Document:

Exhibit 4.10

REGISTRATION
RIGHTS AGREEMENT

 

This
Registration Rights Agreement (this “Agreement”)
is made and entered into as of March 30, 2007, by and among Power Medical
Interventions, Inc., a Delaware corporation (the “Company”),
and the investors signatory hereto (each a “Buyer”
and collectively, the “Buyers”).

WHEREAS,
In connection with that certain Securities
Purchase Agreement by and among the parties
hereto of even date herewith  (the “Securities Purchase Agreement”),
the Company has  agreed,
upon the terms and subject to the conditions set forth in the Securities
Purchase Agreement, to issue and sell
to each Buyer 7% convertible senior secured notes due 2010 in the form attached
to the Securities Purchase Agreement as Exhibit A (together with the PIK Notes,
the “Notes”)  which, among other things, will be convertible into shares of
the Company’s common stock, par value $0.001 per share (the “Common Stock”)  (as
issued or issuable upon conversion of the Notes, the “Underlying
Shares”)  in
accordance with the terms of the
Notes.

WHEREAS, In accordance with the terms of the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar successor statute
(collectively, the “Securities
Act”), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree
as follows:

1              Definitions.  

Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.  As used in this
Agreement, the following terms shall have the respective meanings set forth in
this Section 1:

(a) “Agreement” shall have
the meaning set forth in the preamble.

(b) “Additional Payment Date”
shall have the meaning set forth in Section 2(c).

(c) “Advice” shall have
the meaning set forth in Section 6(e).

(d) “Business Day” means
any day except Saturday, Sunday and any day that is a federal legal holiday or
a day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.

(e) “Common Stock” shall
have the meaning set forth in the preamble.

(f) “Commission” shall
mean the United States Securities and Exchange Commission.

 

 

 

(g) “Conversion Price”
means the price per share of Common Stock at which the Notes are convertible
into Common Stock following the completion of a Qualified Initial Public
Offering, as determined in accordance with the terms of the Notes.

(h) “Effective Date” means, with
respect to any Registration Statement, the date that the Commission first
declares effective such Registration Statement.

(i) “Effectiveness Deadline”
means the 180th day following the Qualified IPO Closing Date.

(j) “Effectiveness Period”
shall have the meaning set forth in Section 2(a).

(k) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

(l) “Filing Date” means
the 90th day following a Qualified IPO Closing Date.

(m) “Holder” or “Holders” means the
holder or holders, as the case may be, from time to time of Registrable
Securities.

(n) “Indemnified Party”
shall have the meaning set forth in Section 5(c).

(o) “Indemnifying Party”
shall have the meaning set forth in Section 5(c).

(p) “Notes” shall have the
meaning set forth in the preamble.

(q) “Qualified Initial Public Offering”
means an underwritten public offering of Common Stock, which shall be
preceded by a customary marketing process, and results in the Common Stock
being traded on a Trading Market and for which aggregate gross proceeds to the
Company from such offering are not less than $40 million (prior to underwriting
commissions and discounts).

(r) “Qualified IPO Closing Date”
means the closing date of the Qualified Initial Public Offering as provided
for in the underwriting agreement related to such Qualified Initial Public
Offering.

(s) “Losses” shall have
the meaning set forth in Section 5(a).

(t) “Plan of Distribution”
shall have the meaning set forth in Section 2(a).

(u) “Proceeding” means an
action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

(v) “Prospectus” means the
prospectus included in a Registration Statement (including, without limitation, any preliminary prospectus and any free-writing
prospectus and any prospectus that includes
any information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities

 

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Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

(w) “Registration Default”
shall have the meaning set forth in Section 2(b).

(x) “Registrable
Securities” means all of the Underlying Shares issued or
issuable upon conversion of the Notes from time to time (including any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event, or any conversion price
adjustment with respect thereto); provided, however, that any such
Underlying Shares shall cease to be Registrable Securities (i) when a
Registration Statement with respect to such Underlying Shares shall have been
declared effective and such Underlying Shares shall have been disposed of
pursuant to such Registration Statement or (ii) after a Qualified Initial
Public Offering, such Underlying Shares shall have been or may be disposed of
within a ninety day period pursuant to Rule 144 (or similar provision then in
force, including 144(k), but not Rule 144A) or (iii) such Underlying Shares
shall cease to be outstanding; provided, further, that if at the time of the
filing of the Registration Statement the Company is advised by its counsel (who
shall be reasonably satisfactory to the Holders) that the Commission (or its
staff) will not permit the registration of Underlying Shares issued or issuable
upon conversion of the PIK Notes, then such Underlying Shares shall be excluded
from the Registrable Securities for such Registration Statement.

(y) “Registration Statement”
means a registration statement filed pursuant to the terms hereof and which
covers the resale by the Buyers of the Underlying Shares, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.

(z) “Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

(aa) “Rule 415” means Rule
415 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

(bb) “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

(cc) “Securities Act” shall
have the meaning set forth in the preamble.

(dd) “Subsequent Form S-3”
shall have the meaning set forth in Section 3(i).

(ee) “Suspension Period”
shall have the meaning set forth in Section 2(a).

 

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(ff) “Trading Day” means
(i) a day on which the Common Stock is traded on a Trading Market, or (ii) if
the Common Stock is not listed on a Trading Market, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, (iii) if the Common Stock is not quoted on any Trading
Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of reporting
prices), or (iv) in the event that the Common Stock is not listed or quoted as
set forth in (i), (ii) and (iii) hereof, a Business Day.

(gg) “Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq Global Market, the Nasdaq Capital Market or such other United States registered
national securities exchange on which the Common Stock is listed or quoted for
trading on the date in question.

(hh) “Underlying Shares”
shall have the meaning set forth in the preamble.

2.             Registration.

(a) On or prior to the
Filing Date, the Company shall prepare and file with the Commission a
Registration Statement covering the resale of all Registrable Securities (assuming
such Notes are held until the maturity date thereof and all interest is
accreted to principal thereunder at the Conversion Price) not already covered
by an existing and effective Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415. 
The Registration Statement shall be on Form S-1, S-3 or SB-2 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-1, S-3 or SB-2, in which case such registration shall be
on another appropriate form for such purpose) and shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) a “Plan of Distribution” substantially in
the form attached hereto Annex A (as may be amended in accordance with
the provisions of this Agreement).  The
Company shall use its reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as soon as possible
but, in any event, no later than the Effectiveness Deadline, and to keep the
Registration Statement (or a Subsequent Form S-3, as defined below)
continuously effective under the Securities Act until the second year after the
Effective Date or such earlier date when all Underlying Shares covered by the
Registration Statement cease to be Registrable Securities as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Holders (the “Effectiveness
Period”).  The
Registration Statement shall include, at the Effective Date, a number of
Registrable Securities equal to the sum of the number of Underlying Shares
issuable upon an assumed conversion in full of the Notes (assuming for such
purpose that the Notes are held until their respective schedules Maturity Dates
and all interest, including any Additional Payment, accreted to principal for
the life thereof).  Notwithstanding
anything to the contrary contained herein, the Company may suspend the
effectiveness, of the Registration Statement by written notice to the Holders
for a period (each such period, a “Suspension Period”) not to exceed an
aggregate of 30 days in any 90-day period, and not to exceed an aggregate of 60
days in any 360-day period, if:

 

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(i)                                     an event occurs
and is continuing as a result of which, if such event were not disclosed in the
Registration Statement, the Registration Statement would, in the Company’s
reasonable judgment, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and

(ii)                                  the Company
reasonably determines in good faith that the disclosure of such event at such
time would be seriously detrimental to the Company or its business;

provided, that in the event
the disclosure relates to a previously undisclosed proposed or pending material
business transaction, the disclosure of which would impede the Company’s
ability to consummate such transaction, the Company may extend a Suspension
Period from 30 days to 45 days during any 90-day period.

