Document:

ex10_4.htm

    
      
        

      

      AMENDED
        REGISTRATION RIGHTS AGREEMENT

       

      THIS
        AMENDED REGISTRATION RIGHTS AGREEMENT (the “Agreement”), dated
        as of July 13, 2007, by and among Positron Corporation, a Texas corporation
        with
        its headquarters located at 1304 Langham Creek Drive, Suite 300, Houston,
        TX
        77084  (the “Company”), and each of the undersigned
        (together with their respective affiliates and any assignee or transferee
        of all
        of their respective rights hereunder, the “Initial
        Investors”).

       

      WHEREAS:

       

      A.           On
        May 23, 2006, in connection with the Securities Purchase Agreement by and
        among
        the parties hereto of even date therewith (the “Securities Purchase Agreement”),
        the Company agreed, upon the terms and subject to the conditions contained
        therein, to issue and sell to the Initial Investors (i) secured convertible
        notes in the aggregate principal amount of up to Two Million Dollars
        ($2,000,000) (the “Notes”) that are convertible into shares of the Company’s
        common stock (the “Common Stock”), upon the terms and subject to the limitations
        and conditions set forth in such Notes and (ii) warrants (the “Warrants”)
        to acquire an aggregate of 30,000,000 shares of Common Stock, upon the terms
        and
        conditions and subject to the limitations and conditions set forth in the
        Warrants;

       

      B.           On
        May 23, 2006, to induce the Initial Investors to execute and deliver 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
“1933 Act”), and applicable state securities laws;
        and

       

      C.           On
        September 20, 2006, the Company filed a registration statement on Form SB-2
        (the
        "Initial Registration Statement") to register 72,727,273 shares of the Company’s
        Common Stock on behalf of the Initial Investors which was subsequently amended
        to register 24,340,560 and 13,246,240 shares of the Common Stock, respectively,
        and the Company and the Initial Investors desire to provide for such amendment
        by executing this Agreement which shall supersede in its entirety the Initial
        Registration Statement.

       

      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
        Initial Investors hereby agree as follows:

       

      1.   DEFINITIONS.

       

      a.           As
        used in this Agreement, the following terms shall have the following
        meanings:

       

      (i)           “Investors”
        means the Initial Investors and any transferee or assignee who agrees to
        become
        bound by the provisions of this Agreement in accordance with Section 9
        hereof.

       

      (ii)           “register,”
        “registered,” and “registration” refer to a
        registration effected by preparing and filing a Registration Statement or
        Statements in compliance with the 1933 Act and pursuant to Rule 415 under
        the
        1933 Act or any successor rule providing for offering securities on a continuous
        basis (“Rule 415”), and the declaration or ordering of
        effectiveness of such Registration Statement by the United States Securities
        and
        Exchange Commission (the “SEC”).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (iii)           “Registrable
        Securities” means the Conversion Shares issued or issuable upon
        conversion or otherwise pursuant to the Notes and Additional Notes (as defined
        in the Securities Purchase Agreement) including, without limitation, Damages
        Shares (as defined in the Notes) issued or issuable pursuant to the Notes,
        shares of Common Stock issued or issuable in payment of the Standard Liquidated
        Damages Amount (as defined in the Securities Purchase Agreement), shares
        issued
        or issuable in respect of interest or in redemption of the Notes in accordance
        with the terms thereof) and any shares of capital stock issued or issuable
        as a
        dividend on or in exchange for or otherwise with respect to any of the
        foregoing.

       

      (iv)           “Registration
        Statement” means a registration statement of the Company under the 1933
        Act.

       

      b.           Capitalized
        terms used herein and not otherwise defined herein shall have the respective
        meanings set forth in the Securities Purchase Agreement or the Convertible
        Note.

       

      2.   REGISTRATION.

       

      a.           Mandatory
        Registration.  The Company shall prepare, and within ten
        (10) days from the date hereof (the “Filing Date”), file with
        the SEC a Registration Statement on Form SB-2 on such form of Registration
        Statement as is then available to effect a registration of the Registrable
        Securities, subject to the consent of the Initial Investors, which consent
        will
        not be unreasonably withheld) covering the resale of the Registrable Securities
        underlying the Notes issued or issuable pursuant to the Securities Purchase
        Agreement, which Registration Statement, to the extent allowable under the
        1933
        Act and the rules and regulations promulgated thereunder (including Rule
        416),
        shall state that such Registration Statement also covers such indeterminate
        number of additional shares of Common Stock as may become issuable upon
        conversion of or otherwise pursuant to the Notes and to prevent dilution
        resulting from stock splits, stock dividends or similar
        transactions.  The number of shares of Common Stock initially included
        in such Registration Statement shall be no less than an amount equal to
        13,246,240 Conversion Shares that are then issuable upon conversion of the
        Notes
        and Additional Notes (based on the Variable Conversion Price as would then
        be in
        effect and assuming the Variable Conversion Price is the Conversion Price
        at
        such time), without regard to any limitation on the Investor’s ability to
        convert the Notes.  The Company acknowledges that the number of shares
        initially included in the Registration Statement represents a good faith
        estimate of the maximum number of shares issuable upon conversion of the
        Notes.

       

      b.           Underwritten
        Offering.  If any offering pursuant to a Registration
        Statement pursuant to Section 2(a) hereof involves an underwritten offering,
        the
        Investors who hold a majority in interest of the Registrable Securities subject
        to such underwritten offering, with the consent of a majority-in-interest
        of the
        Initial Investors, shall have the right to select one legal counsel and an
        investment banker or bankers and manager or managers to administer the offering,
        which investment banker or bankers or manager or managers shall be reasonably
        satisfactory to the Company.

       

      
        
          
          

        

