Document:

Exhibit 10.3

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

This
Amended and Restated Employment Agreement (the “Agreement”) by and between Power 3 Medical Products, Inc.,
a New York corporation (the “Company”),
and Michael J. Rosinski (the “Officer”)
is executed this 29th day of December, 2004 but shall be effective for all
purposes as of July 2, 2004 (the “Effective
Date”).

 

RECITALS

 

WHEREAS,
the Company and the Officer previously entered into that certain Employment
Agreement which was dated as of May 18, 2004 although the Officer did not
commence employment until July 2, 2004 (the “Original Agreement”);

 

WHEREAS,
the Company and the Officer have determined that the Original Agreement did not
accurately reflect the parties’ mutual intent in that it did not correctly set
forth the parties’ mutual understanding and agreement regarding the
restrictions applicable to the stock grants referenced therein and the risks of
forfeiture intended to be applicable to such shares of stock; and

 

WHEREAS,
the Company and the Officer desire to enter into this Agreement to reform the
provisions of the Original Agreement to reflect the parties’ mutual
understanding and intent and to restate the Original Agreement, as amended, in
its entirety.

 

NOW,
THEREFORE, in consideration of the premises and of the covenants and agreements
herein provided, the parties hereto agree as follows:

 

1.                                      EMPLOYMENT TERMS

 

1.1                                   Term.   The
Company hereby employs the Officer, and the Officer hereby accepts employment
with the Company, all in accordance with the terms and conditions hereof, for a
term commencing on July 2, 2004 and terminating on July 1, 2007.  However, the Officer shall be considered to
be employed by the Company beyond the Termination Date for purposes of
receiving certain benefits conferred under this Agreement, as described in
Paragraph 3.1 hereof.

 

1.2                                 Position and Duties.

 

(a)                                  The Company hereby employs
the Officer, and the Officer agrees to serve the Company, as an officer of the
Company pursuant to the terms of this Agreement.  The Company has by action of its Board of
Directors appointed the Officer to the position of Chief Financial Officer,
however it may, in the sole and unfettered discretion of the Board of
Directors, amend the Officer’s title and/or duties and

 

 

responsibilities, provided that the Officer remains an officer of the
Company pursuant to the terms of this Agreement.

 

(b)                                 The Officer shall be responsible for such
duties as are commensurate with the office in which he serves and as may from
time to time be assigned to the Officer by the Company’s Board of Directors.

 

1.3                                 Performance of Duties.

 

(a)                                  At all times prior to the
Termination Date, the Officer (i) shall devote his full business time,
energies, best efforts, and attention to the business of the Company, (ii) shall
faithfully and diligently perform the duties of his employment with the
Company, (iii) shall do all reasonably in his power to promote, develop,
and extend the business of the Company, and (iv) shall not enter into the
service of, or be employed in any capacity or for any purpose whatsoever by,
any person, firm or corporation other than the Company without the prior
written consent of the Board of Directors of the Company.

 

(b)                                 The Officer shall perform his duties in
accordance with all applicable laws, rules, or regulations that apply to the
Company and/or its business, assets (real or personal), or employees.

 

2.                                      COMPENSATION.

 

2.1                                 Salary.

 

(a)                                  For so long as Officer is employed by the
Company, the Company agrees to pay to the Officer, and the Officer shall accept
from the Company, for all of his services rendered pursuant to this Agreement,
a salary of One Hundred Twenty Thousand Dollars ($120,000) per annum, payable
semimonthly.

 

(b)                                 The Company’s Board of Directors, or
compensation committee of the Board of Directors (the “Compensation Committee”), shall review the
Officer’s salary annually and merit increases thereon shall be considered and
may be approved, in the sole and unlimited discretion of the Company’s Board of
Directors, depending in part on the profits and cash flow of the Company.  If the Company’s Board of Directors elects in
its discretion to increase the salary of the Officer at any time or from time
to time, the new salary rate shall, without further action by the Officer or
the Company, be deemed substituted for the amount set forth above.  At such time, this Agreement shall be deemed
amended accordingly (notwithstanding the provisions of Paragraph 7.8 below),
and, as so amended, shall remain in full force and effect.

 

2.2                                  Bonuses.   The
Company, in the sole and unfettered discretion of its Board of Directors or
Compensation Committee, may from time to time award cash bonuses to the Officer
based upon its measure of Officer’s performance.  Such bonuses

 

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may
be awarded in a lump sum or may be conditioned upon the future performance or
employment of Officer, in the sole and unfettered discretion of the Board of
Directors of the Company.

 

2.3                                  Expenses.   Upon
submission of appropriate invoices or vouchers, the Company shall pay or
reimburse the Officer for all reasonable expenses incurred by the Officer in
the performance of his duties hereunder in furtherance of the business of the
Company.

 

2.4                                  Benefits.   The Company extends to the Officer the right to
participate in whatever employee benefit plans (excluding any employee benefit
plan covered separately in this Agreement) may be in effect from time to time,
to the extent the Officer is eligible under the terms of the plans.  However, no employee benefits other than
those specifically conferred by the terms of this Agreement have been promised
to the Officer in connection with this employment.  The adoption of one or more employee benefit
plans, the terms of the plans, and the Officer’s participation in the plans, if
any, are in the sole discretion of the Company and may be changed by the
Company at any time and from time to time.

 

2.5                                  Stock Grant.

 

(a)                                  To induce the Officer to accept the position
of Chief Financial Officer, and subject to the terms of this
Paragraph 2.5, the Officer is hereby granted by the Company, effective
upon the Effective Date of this Agreement, One Hundred Forty Thousand (140,000)
shares of the Company’s common stock (the “Restricted
Stock”).  The grant of the Restricted
Stock shall be subject to the following terms and conditions:

 

(i)                                     If at any time before July 1, 2006, the
Officer’s employment with the Company shall cease or terminate for any reason,
including but not limited to, termination by reason of [death or] disability, termination by the
Company with or without cause and whether or not in breach of the Agreement, or
termination by the Officer for any reason, voluntarily or otherwise, then the
Officer shall forfeit all of such Restricted Stock to the Company, and the
Officer shall have no claim or right, either express or implied, against the
Company for any compensation, payment or benefit in lieu of the Restricted
Stock so forfeited or otherwise.  In
addition, unless and until the Officer’s rights in the foregoing Restricted
Stock become nonforfeitable by virtue of the satisfaction of the foregoing
condition, the Officer shall have no right to, and the Officer hereby agrees
that he shall not, sell, pledge, assign, hypothecate, encumber, give, grant or otherwise
transfer such Restricted Stock or alienate his then-current or expected future
rights to such Restricted Stock, and the certificates representing all of such
Restricted Stock shall prominently bear appropriate legends reflecting these
restrictions and the Company’s stock register shall likewise reflect these
restrictions.

 

(ii)                                  Upon issuance of the Restricted Stock, except
for the restrictions set forth in this Paragraph 2.5, the Officer shall
have all rights of a

 

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shareholder
of the Company with respect to such Restricted Stock including the right to
vote such Restricted Stock and to receive all dividends and other distributions
paid with respect to such Restricted Stock; provided, however, dividends, if
any, paid or distributed on the Restricted Stock shall not be paid by the
Company to the Officer unless and until such time as the Restricted Stock
becomes nonforfeitable.

 

(iii)                               In the event of a Change in Control (as
herein defined), the Company may waive in whole or in part any and all
remaining restrictions on the Restricted Stock. 
For purposes hereof, a Change of Control shall mean, and shall be deemed
to have occurred:

 

(A)                              if any person, other than any benefit plan of
the Company or Steven B. Rash and Ira L. Goldknopf, Ph.D., as holders
of the Company’s Series B Preferred Stock, directly or indirectly, becomes
the beneficial owner (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of securities representing 51% or more of the
combined voting power of the Company’s then-outstanding securities, but
excluding any such acquisition pursuant to a merger, consolidation or similar
business combination involving the Company; or

 

(B)                                upon the consummation of a merger, consolidation,
or similar business combination involving the Company, other than any such
transaction which results in at least 75% of the total voting power represented
by the voting securities of the surviving entity (or the parent entity thereof)
outstanding immediately after such transaction being beneficially owned by at
least 75% of the holders of the outstanding voting securities of the Company
immediately prior to the transaction with the voting power of each such
continuing holder relative to other such continuing holders not being
substantially altered in the transaction; or

 

(C)                                upon the Board of Directors or the
shareholders of the Company approving a plan of complete or substantially
complete liquidation of the Company; or

 

(D)                               upon the consummation of the sale, lease, or
disposition by the Company of 50% or more of the total assets of the Company in
one or a series of related transactions (provided that a license, sublicense or
similar transaction involving the Company’s intellectual property rights shall
not be considered as a Change of Control); or

 

(E)                                 upon the individuals who constitute the Board
as of the Effective Date (the “Incumbent
Board”) ceasing for any reason to constitute at least a majority of
the members of the Board, provided that any person becoming a director after
the Effective Date whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board (other than any individual whose initial
assumption of office occurs as a result of either (a) an actual or
threatened election contest or (b) an actual or threatened solicitation of
proxies or consents by or on behalf

 

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of
a person other than the Board) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board.

