to Item 6(e) of Schedule 14A of Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or any similar item on a successor or revised form; provided, however, that a
Change in Control shall be deemed to have occurred when:

              (i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding voting securities; or

              (ii) During any period of three consecutive years, the individuals
who at the beginning of such period constituted the Board, together with any
Approved Directors elected during such period, cease for any reason to
constitute at least a majority of the Board; or

              (iii) The shareholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets.

                                       4
<PAGE>

         (d) The term "Good Reason," in connection with the termination by the
Executive of his employment with the Company subsequent to a Change of Control
or Company Acquisition, shall mean:

              (i) A diminution in the responsibilities, title or office of the
Executive such that he does not serve as President and CEO of the Company (which
diminution was not for "Cause" (as defined below) or the result of the
Executive's disability), or the assignment (without the Executive's express
written consent) by the Company to the Executive of any significant duties that
are inconsistent with the Executive's position, duties, responsibilities and
status as President of the Company;

              (ii) The Company's transfer or assignment of the Executive,
without the Executive's prior express written consent, to any location other
than the Company's principal place of business in Salt Lake County, Utah, except
for required travel on Company business to an extent that does not constitute a
substantial abrupt departure from the Executive's normal business travel
obligations;

              (iii) The failure by the Company to continue in effect any
material benefit or compensation plan, life insurance plan, health and medical
benefit plan, disability plan or any other benefit plan in which the Executive
is a participant, or the taking of any action by the Company that would
adversely affect the Executive's right to participate in, or materially reduce
the Executive's benefits under, any of such plans or benefits, or deprive the
Executive of any material fringe benefit enjoyed by the Executive (except where
such failure to continue in effect or taking of such action affects all
executives of the Company who participate in the applicable plan or receive the
applicable benefits); or

              (iv) The failure of the Executive to serve as a director of the
Board (except if such decision not to serve was made voluntarily by the
Executive) at any time from his initial election to the Board through the end of
the Contract Term.

         (e) The terms "Parachute Payments" and "Excess Parachute Payments"
shall each have the meanings attributed to them under Section 280G of the Code,
or any successor section, and any regulations which may be promulgated in
connection with said section.

         5.02 Severance Payments. During the Contract Term, if (a) within six
(6) months after a Change of Control occurs the Executive voluntarily terminates
his employment with the Company or (b) within twelve (12) months after a Change
in Control or a Company Acquisition occurs, the Executive's employment is
terminated either (1) by the Company for any reason other than (A) for Cause (as
defined below), (B) as a result of the Executive's death or disability, or (C)
as a result of the Executive's retirement in accordance with the Company's
general retirement policies, or (2) by the Executive for Good Reason, then:

              (i) the Executive shall be paid an amount in cash equal to (x) one
and one-half times (1.5x) the Annual Base Salary in effect at the time of such
termination and (y) one and one-half times (1.5x) the average Annual Bonus paid

                                       5
<PAGE>

by the Company to Executive over the previous three (3) complete fiscal years;
50% of such amount to be paid within thirty (30) days after such termination and
the balance to be paid ratably over the subsequent six (6) months.

              (ii) the Company shall maintain in full force and effect for
eighteen (18) months after termination, all employee health and medical benefit
plans and programs including, without limitation, the Executive's 401(k) Plan,
in which the Executive, his family, or both, were participants immediately prior
to termination; provided that such continued participation is possible under the
general terms and provisions of such plans and programs; provided, however, that
if the Executive becomes eligible to participate in a health and medical benefit
plan or program of another employer which confers substantially similar
benefits, the Executive shall cease to receive benefits under this subparagraph
in respect of such plan or program;

              (iii) all of the Options and other stock options, warrants and
other similar rights granted by the Company to the Executive, if any, shall
immediately and entirely vest and shall be immediately delivered to the
Executive without restriction or limitation of any kind (except for normal
transfer restrictions);

              (iv) the Executive shall be paid an amount equal to the cash
surrender value, if any, of those certain life insurance policies underwritten
by ING/Security Life of Denver (or such successor or replacement policies) owned
by the Company for the purpose of funding the Company's obligations under the
Salary Continuation Agreement; and

              (v) the Company shall transfer to the Executive title, free and
clear of all encumbrances, to either (i) the Company-owned vehicle used by the
Executive at the time the Executive's employment with the Company terminates
(the "Company Vehicle"), or (ii) a vehicle of substantially similar market value
as the market value of the Company Vehicle at the time Executive's employment
with the Company terminates.