(b) The Company and the
Buyers agree that the Holders will suffer damages if the Company fails to
fulfill its obligations under Section 2(a) hereof and that it would not
be feasible to ascertain the extent of such damages with precision.
Accordingly, if:

(i)                                     the
Registration Statement is not filed with the Commission on or before the Filing
Date;

(ii)                                  the
Registration Statement is not declared effective by the Commission on or before
the Effectiveness Deadline;

(iii)                               the Registration
Statement is filed and declared effective but, during the Effectiveness Period,
shall cease to be effective, including by reason of its withdrawal or
termination pursuant to Section 3(i) below, or (other than by reason of
a Suspension Period as provided in the last sentence of Section 2(a)
above) shall fail to be usable for its intended purpose without such disability
being cured within ten Business Days by an effective post-effective amendment
to the Registration Statement, a supplement to the Prospectus or a report filed
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act that cures such failure or the effectiveness of a Subsequent Form
S-3; or

(iv)                              (A) prior to or
on the 30th or 45th day, as may be permitted under the
last sentence of Section 2(a) above, of any Suspension Period, such
suspension has not been terminated or (B) Suspension Periods exceed an
aggregate of 30 or 45 days, as may be permitted under the last sentence of Section
2(a) above, in any 90-day period or more than an aggregate of 60 days in
any 360-day period,

(each such event referred to in foregoing clauses
(i) through (iv), a “Registration
Default”), then in such event as partial relief for the damages
to any holder by reason of any such delay in or reduction of its ability to
sell the Underlying Shares and not as a penalty (which remedy shall not be
exclusive of any other remedies available at law or equity), the Company hereby
agrees to pay

 

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 to each
Holder (x) additional interest with respect to Notes that have not been
converted to Common Stock in an amount equal to the product of (A) the
outstanding principal amount of each such Note multiplied by (B) a rate equal
to 0.5% per annum or, if any Registration Default shall continue for more than
180 consecutive days, 1.0% per annum after such 180th day, and (y)
as partial relief with respect to Notes that have been converted to Underlying
Shares, which Underlying Shares are at the time of such Registration Default
Registrable Securities, an amount equal to the product of (A) that portion of
the principal amount of each such Note as was converted into Underlying Shares
are then Registrable Securities, multiplied by (B) a rate equal to 4.0% per
annum (all such amounts being collectively referred to as “Additional Payment Amounts”);
provided that in no event shall Additional Payment Amounts in respect of any
Note accrue at a rate exceeding 1.0% per annum pursuant to clause (x) above or 4.0%
per annum pursuant to clause (y) above. 
Additional Payment Amounts shall accrue from and including the day
following the Registration Default to but excluding the day on which the
Registration Default has been cured.  As
promptly as practicable after the occurrence of either (i) a Registration
Default or (ii)  the cure of a
Registration Default, the Company shall notify the Holders of such Registration
Default or such cure, as the case may be, and the date on which Additional
Payment Amounts began or ceased to accrue.

 

(c) (i)  Any Additional Payment Amounts due pursuant
to clause (b)(X) of this Section 2 will be payable in cash semi-annually
in arrears on the last day of March and September, commencing with the first
such date occurring after any such Additional Payment Amount commences to
accrue, and ending on the Additional Payment Date next occurring after such
Additional Payment Amount has ceased to accrue or, if sooner, at maturity (if
such Note has not been converted to Common Stock), or at the expiration of the
Effectiveness Period (if such Note has been converted to Common Stock) and (ii)
any Additional Payment Amounts due pursuant to clause (b)(y) of this Section
2 will be payable in cash in arrears on the day of a Registration Default
and on every thirtieth (30th) day after the day of the Registration
Default and thereafter (pro rated for periods totaling less than thirty (30)
days) until such Registration Default is cured or, if sooner, at the expiration
of the Effectiveness Period (each of the payment dates under (i) or (ii) in
this subsection (c) an “Additional
Payment Date”).

(d) Each Holder agrees to
furnish to the Company a completed Questionnaire in the form attached to this
Agreement as Annex B (a “Selling Holder Questionnaire”).  The Company shall not be required to include
the Registrable Securities of a Holder in a Registration Statement and shall
not be required to pay any liquidated or other damages under Section 2(b)
to any Holder who fails to furnish to the Company a fully completed Selling
Holder Questionnaire at least ten Trading Days prior to the Filing Date.

3.             Registration Procedures.

In connection with the
Company’s registration obligations hereunder, the Company shall:

(a) Not less than five
Trading Days prior to the filing of a Registration Statement or any related
Prospectus or any amendment or supplement thereto, the Company shall furnish to
each Holder copies of the “Selling Stockholders” section of such document, the “Plan
of Distribution” and any risk factor contained in such document that addresses
specifically this transaction or the Selling Stockholders, as proposed to be
filed which documents will be subject to the review of

 

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each such Holder. 
Each Holder shall provide comments, if any, within three Trading Days
after the date such materials are provided. 
The Company shall not file a Registration Statement, any Prospectus or
any amendments or supplements thereto in which the “Selling Stockholder” or the
“Plan of Distribution” sections thereof differs in any material respect from
the disclosure received from a Holder in its Selling Holder Questionnaire (as
amended or supplemented).

(b) (i)  Prepare and file with the Commission such
amendments, including post-effective amendments, pursuant to Rule 462 or
otherwise, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective as to the applicable Registrable Securities for its Effectiveness
Period; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to each Registration
Statement or any amendment thereto; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the Registration Statements and the disposition of all Registrable Securities
covered by each Registration Statement.

(c) Notify the Holders as
promptly as reasonably possible (and, in the case of Subsection  3(c)(i)(A)
below, not less than two Trading Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Trading
Day following the day (i)(A) when a Prospectus or any supplement thereto or
post-effective amendment to a Registration Statement is proposed to be
filed; (B) when the Commission notifies the Company whether there will be a “review”
of such Registration Statement and whenever the Commission comments in writing
on such Registration Statement; and (C) with respect to each Registration
Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation
of any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for inclusion
therein or any statement made in such Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

(d) Furnish to each Holder,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto and all exhibits to the extent requested by such Holder
(excluding those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.

 

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(e) Promptly deliver to each
Holder, without charge, as many copies of each Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Holder may reasonably request.  The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.

(f) Prior to any public
offering of Registrable Securities, use its reasonable best efforts to register
or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of all jurisdictions within the United States, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statements; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or subject the Company to
any material tax in any such jurisdiction where it is not then so subject.

(g) Cooperate with the
Holders to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee pursuant to
the Registration Statements, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may reasonably
request.

(h) Upon the occurrence of
any event contemplated by Subsection 3(c)(v), as promptly as reasonably
possible, prepare a supplement or amendment, including a post-effective
amendment, to the affected Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, no Registration Statement nor any Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.

(i) If at the time of filing
the Registration Statement the Company is not eligible to use Form S-3 for
transactions involving secondary offerings and the Company is not otherwise
eligible to incorporate by reference prospectively into the Registration
Statement, then at such time as the Company becomes eligible to register
transactions involving secondary offerings on Form S-3, the Company may, in its
sole discretion, file in accordance with the procedures outlined in this Section
3, including but not limited to all required notices to the Holders, an
additional Registration Statement on Form S-3 to cover resales pursuant to Rule
415 of the Registrable Securities (a “Subsequent Form S-3”), and when such Subsequent
Form S-3 has been filed with the Commission, the Company may, concurrently with
its filing of a request for acceleration of effectiveness of such Subsequent
Form S-3, withdraw or terminate the original Registration Statement, provided however, nothing in this Section
3(i) shall be interpreted to limit the Company’s obligations pursuant to Section
2(b) above.

 

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(j) If underwriters are used
or if any Holder is deemed to be, alleged to be or reasonably believes it may
be deemed or alleged to be, an underwriter or is required under applicable
securities laws to be described in a Registration Statement as an underwriter,
the Company shall use its reasonable efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, and (ii) a
letter, dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.