 

(v)                                 The Common Shares shall have demand
registration rights or piggyback registration rights (neither of which,
however, shall be effective unless and until, after July 1, 2006, the
Officer’s rights to such shares have ceased to be subject to the risks of
forfeiture as provided herein).

 

(b)                                 The Officer agrees to pay in a timely manner
deemed suitable by the Company, and to indemnify and hold harmless the Company
from, any and all taxes (including all penalties and interest, if any,
thereon), resulting from the grant and/or transfer of the above-referenced
Restricted Stock for which ultimate responsibility is assigned to or asserted
against the Officer under applicable law. 
For purposes of this provision, all withholding obligations of the
Company in respect of the aforementioned taxes (including any and all taxes,
penalties and interest imposed on or asserted against the Company for failure
to properly withhold and remit any such amounts in a timely manner) shall be
considered the responsibility of the Officer and, accordingly, the Officer
agrees to pay in a timely manner deemed suitable by the Company, and to
indemnify and hold harmless the Company from, any and all of such obligations.

 

2.6                                 Vacation; Sick Leave.   The Company’s vacation and
sick leave policy has been established by the Company and may be changed by the
Company at any time and from time to time. 
Said policy is published in separate data files accessible to the
Officer.  The Officer will not be
entitled to receive payment for any unused sick leave either during employment
or upon termination of employment.

 

2.7                                 Withholding.   The Company may withhold from any amounts payable
under this Agreement any and all federal, state, city, or other taxes or other
amounts required to be withheld by any applicable law.

 

3.                                       TERMINATION.

 

3.1                                 Termination Upon 30 Days Notice.

 

(a)                                  Either party may terminate the Officer’s
employment under this Agreement for any reason whatsoever, either with or
without cause, upon giving the other party no less than thirty (30) days prior
written notice of such termination ( the “Notice
Date”).  The effective date of
a termination pursuant to this Paragraph 3.1 shall be such termination date as
stated on the notice, provided that the termination date can be no earlier than
the 31st day following the day the notice becomes effective pursuant
to Paragraph 5.4 below (the “Termination Date”).

 

(b)                                 Until the expiration of the contract on July 1,
2007 (“Transition Period”), unless
terminated for “Cause” as defined in Paragraph 3.4 or if

 

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the
Officer resigns from his position or duties, the Officer will continue to be
considered as an employee of the Company only for the purpose of receiving the
compensation and benefits awarded in Paragraphs 2.1, 2.2, and 2.4
hereof.  More specifically, for the
duration of Transition Period the Officer (i) shall continue to receive
his salary at the rate in effect as of the Notice Date, (ii) shall
continue to be considered an employee of the Company for purposes of
determining eligibility to receive any contingent or deferred bonuses awarded
to the Officer prior to the Termination Date, (iii) shall continue to be
considered an officer of the Company for purposes of vesting in any stock
options granted to Officer (but not for purposes of the forfeiture restrictions
applicable to the Restricted Stock as set forth in Paragraph 2.5), and (iv) shall,
to the extent allowed by such plan, remain eligible to participate in any
benefit plan of the Company in which the Officer participates as of the Notice
Date.

 

(c)                                  Notwithstanding any provision herein to the
contrary, however, the Officer will not be entitled to act as, or represent
himself to be, an officer or employee of the Company following the Termination
date and will not be entitled to receive or participate in any bonus,
incentive, or benefit program, involving stock or otherwise, that is
established following the Termination Date.

 

3.2                                 Termination by Mutual Consent.   The Officer and the
Company may at any time terminate the employment of the Officer under this
Agreement by mutual consent in writing upon the terms and conditions stated in
such writing.

 

3.3                                 Termination Upon Death.   If the Officer dies, his
employment shall immediately terminate automatically as of the date of his
death.  In such event, the Officer shall
be treated as if he had terminated his employment with the Company under the
terms of Paragraph 3.1 above, with the date of his death serving as both
the Notice Date and the Termination Date.

 

3.4                                 Termination for Cause.   This Agreement may be
terminated for Cause by either party for the following reasons, only:

 

3.4.a.1             Commission
of a criminal offense by either party in the course of performance of the
Agreement shall entitle the other to effect immediate termination upon giving
written notice;

 

3.4.a.2             If either party becomes insolvent or makes a
general assignment for the benefit of creditors or if petition in bankruptcy is
filed against the defaulting party and is not discharged or disputed within
five (5) working days of such filing or of the agent is adjudicated
bankrupt or insolvent;

 

3.4.a.3             The
election of one party (the “aggrieved party”)
to terminate this Agreement upon (1) the actual breach or actual default
by the other party in the reasonable performance of the defaulting party’s
obligations and duties under this Agreement and (2) the failure of the
defaulting party to

 

6

 

cure
the same within fifteen (15) days (the “cure period”) after receipt by the
defaulting party of a good faith written notice from the aggrieved party
specifying such breach or default and (3) provided that the defaulting
party has not cured the default and the aggrieved party may then give written
notice to defaulting party of his or its election to terminate ten (10) days
after expiration of the cure period.

 

3.5                                 Transition.  Officer shall make a good
faith effort to aid in the transition of management necessitated by the
termination of his employment pursuant to this Agreement.  To the extent feasible and/or practical,
Officer shall devote the time and energy necessary to effect said goal of a
smooth transition for the successor chief financial officer.  The salary payable to Officer by the Company
pursuant to Paragraph 2.1(a) of this contract shall continue to be
paid to Officer during such transition period.

 

4.                                      PROPRIETARY INFORMATION AND
ITEMS.

 

4.1                                 Acknowledgments.   The Officer acknowledges
that (a) the Officer has or will be afforded access to Proprietary
Information of the Company or its affiliates; (b) public disclosure of
such Proprietary Information could have an adverse effect on the Company and
its affiliates; and (c) the provisions of this Section 4 are
reasonable and necessary to prevent the improper use or disclosure of such
Proprietary Information.

 

4.2                                 Non-Disclosure and Non-Use of Proprietary
Information.   During
the Officer’s employment by the Company and for a period of five (5) years
thereafter, the Officer covenants and agrees that the Officer (a) shall
not disclose to others or use for the benefit of himself or others, any of the
Company’s Proprietary Information, except that the Officer may disclose such
information (i) in the course of and in furtherance of the Officer’s
employment with the Company to the extent necessary for the benefit of the
Company, (ii) with the prior specific written consent of the Board of Directors
of the Company, or (iii) to the extent required by law; and (b) shall
take all measures reasonably necessary to preserve the confidentiality of all
Proprietary Information of the Company known to the Officer, shall cooperate
fully with the Company’s or its affiliates’ enforcement of measures intended to
preserve the confidentiality of all Proprietary Information, and shall notify
the Board of Directors immediately upon receiving any request for, or making
any disclosure of, any Proprietary Information from or to any person other than
an officer or employee of the Company or of one of its affiliates who has a
need to know such information.

 

4.3                                 Proprietary Information.   For purposes of this
Agreement,  “Proprietary Information” means trade secrets, secret or
confidential information or knowledge pertaining to, or any other nonpublic
information pertaining to the business or affairs of the Company or any of its
affiliates, including without limitation, medical imaging software programs
(including source code and object code) and design documentation; identities,
addresses, backgrounds, or other information regarding licensors, suppliers,
customers, sublicensees, potential customers and sublicensees, employees,

 

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contractors,
or sources of referral; marketing plans or strategies, business or personnel
acquisition plans; pending or contemplated projects, ventures, or proposals;
financial information (including historical financial statements; financial, capital,
or operating budgets, plans or projections; historical or projected sales,
royalties and license fees, and the amounts of compensation paid to employees
and contractors); trade secrets, know-how, technical processes, or research
projects; and notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole or in
part, on any information included in the foregoing, except information that is
generally known in the industry (other than as a result of a disclosure by the
Officer).