         Any obligation owed or amount payable pursuant to this Section together
with any  compensation  pursuant  to Article  III that is payable  for  services
rendered  through the effective date of termination,  shall  constitute the sole
obligation  of the  Company  payable  with  respect  to the  termination  of the
Executive as provided in this Section.  Upon such termination,  the Company will
have  no  obligation  to pay  Executive  any  amounts  pursuant  to  the  Salary
Continuation Agreement.

         5.03 Parachute Payment Limitation. Notwithstanding any other provision
of this Agreement, if the severance payments under Section 5.02 of this
Agreement, together with any other Parachute Payments made by the Company to the
Executive, if any, are characterized as Excess Parachute Payments, then the
following rules shall apply:

         (a) The Company shall compute the net value to the Executive of all
such severance payments after reduction for the excise taxes imposed by Section
4999, of the Code and for any normal income taxes that would be imposed on the
Executive if such severance payments constituted the Executive's sole taxable
income;

                                       6
<PAGE>

         (b) The Company shall next compute the maximum amount of severance
payments that can be provided without any such payments being characterized as
Excess Parachute Payments, and reduce the result by the amount of any normal
income taxes that would be imposed on the Executive if such reduced severance
benefits constituted the Executive's sole taxable income;

         (c) If the amount derived in Section 5.03(a) is greater than the amount
derived in Section 5.03(b), then the Company shall pay the Executive the full
amount of severance payments without reduction. If the amount derived in Section
5.03(a) is not greater than the amount derived in Section 5.03(b), then the
Company shall pay the Executive the maximum amount of severance payments that
can be provided without any such payments being characterized as Excess
Parachute Payments.

         5.04 No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5.02 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in Section 5.02
be reduced by any compensation earned by the Executive as a result of employment
by another company, self-employment or otherwise.

                                   ARTICLE VI
                              RESTRICTIVE COVENANTS
                              ---------------------

         6.01 Trade Secrets. Confidential and Proprietary Business Information.

         (a) The Company has advised the Executive and the Executive has
acknowledged that it is the policy of the Company to maintain as secret and
confidential all Protected Information (as defined below), and that Protected
Information has been and will be developed at substantial cost and effort to the
Company. "Protected Information" means trade secrets, confidential and
proprietary business information of the Company, any information of the Company
other than information which has entered the public domain (unless such
information entered the public domain through effects of or on account of the
Executive), and all valuable and unique information and techniques acquired,
developed or used by the Company relating to its business, operations,
employees, customers and suppliers, which give the Company a competitive
advantage over those who do not know the information and techniques and which
are protected by the Company from unauthorized disclosure, including but not
limited to, customer lists (including potential customers), sources of supply,
processes, plans, materials, pricing information, internal memoranda, marketing
plans, internal policies, and products and services which may be developed from
time to time by the Company and its agent or employees.

         (b) The Executive acknowledges that the Executive will acquire
Protected Information with respect to the Company and its successors in
interest, which information is a valuable, special and unique asset of the
Company's business and operations and that disclosure of such Protected
Information would cause irreparable damage to the Company.

         (c) Either during or for a period of two (2) years following
termination of employment by the Company, the Executive shall not, directly or
indirectly, divulge, furnish or make accessible to any person, firm,

                                       7
<PAGE>

corporation, association or other entity (otherwise than as may be required in
the regular course of the Executive's employment) nor use in any manner, any
Protected Information, or cause any such information of the Company to enter the
public domain.

         6.02 Non-Competition

         (a) The Executive agrees that the Executive shall not during the
Executive's employment with the Company, and, for a period of two (2) years
after the termination of this Agreement, directly or indirectly, in any
capacity, engage or participate in, or become employed by or render advisory or
consulting or other services in connection with any Prohibited Business as
defined in Section 6.02(c).

         (b) The Executive agrees that the Executive shall not during the
Executive's employment with the Company, and, for a period of two (2) years
after the termination of this Agreement, make any financial investment, whether
in the form of equity or debt, or own any interest, directly or indirectly, in
any Prohibited Business. Nothing in this Section 6.02(b) shall, however,
restrict the Executive from making any investment in any company whose stock is
listed on a national securities exchange; provided that (i) such investment does
not give the Executive the right or ability to control or influence the policy
decisions of any Prohibited Business, and (ii) such investment does not create a
conflict of interest between the Executive's duties hereunder and the
Executive's interest in such investment.

         (c) For purposes of this Section 6.02, "Prohibited Business" shall be
defined as any business and any branch, office or operation thereof, which is a
competitor of the Company and which has established or seeks to establish
contact, in whatever form (including, but not limited to solicitation of sales,
or the receipt or submission of bids), with any entity who is at any time a
client, customer or supplier of the Company (including but not limited to all
subdivisions of the federal government.)