(k) Holders shall have the
right to select one legal counsel, at their own expense, to review any
registration statement prepared pursuant to this Section 3 (“Legal Counsel”),
which shall be such counsel as designated by the Holders of a majority of the
Registrable Securities then outstanding. 
The Company shall reasonably cooperate with Legal Counsel in performing
the Company’s obligations under this Agreement.

(l) Cause all such
Registrable Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then
listed.

(m) Provide a transfer agent
and registrar for all Registrable Securities registered pursuant to such
registration statement and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such registration.

(n) At such time as the
Company becomes subject to Sections 13 or 15(d) of the Exchange Act, with a
view to making available to Holders the benefits of Rule 144 promulgated under
the Securities Act, file with the SEC in a timely manner all reports and other
documents required of the company under the Securities Act and Exchange Act and
provide to any Holder, as long as such Holder owns Registrable Securities, upon
reasonable request (i) a written statement by the Company that it has complied
with the current information requirements of Rule 144(c) (at any time after the
effective date of the first registration statement filed by the Company) and
(ii) such other information as may be reasonably requested to avail any Holder
of any rule or regulation of the SEC that permits the selling of any such
securities without registration.

4.             Registration Expenses.

(a) All fees and expenses
incident to the performance of or compliance with this Agreement by the
Company, other than underwriting discounts and commissions, shall be borne by
the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement.  The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with any Trading Market on which the Common Stock is then listed for trading,
and (B) related to compliance with applicable state securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses

 

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is reasonably requested by the holders of a majority
of the Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, (vi) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions contemplated
by this Agreement, and all fees of counsel for the Holder’s counsel up to a
maximum of $25,000.  In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.

 

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5.             Indemnification.

(a) Indemnification by
the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, trustees, agents, investment advisors,
partners, members, shareholders and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys’
fees) and expenses (collectively, “Losses”), as incurred, (x) arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus, (y) any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading or (z)
any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law, or any rule or regulation promulgated
under the Securities Act, the Exchange Act, or any state securities law in
connection with the offering covered by such Registration Statement, except
with respect to clauses (x) and (y), to the extent, but only to the extent, that
(1) such untrue statements or omissions are made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Holder expressly for use in a Registration Statement, or to the extent that
such information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and approved in writing
by such Holder for use in the Registration Statement, such Prospectus or such
form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto, as may be
amended in accordance with the provisions of this Agreement, for this purpose)
or (2) in the case of an occurrence of an event of the type specified in Subsections
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing (and such Holder has received
such notice pursuant to Section 6(f) below) that the Prospectus
is outdated or defective and prior to the receipt by such Holder of an Advice
or an amended or supplemented Prospectus, but only if and to the extent that
following the receipt of the Advice or the amended or supplemented Prospectus
the misstatement or omission giving rise to such Loss would have been
corrected.  The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.

(b) Indemnification by Holders.
Each Holder shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law and any other Holder selling securities under a Registration
Statement or any of such other Holder’s partners, directors, officers, or
employees, each Person who controls such Holder (within the meaning of the
Section 15 of the Securities

 

11

Act and Section 20 of the Exchange Act), and the
partners, directors, officers, or employees of such Person who controls such
Holder, from and against all Losses, as incurred, arising solely out of or
based upon any untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising out of or based upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent that,
(1) such untrue statements or omissions are made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Holder expressly for use in a Registration Statement, or to the extent that
such information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and approved in writing
by such Holder for use in the Registration Statement (it being understood that
the Holder has approved Annex A hereto, as may be amended in accordance
with the provisions of this Agreement, for this purpose), such Prospectus or
such form of Prospectus or in any amendment or supplement thereto or (2) in the
case of an occurrence of an event of the type specified in Subsections 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing (and such Holder has received
such notice pursuant to Section 6(f) below) that the Prospectus is
outdated or defective and prior to the receipt by such Holder of an Advice or
an amended or supplemented Prospectus, but only if and to the extent that
following the receipt of the Advice or the amended or supplemented Prospectus
the misstatement or omission giving rise to such Loss would have been
corrected.  In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

(c) Conduct of
Indemnification Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction, which determination is not subject to appeal or further review,
that such failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.

An Indemnified Party shall
have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(3) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying

 

12

Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party).  The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.

All reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section 5(c))
shall be paid to the Indemnified Party, as incurred, within twenty Trading Days
of written notice thereof to the Indemnifying Party (regardless of whether it
is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

(d) Contribution.  If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section 5(d) was available to such party in accordance with its
terms.

The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
5(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section
5(d), no Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by such
Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.

The indemnity and
contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

6.             Miscellaneous.

 

13

(a) Remedies.  In the event of a breach by the Company or by
a Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

(b) Piggyback
Registrations.  Each Buyer acknowledges that, in addition
to rights granted to holders of Notes under this Agreement, the Company has
granted registration rights to holders of approximately 45,200,000 shares of
its common stock and 155,400,000 shares of common stock issuable on conversion
of preferred stock and exercise of warrants issued in prior financing
transactions.  Upon the request of the
holders of these registration rights, and subject to certain terms and
conditions, the Company is obligated to include the foregoing shares on any
registration statement filed for the account of other security holders, and therefore, these shares may be
included in the Registration Statement to be filed by the Company pursuant to
this Agreement.

(c) Limitations on
Subsequent Registration Rights.  From and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders, enter into any
agreement with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder any registration rights the
terms of which are pari passu with or senior to the registration rights granted to the Holders
hereunder.

(d) Compliance.  Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.

(e) Discontinued
Disposition.  Each Holder agrees by
its acquisition of such Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described in the
last sentence of Section 2(a) or in Section 3(c), such Holder
will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. 
The Company may provide appropriate stop orders to enforce the provisions
of this paragraph.

(f) Amendments and
Waivers. The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the same
shall be in writing and signed by the Company and the Holders of a majority of
the then outstanding Registrable Securities (assuming the conversion to Common
Stock of all outstanding Notes). 
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of one or more Holders and that does not 

 

14

directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates, provided, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.

(g) Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Trading Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.  The address for such notices and
communications shall be as follows:

If to the Company:

Power Medical Interventions,
Inc.

2021 Cabot Boulevard

Langhorne, Pennsylvania 19074

Attn: Chief Financial Officer

Facsimile: 267.775.8122

With copy to:

Foley Hoag LLP

Seaport World Trade Center West

155 Seaport Boulevard

Boston, Massachusetts 02110

Attn: Jeffrey L. Quillen, Esq.

Facsimile: 617.832.1000

If to a Buyer:

To the address set forth under
such Buyer’s name on the signature pages hereto.

If to any other Person who
is then the registered Holder:

To the address of such
Holder as it appears in the stock transfer books of the Company.

or such other address as may
be designated in writing hereafter, in the same manner, by such Person.

(h) Successors and
Assigns.  Subject to the restrictions
on transfer by the Holder, this Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns

 

15

of each of the parties.  The right to cause the Company to register
Registrable Securities hereunder may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee who acquires all or any
part of such Holder’s Registrable Securities from the Holder; provided that,
the transferee agrees in writing to be bound by the provisions of this
Agreement.

(i) Execution and
Counterparts.  This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall constitute one
and the same Agreement.  In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

(j) Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York.  Each party agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its
respective Affiliates, employees or agents) may be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits
to the non-exclusive jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally
subject to the jurisdiction of any New York Court, or that such Proceeding has
been commenced in an improper or inconvenient forum.  The Company hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to the Company at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.  Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.  If either party shall commence a proceeding
to enforce any provisions of this Agreement, then the prevailing party in such
proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such proceeding.

(k) Cumulative Remedies.  The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

(l) Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby
stipulated and declared to be the intention of the parties that they would

 

16

have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.