        
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      c.           Payments
        by the Company.  The Company shall use its best efforts
        to obtain effectiveness of the Registration Statement as soon as
        practicable.  If (i) the Registration Statement(s) covering the
        Registrable Securities required to be filed by the Company pursuant to Section
        2(a) hereof is not filed by the Filing Date or declared effective by the
        SEC on
        or prior to one hundred and twenty (120) days from the Filing Date, or
        (ii) after the Registration Statement has been declared effective by the
        SEC, sales of all of the Registrable Securities cannot be made pursuant to
        the
        Registration Statement, or (iii) the Common Stock is not listed or included
        for quotation on the Nasdaq National Market (“Nasdaq”), the
        Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
        Exchange (the “NYSE”) or the American Stock Exchange (the
“AMEX”) after being so listed or included for
        quotation after
        the date hereof, or (iv) the Common Stock ceases to be traded on the
        Over-the-Counter Bulletin Board (the “OTCBB”) or any equivalent
        replacement exchange prior to being listed or included for quotation on one
        of
        the aforementioned markets, then the Company will make payments to the Investors
        in such amounts and at such times as shall be determined pursuant to this
        Section 2(c) as partial relief for the damages to the Investors by reason
        of any
        such delay in or reduction of their ability to sell the Registrable Securities
        (which remedy shall not be exclusive of any other remedies available at law
        or
        in equity).  The Company shall pay to each holder of the Notes or
        Registrable Securities an amount equal to the then outstanding principal
        amount
        of the Notes (and, in the case of holders of Registrable Securities, the
        principal amount of Notes from which such Registrable Securities were converted)
        (“Outstanding Principal Amount”), multiplied by the Applicable
        Percentage (as defined below) times the sum of:  (i) the number of
        months (prorated for partial months) after the Filing Date or the end of
        the
        aforementioned one hundred and twenty (120) day period and prior to the date
        the
        Registration Statement is declared effective by the SEC, provided, however,
        that
        there shall be excluded from such period any delays which are solely
        attributable to changes required by the Investors in the Registration Statement
        with respect to information relating to the Investors, including, without
        limitation, changes to the plan of distribution, or to the failure of the
        Investors to conduct their review of the Registration Statement pursuant
        to
        Section 3(h) below in a reasonably prompt manner; (ii) the number of months
        (prorated for partial months) that sales of all of the Registrable Securities
        cannot be made pursuant to the Registration Statement after the Registration
        Statement has been declared effective (including, without limitation, when
        sales
        cannot be made by reason of the Company’s failure to properly supplement or
        amend the prospectus included therein in accordance with the terms of this
        Agreement, but excluding any days during an Allowed Delay (as defined in
        Section
        3(f)); and (iii) the number of months (prorated for partial months) that
        the
        Common Stock is not listed or included for quotation on the OTCBB, Nasdaq,
        Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
        Registration Statement has been declared effective.  The term
“Applicable Percentage” means two hundredths
        (.02).  (For example, if the Registration Statement becomes effective
        one (1) month after the end of such one hundred and twenty (120) day period,
        the
        Company would pay $5,000 for each $250,000 of Outstanding Principal
        Amount.  If thereafter, sales could not be made pursuant to the
        Registration Statement for an additional period of one (1) month, the Company
        would pay an additional $5,000 for each $250,000 of Outstanding Principal
        Amount.)  Such amounts shall be paid in cash or, at the Company’s
        option, in shares of Common Stock priced at the Conversion Price (as defined
        in
        the Notes) on such payment date.

       

      
        
          
          

        

        
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      d.           Piggy-Back
        Registrations.  Subject to the last sentence of this
        Section 2(d), if at any time prior to the expiration of the Registration
        Period
        (as hereinafter defined) the Company shall determine to file with the SEC
        a
        Registration Statement relating to an offering for its own account or the
        account of others under the 1933 Act of any of its equity securities (other
        than
        on Form S-4 or Form S-8 or their then equivalents relating to equity securities
        to be issued solely in connection with any acquisition of any entity or business
        or equity securities issuable in connection with stock option or other
bonafide, employee benefit plans), the Company shall send to each
        Investor who is entitled to registration rights under this Section 2(d) written
        notice of such determination and, if within fifteen (15) days after the
        effective date of such notice, such Investor shall so request in writing,
        the
        Company shall include in such Registration Statement all or any part of the
        Registrable Securities such Investor requests to be registered, except that
        if,
        in connection with any underwritten public offering for the account of the
        Company the managing underwriter(s) thereof shall impose a limitation on
        the
        number of shares of Common Stock which may be included in the Registration
        Statement because, in such underwriter(s)’ judgment, marketing or other factors
        dictate such limitation is necessary to facilitate public distribution, then
        the
        Company shall be obligated to include in such Registration Statement only
        such
        limited portion of the Registrable Securities with respect to which such
        Investor has requested inclusion hereunder as the underwriter shall permit.
        Any
        exclusion of Registrable Securities shall be made pro rata among the Investors
        seeking to include Registrable Securities in proportion to the number of
        Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities
        unless the Company has first excluded all outstanding securities, the holders
        of
        which are not entitled to inclusion of such securities in such Registration
        Statement or are not entitled to pro rata inclusion with the Registrable
        Securities; and provided, further, however, that, after
        giving effect to the immediately preceding proviso, any exclusion of Registrable
        Securities shall be made pro rata with holders of other securities having
        the
        right to include such securities in the Registration Statement other than
        holders of securities entitled to inclusion of their securities in such
        Registration Statement by reason of demand registration rights.  No
        right to registration of Registrable Securities under this Section 2(d) shall
        be
        construed to limit any registration required under Section 2(a)
        hereof.  If an offering in connection with which an Investor is
        entitled to registration under this Section 2(d) is an underwritten offering,
        then each Investor whose Registrable Securities are included in such
        Registration Statement shall, unless otherwise agreed by the Company, offer
        and
        sell such Registrable Securities in an underwritten offering using the same
        underwriter or underwriters and, subject to the provisions of this Agreement,
        on
        the same terms and conditions as other shares of Common Stock included in
        such
        underwritten offering.  Notwithstanding anything to the contrary set
        forth herein, the registration rights of the Investors pursuant to this Section
        2(d) shall only be available in the event the Company fails to timely file,
        obtain effectiveness or maintain effectiveness of any Registration Statement
        to
        be filed pursuant to Section 2(a) in accordance with the terms of this
        Agreement.

       

      e.           Eligibility
        for Form S-3, SB-2 or S-1; Conversion to Form S-3.  The
        Company represents and warrants that it meets the requirements for the use
        of
        Form S-3, SB-2 or S-1 for registration of the sale by the Initial Investors
        and
        any other Investors of the Registrable Securities.   The Company
        agrees to file all reports required to be filed by the Company with the SEC
        in a
        timely manner so as to remain eligible or become eligible, as the case may
        be,
        and thereafter to maintain its eligibility, for the use of Form
        S-3.  If the Company is not currently eligible to use Form S-3, not
        later than five (5) business days after the Company first meets the registration
        eligibility and transaction requirements for the use of Form S-3 (or any
        successor form) for registration of the offer and sale by the Initial Investors
        and any other Investors of Registrable Securities, the Company shall file
        a
        Registration Statement on Form S-3 (or such successor form) with respect
        to the
        Registrable Securities covered by the Registration Statement on Form SB-2
        or
        Form S-1, whichever is applicable, filed pursuant to Section 2(a) (and include
        in such Registration Statement on Form S-3 the information required by Rule
        429
        under the 1933 Act) or convert the Registration Statement on Form SB-2 or
        Form
        S-1, whichever is applicable, filed pursuant to Section 2(a) to a Form S-3
        pursuant to Rule 429 under the 1933 Act and cause such Registration Statement
        (or such amendment) to be declared effective no later than thirty (30) days
        after filing.  In the event of a breach by the Company of the
        provisions of this Section 2(e), the Company will be required to make payments
        pursuant to Section 2(c) hereof.

       

      
        
          
          

        

        
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      3.   OBLIGATIONS
        OF
        THE COMPANY.

       

      In
        connection with the registration of the Registrable Securities, the Company
        shall have the following obligations:

       

      a.           The
        Company shall prepare promptly, and file with the SEC not later than the
        Filing
        Date, a Registration Statement with respect to the number of Registrable
        Securities provided in Section 2(a), and thereafter use its best efforts
        to
        cause such Registration Statement relating to Registrable Securities to become
        effective as soon as possible after such filing but in no event later than
        one
        hundred and twenty (120) days from the Filing Date), and keep the Registration
        Statement effective pursuant to Rule 415 at all times until such date as
        is the
        earlier of (i) the date on which all of the Registrable Securities have been
        sold and (ii) the date on which the Registrable Securities (in the opinion
        of
        counsel to the Initial Investors) may be immediately sold to the public without
        registration or restriction (including, without limitation, as to volume
        by each
        holder thereof) under the 1933 Act (the “Registration Period”),
        which Registration Statement (including any amendments or supplements thereto
        and prospectuses contained therein) shall not contain any 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.