         6.03 Non-Solicitation. From the date hereof until two (2) years after
the Executive's termination of employment with the Company, the Executive shall
not, directly or indirectly (a) encourage any employee or supplier of the
Company or its successors in interest to leave his or her employment with the
Company or its successors in interest, (b) employ, hire, solicit or cause to be
employed, hired or solicited (other than by the Company or its successors in
interest), or encourage others to employ or hire any person who within two (2)
years prior thereto was employed by the Company or its successors in interest,
or (c) establish a business with, or encourage others to establish a business
with, any person who within two (2) years prior thereto was an employee or
supplier of the Company or its successors in interest.

         6.04 Survival of Undertakings and Injunctive Relief.

         (a) The provisions of Sections 6.01, 6.02 and 6.03 shall survive the
termination of the Executive's employment with the Company irrespective of the
reasons therefor.

         (b) The Executive acknowledges and agrees that the restrictions imposed
upon the Executive by Sections 6.01, 6.02 and 6.03 and the purpose of such
restrictions are reasonable and are designed to protect the Protected

                                       8
<PAGE>

Information and the continued success of the Company without unduly restricting
the Executive's future employment by others. Furthermore, the Executive
acknowledges that, in view of the Protected Information which the Executive has
or will acquire or has or will have access to and in view of the necessity of
the restrictions contained in Sections 6.01, 6.02 and 6.03, any violation of any
provision of Sections 6.01, 6.02 and 6.03 hereof would cause irreparable injury
to the Company and its successors in interest with respect to the resulting
disruption in their operations. By reason of the foregoing the Executive
consents and agrees that if the Executive violates any of the provisions of
Sections 6.01, 6.02 or 6.03 of this Agreement, the Company and its successors in
interest as the case may be, shall be entitled, in addition to any other
remedies that they may have, including money damages, to an injunction to be
issued by a court of competent jurisdiction, restraining the Executive from
committing or continuing any violation of such Sections of this Agreement.

         In the event of any such violation of Sections 6.01, 6.02 or 6.03 of
this Agreement, the Executive further agrees that the time periods set forth in
such Sections shall be extended by the period of such violation.

                                   ARTICLE VII
                                   TERMINATION
                                   -----------

         7.01 Termination of Employment. The Executive's employment may be
terminated (i) at any time during the Contract Term by mutual agreement of the
parties, (ii) at the end of any Renewal Contract Term if written notice of
non-renewal is given by either party to the other at least 90 days prior to the
end of said Renewal Contract Term or (iii) as otherwise provided in this
Article.

         7.02 Termination for Cause. The Company may terminate the Executive's
employment for Cause by giving the Executive seven (7) days prior written notice
of such termination. For purposes of this Agreement, "Cause" for termination
shall mean

              (i) the willful failure or refusal to carry out the reasonable
directions of the Board, which directions are consistent with the Executive's
duties as set forth under this Agreement and have been given to the Executive in
writing but which directions the Executive has failed to follow or implement
within thirty (30) days after said written notice, other than a failure
resulting from the Executive's complete or partial incapacity due to physical or
mental illness or impairment;

              (ii) a conviction for a violation of a state or federal criminal
law involving the commission of a felony;

              (iii) a willful act by the Executive that constitutes gross
negligence in the performance of the Executive's duties under this Agreement and
which materially injures the Company. No act, or failure to act, by the
Executive shall be considered "willful" unless committed without good faith and
without a reasonable belief that the act or omission was in the Company's best
interest;

                                       9
<PAGE>

              (iv) a material breach by the Executive of the terms of this
Agreement, which breach has not been cured by the Executive within fifteen (15)
days of written notice of said breach by the Company;

              (v) repeated unethical business practices by the Executive in
connection with the Company's business, which unethical business practices
continue after fifteen (15) days after written notice thereof by the Company; or

              (vi) habitual use of alcohol or drugs by the Executive.

         Upon termination for Cause, the Executive shall not be entitled to
payment of any compensation other than salary and benefits under this Agreement
earned up to the date of such termination and any stock options, warrants or
similar rights which have vested at the date of such termination.

         7.03 Termination Without Cause. Should the Executive's employment be
terminated for a reason other than as specifically set forth in Sections 7.01
and 7.02 or Article V above the Company shall pay and/or provide to the
Executive each of the benefits and payments provided in Section 5.02 (i)-(v).