(m) Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

(n) Independent Nature of
Buyer’s Obligations and Rights.  The
obligations of each Buyer under this Agreement are several and not joint with
the obligations of each other Buyer, and no Buyer shall be responsible in any
way for the performance of the obligations of any other Buyer under this
Agreement.  Nothing contained herein or
in any Transaction Document, and no action taken by any Buyer pursuant thereto,
shall be deemed to constitute the Buyer as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Buyers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement or any other
Transaction Document.  Each Buyer
acknowledges that no other Buyer will be acting as agent of such Buyer in
enforcing its rights under this Agreement. 
Each Buyer shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any Proceeding for such purpose. 
The Company acknowledges that each of the Buyers has been provided with
the same Registration Rights Agreement for the purpose of closing a transaction
with multiple Buyers and not because it was required or requested to do so by
any Buyer.

[Remainder of page
intentionally left blank, signature pages to follow]

 

 

17

IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

	
   

  	
  POWER MEDICAL INTERVENTIONS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John P. Gandolfo

  
	
   

  	
   

  	
  John P. Gandolfo

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  

 

 

18Exhibit
4.11

 

POWERMED,
INC.

 

2000
STOCK OPTION PLAN

 

1.                         Purpose
of Plan

 

The purpose of this 2000
Stock Option Plan (the “Plan”) is to provide additional incentive to officers,
directors and key employees of and important consultants to PowerMed, Inc., a Pennsylvania
corporation (the “Company”), and each present or future parent or subsidiary
corporation, by encouraging them to invest in shares of the Company’s common
stock (“Common Stock”), and thereby acquire a proprietary interest in the
Company and an increased personal interest in the Company’s continued success
and progress, to the mutual benefit of officers, directors, employees and
shareholders.

 

2.                         Aggregate
Number of Shares

 

Nine Hundred Thousand
(900,000), amended to 10,500,000 shares total, shares of the Company’s Common
Stock shall be the aggregate number of shares that may be issued under this
Plan. Notwithstanding the foregoing, in the event of any change in the
outstanding shares of the Preferred Stock and/or Common Stock of the Company by
reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee (defined in Section 4(a) below), deems in its
sole discretion to be similar circumstances, the aggregate number and kind of
shares of stock which may be issued under this Plan shall be appropriately
adjusted in a manner determined in the sole discretion of the Committee.
Reacquired shares of the Company’s Common Stock, as well as unissued shares,
may be used for the purpose of this Plan. Stock of the Company subject to
options which have terminated unexercised, either in whole or in part, shall be
available for future options granted under this Plan.

 

 

3.                         Class of
Persons Eligible to Receive Options

 

All officers, directors
and key employees of, and consultants to, the Company and of any present or
future Company parent or subsidiary corporation are eligible to receive an
option or options under this Plan. The individuals who shall, in fact, receive
an option or options shall be selected by the Committee, in its sole
discretion, except as otherwise specified in Section 4 hereof. No individual
may receive options under this Plan for more than twenty percent (20%) of the
total number of shares of the Company’s Common Stock authorized for issuance
under this Plan.

 

4.                         Administration
of Plan

 

(a)                      This Plan
shall be administered by an Option Committee appointed by the Company’s Board
of Directors (the “Board”). The Option Committee shall consist of a minimum of
two and a maximum of five members of the Board; after the registration of the
Company’s Stock under Section 12 of the Securities Exchange Act of 1934, as
amended (the “Securities Exchange Act”), each member of the Option Committee
shall be a “Non-Employee Director” within the meaning of Rule 16b-3(b)(3) under
the Securities Exchange Act, or any future corresponding rule, except that the
failure of the Option Committee for any reason to be composed solely of
Non-Employee Directors shall not prevent an option from being considered
granted under this Plan. The term “Committee”, as used in this Plan and the
options granted hereunder, refers to the Option Committee referred to above.

 

(b)                     The Committee
shall, in addition to its other authority and subject to the provisions of this
Plan, determine which individuals shall in fact be granted an option or
options, whether the option shall be an Incentive Stock Option or a
Non-Qualified Stock Option (as such terms are defined in Section 5(a) below), the
number of shares to be subject to each of the options, the time or times at
which the options shall be granted, the rate and times of option
exercisability, and, subject to Section 5 hereof, the price at which each of
the options is exercisable and the duration of the option.

 

(c)                      The
Committee shall adopt such rules for the conduct of its business and
administration of this Plan as it considers desirable. A majority of the
members of the Committee shall constitute a quorum for all purposes. The vote
or written consent of a majority of the members of the Committee on a
particular matter shall constitute the act of the Committee on such matter. The
Committee shall have the right to construe the Plan and the options issued
pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee shall be liable for any
act or omission (whether or not negligent) taken or omitted in good faith, or
for the exercise of an authority or discretion granted in connection with the
Plan to the Committee or for the acts or omissions of any other members of a
Committee.

 

2

 

(d)                     Subject to
the numerical limitations on Committee membership set forth in Section 4(a)
hereof, the Board of Directors may at any time appoint additional members of
the Committee and may at any time remove any member of the Committee with or
without cause. Vacancies in the Committee, however caused, may be filled by the
Board of Directors, if it so desires.

 

5.                         Incentive
Stock Options and Non-Qualified Stock Options

 

(a)                      Options
issued pursuant to this Plan may be either Incentive Stock Options granted
pursuant to Section 5(b) hereof or Non-Qualified Stock Options granted pursuant
to Section 5(c) hereof, as determined by the Committee. An “Incentive Stock
Option” is an option which satisfies all of the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury
Regulations thereunder, and a “Non-Qualified Stock Option” is an option which
either does not satisfy all of those requirements or the terms of the option
provide that it will not be treated as an Incentive Stock Option. The Committee
may grant both an Incentive Stock Option and a Non-Qualified Stock Option to
the same person, or more than one of each type of option to the same person.
The option price for Incentive Stock Options issued under this Plan shall be
equal at least to the “Fair Market Value” (as defined below) of the Company’s
Common Stock on the date of the grant of the Option and the option price for
Non-Qualified Stock Options may or may not be equal to such Value.
Notwithstanding the foregoing, in the case of an Incentive Stock Option granted
to an individual who owns more than 10 percent (10%) of the total combined
voting power of all classes of outstanding stock of the Company a (“10% Shareholder”),
the exercise price per share shall be at least 110 percent (110%) of such Fair
Market Value. For purposes of this paragraph in determining stock ownership, an
individual shall be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by whole or half
blood), spouse, ancestors, lineal descendants and other parties, if any,
referred to in Section 267 of the Code. The Fair Market Value of the Company’s
Common Stock on any particular date shall mean the last reported sale price of
a share of the Company’s Common Stock on any stock exchange on which such Stock
is then listed or admitted to trading, or on the NASDAQ National Market System
or Small Cap NASDAQ, on such date, or if no sale took place on such day, the
last such date on which a sale took place, or if the Common Stock is not then
quoted on the NASDAQ National Market System or Small Cap NASDAQ, or listed or
admitted to trading on any stock exchange, the average of the bid and asked
prices in the over-the-counter market on such date, or if none of the
foregoing, a price determined by the Committee in good faith and in its
reasonable discretion to equal the then fair market value per share of Common
Stock.

 

(b)                     Subject to
the authority of the Committee set forth in this Plan’s Incentive Stock Options
issued pursuant to this Plan shall be issued substantially in the form set
forth in Appendix I hereof, which form is hereby incorporated by reference and
made a part hereof, and shall contain substantially the terms and conditions
set forth therein. Incentive Stock Options shall not be exercisable after the
expiration of ten years from the date such options are granted, unless
terminated earlier under the terms

 

3

 

of the option, except that options granted to individuals described in
Section 422(b)(6) of the Code shall conform to the provisions of Section
422(c)(5) of the Code. At the time of the grant of an Incentive Stock Option
hereunder, the Committee may, in its sole and absolute discretion, set, amend
or supplement any of the option terms contained in Appendix I for any
particular optionee provided that the option as amended or supplemented
satisfies the requirements of Section 422 of the Code and the applicable
Treasury Regulations thereunder. Each of the options granted pursuant to this
Section 5(b) is intended, if possible, to be an “Incentive Stock Option” as
that term is defined in Section 422 of the Code and the Treasury Regulations
thereunder. In the event this Plan or any option granted pursuant to this
Section 5(b) is in any way inconsistent with the applicable legal requirements
of the Code or the regulations thereunder for an Incentive Stock Option, this
Plan and such option shall be deemed automatically amended as of the date
hereof to conform to such legal requirements, if such conformity may be
achieved by amendment. If such conformity may not be achieved by amendment,
such option shall be deemed to be a Non-Qualified Stock Option.