       

      b.           The
        Company shall prepare and file with the SEC such amendments (including
        post-effective amendments) and supplements to the Registration Statement
        and the
        prospectus used in connection with the Registration Statements as may be
        necessary to keep the Registration Statements effective at all times during
        the
        Registration Period, and, during such period, comply with the provisions
        of the
        1933 Act with respect to the disposition of all Registrable Securities of
        the
        Company covered by the Registration Statements until such time as all of
        such
        Registrable Securities have been disposed of in accordance with the intended
        methods of disposition by the seller or sellers thereof as set forth in the
        Registration Statements.  In the event the number of shares available
        under a Registration Statement filed pursuant to this Agreement is insufficient
        to cover all of the Registrable Securities issued or issuable upon conversion
        of
        the Notes and exercise of the Warrants, the Company shall amend the Registration
        Statement, or file a new Registration Statement (on the short form available
        therefor, if applicable), or both, so as to cover all of the Registrable
        Securities, in each case, as soon as practicable, but in any event within
        fifteen (15) days after the necessity therefor arises (based on the market
        price
        of the Common Stock and other relevant factors on which the Company reasonably
        elects to rely).  The Company shall use its best efforts to cause such
        amendment and/or new Registration Statement to become effective as soon as
        practicable following the filing thereof, but in any event within thirty
        (30)
        days after the date on which the Company reasonably first determines (or
        reasonably should have determined) the need therefor.  The provisions
        of Section 2(c) above shall be applicable with respect to such obligation, with
        the one hundred and twenty (120) days running from the day the Company
        reasonably first determines (or reasonably should have determined) the need
        therefor.

       

      
        
          
          

        

        
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      c.           The
        Company shall furnish to each Investor whose Registrable Securities are included
        in a Registration Statement and its legal counsel (i) promptly (but in no
        event more than two (2) business days) after the same is prepared and publicly
        distributed, filed with the SEC, or received by the Company, one copy of
        each
        Registration Statement and any amendment thereto, each preliminary prospectus
        and prospectus and each amendment or supplement thereto, and, in the case
        of the
        Registration Statement referred to in Section 2(a), each letter written by
        or on
        behalf of the Company to the SEC or the staff of the SEC, and each item of
        correspondence from the SEC or the staff of the SEC, in each case relating
        to
        such Registration Statement (other than any portion of any thereof which
        contains information for which the Company has sought confidential treatment),
        and (ii) promptly (but in no event more than two (2) business days) after
        the Registration Statement is declared effective by the SEC, such number
        of
        copies of a prospectus, including a preliminary prospectus, and all amendments
        and supplements thereto and such other documents as such Investor may reasonably
        request in order to facilitate the disposition of the Registrable Securities
        owned by such Investor.  The Company will immediately notify each
        Investor by facsimile of the effectiveness of each Registration Statement
        or any
        post-effective amendment.  The Company will promptly respond to any
        and all comments received from the SEC (which comments shall promptly be
        made
        available to the Investors upon request), with a view towards causing each
        Registration Statement or any amendment thereto to be declared effective
        by the
        SEC as soon as practicable, shall promptly file an acceleration request as
        soon
        as practicable (but in no event more than two (2) business days) following
        the
        resolution or clearance of all SEC comments or, if applicable, following
        notification by the SEC that any such Registration Statement or any amendment
        thereto will not be subject to review and shall, if required by SEC Rules,
        promptly file with the SEC a final prospectus as soon as practicable (but
        in no
        event more than two (2) business days) following receipt by the Company from
        the
        SEC of an order declaring the Registration Statement effective.  In
        the event of a breach by the Company of the provisions of this Section 3(c),
        the
        Company will be required to make payments pursuant to Section 2(c)
        hereof.

       

      d.           The
        Company shall use reasonable efforts to (i) register and qualify the
        Registrable Securities covered by the Registration Statements under such
        other
        securities or “blue sky” laws of such jurisdictions in the United States as the
        Investors who hold a majority in interest of the Registrable Securities being
        offered reasonably request, (ii) prepare and file in those jurisdictions
        such amendments (including post-effective amendments) and supplements to
        such
        registrations and qualifications as may be necessary to maintain the
        effectiveness thereof during the Registration Period, (iii) take such other
        actions as may be necessary to maintain such registrations and qualifications
        in
        effect at all times during the Registration Period, and (iv) take all other
        actions reasonably necessary or advisable to qualify the Registrable Securities
        for sale in such jurisdictions; provided, however, that the
        Company shall not be required in connection therewith or as a condition thereto
        to (a) qualify to do business in any jurisdiction where it would not
        otherwise be required to qualify but for this Section 3(d), (b) subject
        itself to general taxation in any such jurisdiction, (c) file a general
        consent to service of process in any such jurisdiction, (d) provide any
        undertakings that cause the Company undue expense or burden, or (e) make
        any change in its charter or bylaws, which in each case the Board of Directors
        of the Company determines to be contrary to the best interests of the Company
        and its shareholders.

       

      
        
          
          

        

        
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      e.           In
        the event Investors who hold a majority-in-interest of the Registrable
        Securities being offered in the offering  (with the approval of a
        majority-in-interest of the Initial Investors) select underwriters for the
        offering, the Company shall enter into and perform its obligations under
        an
        underwriting agreement, in usual and customary form, including, without
        limitation, customary indemnification and contribution obligations, with
        the
        underwriters of such offering.

       

      f.           As
        promptly as practicable after becoming aware of such event, the Company shall
        notify each Investor of the happening of any event, of which the Company
        has
        knowledge, as a result of which the prospectus included in any Registration
        Statement, as then in effect, includes an untrue statement of a material
        fact or
        omission to state a material fact required to be stated therein or necessary
        to
        make the statements therein not misleading, and use its best efforts promptly
        to
        prepare a supplement or amendment to any Registration Statement to correct
        such
        untrue statement or omission, and deliver such number of copies of such
        supplement or amendment to each Investor as such Investor may reasonably
        request; provided that, for not more than ten (10) consecutive trading days
        (or
        a total of not more than twenty (20) trading days in any twelve (12) month
        period), the Company may delay the disclosure of material non-public information
        concerning the Company (as well as prospectus or Registration Statement
        updating) the disclosure of which at the time is not, in the good faith opinion
        of the Company, in the best interests of the Company (an “Allowed
        Delay”); provided, further, that the Company shall promptly
        (i) notify the Investors in writing of the existence of (but in no event,
        without the prior written consent of an Investor, shall the Company disclose
        to
        such investor any of the facts or circumstances regarding) material non-public
        information giving rise to an Allowed Delay and (ii) advise the Investors
        in writing to cease all sales under such Registration Statement until the
        end of
        the Allowed Delay. Upon expiration of the Allowed Delay, the Company shall
        again
        be bound by the first sentence of this Section 3(f) with respect to the
        information giving rise thereto.