 

4.4                                 Proprietary Items.   Upon termination or
expiration of the Officer’s employment by the Company for any reason or by
either party, or upon the request of the Company during such tenure, the
Officer will immediately return to the Company all Proprietary Items in the
Officer’s possession or subject to the Officer’s control, and the Officer shall
not retain any copies, abstracts, sketches, or other physical embodiment of any
Proprietary Items.  For purposes of this
Agreement, “Proprietary Items”
means all documents and tangible items (including all customer lists,
memoranda, books, papers, records, notebooks, plans, models, components,
devices, or computer software or code, whether embodied in a disk or in any
other form) provided to the Officer by the Company, created by the Officer, or
otherwise coming into the Officer’s possession for use in connection with is
engagement with the Company or otherwise containing Proprietary Information
(whether provided or created during the term of this agreement or prior
thereto).

 

4.5                                 Ownership Rights.   The Officer recognizes
that, as between the Company and the Officer, all of the Proprietary
Information and all of the Proprietary Items, whether or not developed by the
Officer, are the exclusive property of the Company.  The Officer agrees that all intellectual
property of every kind, including without limitation copyright, patent,
trademarks, trade secrets, and similar rights, created or developed or realized
in connection with the Officer’s performance of any duties or functions as an
Officer of the Company (collectively, the “Intellectual
Property”) shall be the exclusive property of the Company and shall
constitute Proprietary Information.  The
Officer hereby assigns unto the Company all rights, title, and interest that
the Officer may have to such Intellectual Property and each and every
derivative work thereof, and agrees to execute, acknowledge, and deliver to the
Company as assignment to the Company of any right, title, or interest of the
Officer in any and all such Intellectual Property, in such form as may be
reasonably requested by the Company.

 

4.6                                 Disputes of Controversies.   The Officer recognizes
that, should a dispute or controversy arising from or relating to this portion
of the Agreement (Section 4) be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Proprietary Information may be jeopardized. 
The Officer agrees that he will use best efforts to ensure that all
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy.

 

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5.                                      NON-INTERFERENCE; COMPLIANCE
WITH LAW; COOPERATION

 

5.1                                 Non-Interference.   During the Officer’s
employment with the Company and for a period of five (5) years following
termination or expiration of such tenure, the Officer covenants and agrees that
the Officer shall not, directly or indirectly, for the benefit of the Officer
or another (a) persuade or attempt to persuade any employee, independent
contractor, consultant, agent, supplier, licensor, or distributor of the
Company or of any affiliate of the Company to discontinue such person’s
relationship with the Company or the affiliate; (b) hire away or solicit
to hire away from the Company or from any of its affiliates any employee; (c) otherwise
engage or seek to engage any employee or independent contractor of the Company
or of any of its affiliates in a business relationship that would or might
conflict with such employee’s or independent contractor’s obligations to the
Company or affiliate; (d) interfere with the Company’s or any of its
affiliates’ relationship with any governmental or business entity, including
payor, supplier, licensor, lender, or contractor of the Company or the
affiliate; or (e) disparage the Company or any of its affiliates or any of
the shareholders, directors, officers, employees, or agents of any of them.

 

5.2                                 Cooperation.   During the Officer’s Employment with the Company and
for a period of five (5) years following the termination or expiration of
such tenure, the Officer agrees to cooperate with the Company and its
affiliates in connection with any litigation or investigation involving the
Company or any of its affiliates or any of the shareholders, directors,
officers, employees, or agents of any of them and shall furnish such
information and assistance as may be lawfully requested by the Company.

 

6.                                      NON-COMPETITION

 

During the Officer’s employment by the
Company and for a period of two (2) years following the termination or
expiration of such tenure, the officer covenants and agrees to refrain from
carrying on or engaging in a business similar to that of the Company, and from
soliciting customers of the Company, within the North America, so long as the
Company carries on a like business therein. 
It is further stipulated that as forbearance for this contract term,
Company has provided Officer with separate and distinct consideration
consisting of 25,000 shares of common stock. 
Such shares are included in the Restricted Stock described in
Paragraph 2.5 and shall be subject to the restrictions set forth therein.

 

Each word of the foregoing provision is
severable.

 

7.                                      GENERAL PROVISIONS

 

7.1                                 Indemnification.   The Company hereby agrees
to indemnify and hold harmless the Officer from and against any and all losses,
claims, damages, expenses and/or liabilities which may incur arising out of the
normal course of business in carrying

 

9

 

out
the duties and responsibilities associated with the position of Chief Financial
Officer arising from the Officer’s reliance upon and approved use of
information, reports and data furnished by and representations made by the Company,
with respect to itself, where the Officer in turn distributes and conveys such
information, reports and data to the public in the normal course of
representing the Company.  Such
indemnification shall include, but not be limited to, expenses (including all
attorney’s fees), judgments, and amounts paid in settlement actually and
reasonably incurred by Officer in connection with an action, suit or proceeding
brought against the Company or Officer.

 

7.2                                 Injunctive Relief.   The Officer acknowledges
that the injury that would be suffered by the Company as a result of a breach
of the provisions of this Agreement would be largely irreparable and that an
award of monetary damages to the Company for such a breach would be an
inadequate remedy.  The Company will have
the right, in addition to any other rights it may have (including the right to
damages that the Company may suffer), to obtain injunctive relief to restrain
any breach or threatened breach or otherwise to specifically enforce any
provision of this Agreement, and the Company will not be obligated to post bond
or other security in seeking such relief. 
The Officer agrees to request neither bond nor security in connection
with any such injunction.  The Officer
agrees that if he breaches this Agreement, the Officer shall be liable for any
attorney’s fees and costs incurred by the Company in enforcing its rights under
this Agreement.

 

7.3                                 Essential, Independent, and Surviving
Covenants.

 

(a)                                  The parties agree that the covenants by the
Officer in Sections 4, 5, and 6 are essential elements of this Agreement, and
without the Officer’s agreement to comply with such covenants, the Company
would not have entered into this Agreement.

 

(b)                                 The Officer’s covenants in Sections 4, 5, and
6 are independent covenants and the existence of any claim by the officer
against the Company under this Agreement or otherwise will not excuse the
Officer’s breach of any covenant in Section 4, 5, or 6.

 

(c)                                  After the Officer’s employment by the Company
is terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of the Officer
in Sections 4, 5, and 6.

 

7.4                                 Binding Effect; Benefits; Assignment.   This Agreement shall inure
to the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives.  Insofar as the Officer is concerned, this
contract, being personal, cannot be assigned other than by will or the laws of
descent and distribution.

 

7.5                                 Notices.   All notices and other communications which are
required or permitted hereunder shall be in writing and shall be sufficient if
mailed by certified mail, postage prepaid, and shall be effective three days
after such mailing or upon delivery,

 

10

 

whichever
is earlier, to the following addresses or such other address as the appropriate
party may advise each other party hereto:

 

If
to the Officer:

 

Michael
J. Rosinski

3
West Windward Cove

The
Woodlands, TX 77381

 

If
to the Company:

Power
3 Medical Products, Inc.

3400
Research Forest Drive

The
Woodlands, TX  77381

 

Copy
to:

 

Billings
and Solomon, PLLC

2777
Allen Parkway, Suite 460

Houston,
TX 77019

ATTN:  Richard P. Martini

 

7.6                                 Entire Agreement.   This Agreement contains
the entire agreement between the parties hereto and supersedes all prior
agreements and understandings, oral or written, between the parties hereto with
respect to the subject matter hereof including, without limitation, the Original
Agreement.

 

7.7                                 No Third-Party Beneficiaries.   This Agreement shall not
confer any rights or remedies upon any person other than the Company, the
Officer, and their respective successors and permitted assigns, other than as
expressly set forth in this Agreement.

 

7.8                                 Amendments and Waivers.   Except as set forth in
Paragraph 2.1(b) above, this Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment sought.  Either party hereto may, by an instrument in
writing, waive compliance by the other party with any term or provision of this
Agreement on the part of such other party hereto to be performed or complied
with.  The waiver by any party hereto of
a breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.  No
delay or failure by either party in exercising any right under this Agreement,
and no partial or single exercise of that right, shall constitute a waiver of
that or any other right.

 

7.9                                 Headings.   The paragraph headings contained in this Agreement
are for reference purposes only and shall not be deemed to be a part of this
Agreement or to control or affect the meaning or construction of any provision
of this Agreement.

 

11

 

7.10                           Construction.   The language used in this
Agreement will be deemed to be the language chosen by the Company and the
Officer to express their mutual intent, and no rule of strict construction
shall be applied against either party.

 

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

 

7.12                           Severability.   If any term or provision
of this Agreement is held or deemed to be invalid or unenforceable, in whole or
in part, by a court of competent jurisdiction, this Agreement shall be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement.

