Chief Socientific Officer Employment Agreement

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 Ira L. Goldknopf, Ph.D. (the "OFFICER") is executed this 29th day of December, 2004 but shall be effective for all purposes as of May 18, 2004 (the "EFFECTIVE DATE").


RECITALS


WHEREAS, the Company and the Officer previously entered into that certain Employment Agreement dated as of May 18, 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 May 18, 2004 and terminating on May 17, 2009. 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 Scientific 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 Five Thousand Dollars ($125,000) per annum, payable semimonthly for the period from May 18, 2004 to December 15, 2004 and a salary of One Hundred Thousand Dollars ($100,000) per annum, payable semimonthly for the period beginning December 16, 2004.


(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


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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 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 Scientific 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, Thirteen Million Two Hundred Fifty Thousand (13,250,000) shares of the Company's common stock (the "COMMON SHARES") and One Million Five Hundred Thousand (1,500,000) shares of Series B preferred stock to be designated by the Company (the "SERIES B SHARES"; and collectively with the Common Shares, the "RESTRICTED STOCK"). The grant of the Restricted Stock shall be subject to the following terms and conditions:


(i) If at any time before May 18, 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


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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 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 the Officer and Steven B. Rash, as holders of the 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


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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 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 May 18, 2006, the Officer's rights to such share ...