       

      g.           The
        Company shall use its best efforts to prevent the issuance of any stop order
        or
        other suspension of effectiveness of any Registration Statement, and, if
        such an
        order is issued, to obtain the withdrawal of such order at the earliest possible
        moment and to notify each Investor who holds Registrable Securities being
        sold
        (or, in the event of an underwritten offering, the managing underwriters)
        of the
        issuance of such order and the resolution thereof.

       

      h.           The
        Company shall permit a single firm of counsel designated by the Initial
        Investors to review such Registration Statement and all amendments and
        supplements thereto (as well as all requests for acceleration or effectiveness
        thereof) a reasonable period of time prior to their filing with the SEC,
        and not
        file any document in a form to which such counsel reasonably objects and
        will
        not request acceleration of such Registration Statement without prior notice
        to
        such counsel.  The sections of such Registration Statement covering
        information with respect to the Investors, the Investor’s beneficial ownership
        of securities of the Company or the Investors intended method of disposition
        of
        Registrable Securities shall conform to the information provided to the Company
        by each of the Investors.

       

      
        
          
          

        

        
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      i.           The
        Company shall make generally available to its security holders as soon as
        practicable, but not later than one hundred and twenty (120) days after the
        close of the period covered thereby, an earnings statement (in form complying
        with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
        period beginning not later than the first day of the Company’s fiscal quarter
        next following the effective date of the Registration Statement.

       

      j.           At
        the request of any Investor, the Company shall furnish, on the date that
        Registrable Securities are delivered to an underwriter, if any, for sale
        in
        connection with any Registration Statement or, if such securities are not
        being
        sold by an underwriter, on the date of effectiveness thereof (i) an
        opinion, dated as of such date, from counsel representing the Company for
        purposes of such Registration Statement, in form, scope and substance as
        is
        customarily given in an underwritten public offering, addressed to the
        underwriters, if any, and the Investors and (ii) a letter, dated such date,
        from the Company’s independent certified public accountants in form and
        substance as is customarily given by independent certified public accountants
        to
        underwriters in an underwritten public offering, addressed to the underwriters,
        if any, and the Investors.

       

      k.           The
        Company shall make available for inspection by (i) any Investor,
        (ii) any underwriter participating in any disposition pursuant to a
        Registration Statement, (iii) one firm of attorneys and one firm of
        accountants or other agents retained by the Initial Investors, (iv) one
        firm of attorneys and one firm of accountants or other agents retained by
        all
        other Investors, and (v) one firm of attorneys retained by all such
        underwriters (collectively, the “Inspectors”) all pertinent
        financial and other records, and pertinent corporate documents and properties
        of
        the Company, including without limitation, records of conversions by other
        holders of convertible securities issued by the Company and the issuance
        of
        stock to such holders pursuant to the conversions (collectively, the
“Records”), as shall be reasonably deemed necessary by each
        Inspector to enable each Inspector to exercise its due diligence responsibility,
        and cause the Company’s officers, directors and employees to supply all
        information which any Inspector may reasonably request for purposes of such
        due
        diligence; provided, however, that each Inspector shall hold in
        confidence and shall not make any disclosure (except to an Investor) of any
        Record or other information which the Company determines in good faith to
        be
        confidential, and of which determination the Inspectors are so notified,
        unless
        (a) the disclosure of such Records is necessary to avoid or correct a
        misstatement or omission in any Registration Statement, (b) the release of
        such Records is ordered pursuant to a subpoena or other order from a court
        or
        government body of competent jurisdiction, or (c) the information in such
        Records has been made generally available to the public other than by disclosure
        in violation of this or any other agreement.  The Company shall not be
        required to disclose any confidential information in such Records to any
        Inspector until and unless such Inspector shall have entered into
        confidentiality agreements (in form and substance satisfactory to the Company)
        with the Company with respect thereto, substantially in the form of this
        Section
        3(k).  Each Investor agrees that it shall, upon learning that
        disclosure of such Records is sought in or by a court or governmental body
        of
        competent jurisdiction or through other means, give prompt notice to the
        Company
        and allow the Company, at its expense, to undertake appropriate action to
        prevent disclosure of, or to obtain a protective order for, the Records deemed
        confidential.  Nothing herein (or in any other confidentiality
        agreement between the Company and any Investor) shall be deemed to limit
        the
        Investor’s ability to sell Registrable Securities in a manner which is otherwise
        consistent with applicable laws and regulations.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      l.           The
        Company shall hold in confidence and not make any disclosure of information
        concerning an Investor provided to the Company unless (i) disclosure of
        such information is necessary to comply with federal or state securities
        laws,
        (ii) the disclosure of such information is necessary to avoid or correct a
        misstatement or omission in any Registration Statement, (iii) the release
        of such information is ordered pursuant to a subpoena or other order from
        a
        court or governmental body of competent jurisdiction, or (iv) such
        information has been made generally available to the public other than by
        disclosure in violation of this or any other agreement.  The Company
        agrees that it shall, upon learning that disclosure of such information
        concerning an Investor is sought in or by a court or governmental body of
        competent jurisdiction or through other means, give prompt notice to such
        Investor prior to making such disclosure, and allow the Investor, at its
        expense, to undertake appropriate action to prevent disclosure of, or to
        obtain
        a protective order for, such information.

       

      m.           The
        Company shall (i) cause all the Registrable Securities covered by the
        Registration Statement to be listed on each national securities exchange
        on
        which securities of the same class or series issued by the Company are then
        listed, if any, if the listing of such Registrable Securities is then permitted
        under the rules of such exchange, or (ii) to the extent the securities of
        the same class or series are not then listed on a national securities exchange,
        secure the designation and quotation, of all the Registrable Securities covered
        by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
        Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap, on the
        OTCBB
        and, without limiting the generality of the foregoing, to arrange for at
        least
        two market makers to register with the National Association of Securities
        Dealers, Inc. (“NASD”) as such with respect to such Registrable
        Securities.

       

      n.           The
        Company shall provide a transfer agent and registrar, which may be a single
        entity, for the Registrable Securities not later than the effective date
        of the
        Registration Statement.

       

      o.           The
        Company shall cooperate with the Investors who hold Registrable Securities
        being
        offered and the managing underwriter or underwriters, if any, to facilitate
        the
        timely preparation and delivery of certificates (not bearing any restrictive
        legends) representing Registrable Securities to be offered pursuant to a
        Registration Statement and enable such certificates to be in such denominations
        or amounts, as the case may be, as the managing underwriter or underwriters,
        if
        any, or the Investors may reasonably request and registered in such names
        as the
        managing underwriter or underwriters, if any, or the Investors may request,
        and,
        within three (3) business days after a Registration Statement which includes
        Registrable Securities is ordered effective by the SEC, the Company shall
        deliver, and shall cause legal counsel selected by the Company to deliver,
        to
        the transfer agent for the Registrable Securities (with copies to the Investors
        whose Registrable Securities are included in such Registration Statement)
        an
        instruction in the form attached hereto as Exhibit 1 and an
        opinion of such counsel in the form attached hereto as
Exhibit 2.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      p.           At
        the request of the holders of a majority-in-interest of the Registrable
        Securities, the Company shall prepare and file with the SEC such amendments
        (including post-effective amendments) and supplements to a Registration
        Statement and any prospectus used in connection with the Registration Statement
        as may be necessary in order to change the plan of distribution set forth
        in
        such Registration Statement.