 

(c)                      Subject to
the authority of the Committee set forth in this Plan, Non-Qualified Stock
Options issued pursuant to this Plan shall be issued substantially in the form
set forth in Appendix II hereof, which form is hereby incorporated by reference
and made a part hereof, and shall contain substantially the terms and
conditions set forth therein. Non-Qualified Stock Options shall expire ten
years after the date they are granted, unless terminated earlier under the
option terms. At the time of granting a Non-Qualified Stock Option hereunder,
the Committee may, in its sole and absolute discretion, set, amend or
supplement any of the option terms contained in Appendix II for any particular
optionee.

 

(d)                     Neither the
Company nor any of its current or future parent, subsidiaries or affiliates,
nor their officers, directors, shareholders, stock option plan committees,
employees or agents shall have any liability to any optionee in the event (i)
an option granted pursuant to Section 5(b) hereof does not qualify as an “Incentive
Stock Option” as that term is used in Section 422 of the Code and the
regulations thereunder; (ii) any optionee does not obtain the tax treatment
pertaining to an Incentive Stock Option; or (iii) any option granted pursuant
to Section 5(c) hereof is an “Incentive Stock Option.”

 

(e)                      Except as
otherwise provided in Section 422 of the Code and Treasury Regulations
thereunder or any successor provision, no Incentive Stock Option granted
pursuant to this Plan shall be transferable other than by will or the laws of
descent and distribution. Except as otherwise provided by the Rules and
Regulations of the Securities and Exchange Commission, the Committee at the
time of grant of a Non- Qualified Stock Option may provide that such stock
option is transferable to any “family member” of the optionee by gift or
qualified domestic relations order. For purposes of this section, a family
member includes any child, stepchild, grandchild, parent, step-parent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including

 

4

 

adoptive relationships, any person sharing the grantee’s household
(other than a tenant or employee), a trust in which these persons have more
than 50 percent (50%) of the beneficial interest, a foundation in which these
persons (or the grantee) control the management of assets, and any other entity
in which these persons or the grantee own more than 50 percent (50%) of the
voting interests.

 

6.                         Limitations
on Exercise of Incentive Stock Options

 

In addition to the
restrictions on exercise described in Section 5(b) hereof, for any calendar
year, the ability of an employee to exercise any Option granted under this Plan
shall also be limited to the extent provided under the express terms of such
Option.

 

7.                         Amendment,
Supplement, Suspension and Termination

 

Options shall not be
granted pursuant to this Plan after the expiration of ten years from the date the
Plan is adopted by the Board. The Board reserves the right at any time, and
from time to time, to amend or supplement this Plan, including the forms of
option agreement attached hereto, in any way, or to suspend or terminate it,
effective as of such date, which date may be either before or after the taking
of such action, as may be specified by the Board; provided, however, that such
action shall not affect options granted under the Plan prior to the actual date
on which such action occurred. If an amendment or supplement of this Plan is
required by the Code or the Treasury Regulations thereunder to be approved by
the shareholders of the Company in order to permit the granting of “Incentive
Stock Options” (as that term is defined in Section 422 of the Code and Treasury
Regulations thereunder) pursuant to the amended or supplemented Plan, such
amendment or supplement shall also be approved by the shareholders of the
Company in such manner as is prescribed by the Code and the Treasury
Regulations thereunder. If the Board voluntarily submits a proposed amendment,
supplement, suspension or termination for shareholder approval, such submission
shall not require any future amendments, supplements, suspensions or
terminations (whether or not relating to the same provision or subject matter)
to be similarly submitted for shareholder approval.

 

8.                         Effectiveness
of Plan

 

This Plan shall become
effective on the date of its adoption by the Board, subject however to any
required approval by the holders of the Company’s Stock in the manner as
prescribed in the Code and the Treasury Regulations thereunder. Options may be
granted under this Plan prior to obtaining any required shareholder approval,
provided such options shall not be exercisable until any required shareholder
approval is obtained.

 

5

 

9.                         General
Conditions

 

(a)                      Nothing
contained in this Plan or any option granted pursuant to this Plan shall confer
upon any employee the right to continue in the employ of the Company or any
affiliated or subsidiary corporation or interfere in any way with the rights of
the Company or any affiliated or subsidiary corporation to terminate his
employment in any way.

 

(b)                     Nothing
contained in this Plan or any option granted pursuant to this Plan shall confer
upon any director or consultant the right to continue as a director of, or
consultant to, the Company or any affiliated or subsidiary corporation or
interfere in any way with the rights of the Company or any affiliated or
subsidiary corporation, or their respective shareholders, to terminate the
directorship of any such director or the consultancy relationship of any such
consultant.

 

(c)                      Corporate
action constituting an offer of stock for sale to any, person under the terms
of the options to be granted hereunder shall be deemed complete as of the date
when the Committee authorizes the grant of the option to the person, regardless
of when the option is actually delivered to the person or acknowledged or
agreed to by him.

 

(d)                     The terms “parent
corporation” and “subsidiary corporation” as used throughout this Plan, and the
options granted pursuant to this Plan, shall (except as otherwise provided in
the option form) have the meaning that is ascribed to that term in Section
422(b) of the Code and the regulations thereunder, and the Company shall be
deemed to be the grantor corporation for purposes of applying such meaning.

 

(e)                      References
in this Plan to the Code shall be deemed to also refer to the corresponding
provisions of any future United States revenue law.

 

(f)                        The use of
the masculine pronoun shall include the feminine gender whenever appropriate.

 

6

 

APPENDIX I

 

POWERMED, INC.

 

INCENTIVE STOCK OPTION

 

	
  To:

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  

 

Date of Grant:

 

You are hereby granted an
option, effective as of the date hereof, to purchase                              
shares of common stock, no par value (“Stock”), of PowerMed, Inc., a
Pennsylvania corporation (the “Company”) at a price of $                      
per share pursuant to the Company’s 2000 Stock Option Plan (the “Plan”).

 

Your option does not
become vested prior to the earliest of (a) the exercisability dates described
in the next succeeding paragraph, (b) the first closing date for the initial
public offering of the Stock of the Company (or of a holding company owning all
of the Company’s outstanding Common Stock) in which the Company (or such
holding company) raises at least $10 million (the “IPO Date”), or (c) upon the
occurrence of a Change of Control (as defined below).

 

Your option may be
exercised in accordance with Schedule A attached hereto (“Exercise Schedule”).
The number of shares subject to the option exercisable at any time shall be the
total number then exercisable in accordance with the Exercise Schedule minus
the number of shares previously purchased by exercise of the option (as
adjusted for any change in the outstanding shares of the Stock of the Company
by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee deems in its sole discretion to be similar
circumstances). No fractional shares shall be issued or delivered. This option
shall terminate and is not exercisable after ten years from the date of its
grant (the “Scheduled Termination Date”), except if terminated earlier as
hereafter provided.