 

7.13                           Expenses and Attorney’s Fees.   In the event that a
dispute arises under this Agreement that results in litigation or arbitration,
the prevailing party, as determined by the decision of a court or forum of
competent and final jurisdiction, shall be entitled to court costs and
reasonable attorney’s fees.  A court or
forum of “final” jurisdiction shall mean a court of forum from which no appeal
may be taken or from whose decree, decision, judgment, or order no appeal is
taken or prosecuted.

 

7.14                           Governing Law.   This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without regard to the conflict of laws principles thereof.

 

7.15                           Agreement Preparation.   The Officer acknowledges
that this Agreement has been prepared by counsel for the Company, and the
Officer has not relied on any representation made by the Company’s
attorneys.  The Officer has engaged an
attorney of his choice to review this agreement on his behalf.  By signing this employment agreement, officer
is hereby certifying that officer (a) received a copy of this agreement
for review and study before executing it; (b) read this agreement carefully
before signing it; (c) had sufficient opportunity before signing the
agreement to ask any questions officer had about the agreement and received
satisfactory answers to all such questions; and (d) understands officer’s
rights and obligations under the agreement.

 

12

 

IN
WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement as of the date first written above but to be effective as of the
Effective Date.

 

 

	
   

  	
  OFFICER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael J Rosinski

  	
   

  
	
   

  	
  Michael
  J. Rosinski

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  Power
  3 Medical Products, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven B. Rash

  	
   

  
	
   

  	
   

  	
     Steven B. Rash

  
	
   

  	
   

  	
     Chief Executive Officer

  
					

 

13Exhibit 10.4

 

Confidential Treatment Requested.  *** indicates material has been omitted
pursuant to a Confidential Treatment Request filed with the Securities and
Exchange Commission. A complete copy of this agreement has been filed
separately with the Securities and Exchange Commission.

 

EXCLUSIVE LICENSE AGREEMENT

 

Re:
Baylor OTA # 04-107 Entitled “Serum Proteomic Methods and Biomarkers for
Diagnosis of Neurodegenerative Disease and Differential Diagnosis of Alzheimer’s,
Parkinson’s Lou Gehrig’s (ALS) Diseases, and other Motor Neuron and
Neurological Disorders”

 

This Exclusive License
Agreement (hereinafter called “Agreement”), to be effective as of the 28th day
of June, 2004 (hereinafter called “Agreement Date”), is by and between Baylor
College of Medicine (hereinafter called “BAYLOR”), a Texas nonprofit
corporation having its principal place of business at One Baylor Plaza,
Houston, Texas 77030, and Power3 Medical Products, Inc., a corporation
organized under the laws of New York and having a principal place of business
at 3400 Research Forest Drive, Suite B2-3, The Woodlands, Texas 77381, and
its Affiliates (hereinafter, collectively referred to as “LICENSEE”).

 

WITNESSETH:

 

WHEREAS,
BAYLOR and LICENSEE each own an undivided interest in and to the Patent Rights
as defined below; and

 

WHEREAS,
BAYLOR is willing to grant a royalty bearing, worldwide, exclusive license to
the Patent Rights to LICENSEE on the terms set forth herein; and

 

WHEREAS,
LICENSEE desires to obtain said exclusive license under the Patent Rights.

 

NOW,
THEREFORE, for and in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties hereto expressly agree as follows:

 

1.                                       DEFINITIONS
AS USED HEREIN

 

1.1  The term “Affiliates” shall mean any
corporation, partnership, joint venture or other entity of which the common
stock or other equity ownership thereof is twenty five percent (25%) or more
owned by LICENSEE.

 

1.2  The term “Confidential Information” shall
mean all information relating to the business of a Party that is not available
to the general public, including but not limited to its technical and business
information, products, assets, inventions, know-how, research programs,
biological materials, software, trade secrets, designs, personnel, financial
condition, business plans or prospects, protocols, clinical parameters or
markers and other information associated with this Agreement, whether or not
patentable or copyrightable, delivered or communicated to the other Party.

 

Confidential
Information includes not only written information, but information transferred
orally, visually, electronically or by any other means, that is designated as
being confidential.  Confidential
Information also includes any copies, notes or summaries prepared from the
Confidential Information provided by either Party.

 

1

 

1.3  The term “Field” shall mean all fields.

 

1.4  The term “Inventors”
shall mean Stanley Appel, Ericka Simpson and Albert Yen, employees of BAYLOR,
and Ira Goldknopf and Essam Sheta, employees of LICENSEE.

 

1.5  The term “Legal
Costs” shall mean all legal fees and expenses, filing or maintenance fees,
assessments and all other costs and expenses related to prosecuting, obtaining
and maintaining patent protection on the Patent Rights in the United States and
foreign countries.

 

1.6  The term “Licensed Product(s)” shall mean any
product, process or service that incorporates, utilizes or is made with the use
of the Patent Rights.

 

1.7  The term “Net Sales” shall mean the gross
amount of monies or cash equivalent or other consideration which is paid by
unrelated third parties to LICENSEE or sublicensees for the Licensed Products
by sale or other mode of transfer, less all trade, quantity and cash discounts
actually allowed, credits, and allowances actually granted on account of
rejections, returns or billing errors, duties, transportation and insurance,
taxes and other governmental charges actually paid.  The term “Net Sales” in the case of non-cash
sales, shall mean the fair market value of all equivalent or other
consideration received by LICENSEE for the Licensed Products.

 

1.8  The term “Party” shall mean either LICENSEE
or BAYLOR, and “Parties” shall mean LICENSEE and BAYLOR.

 

1.9  The term “Patent Rights” shall mean United
States Patent Application Serial No. TBA, entitled “Biomarkers for
Neurodegenerative Disease,” filed TBA, which was developed by the Inventors,
the inventions described and claimed therein, and all other pending United
States patent applications or parts thereof and any United States patent which
issues from any such pending applications and any and all divisions, reissues,
re-examinations, renewals, continuations, continuations-in-part to the extent
the claims are directed to subject matter specifically described in the
aforementioned patent application and are dominated by the claims of the
existing Patent Rights, and extensions thereof, and all other counterpart,
pending or issued patents in all other countries.

 

1.10  The term “Sublicensing Revenue” shall mean
all (i) cash, (ii) sublicensing fees and (iii) all other
payments and the cash equivalent thereof, which are paid to LICENSEE by the
sublicensees of its rights hereunder, other than research and development money
paid to LICENSEE to conduct research.

 

2.                                       GRANT
OF LICENSE

 

2.1  Subject to the reservations of rights set
forth in Paragraph 2.2, BAYLOR hereby grants to LICENSEE an exclusive,
worldwide, sublicensable license under the Patent Rights to make, have made,
use, market, sell, offer to sell, lease and import Licensed Products in the
Field.

 

2.2  The grant in Section 2.1 shall be
further subject to, restricted by and non-exclusive with respect to:

 

(i)   the
making or use of the Patent Rights by BAYLOR for non-commercial research,
patient care, teaching and other educationally related purposes;

 

(ii)   the
making or use of the Patent Rights by the BAYLOR Inventors for non-commercial
research purposes at academic or research institutions;

 

2

 

(iii)   any
non-exclusive license of the Patent Rights that BAYLOR grants to other academic
or research institutions for non-commercial research purposes; and

 

(iv)   any
non exclusive license of the Patent Rights that BAYLOR is required by law or
regulation to grant to the United States of America or to a foreign state
pursuant to an existing or future treaty with the United States of America.

 

2.3  Government Reservation.  Rights under this Agreement are subject to
rights required to be granted to the Government of the United States of America
pursuant to 35 USC Section 200-212, including a nonexclusive,
nontransferable, irrevocable, paid-up license to practice or have practiced for
or on behalf of the United States the subject inventions throughout the world.

 

3.                                       MARKETING
EFFORTS

 

LICENSEE
shall use reasonable efforts, as defined herein, to effect assiduously the
introduction of Licensed Products into the commercial market as soon as
practicable.  Such efforts shall include,
but not be limited to: (i) diligence in the patent filings and prosecution
as described in Section 8 and (ii) working with Dr. Stan Appel
to increase the clinical data and relevance of the diagnostic processes.

 

4.                                       PAYMENTS

 

4.1   As
partial consideration for the rights conveyed by BAYLOR under this Agreement,
LICENSEE shall pay BAYLOR a license fee of  *** 
upon execution of this Agreement.

 

4.2   In addition to the foregoing, LICENSEE shall pay
BAYLOR a royalty of  ***.  Such royalties shall be payable as provided
in Section 5.