       

      q.           From
        and after the date of this Agreement, the Company shall not, and shall not
        agree
        to, allow the holders of any securities of the Company to include any of
        their
        securities, in excess of 250,000 shares of Common Stock, in any Registration
        Statement under Section 2(a) hereof or any amendment or supplement thereto
        under
        Section 3(b) hereof without the consent of the holders of a majority-in-interest
        of the Registrable Securities.

       

      r.           The
        Company shall take all other reasonable actions necessary to expedite and
        facilitate disposition by the Investors of Registrable Securities pursuant
        to a
        Registration Statement.

       

      4.   OBLIGATIONS
        OF
        THE INVESTORS.

       

      In
        connection with the registration of the Registrable Securities, the Investors
        shall have the following obligations:

       

      a.           It
        shall be a condition precedent to the obligations of the Company to complete
        the
        registration pursuant to this Agreement with respect to the Registrable
        Securities of a particular Investor that such Investor shall furnish to the
        Company such information regarding itself, the Registrable Securities held
        by it
        and the intended method of disposition of the Registrable Securities held
        by it
        as shall be reasonably required to effect the registration of such Registrable
        Securities and shall execute such documents in connection with such registration
        as the Company may reasonably request.  At least three (3) business
        days prior to the first anticipated filing date of the Registration Statement,
        the Company shall notify each Investor of the information the Company requires
        from each such Investor.

       

      b.           Each
        Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
        cooperate with the Company as reasonably requested by the Company in connection
        with the preparation and filing of the Registration Statements hereunder,
        unless
        such Investor has notified the Company in writing of such Investor’s election to
        exclude all of such Investor’s Registrable Securities from the Registration
        Statements.

       

      c.           In
        the event Investors holding a majority-in-interest of the Registrable Securities
        being registered (with the approval of the Initial Investors) determine to
        engage the services of an underwriter, each Investor agrees to enter into
        and
        perform such Investor’s obligations under an underwriting agreement, in usual
        and customary form, including, without limitation, customary indemnification
        and
        contribution obligations, with the managing underwriter of such offering
        and
        take such other actions as are reasonably required in order to expedite or
        facilitate the disposition of the Registrable Securities, unless such Investor
        has notified the Company in writing of such Investor’s election to exclude all
        of such Investor’s Registrable Securities from such Registration
        Statement.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      d.           Each
        Investor agrees that, upon receipt of any notice from the Company of the
        happening of any event of the kind described in Section 3(f) or 3(g), such
        Investor will immediately discontinue disposition of Registrable Securities
        pursuant to the Registration Statement covering such Registrable Securities
        until such Investor’s receipt of the copies of the supplemented or amended
        prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
        Company, such Investor shall deliver to the Company (at the expense of the
        Company) or destroy (and deliver to the Company a certificate of destruction)
        all copies in such Investor’s possession, of the prospectus covering such
        Registrable Securities current at the time of receipt of such
        notice.

       

      e.           No
        Investor may participate in any underwritten registration hereunder unless
        such
        Investor (i) agrees to sell such Investor’s Registrable Securities on the
        basis provided in any underwriting arrangements in usual and customary form
        entered into by the Company, (ii) completes and executes all
        questionnaires, powers of attorney, indemnities, underwriting agreements
        and
        other documents reasonably required under the terms of such underwriting
        arrangements, and (iii) agrees to pay its pro rata share of all
        underwriting discounts and commissions and any expenses in excess of those
        payable by the Company pursuant to Section 5 below.

       

      5.   EXPENSES
        OF
        REGISTRATION.

       

      All
        reasonable expenses, other than underwriting discounts and commissions, incurred
        in connection with registrations, filings or qualifications pursuant to Sections
        2 and 3, including, without limitation, all registration, listing and
        qualification fees, printers and accounting fees, the fees and disbursements
        of
        counsel for the Company, and the reasonable fees and disbursements of one
        counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
        hereof shall be borne by the Company and shall be included in the fees paid
        to
        counsel under the Securities Purchase Agreement for purposes of counsel selected
        by the Initial Investors.

       

      6.   INDEMNIFICATION.

       

      In
        the
        event any Registrable Securities are included in a Registration Statement
        under
        this Agreement:

       