                                  ARTICLE VIII
                                  MISCELLANEOUS
                                  -------------

         8.1 Assignment, Successors. This Agreement may not be assigned by
either party hereto without the prior written consent of the other party. This
Agreement shall be binding upon and inure to the benefit of the Executive and
the Executive's estate and the Company and any assignee of or successor to the
Company.

         8.2 Beneficiary. If the Executive dies during the Contract Term, the
Company shall pay as an additional death benefit (and not in lieu of any other
such benefit to which Executive may be entitled at such time) the Annual Base
Salary under paragraph 3.01 for the remainder of the Contract Term in a lump sum
payment to the Executive's beneficiary or beneficiaries designated in writing by
the Executive (collectively the "Beneficiary") and if no such Beneficiary is
designated, to the Executive's estate; provided, however, that such sum shall be
reduced by the amounts, if any, that are paid to the Beneficiary or the estate
of Executive, as the case may be, under the Salary Continuation Agreement during
the remainder of the Contract Term.

         8.3 Nonalienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
hereunder shall be void.

         8.4 Severability. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not

                                       10
<PAGE>

declared to be unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful and valid.

         8.5 Amendment and Waiver. This Agreement shall not be altered, amended
or modified except by written instrument executed by the Company and the
Executive. A waiver of any term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition and any waiver of any other term, covenant, agreement or
condition, and any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default thereof or of any
other term, covenant, agreement or condition.

         8.6 Notices. All notices and other communications hereunder shall be in
writing and delivered by hand or by first class registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

         If to the Company:       DYNATRONICS CORPORATION
                                  7030 Park Centre Drive
                                  Salt Lake City, Utah 84121

         With a copy to:          DURHAM, EVANS, JONES & PINEGAR
                                  Attn: Wayne D. Swan, Esq.
                                  111 East Broadway, Suite 900
                                  P.O. Box 4050
                                  Salt Lake City, Utah 84110

         If to the Executive:     Kelvyn H. Cullimore, Jr.
                                  2143 Worchester Dr.
                                  Cottonwood Heights, Utah 84121

         Either party may from time to time designate a new address by notice
given in accordance with this Section. Notice and communications shall be
effective when actually received by the addressee.

         8.7 Counterpart Originals. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         8.8 Entire Agreement. This Agreement forms the entire agreement between
the parties hereto with respect to any severance payment and with respect to the
subject matter contained in the Agreement.

         8.9 Applicable Law. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the state of Utah,
without regard to its choice of law principles.

                                       11
<PAGE>

         8.10 Effect on Other Agreements. This Agreement shall supersede
entirely all prior agreements (including, without limitation, any existing
employment agreement), promises and representations regarding employment by the
Company and severance or other payments contingent upon termination of
employment not referenced by this agreement. Notwithstanding the foregoing, the
Executive shall be entitled to any other severance plan applicable to other
senior executives of the Company.

         8.11 Extension or Renegotiation. The parties hereto agree that at any
time prior to the expiration of this Agreement, they may extend or renegotiate
this Agreement upon mutually agreeable terms and conditions.

         IN WITNESS WHEREOF the parties have executed this Employment Agreement
on the date first written above.

                                  DYNATRONICS CORPORATION,
                                  a Utah corporation

                                  By:  /s/ Bob Cardon
                                  ------------------------------------------

                                  Name:  Bob Cardon
                                  ------------------------------------------

                                  Title:  Vice President of Administration
                                  ------------------------------------------

                                  KELVYN H. CULLIMORE, JR.,
                                  an individual

                                  /s/  Kelvyn H. Cullimore, Jr.
                                  ------------------------------------------
                                  Kelvyn H. Cullimore, Jr.

                                       12
<PAGE>

                                    EXHIBIT A

         Responsibilities and Authority of Chairman/President/Chief Executive
Officer (CEO)

         Overall strategic planning, corporate direction and implementation of
         strategic plan.

         General deployment of corporate assets.

         Hiring of Company officers and other employees.

         Establishment of incentive programs for Company officers and employees.

         Approves capital expenditures for budget categories (as approved by the
         Board) or up to $25,000 if not included in annual budget.

         Approval of major Company Policies and Procedures and exceptions to the
         same.

         Interfaces with stock brokerages.

         Approval of all corporate communications.

         Assures compliance with all applicable laws and regulations
         (domestic/international) pertinent to the Company.

         Review and Approval of all legal agreements to which the Company is a
         party.

         Represents Company in strategic business transactions subject to the
         approval of the Board.

         Management Team Chair.

         Serves as Chairman of the Board of Directors.

                                       13

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