 

4.3   After
the first commercial sale, if the royalties paid in any calendar year do not
reach the minimum amount of  *** ,
LICENSEE shall pay an additional amount with the payment due for the period ending
December 31 of such year, so that the total amount paid for such year
shall reach such minimum amount.

 

4.4   LICENSEE
shall also pay BAYLOR the following milestone payment set forth below:

 

(i)  First FDA
approval in the United States            ***

 

LICENSEE shall notify BAYLOR in writing within thirty
(30) days upon the achievement of the milestone, such notice to be accompanied
by payment of the appropriate milestone payment.  Milestones are to be paid regardless of whether
LICENSEE or LICENSEE’s sublicensee attains such milestone.

 

4.5   In
addition to the foregoing fees and royalties, LICENSEE agrees to pay to
BAYLOR  *** .

 

4.6   LICENSEE
will be responsible for all Legal Costs incurred after the Agreement Date.

 

4.7   Should
LICENSEE fail to make any payment whatsoever due and payable to BAYLOR
hereunder, BAYLOR may, at its sole option, terminate this Agreement as provided
in Section 10.

 

3

 

5.                                       REPORTING

 

5.1   No
later than sixty (60) days after December 31 of each calendar year,
LICENSEE shall provide to BAYLOR a written annual Progress Report describing
progress on research and development, regulatory approvals, manufacturing,
sublicensing, marketing and sales during the most recent twelve (12) month
period ending December 31 and plans for the forthcoming year.  If multiple technologies are covered by the
license granted hereunder, the Progress Report shall provide the information
set forth above for each technology. 
LICENSEE shall also provide any reasonable additional data BAYLOR
requires to evaluate LICENSEE’s performance.

 

5.2   LICENSEE
shall report to BAYLOR the date of first sale of Licensed Products in each
country within thirty (30) days of occurrence.

 

5.3   LICENSEE
shall submit to BAYLOR within thirty (30) days after March 31, June 30,
September 30 and December 31, a Royalty Report setting forth for such
calendar quarter at least the following information:

 

(i)             the number of
Licensed Products sold by LICENSEE and sublicensees in each country;

 

(ii)          total billings for such
Licensed Products;

 

(iii)       deductions applicable to
determine the Net Sales thereof;

 

(iv)      the amount of Sublicensing
Revenue received by LICENSEE;

 

(v)         the amount of royalty due
thereon, or, if no royalties are due to BAYLOR for any reporting period, the
statement that no royalties are due; and

 

(vi)      the amount of other payments
due BAYLOR, including but not limited to, milestone payments and minimum
royalty payments.

 

Such report shall be
certified as correct by an officer of LICENSEE and shall include a detailed
listing of all deductions from royalties and other payments.  After termination or expiration of this
Agreement, a final payment shall be made by LICENSEE covering the whole or
partial calendar quarter.

 

5.4   LICENSEE shall pay to BAYLOR with
each such Royalty Report the amount of royalties and other payments due with
respect to such calendar quarter.  If
multiple technologies are covered by the license granted hereunder, LICENSEE
shall specify which Patent Rights are utilized for each Licensed Product
included in the Royalty Report by citing the applicable OTA number listed on the front page of
the Agreement.

 

5.5   All
payments due hereunder shall be deemed received when funds are credited to
BAYLOR’s bank account and shall be payable by check or wire transfer in United
States dollars.  For sales of Licensed
Products in currencies other than the United States, LICENSEE shall use
exchange rates published in The Wall Street Journal on the last business
day of the calendar quarter that such payment is due.  No transfer, exchange, collection or other
charges, including any wire transfer fees,
shall be deducted from such payments.

 

5.6   Late payments
shall be subject to a charge of one and one-half percent (1.5%) per month, the interest
being compounded annually, or two hundred fifty dollars ($250.00), whichever is
greater.  LICENSEE shall calculate the
correct late payment charge, and shall add it to each such late payment.

 

4

 

Said late payment charge and
the payment and acceptance thereof shall not negate or waive the right of
BAYLOR to seek any other remedy, legal or equitable, to which it may be
entitled because of the delinquency of any payment.

 

5.7   If
payments are sent by check, they shall be sent to the address listed in
Paragraph 14.1.  If payments are sent by
wire transfer, they shall be sent using the wiring instructions sent by BAYLOR.

 

5.8   In
the event of acquisition, merger, change of corporate name, or change of make-up,
organization, or identity, LICENSEE shall notify BAYLOR in writing within
thirty (30) days of such event.

 

5.9   If
LICENSEE or sublicensee (or optionee) does not qualify as a “small entity” as
provided by the United States Patent and Trademark Office, LICENSEE must notify
BAYLOR immediately.

 

6.                                       RECORDS
AND INSPECTION

 

LICENSEE
shall maintain or cause to be maintained a true and correct set of records
pertaining to the Net Sales of Licensed Products by LICENSEE under this
Agreement.  During the term of this
Agreement and for a period of two (2) years thereafter, LICENSEE agrees to
permit an accountant selected and paid by BAYLOR and reasonably acceptable to
LICENSEE to have access during ordinary business hours to such records as are
maintained by LICENSEE as may be necessary, in the opinion of such accountant,
to determine the correctness of any report and/or payment made under this
Agreement.  In the event that the audit
reveals an underpayment of royalty by more than five percent (5%), the cost of the
audit shall be paid by LICENSEE.  If the
underpayment is less than five percent (5%) but more than two percent (2%),
LICENSEE and BAYLOR shall each pay fifty percent (50%) of the cost of the
independent audit.  Such accountant shall
maintain in confidence, and shall not disclose to BAYLOR, any information
concerning LICENSEE or its operations or properties other than information
directly relating to the correctness of such reports and payments.  BAYLOR will be entitled to no
more than one examination per year without LICENSEE’s written consent.

 

7.                                       SUBLICENSES

 

All
sublicenses granted by LICENSEE of its rights hereunder shall be subject to the
terms of this Agreement.  LICENSEE shall
be responsible for its sublicensees and shall not grant any rights which are
inconsistent with the rights granted to and obligations of LICENSEE
hereunder.  Any act or omission of a
sublicensee which would be a breach of this Agreement if performed by LICENSEE
shall be deemed to be a breach by LICENSEE of this Agreement.  Each sublicense agreement granted by LICENSEE
shall include an audit right by BAYLOR of the same scope as provided in Section 6
hereof with respect to LICENSEE.  No such
sublicense agreement shall contain any provision which would cause it to extend
beyond the term of this Agreement. 
LICENSEE shall give BAYLOR prompt notification of the identity and
address of each sublicensee with whom it concludes a sublicense agreement and
shall supply BAYLOR with a copy of each such sublicense agreement.

 

8.                                       PATENTS
AND INFRINGEMENT

 

8.1   From
the Agreement Date and for the term of this Agreement, LICENSEE shall have
primary responsibility using
patent counsel of its choice reasonably acceptable to BAYLOR for filing, prosecuting and maintaining all
patent applications and patents included in the Patent Rights licensed
hereunder, except that BAYLOR may assume responsibility at its sole expense for
pursuing any protection which LICENSEE declines to prosecute pursuant to
Paragraph 8.2 of this Agreement.

 

5

 

8.2   During
the term of this Agreement, if LICENSEE decides not to file any or all United
States and foreign applications or to continue prosecution of a patent
application to issuance or maintain any United States or foreign patent
application or patent, LICENSEE shall timely notify BAYLOR in writing in order
that BAYLOR may file the United States and foreign applications and continue
the prosecution or maintenance of such patent applications at its own expense.  If LICENSEE fails to notify BAYLOR in
sufficient time for BAYLOR to assume the cost, LICENSEE shall be considered in
default of this Agreement.

 

8.3   During
the term of this Agreement, LICENSEE agrees to prosecute with good faith and
due diligence all such patent applications and to take all actions reasonably
necessary to maintain and enforce the patents and proprietary rights in and to
the Patent Rights.

 

8.4   During
the term of this Agreement LICENSEE shall instruct counsel for LICENSEE to keep
BAYLOR reasonably informed, at LICENSEE’s expense, of prosecutions pursuant to
this Section 8 including submitting to BAYLOR copies of all official
actions and responses thereto.

 

8.5   BAYLOR
agrees to cooperate with LICENSEE to whatever extent is necessary to procure
patent protection of any rights, including fully agreeing to execute any and
all documents to give LICENSEE the full benefit of the licenses granted herein.