      a.           To
        the extent permitted by law, the Company will indemnify, hold harmless and
        defend (i) each Investor who holds such Registrable Securities,
        (ii) the directors, officers, partners, employees, agents and each person
        who controls any Investor within the meaning of the 1933 Act or the Securities
        Exchange Act of 1934, as amended (the “1934 Act”), if any,
        (iii) any underwriter (as defined in the 1933 Act) for the Investors, and
        (iv) the directors, officers, partners, employees and each person who
        controls any such underwriter within the meaning of the 1933 Act or the 1934
        Act, if any (each, an “Indemnified Person”), against any joint
        or several losses, claims, damages, liabilities or expenses (collectively,
        together with actions, proceedings or inquiries by any regulatory or
        self-regulatory organization, whether commenced or threatened, in respect
        thereof, “Claims”) to which any of them may become subject
        insofar as such Claims arise out of or are based upon: (i) any untrue statement
        or alleged untrue statement of a material fact in a Registration Statement
        or
        the omission or alleged omission to state therein a material fact required
        to be
        stated or necessary to make the statements therein not misleading; (ii) any
        untrue statement or alleged untrue statement of a material fact contained
        in any
        preliminary prospectus if used prior to the effective date of such Registration
        Statement, or contained in the final prospectus (as amended or supplemented,
        if
        the Company files any amendment thereof or supplement thereto with the SEC)
        or
        the omission or alleged omission to state therein any material fact necessary
        to
        make the statements made therein, in light of the circumstances under which
        the
        statements therein were made, not misleading; or (iii) any violation or alleged
        violation by the Company of the 1933 Act, the 1934 Act, any other law,
        including, without limitation, any state securities law, or any rule or
        regulation thereunder relating to the offer or sale of the Registrable
        Securities (the matters in the foregoing clauses (i) through (iii) being,
        collectively, “Violations”).  Subject to the
        restrictions set forth in Section 6(c) with respect to the number of legal
        counsel, the Company shall reimburse the Indemnified Person, promptly as
        such
        expenses are incurred and are due and payable, for any reasonable legal fees
        or
        other reasonable expenses incurred by them in connection with investigating
        or
        defending any such Claim.  Notwithstanding anything to the contrary
        contained herein, the indemnification agreement contained in this Section
        6(a):
        (i) shall not apply to a Claim arising out of or based upon a Violation which
        occurs in reliance upon and in conformity with information furnished in writing
        to the Company by any Indemnified Person or underwriter for such Indemnified
        Person expressly for use in connection with the preparation of such Registration
        Statement or any such amendment thereof or supplement thereto, if such
        prospectus was timely made available by the Company pursuant to Section 3(c)
        hereof; (ii) shall not apply to amounts paid in settlement of any Claim if
        such
        settlement is effected without the prior written consent of the Company,
        which
        consent shall not be unreasonably withheld; and (iii) with respect to any
        preliminary prospectus, shall not inure to the benefit of any Indemnified
        Person
        if the untrue statement or omission of material fact contained in the
        preliminary prospectus was corrected on a timely basis in the prospectus,
        as
        then amended or supplemented, such corrected prospectus was timely made
        available by the Company pursuant to Section 3(c) hereof, and the Indemnified
        Person was promptly advised in writing not to use the incorrect prospectus
        prior
        to the use giving rise to a Violation and such Indemnified Person,
        notwithstanding such advice, used it.  Such indemnity shall remain in
        full force and effect regardless of any investigation made by or on behalf
        of
        the Indemnified Person and shall survive the transfer of the Registrable
        Securities by the Investors pursuant to Section 9.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      b.           In
        connection with any Registration Statement in which an Investor is
        participating, each such Investor agrees severally and not jointly to indemnify,
        hold harmless and defend, to the same extent and in the same manner set forth
        in
        Section 6(a), the Company, each of its directors, each of its officers who
        signs
        the Registration Statement, each person, if any, who controls the Company
        within
        the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
        shareholder selling securities pursuant to the Registration Statement or
        any of
        its directors or officers or any person who controls such shareholder or
        underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
        and
        together with an Indemnified Person, an “Indemnified Party”),
        against any Claim to which any of them may become subject, under the 1933
        Act,
        the 1934 Act or otherwise, insofar as such Claim arises out of or is based
        upon
        any Violation by such Investor, in each case to the extent (and only to the
        extent) that such Violation occurs in reliance upon and in conformity with
        written information furnished to the Company by such Investor expressly for
        use
        in connection with such Registration Statement; and subject to Section 6(c)
        such
        Investor will reimburse any legal or other expenses (promptly as such expenses
        are incurred and are due and payable) reasonably incurred by them in connection
        with investigating or defending any such Claim; provided, however,
        that the indemnity agreement contained in this Section 6(b) shall not apply
        to
        amounts paid in settlement of any Claim if such settlement is effected without
        the prior written consent of such Investor, which consent shall not be
        unreasonably withheld; provided, further, however, that the
        Investor shall be liable under this Agreement (including this Section 6(b)
        and
        Section 7) for only that amount as does not exceed the net proceeds to such
        Investor as a result of the sale of Registrable Securities pursuant to such
        Registration Statement.  Such indemnity shall remain in full force and
        effect regardless of any investigation made by or on behalf of such Indemnified
        Party and shall survive the transfer of the Registrable Securities by the
        Investors pursuant to Section 9. Notwithstanding anything to the contrary
        contained herein, the indemnification agreement contained in this Section
        6(b)
        with respect to any preliminary prospectus shall not inure to the benefit
        of any
        Indemnified Party if the untrue statement or omission of material fact contained
        in the preliminary prospectus was corrected on a timely basis in the prospectus,
        as then amended or supplemented.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      c.           Promptly
        after receipt by an Indemnified Person or Indemnified Party under this Section
        6
        of notice of the commencement of any action (including any governmental action),
        such Indemnified Person or Indemnified Party shall, if a Claim in respect
        thereof is to be made against any indemnifying party under this Section 6,
        deliver to the indemnifying party a written notice of the commencement thereof,
        and the indemnifying party shall have the right to participate in, and, to
        the
        extent the indemnifying party so desires, jointly with any other indemnifying
        party similarly noticed, to assume control of the defense thereof with counsel
        mutually satisfactory to the indemnifying party and the Indemnified Person
        or
        the Indemnified Party, as the case may be; provided, however, that
        an Indemnified Person or Indemnified Party shall have the right to retain
        its
        own counsel with the fees and expenses to be paid by the indemnifying party,
        if,
        in the reasonable opinion of counsel retained by the indemnifying party,
        the
        representation by such counsel of the Indemnified Person or Indemnified Party
        and the indemnifying party would be inappropriate due to actual or potential
        differing interests between such Indemnified Person or Indemnified Party
        and any
        other party represented by such counsel in such proceeding.  The
        indemnifying party shall pay for only one separate legal counsel
        for  the Indemnified Persons or the Indemnified Parties, as
        applicable, and such legal counsel shall be selected by Investors holding
        a
        majority-in-interest of the  Registrable Securities included in the
        Registration Statement to which the Claim relates (with the approval of a
        majority-in-interest of the Initial Investors), if the Investors are entitled
        to
        indemnification hereunder, or the Company, if the Company is entitled to
        indemnification hereunder, as applicable.  The failure to deliver
        written notice to the indemnifying party within a reasonable time of the
        commencement of any such action shall not relieve such indemnifying party
        of any
        liability to the Indemnified Person or Indemnified Party under this Section
        6,
        except to the extent that the indemnifying party is actually prejudiced in
        its
        ability to defend such action.  The indemnification required by this
        Section 6 shall be made by periodic payments of the amount thereof during
        the
        course of the investigation or defense, as such expense, loss, damage or
        liability is incurred and is due and payable.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      7.   CONTRIBUTION.

       

      To
        the
        extent any indemnification by an indemnifying party is prohibited or limited
        by
        law, the indemnifying party agrees to make the maximum contribution with
        respect
        to any amounts for which it would otherwise be liable under Section 6 to
        the
        fullest extent permitted by law; provided, however, that
        (i) no contribution shall be made under circumstances where the maker would
        not have been liable for indemnification under the fault standards set forth
        in
        Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
        misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
        be
        entitled to contribution from any seller of Registrable Securities who was
        not
        guilty of such fraudulent misrepresentation, and (iii)contribution (together
        with any indemnification or other obligations under this Agreement) by any
        seller of Registrable Securities shall be limited in amount to the net amount
        of
        proceeds received by such seller from the sale of such Registrable
        Securities.

       

      8.   REPORTS
        UNDER
        THE 1934 ACT.

       

      With
        a
        view to making available to the Investors the benefits of Rule 144 promulgated
        under the 1933 Act or any other similar rule or regulation of the SEC that
        may
        at any time permit the investors to sell securities of the Company to the
        public
        without registration (“Rule 144”), the Company agrees
        to:

       

      a.           make
        and keep public information available, as those terms are understood and
        defined
        in Rule 144;

       

      b.           file
        with the SEC in a timely manner all reports and other documents required
        of the
        Company under the 1933 Act and the 1934 Act so long as the Company remains
        subject to such requirements (it being understood that nothing herein shall
        limit the Company’s obligations under Section 4(c) of the Securities Purchase
        Agreement) and the filing of such reports and other documents is required
        for
        the applicable provisions of Rule 144; and

       

      c.           furnish
        to each Investor so long as such Investor owns Registrable Securities, promptly
        upon request, (i) a written statement by the Company that it has complied
        with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act,
        (ii) a copy of the most recent annual or quarterly report of the Company
        and such other reports and documents so filed by the Company, and
        (iii) such other information as may be reasonably requested to permit the
        Investors to sell such securities pursuant to Rule 144 without
        registration.