 

Notwithstanding anything
in the foregoing to the contrary, in addition to the restrictions on exercise described
above for any calendar year, any options granted hereunder shall become
exercisable solely to the extent that the aggregate fair market

 

 

value (“FMV”) of the Stock (as determined for purposes of Section
422(d) of the Internal Revenue Code of 1986, as amended, or any successor
provision thereto) with respect to which the options are exercisable for the
first time in such calendar year does not exceed $100,000. For these purposes,
(i) the FMV of the optioned Stock shall be determined as of the date of grant
of the related option, (ii) options shall be taken into account in the order in
which they were granted, and (iii) any options which would have been
exercisable in a calendar year but for the restriction in the immediately
preceding sentence shall become exercisable in the following calendar year
subject to: (x) the restrictions provided in the immediately preceding sentence
(as determined for such following calendar year), and (y) the limitations
otherwise described in this option or the Plan.

 

In the event of the
occurrence of a “Change of Control” (as hereafter defined) of the Company, your
option may, from and after the date of the Change of Control, be exercised for
up to 100% of the total number of shares then subject to the option minus the
number of shares previously purchased upon exercise of the option (as adjusted
for stock dividends, stock splits, combinations of shares and what the
Committee deems in its sole discretion to be similar circumstances) and your
vesting date will accelerate accordingly. A “Change of Control” shall be deemed
to have occurred upon the happening of any of the following events:

 

1.                           A
change within a twelve-month period in the holders of more than 80% of the
outstanding voting stock of the Company;

 

2.                           A sale
of all or substantially all of the Company’s assets;

 

3.                           A
merger or consolidation of the Company where the Company’s shareholders prior
to the merger do not control the surviving entity;

 

4.                           A
dissolution or liquidation of the Company; or

 

5.                           Any
other event deemed by the Committee to constitute a “Change of Control”.

 

You may exercise your
option by giving written notice to the Secretary of the Company on forms
supplied by the Company at its then principal executive office, accompanied by
payment of the option price for the total number of shares you specify that you
wish to purchase. The payment may be in any of the following forms: (a) cash,
which may be evidenced by a check and includes cash received from a stock
brokerage firm in a so-called “cashless exercise”; (b) (unless prohibited by
the Committee) certificates representing shares of Stock of the Company, which
will be valued by the Secretary of the Company at the Fair Market Value per
share of the Company’s Stock (as determined in accordance with the Plan) on the
date of delivery of such certificates to the Company, accompanied by an
assignment of the stock to the Company; or (c) (unless prohibited by the
Committee) any combination of cash and Stock of the Company valued as provided
in clause (b). The use of the so-called “attestation

 

2

 

procedure” to exercise a stock option may be permitted by the
Committee. Any assignment of the Company’s Stock shall be in a form and
substance satisfactory to the Secretary of the Company, including guarantees of
signature(s) and payment of all transfer taxes if the Secretary deems such
guarantees necessary or desirable.

 

Your option will, to the
extent not previously exercised by you, terminate three months after the date
on which your employment by the Company or a Company subsidiary corporation is
terminated (whether such termination be voluntary or involuntary) other than by
reason of disability as defined in Section 422(e)(3) of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations thereunder, or
death, in which case your option will terminate one year from the date of
termination of employment due to disability or death (but in no event later
than the Scheduled Termination Date). After the date your employment is
terminated, as aforesaid, you may exercise this option only for the number of
shares which you had a right to purchase and did not purchase on the date your
employment terminated. If you are employed by a Company subsidiary corporation,
your employment shall be deemed to have terminated on the date your employer
ceases to be a Company subsidiary corporation, unless you are on that date
transferred to the Company or another Company subsidiary corporation. Your
employment shall not be deemed to have terminated if you are transferred from
the Company to a Company subsidiary corporation, or vice versa, or from one
Company subsidiary corporation to another Company subsidiary corporation.

 

If you die while employed
by the Company or a Company subsidiary corporation, your executor or
administrator, as the case may be, may, at any time within one year after the
date of your death (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase during your lifetime. If your employment with the Company or a
Company parent or subsidiary corporation is terminated by reason of your
becoming disabled (within the meaning of Section 422(e)(3) of the Code and the regulations
thereunder), you or your legal guardian or custodian may at any time within one
year after the date of such termination (but in no event later than the
Scheduled Termination Date), exercise the option as to any shares which you had
a right to purchase and did not purchase prior to such termination. Your
executor, administrator, guardian or custodian must present proof of his
authority satisfactory to the Company prior to being allowed to exercise this
option.

 

In the event of any
change in the outstanding shares of the Stock of the Company by reason of a
stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances, the number
and kind of shares subject to this option and the option price of such shares
shall be appropriately adjusted in a manner to be determined in the sole
discretion of the Committee.

 

3

 

Notwithstanding anything
to the contrary contained in this option, in the event of a sale or a proposed
sale of the majority of the stock or assets of the Company or a proposed Change
of Control, the Committee shall have the right to terminate this option upon
thirty (30) days written notice to you. Nothing in this Agreement shall be
construed to limit or restrict your ability to exercise this Option (but only
to the extent exercise is otherwise available to you under the terms hereof)
prior to the close of such thirty (30) day period.

 

This option is not
transferable otherwise than by will or the laws of descent and distribution,
and is exercisable during your lifetime only by you, including, for this
purpose, your legal guardian or custodian in the event of disability. Until the
option price has been paid in full pursuant to due exercise of this option and
the purchased shares are delivered to you, you do not have any rights as a
shareholder of the Company. The Company reserves the right not to deliver to
you the shares purchased by virtue of the exercise of this option during any
period of time in which the Company deems, in its sole discretion, that such
delivery would violate a federal, state, local or securities exchange rule,
regulation or law.

 

Notwithstanding anything
to the contrary contained herein, this option is not exercisable until all the
following events occur and during the following periods of time:

 

(a)                      Until the
Plan pursuant to which this option is granted is approved by the shareholders
of the Company in the manner prescribed by the Code and the regulations
thereunder;

 

(b)                     Until this
option and the optioned shares are approved and/or registered with such
federal, state and local regulatory bodies or agencies and securities exchanges
as the Company may deem necessary or desirable;

 

(c)                      During any
period of time in which the Company deems that the exercisability of this
option, the offer to sell the shares optioned hereunder, or the sale thereof,
may violate a federal, state, local or securities exchange rule, regulation or
law, or may cause the Company to be legally obligated to issue or sell more
shares than the Company is legally entitled to issue or sell;

 

(d)                     Until you
have paid or made suitable arrangements to pay (which may include payment
through the surrender of Common Stock, unless prohibited by the Committee) (i)
all federal, state and local income tax withholding required to be withheld by
the Company in connection with the option exercise and (ii) the employee’s
portion of other federal, state and local payroll and other taxes due in
connection with the option exercise; or

 

(e)                      Until any
applicable restrictions on exercisability are satisfied.

 

4

 

The following two
paragraphs shall be applicable if, on the date of exercise of this option, the
Stock to be purchased pursuant to such exercise has not been registered under
the Securities Act of 1933, as amended, and under applicable state securities
laws, and shall continue to be applicable for so long as such registration has
not occurred (there being no obligation on the Company to effect such
registration):

 

(a)                      The optionee
hereby agrees, warrants and represents that he will acquire the Stock to be
issued hereunder for his own account for investment purposes only, and not with
a view to, or in connection with, any resale or other distribution of any of
such shares, except as hereafter permitted. The optionee further agrees that he
will not at any time make any offer, sale, transfer, pledge or other
disposition of such Stock to be issued hereunder without an effective
registration statement under the Securities Act of 1933, as amended, and under
any applicable state securities laws or an opinion of counsel acceptable to the
Company to the effect that the proposed transaction will be exempt from such
registration. The optionee shall execute such instruments, representations,
acknowledgements and agreements as the Company may, in its sole discretion,
deem advisable to avoid any violation of federal, state, local or securities
exchange rule, regulation or law.

 

(b)                     The
certificates for Stock to be issued to the optionee hereunder shall bear the
following legend:

 

“The shares represented
by this certificate have not been registered under the Securities Act of 1933,
as amended, or under applicable state securities laws. The shares have been
acquired for investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company that  the proposed transaction will be exempt from
such registration.”