 

8.6   During
the term of this Agreement, each Party shall promptly inform the other of any
suspected infringement of any claims in the Patent Rights or the misuse,
misappropriation, theft or breach of confidence of other proprietary rights in
the Patent Rights by a third party, and with respect to such activities as are
suspected.  Any action or proceeding against
such third party shall be instituted as following:

 

(i)             BAYLOR and LICENSEE
may agree to jointly institute an action for infringement, misuse,
misappropriation, theft or breach of confidence of the proprietary rights
against such third party.  Such joint
action shall be brought in the names of both BAYLOR and LICENSEE.  If BAYLOR or LICENSEE decide to jointly
prosecute an action or proceeding after it has been instituted by one Party,
the action shall be continued in the name or names they both agree is expedient
for efficient prosecution of such action. 
LICENSEE and BAYLOR shall agree to the manner in which they shall
exercise control over any joint action or proceeding, providing however that if
they cannot agree BAYLOR shall have the right to unilaterally decide on
control.  In such joint action or
proceeding, the out-of-pocket costs shall be borne equally, and any recovery or
settlement shall be shared equally.

 

(ii)          If LICENSEE does not
agree to participate in a joint action or proceeding then BAYLOR shall have the
right, but not the obligation, to institute an action for infringement, misuse,
misappropriation, theft or breach of confidence of the proprietary rights
against such third party.  If BAYLOR elects
to institute action, it does so at its own cost.  If BAYLOR fails to bring such an action or
proceeding within a period of three (3) months after receiving notice or
otherwise having knowledge of such infringement, then LICENSEE shall have the
right, but not the obligation, to prosecute the same at its own expense.  Should either BAYLOR or LICENSEE commence
suit under the provisions of this Paragraph 8.6 and thereafter elect to abandon
the same, it shall give timely notice to the other Party who may, if it so
desires, continue prosecution of such action or proceeding.  All recoveries, whether by judgment, award,
decree or settlement, from infringement or misuse of Patent Rights shall be
apportioned as follows: (a) the Party bringing the action or proceeding
shall first recover an amount equal the costs and expenses incurred by such
Party directly related to the prosecution of such action or proceeding, (b) the
Party cooperating in such action or proceeding shall then recover costs and
expenses incurred by such Party directly related to its cooperation in the
prosecution of such action or proceeding and (c) the remainder shall be
divided equally between LICENSEE and BAYLOR.

 

6

 

8.7   Neither
BAYLOR nor LICENSEE shall settle any action covered by Paragraph 8.6 without
first obtaining the consent of the other Party, which consent will not be
unreasonably withheld.

 

8.8   BAYLOR
shall not be liable for any losses incurred as the result of an action for
infringement brought against LICENSEE as the result of LICENSEE’s exercise of
any right granted under this Agreement. 
The decision to defend or not defend shall be in LICENSEE’s sole
discretion.

 

9.                                       TERM
AND EXPIRATION

 

Unless
sooner terminated as otherwise provided in Section 10, the license to
employ Patent Rights granted herein as part of Section 2 shall expire on a
country-by-country basis, on the later of (i) the date of expiration of
the last of the Patent Rights to expire or (ii) in the event no patents
included within the Patent Rights issue in such country, the first date
following the tenth (10th) anniversary of the first commercial sale
of Licensed Products by LICENSEE in such country.  After such expiration, LICENSEE shall have a
perpetual, paid-in-full (i.e., royalty free) license in such country.

 

10.                                 TERMINATION

 

10.1   In
the event of default or failure by LICENSEE to perform any of the terms,
covenants or provisions of this Agreement, LICENSEE shall have thirty (30) days
after the giving of written notice of such default by BAYLOR to correct such
default.  If such default is not
corrected within the said thirty (30) day period, BAYLOR shall have the right,
at its option, to cancel and terminate this Agreement.  The failure of BAYLOR to exercise such right
of termination, for non-payment of royalties/ fees or otherwise, shall not be
deemed to be a waiver of any right BAYLOR might have, nor shall such failure
preclude BAYLOR from exercising or enforcing said right upon any subsequent
failure by LICENSEE.

 

10.2   BAYLOR
shall have the right, at its option, to cancel and terminate this Agreement in
the event that LICENSEE shall (i) become involved in insolvency,
dissolution, bankruptcy or receivership proceedings affecting the operation of
its business or (ii) make an assignment of all or substantially all of its
assets for the benefit of creditors, or in the event that (iii) a receiver
or trustee is appointed for LICENSEE and LICENSEE shall, after the expiration
of thirty (30) days following any of the events enumerated above, have been
unable to secure a dismissal, stay or other suspension of such proceedings.

 

10.3   LICENSEE
shall have the right in its sole discretion to terminate this Agreement upon
sixty (60) days’ written notice to BAYLOR.

 

10.4   In
the event of termination of this Agreement, all rights in the Patent Rights
conveyed by BAYLOR to LICENSEE shall automatically revert to BAYLOR, and BAYLOR
shall be free to license such rights to third parties.

 

10.5   LICENSEE shall provide, in all
sublicenses granted by it under this Agreement, that LICENSEE’s interest in
such sublicenses shall, at BAYLOR’s option, terminate or be assigned to BAYLOR
upon termination of this Agreement.

 

10.6   In the event this Agreement is
terminated pursuant to this Section 10, or expires as provided for in Section 9,
BAYLOR is under no obligation to refund any payments made by LICENSEE to
BAYLOR, as set forth in Section 4, prior to the effective date of such
termination or expiration.

 

7

 

10.7   No
termination of this Agreement shall constitute a termination or a waiver of any
rights of either Party against the other Party accruing at or prior to the time
of such termination.  The obligations of
Sections 6, 7, 13, 15 and 16 shall survive termination of this Agreement.

 

11.                                 ASSIGNABILITY

 

LICENSEE may assign this
Agreement as part of:

 

(i)             A
sale or other transfer of LICENSEE’s entire business; or

 

(ii)          A sale or other
transfer of that part of LICENSEE’s business to which the license granted
hereby relates;

 

and upon payment by LICENSEE
to BAYLOR of an assignment fee of ***
..  LICENSEE shall give BAYLOR thirty (30) days prior written notice of such assignment, including the
new contact information of assignee.  BAYLOR, however, shall not be deemed to have approved such assignment and
transfer unless and until such assignee has agreed in writing to BAYLOR to be bound by all the terms and provisions of this Agreement and BAYLOR has received the assignment fee as specified above, in which event
LICENSEE shall be released of liability hereunder.  Upon such assignment of this Agreement by
such assignee, the term “ LICENSEE” as used herein shall include such assignee.

 

12.                                 GOVERNMENTAL
COMPLIANCE

 

12.1   LICENSEE
shall at all times during the term of this Agreement and for so long as it
shall use the Patent Rights, or sell Licensed Products, comply and cause its
sublicensees to comply with all laws that may control the import, export,
manufacture, use, sale, marketing, distribution and other commercial
exploitation of the Patent Rights, Licensed Products or any other activity
undertaken pursuant to this Agreement.

 

12.2   LICENSEE
agrees that Licensed Products leased or sold in the United States shall be
manufactured substantially in the United States.

 

13.                                 ARBITRATION

 

13.1   Amicable
Resolution.  The Parties shall
attempt to settle any controversy between them amicably.  To this end, a senior executive from each
Party shall consult and negotiate to reach a solution.  The Parties agree that the period of amicable
resolution shall toll any otherwise applicable statute of limitations.  However, nothing in this clause shall
preclude any Party from commencing mediation if said negotiations do not result
in a signed written settlement agreement within thirty (30) days after written
notice that these amicable resolution negotiations have commenced.

 

13.2.   Mediation.  If a controversy arises out of or relates to
this agreement, or the breach thereof, and if the controversy cannot be settled
through amicable resolution, the Parties agree to try in good faith to settle
the controversy by mediation before resorting to final and binding
arbitration.  The Party seeking mediation
shall propose five mediators, each of whom shall be a lawyer licensed to practice
by the state of Texas, having practiced actively in the field of commercial law
for at least fifteen (15) years, to the other Party who shall select the
mediator from the list. The Parties shall split the cost of the mediator
equally.  The Parties agree that the
period of mediation shall toll any otherwise applicable statute of
limitations.  However, nothing in this
clause shall preclude any Party from commencing arbitration if said
negotiations do not result in a signed written settlement agreement within
sixty (60) days after written notice that amicable resolution negotiations have
commenced.