       

      9.   ASSIGNMENT
        OF
        REGISTRATION RIGHTS.

       

      The
        rights under this Agreement shall be automatically assignable by the Investors
        to any transferee of all or any portion of Registrable Securities if:
        (i) the Investor agrees in writing with the transferee or assignee to
        assign such rights, and a copy of such agreement is furnished to the Company
        within a reasonable time after such assignment, (ii) the Company is, within
        a reasonable time after such transfer or assignment, furnished with written
        notice of (a) the name and address of such transferee or assignee, and
        (b) the securities with respect to which such registration rights are being
        transferred or assigned, (iii) following such transfer or assignment, the
        further disposition of such securities by the transferee or assignee is
        restricted under the 1933 Act and applicable state securities laws, (iv)
        at or
        before the time the Company receives the written notice contemplated by clause
        (ii) of this sentence, the transferee or assignee agrees in writing with
        the
        Company to be bound by all of the provisions contained herein, (v) such transfer
        shall have been made in accordance with the applicable requirements of the
        Securities Purchase Agreement, and (vi) such transferee shall be an
“accredited investor” as that term defined in Rule 501 of
        Regulation D promulgated under the 1933 Act.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      10.   AMENDMENT
        OF
        REGISTRATION RIGHTS.

       

      Provisions
        of this Agreement may be amended and the observance thereof may be waived
        (either generally or in a particular instance and either retroactively or
        prospectively), only with written consent of the Company, each of the Initial
        Investors (to the extent such Initial Investor still owns Registrable
        Securities) and Investors who hold a majority interest of the Registrable
        Securities.  Any amendment or waiver effected in accordance with this
        Section 10 shall be binding upon each Investor and the Company.

       

      11.   MISCELLANEOUS.

       

      a.           A
        person or entity is deemed to be a holder of Registrable Securities whenever
        such person or entity owns of record such Registrable Securities.  If
        the Company receives conflicting instructions, notices or elections from
        two or
        more persons or entities with respect to the same Registrable Securities,
        the
        Company shall act upon the basis of instructions, notice or election received
        from the registered owner of such Registrable Securities.

       

      b.           Any
        notices required or permitted to be given under the terms hereof shall be
        sent
        by certified or registered mail (return receipt requested) or delivered
        personally or by courier (including a recognized overnight delivery service)
        or
        by facsimile and shall be effective five days after being placed in the mail,
        if
        mailed by regular United States mail, or upon receipt, if delivered personally
        or by courier (including a recognized overnight delivery service) or by
        facsimile, in each case addressed to a party.  The addresses for such
        communications shall be:

       

      If
        to the
        Company:

      

      Positron
        Corp.

      1304
        Langham Creek Drive, Suite 300

      Houston,
        Texas  77084

      Attn:  Chief
        Executive officer

      Telephone:  (281)
        492-7100

      Facsimile:  (281)

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      With
        a
        copy to:

      

      Levy
        & Boonshoft, P.C.

      477
        Madison Avenue

      New
        York,
        NY 10022

      Attn:  Peter
        Campitiello, Esq.

      Telephone:  (212)
        751-1414

      Facsimile:   (212)
        751-6943

      

      If
        to an
        Investor: to the address set forth immediately below such Investor’s name on the
        signature pages to the Securities Purchase Agreement.

       

      

      With
        a
        copy to:

      Ballard
        Spahr Andrews & Ingersoll, LLP

      1735
        Market Street

      51st
        Floor

      Philadelphia,
        Pennsylvania  19103

      Attention:  Gerald
        J. Guarcini, Esq.

      Telephone:  215-865-8625

      Facsimile:  215-864-8999

       

      c.           Failure
        of any party to exercise any right or remedy under this Agreement or otherwise,
        or delay by a party in exercising such right or remedy, shall not operate
        as a
        waiver thereof.

       

      d.           
        THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE
        WITH
        THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
        PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
        CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
        JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK
        WITH
        RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED
        INTO
        IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
        BOTH
        PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
        MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
        THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE
        DEEMED
        IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH
        SUIT OR
        PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
        PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
        A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
        CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
        OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
        ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES
        AND
        EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
        CONNECTION WITH SUCH DISPUTE.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      e.           In
        the event that any provision of this Agreement is invalid or unenforceable
        under
        any applicable statute or rule of law, then such provision shall be deemed
        inoperative to the extent that it may conflict therewith and shall be deemed
        modified to conform with such statute or rule of law.  Any provision
        hereof which may prove invalid or unenforceable under any law shall not affect
        the validity or enforceability of any other provision hereof.

       

      f.           This
        Agreement, the Notes, the Warrants and the Securities Purchase Agreement
        (including all schedules and exhibits thereto) constitute the entire agreement
        among the parties hereto with respect to the subject matter hereof and
        thereof.  There are no restrictions, promises, warranties or
        undertakings, other than those set forth or referred to herein and
        therein.  This Agreement and the Securities Purchase Agreement
        supersede all prior agreements and understandings among the parties hereto
        with
        respect to the subject matter hereof and thereof.

       

      g.           Subject
        to the requirements of Section 9 hereof, this Agreement shall be binding
        upon
        and inure to the benefit of the parties and their successors and
        assigns.

       

      h.           The
        headings in this Agreement are for convenience of reference only and shall
        not
        form part of, or affect the interpretation of, this Agreement.

       

      i.           This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original but all of which shall constitute one and the same agreement
        and shall become effective when counterparts have been signed by each party
        and
        delivered to the other party.  This Agreement, once executed by a
        party, may be delivered to the other party hereto by facsimile transmission
        of a
        copy of this Agreement bearing the signature of the party so delivering this
        Agreement.

       

      j.           Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      k.           Except
        as otherwise provided herein, all consents and other determinations to be
        made
        by the Investors pursuant to this Agreement shall be made by Investors holding
        a
        majority of the Registrable Securities, determined as if the all of the Notes
        then outstanding have been converted into for Registrable
        Securities.

       

      l.           The
        Company acknowledges that a breach by it of its obligations hereunder will
        cause
        irreparable harm to each Investor by vitiating the intent and purpose of
        the
        transactions contemplated hereby.  Accordingly, the Company
        acknowledges that the remedy at law for breach of its obligations under this
        Agreement will be inadequate and agrees, in the event of a breach or threatened
        breach by the Company of any of the provisions under this Agreement, that
        each
        Investor shall be entitled, in addition to all other available remedies in
        law
        or in equity, and in addition to the penalties assessable herein,  to
        an injunction or injunctions restraining, preventing or curing any breach
        of
        this Agreement and to enforce specifically the terms and provisions hereof,
        without the necessity of showing economic loss and without any bond or other
        security being required.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      m.           The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent, and no rules of strict construction
        will
        be applied against any party.

       

      (The
        rest of this page left intentionally
        blank.)                                                                                                

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the Company and the undersigned Initial Investors have
        caused this Agreement to be duly executed as of the date first above
        written.

       

      

      
        	
                POSITRON
                  CORPORATION 

              
	 	 
	 	 
	
                /s/
                  Patrick Rooney

              	 
	
                Patrick
                  Rooney

              	 
	
                Chairman

              	 
	 	 
	
                AJW
                  PARTNERS, INC. 