 

The foregoing legend shall be removed upon registration of the legended
shares under the Securities Act of 1933, as amended, and under any applicable
state laws or upon receipt of any opinion of counsel acceptable to the Company
that said registration is no longer required.

 

The sole purpose of the agreements,
warranties, representations and legend set forth in the two immediately
preceding paragraphs is to prevent violations of the Securities Act of 1933, as
amended, and any applicable state securities laws.

 

In addition to the
foregoing, the shares shall bear a legend which recites any other applicable
restrictions upon the transferability of the stock.

 

It is the intention of
the Company and you that this option shall, if possible, be an “Incentive Stock
Option” as that term is used in Section 422 of the Code and the regulations
thereunder. In the event this option is in any way inconsistent with the legal

 

5

 

requirements of the Code or the regulations thereunder for an “Incentive
Stock Option,” this option shall be deemed automatically amended as of the date
hereof to conform to such legal requirements, if such conformity may be
achieved by amendment. If such conformity may not be achieved by amendment,
such options shall be deemed to be a Non-Qualified Stock Option.

 

Nothing
herein shall modify your status as an at-will employee of the Company. Further,
nothing herein guarantees you employment for any specified period of time. This
means that either you or the Company may terminate your employment at any time
for any reason, or no reason. You recognize that, for instance, you may
terminate your employment or the Company may terminate your employment prior to
the date on which your option becomes vested.

 

Any dispute or
disagreement between you and the Company with respect to any portion of this
option or its validity, construction, meaning, performance or your rights
hereunder shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association or its successor, as
amended from time to time. However, prior to submission to arbitration you will
attempt to resolve any disputes or disagreements with the Company over this
option amicably and informally, in good faith, for a period not to exceed two
(2) weeks. Thereafter, the dispute or disagreement will be submitted to
arbitration. At any time prior to a decision from the arbitrator(s) being
rendered, you and the Company may resolve the dispute by settlement. You and
the Company shall equally share the costs charged by the American Arbitration
Association or its successor, but you and the Company shall otherwise be solely
responsible for your own respective counsel fees and expenses. The decision of
the arbitrator(s) shall be made in writing, setting forth the award, the
reasons for the decision and award and shall be binding and conclusive on you
and the Company. Further, neither you nor the Company shall appeal any such
award. Judgment of a court of competent jurisdiction may be entered upon the
award and may be enforced as such in accordance with the provisions of the
award.

 

This option shall be
subject to the terms of the Plan in effect on the date this option is granted,
which terms are hereby incorporated herein by reference and made a part hereof.
In the event of any conflict between the terms of this option and the terms of
the Plan in effect on the date of this option, the terms of the Plan shall
govern. This option constitutes the entire understanding between the Company
and you with respect to the subject matter hereof and no amendment, supplement
or waiver of this option, in whole or in part, shall be binding upon the
Company unless in writing and signed by the President of the Company. This
option and the performances of the parties hereunder shall be construed in
accordance with and governed by the laws of the State of Pennsylvania.

 

6

 

Please sign the copy of
this option and return it to the Company’s Secretary, thereby indicating your
understanding of and agreement with its terms and conditions including Schedule
A hereto.

 

 

	
   

  	
  POWERMED, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
				

 

I hereby acknowledge
receipt of a copy of the foregoing stock option and the 2000 Stock Option Plan
and, having read them, hereby signify my understanding of, and my agreement
with, all of the terms and conditions thereof including Schedule A hereto. I
accept this option in full satisfaction of any previously written or verbal
promises made to me with respect to option grants.

 

 

	
   

  	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  (Date)

  

 

7

 

Schedule
A

ISO Stock Exercise Schedule

 

 

	
  Dates

  	
   

  	
  Exercisable

  	
   

  	
  Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

APPENDIX II

 

POWERMED, INC.

 

NON-QUALIFIED STOCK
OPTION

 

	
   

  	
  To:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  

 

Date of Grant:

 

You are hereby granted an
option, effective as of the date hereof, to purchase                           
shares of common stock, no par value (“Stock”), of PowerMed, Inc., a
Pennsylvania corporation (the “Company”) at a price of $                  
per share pursuant to the Company’s 2000 Stock Option Plan (the “Plan”).

 

Except as otherwise
provided below, your option does not become vested prior to the latest of (a)
the exercisability dates described in the next succeeding paragraph and (b) the
earlier of (i) the first closing date for the initial public offering of the
Stock of the Company (or of a holding company owning all of the Company’s
outstanding Common Stock) in which the Company (or such holding company) raises
at least $10 million (the “IPO Date”), or (ii) upon the occurrence of a Change
of Control (as defined below).

 

Your option may be
exercised in accordance with Schedule A attached hereto (“Exercise Schedule”).
The number of shares subject to the option exercisable at any time shall be the
total number then exercisable in accordance with the Exercise Schedule minus
the number of shares previously purchased by exercise of the option (as
adjusted for any change in the outstanding shares of the Stock of the Company
by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Committee deems in its sole discretion to be similar
circumstances). No fractional shares shall be issued or delivered. This option
shall terminate and is not exercisable after ten years from the date of its
grant (the “Scheduled Termination Date”), except if terminated earlier as
hereafter provided.

 

 

In the event of the
occurrence of a “Change of Control” (as hereafter defined) of the Company after
which your employment with the Company is terminated by the Company (or its
successor) without cause, your option may, from and after the date of the
Change of Control, be exercised for up to 100% of the total number of shares
then subject to the option minus the number of shares previously purchased upon
exercise of the option (as adjusted for stock dividends, stock splits,
combinations of shares and what the Committee deems in its sole discretion to
be similar circumstances) and your vesting date will accelerate accordingly. A “Change
of Control” shall be deemed to have occurred upon the happening of any of the
following events:

 

1.                          A change
within a twelve-month period in the holders of more than 80% of the outstanding
voting stock of the Company;

 

2.                          A sale
of all or substantially all of the Company’s assets;

 

3.                          A merger
or consolidation of the Company where the Company’s shareholders prior to the
merger do not control the surviving entity;

 

4.                          A
dissolution or liquidation of the Company; or

 

5.                          Any
other event deemed by the Committee to constitute a “Change of Control”.

 

You may exercise your
option by giving written notice to the Secretary of the Company on forms
supplied by the Company at its then principal executive office, accompanied by
payment of the option price for the total number of shares you specify that you
wish to purchase. The payment may be in any of the following forms: (a) cash,
which may be evidenced by a check and includes cash received from a stock
brokerage firm in a so-called “cashless exercise”; (b) (unless prohibited by
the Committee) certificates representing shares of Stock of the Company, which
will be valued by the Secretary of the Company at the Fair Market Value per
share of the Company’s Stock (as determined in accordance with the Plan) on the
date of delivery of such certificates to the Company, accompanied by an
assignment of the stock to the Company; or (c) (unless prohibited by the
Committee) any combination of cash and Stock of the Company valued as provided
in clause (b). The use of the so-called “attestation procedure” to exercise a
stock option may be permitted by the Committee. Any assignment of the Company’s
Stock shall be in a form and substance satisfactory to the Secretary of the
Company, including guarantees of signature(s) and payment of all transfer taxes
if the Secretary deems such guarantees necessary or desirable.

 

Your option will, to the
extent not previously exercised by you, terminate three months after the date on
which your employment by the Company or a Company subsidiary corporation is
terminated (whether such termination be voluntary or involuntary) other than by
reason of disability as defined in Section 422(e)(3) of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations

 

2

 

thereunder, or death, in which case your option will terminate one year
from the date of termination of employment due to disability or death (but in
no event later than the Scheduled Termination Date). After the date your
employment is terminated, as aforesaid, you may exercise this option only for
the number of shares which you had a right to purchase and did not purchase on
the date your employment terminated. If you are employed by a Company
subsidiary corporation, your employment shall be deemed to have terminated on
the date your employer ceases to be a Company subsidiary corporation, unless
you are on that date transferred to the Company or another Company subsidiary
corporation. Your employment shall not be deemed to have terminated if you are
transferred from the Company to a Company subsidiary corporation, or vice
versa, or from one Company subsidiary corporation to another Company subsidiary
corporation.