 

8

 

13.3   Arbitration.  Any dispute, controversy, or claim arising
out of or relating to this Agreement, or the breach, termination or invalidity
thereof, including claims for tortious interference or other tortious or
statutory claims arising before, during or after termination, providing only
that such claim touches upon matters covered by this Agreement shall be finally
settled by arbitration administered by the American Arbitration Association
pursuant to the Commercial Arbitration Rules in force at the time of the
commencement of the arbitration, except as modified by the specific provisions
of this Agreement. It is the specific intent of the Parties that this
arbitration provision is intended to be the broadest form allowed by law.

 

13.4   Parties
to Arbitration.  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.

 

13.5   Consolidation
Permitted.  The Parties expressly
agree that any court with jurisdiction may order the consolidation of any
arbitrable controversy under this Agreement with any related arbitrable controversy
not arising under this Agreement, as the court may deem necessary in the
interests of justice or efficiency or on such other grounds as the court may
deem appropriate.

 

13.6   Entry
of Judgment.  The Parties agree that
a final judgment on the arbitration award may be entered by any court having
jurisdiction thereof.

 

13.7   Appointing
Arbitrators.   The American
Arbitration Association shall appoint the arbitrator(s) from its Large, Complex
Claims Panel. If such appointment cannot be made from the Large, Complex Claims
Panel, then from its Commercial Panel. The Parties hereby agree to and
acquiesce in any appointment of an arbitrator or arbitrators that may be made
by such appointing authority.

 

13.8   Qualifications
of the Arbitrator(s).  The arbitrator(s)
must be a lawyer, having practiced actively in the field of commercial law for
at least fifteen (15) years.

 

13.9   Governing
Substantive Law.   The arbitrator(s)
shall determine the rights and obligations of the Parties according to the
substantive laws of the State of Texas (excluding conflicts of law principles)
as though acting as a court of the State of Texas.

 

13.10   Governing
Arbitration Law.  The law applicable
to the validity of the arbitration clause, the conduct of the arbitration, including
any resort to a court for provisional remedies, the enforcement of any award
and any other question of arbitration law or procedure shall be the Federal
Arbitration Act.

 

13.11   Governing
Convention.  The Parties elect to
have the New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of June 10, 1958 (instead of the Inter-American New York
Convention on International Commercial Arbitration of August 15, 1990)
govern any and all disputes that may be the subject of arbitration pursuant to
this Agreement.

 

13.12   Preliminary
Issues of Law.  The arbitrator(s)
shall hear and determine any preliminary issue of law asserted by a Party to be
dispositive of any claim, in whole or part, in the manner of a court hearing a
motion to dismiss for failure to state a claim or for summary judgment,
pursuant to such terms and procedures as the arbitrator(s) deems appropriate.

 

13.13   Confidentiality.  The Parties and the arbitrator(s) shall treat
all aspects of the arbitration proceedings, including without limitation
discovery, testimony and other evidence, briefs and the award,

 

9

 

as strictly
confidential.  Further, except as may be
required by law, neither Party nor the arbitrator(s) may disclose the
existence, content, or results of any arbitration hereunder without the prior
written consent of both Parties.

 

13.14   Place
of Arbitration.  The seat of
arbitration shall be Houston, Texas, USA.

 

13.15   Language.  The arbitration shall be conducted in the
English language. All submissions shall be made in English or with an English
translation. Witnesses may provide testimony in a language other than English,
provided that a simultaneous English translation is provided. Each Party shall
bear its own translation costs.

 

13.16   Punitive
Damages Prohibited.  The Parties
hereby waive any claim to any damages in the nature of punitive, exemplary, or
statutory damages in excess of compensatory damages, or any form of damages in
excess of compensatory damages, and the arbitrator(s) is/are specially divested
of any power to award any damages in the nature of punitive, exemplary, or
statutory damages in excess of compensatory damages, or any form of damages in
excess of compensatory damages.

 

13.17   Costs.  The Party prevailing on substantially all of
its claims shall be entitled to recover its costs, including attorneys’ fees,
for the arbitration proceedings, as well as for any ancillary proceeding,
including a proceeding to compel or enjoin arbitration, to request interim
measures or to confirm or set aside an award.

 

13.18   Survival.  The provisions of this Section 13 shall
survive expiration or termination of this Agreement.

 

14.                                 ADDRESSES

 

14.1   All
payments shall be made payable to “Baylor College of Medicine” and shall be
sent to the address below, and shall reference OTA # 04-107.

 

BAYLOR
Tax ID #: 74-1613878

Director,
Baylor Licensing Group

Baylor
College of Medicine

One
Baylor Plaza, BCM210-600D

Houston,
TX  77030

 

14.2   All
notices, reports or other communication pursuant to this Agreement shall be
sent to such Party via (i) United States Postal Service postage prepaid, (ii) overnight
courier, or (iii) facsimile transmission, addressed to it at its address
set forth below or as it shall designate by written notice given to the other
Party.  Notice shall be sufficiently
made, or given and received (a) on the date of mailing or (b) when a
facsimile printer reflects transmission.

 

10

 

In the case of BAYLOR:

Patrick
Turley

Associate
General Counsel

Baylor
College of Medicine

One
Baylor Plaza, BCM210-600D

Houston,
TX  77030

 

Facsimile
No. 713-798-1252

 

In the
case of LICENSEE:

Power3 Medical Products, Inc.

3400 Research Forest
Drive, Suite B2-3

The Woodlands, TX  77381

 

Facsimile No. 281-395-0881

 

14.3   Each
such report, notice or other communication shall reference OTA # 04-107.

 

15.                                 INDEMNITY,
INSURANCE & WARRANTIES

 

15.1   INDEMNITY.  EACH PARTY SHALL NOTIFY THE OTHER OF ANY
CLAIM, LAWSUIT OR OTHER PROCEEDING RELATED TO THE PATENT RIGHTS.  LICENSEE AGREES THAT IT WILL DEFEND,
INDEMNIFY AND HOLD HARMLESS BAYLOR, ITS FACULTY MEMBERS, SCIENTISTS,
RESEARCHERS, EMPLOYEES, OFFICERS, TRUSTEES AND AGENTS AND EACH OF THEM (THE “INDEMNIFIED
PARTIES”), FROM AND AGAINST ANY AND ALL CLAIMS, CAUSES OF ACTION, LAWSUITS OR
OTHER PROCEEDINGS (THE “BAYLOR CLAIMS”) FILED OR OTHERWISE INSTITUTED AGAINST
ANY OF THE INDEMNIFIED PARTIES RELATED DIRECTLY OR INDIRECTLY TO OR ARISING OUT
OF THE DESIGN, PROCESS, MANUFACTURE OR USE BY ANY PERSON OR PARTY OF THE PATENT
RIGHTS, LICENSED PRODUCTS OR ANY OTHER EMBODIMENT OF THE PATENT RIGHTS EVEN
THOUGH SUCH BAYLOR CLAIMS AND THE COSTS (INCLUDING, BUT NOT LIMITED TO, THE
PAYMENT OF ALL REASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION OR OTHER
DEFENSE) RELATED THERETO RESULT IN WHOLE OR IN PART FROM THE NEGLIGENCE OF
ANY OF THE INDEMNIFIED PARTIES OR ARE BASED UPON DOCTRINES OF STRICT LIABILITY
OR PRODUCT LIABILITY; PROVIDED, HOWEVER, THAT SUCH INDEMNITY SHALL NOT APPLY TO
ANY BAYLOR CLAIMS ARISING FROM THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT
OF ANY INDEMNIFIED PARTY.  LICENSEE WILL
ALSO ASSUME RESPONSIBILITY FOR ALL COSTS AND EXPENSES RELATED TO SUCH BAYLOR
CLAIMS FOR WHICH IT IS OBLIGATED TO INDEMNIFY THE INDEMNIFIED PARTIES PURSUANT
TO THIS PARAGRAPH 15.1, INCLUDING, BUT NOT LIMITED TO, THE PAYMENT OF ALL
REASONABLE ATTORNEYS’ FEES AND COSTS OF LITIGATION OR OTHER DEFENSE.

 

11

 

15.2  Insurance.

 

(i)                           LICENSEE
shall, for so long as LICENSEE manufactures, uses or sells any Licensed
Product(s) for research applications, maintain in full force and effect
policies of (a) worker’s compensation insurance within statutory limits, (b) employers’
liability insurance with limits of not less than one million dollars
($1,000,000) per occurrence and (c) general liability insurance with
limits of not less than two million dollars ($2,000,000) per occurrence with an
annual aggregate of two million dollars ($2,000,000).