 

If you die while employed
by the Company or a Company subsidiary corporation, your executor or
administrator, as the case may be, may, at any time within one year after the
date of your death (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase during your lifetime. If your employment with the Company or a
Company parent or subsidiary corporation is terminated by reason of your
becoming disabled (within the meaning of Section 422(e)(3) of the Code and the
regulations thereunder), you or your legal guardian or custodian may at any
time within one year after the date of such termination (but in no event later
than the Scheduled Termination Date), exercise the option as to any shares
which you had a right to purchase and did not purchase prior to such
termination. Your executor, administrator, guardian or custodian must present
proof of his authority satisfactory to the Company prior to being allowed to
exercise this option.

 

In the event of any
change in the outstanding shares of the Stock of the Company by reason of a
stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances, the number
and kind of shares subject to this option and the option price of such shares
shall be appropriately adjusted in a manner to be determined in the sole
discretion of the Committee.

 

Notwithstanding anything
to the contrary contained in this option, in the event of a sale or a proposed
sale of the majority of the stock or assets of the Company or a proposed Change
of Control, the Committee shall have the right to terminate this option upon
thirty (30) days written notice to you. Nothing in this Agreement shall be
construed to limit or restrict your ability to exercise this Option (but only
to the extent exercise is otherwise available to you under the terms hereof)
prior to the close of such thirty (30) day period.

 

This option is not
transferable otherwise than by will or the laws of descent and distribution,
and is exercisable during your lifetime only by you, including, for this
purpose, your legal guardian or custodian in the event of disability. Until the
option

 

3

 

price has been paid in full pursuant to due exercise of this option and
the purchased shares are delivered to you, you do not have any rights as a
shareholder of the Company. The Company reserves the right not to deliver to
you the shares purchased by virtue of the exercise of this option during any
period of time in which the Company deems, in its sole discretion, that such
would violate a federal, state, local or securities exchange rule, regulation
or law.

 

Notwithstanding anything
to the contrary contained herein, this option is not exercisable until all the
following events occur and during the following periods of time:

 

(a)                      Until the
Plan pursuant to which this option is granted is approved by the shareholders
of the Company in the manner prescribed by the Code and the regulations
thereunder;

 

(b)                     Until this
option and the optioned shares are approved and/or registered with such
federal, state and local regulatory bodies or agencies and securities exchanges
as the Company may deem necessary or desirable; or

 

(c)                      During any
period of time in which the Company deems that the exercisability of this
option, the offer to sell the shares optioned hereunder, or the sale thereof,
may violate federal, state or local securities rules, regulations or laws, or
may cause the Company to be legally obligated to issue or sell more shares than
the Company is legally entitled to issue or sell.

 

(d)                     Until you
have paid or made suitable arrangements to pay (which may include payment
through the surrender of Common Stock, unless prohibited by the Committee) (i)
all federal, state and local income tax withholding required to be withheld by
the Company in connection with the option exercise and (ii) the employee’s
portion of other federal, state and local payroll and other taxes due in
connection with the option exercise.

 

(e)                      Until any
applicable restrictions on exercisability are satisfied.

 

The following two
paragraphs shall be applicable if, on the date of exercise of this option, the
Common Stock to be purchased pursuant to such exercise has not been registered
under the Securities Act of 1933, as amended, and under applicable state
securities laws, and shall continue to be applicable for so long as such
registration has not occurred (there being no obligation on the Company to
effect such registration):

 

(a)                      The optionee
hereby agrees, warrants and represents that he will acquire the Stock to be
issued hereunder for his own account for investment purposes only, and not with
a view to, or in connection with, any resale or other distribution of any of
such shares, except as hereafter permitted. The optionee further agrees that he
will not at any time make any offer, sale, transfer, pledge or other
disposition of such Stock to be issued hereunder without an effective
registration statement under the Securities

 

4

 

Act of 1933, as amended, and under any applicable state securities laws
or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company may, in its sole discretion, deem advisable to avoid any violation
of federal, state, local or securities exchange rule, regulation or law.

 

(b)                     The
certificates for Stock to be issued to the optionee hereunder shall bear the
following legend:

 

“The shares represented
by this certificate have not been registered under the Securities Act of 1933,
as amended, or under applicable state securities laws. The shares have been
acquired for  investment and may not be
offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as amended,
and under any applicable state securities laws or an opinion of counsel
acceptable to the Company that the proposed transaction will be exempt from
such registration.”

 

The foregoing legend shall be removed upon registration of the legended
shares under the Securities Act of 1933, as amended, and under any applicable
state laws or upon receipt of any opinion of counsel acceptable to the Company
that said registration is no longer required.

 

The sole purpose of the
agreements, warranties, representations and legend set-forth in the two
immediately preceding paragraphs is to prevent violations of the Securities Act
of 1933, as amended, and any applicable state securities laws.

 

In addition to the
foregoing, the share certificates shall bear a legend which recites any other
applicable restrictions upon the transferability of the stock.

 

It is the intention of
the Company and you that this option shall not be an “Incentive Stock Option”
as that term is used in Section 422 of the Code and the regulations thereunder.

 

Nothing
herein shall modify your status as an at-will employee of the Company. Further,
nothing herein guarantees you employment for any specified period of time. This
means that either you or the Company may terminate your employment at any time
for any reason, or no reason. You recognize that, for instance, you may
terminate your employment or the Company may terminate your employment prior to
the date on which your option becomes vested.

 

Any dispute or
disagreement between you and the Company with respect to any portion of this
option or its validity, construction, meaning, performance or your rights
hereunder shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association or its successor, as
amended from time to

 

5

 

time. However, prior to submission to arbitration you will attempt to
resolve any disputes or disagreements with the Company over this option
amicably and informally, in good faith, for a period not to exceed two weeks.
Thereafter, the dispute or disagreement will be submitted to arbitration. At
any time prior to a decision from the arbitrator(s) being rendered, you and the
Company may resolve the dispute by settlement. You and the Company shall
equally share the costs charged by the American Arbitration Association or its
successor, but you and the Company shall otherwise be solely responsible for your
own respective counsel fees and expenses. The decision of the arbitrator(s)
shall be made in writing, setting forth the award, the reasons for the decision
and award and shall be binding and conclusive on you and the Company. Further,
neither you nor the Company shall appeal any such award. Judgment of a court of
competent jurisdiction may be entered upon the award and may be enforced as
such in accordance with the provisions of the award.

 

This option shall be
subject to the terms of the Plan in effect on the date this option is granted,
which terms are hereby incorporated herein by reference and made a part hereof.
In the event of any conflict between the terms of this option and the terms of
the Plan in effect on the date of this option, the terms of the Plan shall
govern. This option constitutes the entire understanding between the Company
and you with respect to the subject matter hereof and no amendment, supplement
or waiver of this option, in whole or in part, shall be binding upon the
Company unless in writing and signed by the President of the Company. This
option and the performances of the parties hereunder shall be construed in
accordance with and governed by the laws of the State of Pennsylvania.

 

Please sign the copy of
this option and return it to the Company’s Secretary, thereby indicating your
understanding of and agreement with its terms and conditions including Schedule
A hereto.

 

	
   

  	
  POWERMED, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
				

 

I hereby acknowledge receipt of a copy of the foregoing stock option
and the 2000 Stock Option Plan and, having read them, hereby signify my
understanding of, and my agreement with, all of the terms and conditions
thereof including Schedule A hereto. I accept this option in full satisfaction
of any previously written or verbal promises made to me with respect to option
grants.

 

	
   

  	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  (Date)

  

 

6

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