 

(ii)                        During any
period in which LICENSEE manufactures, uses or sells any Licensed Product(s)
for clinical applications, LICENSEE shall immediately notify BAYLOR in writing,
and LICENSEE shall maintain in full force and effect policies of (i) worker’s
compensation insurance within statutory limits, (b) employers’ liability
insurance with limits of not less than one million dollars ($1,000,000) per
occurrence, (c) general liability insurance (with Broad Form General
Liability endorsement) with limits of not less than five million dollars
($5,000,000) per occurrence with an annual aggregate of ten million dollars
($10,000,000) and (d) products liability insurance, with limits of not
less than ten million dollars ($10,000,000) per occurrence with an annual
aggregate of twenty million dollars ($20,000000).

 

(iii)                     During any
period in which LICENSEE manufactures or uses any Licensed Product(s) in
clinical trials, LICENSEE shall immediately notify BAYLOR in writing, and
LICENSEE shall maintain in full force and effect a clinical trial insurance
policy with limits of not less than five million dollars ($5,000,000) per
occurrence with an annual aggregate of ten million dollars ($10,000,000).

 

(iv)                    Such
coverage(s) shall be purchased from a carrier or carriers having an A. M. Best
rating of at least A- (A minus) and shall name BAYLOR as an additional
insured.  LICENSEE shall provide to
BAYLOR copies of certificates of insurance within thirty (30) days after
execution of this Agreement.  Upon
request by BAYLOR, LICENSEE shall provide to BAYLOR copies of said policies of
insurance.  It is the intention of the
Parties hereto that LICENSEE shall, throughout the term of this Agreement,
continuously and without interruption, maintain in force the required insurance
coverages set forth in this Paragraph 15.2. 
Failure of LICENSEE to comply with this requirement shall constitute a
default of LICENSEE allowing BAYLOR, at its option, to immediately terminate
this Agreement.

 

(v)                       BAYLOR
reserves the right to request additional policies of insurance where appropriate
and reasonable in light of LICENSEE’s business operations and availability of
coverage.

 

15.3   DISCLAIMER
OF WARRANTY.  BAYLOR AND LICENSEE
MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF FITNESS OR MERCHANTABILITY, REGARDING OR WITH RESPECT
TO THE PATENT RIGHTS OR LICENSED PRODUCTS AND BAYLOR AND LICENSEE MAKE NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OF THE PATENTABILITY OF THE
PATENT RIGHTS OR LICENSED PRODUCTS OR OF THE ENFORCEABILITY OF ANY PATENTS
ISSUING THEREUPON, IF ANY, OR THAT THE PATENT RIGHTS OR LICENSED PRODUCTS ARE
OR SHALL BE FREE FROM INFRINGEMENT OF ANY PATENT OR OTHER RIGHTS OF THIRD
PARTIES.  NOTHING IN THIS AGREEMENT SHALL
BE CONSTRUED AS CONFERRING BY IMPLICATION, ESTOPPEL OR OTHERWISE ANY LICENSE OR
RIGHTS UNDER ANY PATENTS OF BAYLOR OTHER THAN THE PATENT RIGHTS, REGARDLESS OF
WHETHER SUCH PATENTS ARE DOMINANT OR SUBORDINATE TO THE PATENT RIGHTS.

 

12

 

16.                                 ADDITIONAL
PROVISIONS

 

16.1   Use
of BAYLOR Name.  LICENSEE agrees that
it shall not use in any way the name of “Baylor College of Medicine” or any
logotypes or symbols associated with BAYLOR or the names of any of the
scientists or other researchers at BAYLOR without the prior written consent of
BAYLOR.

 

16.2   Confidentiality.

 

(i)   Because BAYLOR and LICENSEE will
be cooperating with each other, and because each may reveal to the other
certain Confidential Information, BAYLOR and LICENSEE agree to hold any Confidential
Information that is obtained in connection with this Agreement as confidential.

 

(ii)   A Party receiving Confidential
Information shall use its best efforts to ensure that all Confidential
Information of the disclosing Party is kept confidential.  Thus, for example, neither Party will
disclose Confidential Information to any third party without the express
written consent of the disclosing Party and no receiving Party will use such
Confidential Information except pursuant to this Agreement.  A receiving Party also agrees to notify the
disclosing Party immediately upon discovery of any unauthorized use or
disclosure of Confidential Information and, in every reasonable way, to
cooperate and to assist the disclosing Party to regain possession of the Confidential
Information and to prevent its further unauthorized use.

 

(iii)   Each
Party’s confidentiality obligations and the limitations upon the right to use
the Confidential Information shall not apply to the extent that the receiving
Party can demonstrate that the same:  (a) was
already known by the receiving Party prior to the disclosure by the disclosing
Party; (b) becomes patented, published or otherwise part of the public
domain through no fault or omission of the receiving Party; (c) is
disclosed to the receiving Party by a third party that has the right to make
such disclosure; (d) is independently developed by the receiving Party
without any use of the Confidential Information and otherwise in a manner not
inconsistent with this Agreement; (e) is authorized to be disclosed by the
disclosing Party in writing; or (f) is required to be disclosed by
applicable law, rule or regulation, by order of governmental or judicial
authority; provided that the receiving Party shall use reasonable efforts to
obtain confidential treatment of such information and notifies the disclosing
Party prior to making such disclosure.

 

16.3   BAYLOR’s
Disclaimers.  Neither BAYLOR, nor any
of its faculty members, scientists, researchers, employees, officers, trustees
or agents assume any responsibility for the manufacture, product
specifications, sale or use of the Patent Rights or Licensed Products which are
manufactured by or sold by LICENSEE.

 

16.4   Independent
Contractors.  The Parties hereby
acknowledge and agree that each is an independent contractor and that neither
Party shall be considered to be the agent, representative, master or servant of
the other Party for any purpose whatsoever, and that neither Party has any
authority to enter into a contract, to assume any obligation or to give
warranties or representations on behalf of the other Party.  Nothing in this relationship shall be
construed to create a relationship of joint venture, partnership, fiduciary or
other similar relationship between the Parties.

 

16.5   Non-Waiver.  The Parties covenant and agree that if a
Party fails or neglects for any reason to take advantage of any of the terms
provided for the termination of this Agreement or if a Party, having the right
to declare this Agreement terminated, shall fail to do so, any such failure or
neglect by such Party shall not be a waiver or be deemed or be construed to be
a waiver of any cause for the termination of this Agreement subsequently
arising, or as a waiver of any of the terms, covenants or conditions of this

 

13

 

Agreement or of the
performance thereof.  None of the terms,
covenants and conditions of this Agreement may be waived by a Party except by
its written consent.

 

16.6   Reformation.  The Parties hereby agree that neither Party
intends to violate any public policy, statutory or common law, rule,
regulation, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries, and that if
any word, sentence, paragraph or clause or combination thereof of this
Agreement is found, by a court or executive body with judicial powers having
jurisdiction over this Agreement or any of the Parties hereto, in a final,
unappealable order to be in violation of any such provision in any country or
community or association of countries, such words, sentences, paragraphs or
clauses or combination shall be inoperative in such country or community or
association of countries, and the remainder of this Agreement shall remain
binding upon the Parties hereto.

 

16.7   Force
Majeure.  No liability hereunder
shall result to a Party by reason of delay in performance caused by force
majeure, that is circumstances beyond the reasonable control of the Party,
including, without limitation, acts of God, fire, flood, war, terrorism, civil
unrest, labor unrest, or shortage of or inability to obtain material or
equipment.

 

16.8   Entire
Agreement.  The terms and conditions
herein constitute the entire agreement between the Parties and shall supersede
all previous agreements, either oral or written, between the Parties hereto
with respect to the subject matter hereof. 
No agreement of understanding bearing on this Agreement shall be binding
upon either Party hereto unless it shall be in writing and signed by the duly
authorized officer or representative of each of the Parties and shall expressly
refer to this Agreement.

 

IN
WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement
in multiple originals by their duly authorized officers and representatives on
the respective dates shown below, but effective as of the Agreement Date.

 

 

	
  POWER3 MEDICAL
  PRODUCTS, INC.

  	
  BAYLOR COLLEGE
  OF MEDICINE

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    /s/
  Steven B. Rash

  	
   

  	
  Name:

  	
   /s/ W.
  Dalton Tomlin

  	
   

  
	
   

  	
   

  	
   

  	
   W. Dalton
  Tomlin

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman/CEO

  	
  Title:

  	
   Senior
  Vice President &

  
	
   

  	
   

  	
   

  	
   General
  Counsel

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  6-28-04

  	
   

  	
  Date:

  	
  6/21/04

  	
   

  
								

 

 

	
  6/11/04

  	
  LICENSEE

  	
  OTA # 04-107

  	
   

  	
   

  	
   

  

 

14

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