              
	
                By:  SMS
                  Group, LLC 

              
	 	 
	 	 
	
                /s/
                  Corey S. Ribotsky

              	 
	
                Corey
                  S. Ribotsky

              	 
	
                Manager

              	 
	 	 
	 	 
	
                AJW
                  OFFSHORE, LTD. 

              
	
                By:
                  First Street Manager II, LLC 

              
	 	 
	 	 
	
                /s/
                  Corey S. Ribotsky

              	 
	
                Corey
                  S. Ribotsky

              	 
	
                Manager

              	 
	 	 
	 	 
	
                AJW
                  QUALIFIED PARTNERS, LLC 

              
	
                By:  AJW
                  Manager, LLC 

              
	 	 
	 	 
	
                /s/
                  Corey S. Ribotsky

              	 
	
                Corey
                  S. Ribotsky

              	 
	
                Manager

              	 
	 	 
	 	 
	
                NEW
                  MILLENNIUM CAPITAL PARTNERS, II, LLC 

              
	
                By:  First
                  Street manager II, LLC 

              
	 	 
	 	 
	
                /s/
                  Corey S. Ribotsky

              	 
	
                Corey
                  S. Ribotsky

              	 
	
                Manager

              	 

      

       

       

      19Unassociated Document

    
      

    

    
      Exhibit
        10.38

       

    

    STOCK
      OPTION AWARD AGREEMENT

    Standard
      Terms And Conditions

    

    

    Fossil,
      Inc., a Delaware corporation
      (the “Company”) has adopted the 2004 Long-Term Incentive Plan of Fossil, Inc.
      (the “Long-Term Incentive Plan”) effective as of the Effective Date (as defined
      in the Long-Term Incentive Plan) with the objective of retaining key executives
      and other selected employees and of rewarding them for making major
      contributions to the success of the Company and its Subsidiaries (as defined
      in
      the Long-Term Incentive Plan).

    

    The
      Long-Term Incentive Plan provides
      that an employee of the Company or its Subsidiaries (the “Optionee”) may be
      granted an Award (as defined in the Long-Term Incentive Plan), which may consist
      of right to purchase a specified number of shares of common stock, par value
      $.01 per share (“Common Stock”), of the Company at a specified price, including
      rights in the form of nonqualified stock options.

    

    In
      consideration of the premises, the
      terms and conditions set forth herein, the terms of the Stock Option Award
      Letter Agreement (the “Award Letter”) between the Company and
      Optionee,  the mutual benefits to be gained by the performance thereof
      and other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, the parties hereto agree as follows:

    

    1.   
      Grant of
      Award; Nonqualified Stock Options.  Subject to the terms and
      conditions set forth herein, the Company hereby grants to the Optionee an Award
      consisting of options (the “Options”) to purchase an aggregate of up to but not
      exceeding  the number of shares of Common Stock (the “Option Shares”)
      from the Company and at a price per share as set forth in the Award Letter
      (which is equal to or greater than the fair market value of the Common Stock
      on
      the date of grant of the Options), such number of shares and such price per
      share being subject to adjustment from time to time as provided in Paragraph
      14
      of the Long-Term Incentive Plan.  The Options are intended to
      be  comply with the requirements of Section 409A of the Internal
      Revenue Code of 1986, as amended (the “Code”) and the regulations and other
      guidance issued thereunder, so that the Options shall be exempt from such
      requirements and this Agreement shall be interpreted to give effect to such
      intention; provided, however, that nothing contained herein shall be construed
      as a representation, guarantee or other undertaking on the part of the Company
      that the Options are or will be found to be exempt from and not subject to
      the
      requirements of Section 409A or any other regulations or guidance issued
      thereunder.  The Options shall not be treated as “incentive stock
      options” under Section 422 of the Code.

    

    The
      grant of this Award to the Optionee
      shall not confer any right to such Optionee (or any other Optionee) to be
      granted any Option or Award in the future under the Long-Term Incentive Plan,
      even if options have been granted in the past.

    

    2.   
      Option Period
      and Vesting.  The Options granted pursuant to this agreement (the
“Agreement”) may be exercised by the Optionee at any time during the ten-year
      period beginning on the Grant Date specified in the Award Letter (“Option
      Period”), subject to the limitation that such Options shall vest and become
      exercisable in accordance with the Vesting Schedule set forth in the Award
      Letter (it being understood that the right to purchase the Option Shares shall
      be cumulative, so that the Optionee may purchase on or after any anniversary
      and
      during the remainder of the Option Period that number of Option Shares which
      the
      Optionee was entitled to purchase but did not purchase during any preceding
      period or periods).

    

    Notwithstanding
      the Vesting Schedule set forth in the Award Letter: (i) the Committee may in
      its
      discretion at any time accelerate the vesting of the Options; and (ii) all
      of
      the Options granted hereunder shall vest upon a Change in Control of the
      Company.

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    3.    Method
      of Exercise.  The Options granted pursuant to this Agreement may
      be exercised by the Optionee by giving written notice of exercise to the
      Secretary of the Company, which notice shall (i) state the number of Option
      Shares with respect to which such Options are being exercised and (ii) be
      accompanied by a check, cash or money order payable to the Company in the full
      amount of the exercise price for such Options or, at the option of the Company,
      by means of a cashless exercise procedure through the use of a brokerage
      arrangement approved by the Company (or any combination of cash, check, money
      order or cashless exercise procedure).  Any shares of Common Stock
      delivered in satisfaction of all or a portion of the exercise price shall be
      appropriately endorsed for transfer to the Company or shall be accompanied
      by
      appropriate stock powers duly executed for transfer to the
      Company.  As promptly as practicable following the receipt of such
      written notification and payment, the Company shall deliver to the Optionee
      a
      certificate or certificates for the number of Option Shares with respect to
      which the Options have been exercised.

    

    4.    Termination
      in
      Event of Nonemployment. In the event that the Optionee ceases to be
      employed by the Company or any of its Subsidiaries during the Option Period
      for
      any reason other than death, the Options granted pursuant to this Agreement
      shall terminate, except to the extent that they are exercisable on the date
      the
      Optionee ceases to be so employed.  To the extent that such Options
      are exercisable on the date that the Optionee ceases to be employed by the
      Company or any of its Subsidiaries for any reason other than death, such Options
      may be exercised by the Optionee during the three-month period beginning on
      such
      date but shall terminate and be of no further force or effect at the end of
      such
      period.

    

    5.   
      Acceleration
      in Event of Death.  In the event that the Optionee ceases to be
      employed by the Company or any of its Subsidiaries during the Option Period
      by
      reason of death at a time when the Options granted pursuant hereto are still
      in
      force and unexpired, such unmatured Options shall be
      accelerated.  Such acceleration shall be effective as of the date of
      death of the Optionee, and each Option so accelerated may be exercised by the
      person or persons to whom the Optionee’s rights shall pass pursuant to Paragraph
      13 of the Long-Term Incentive Plan during the 12-month period beginning on
      such
      date but shall terminate at the end of such period.

    

    6.    Assignability.  The
      Options granted pursuant hereto shall not be assignable or transferable by
      the
      Optionee other than by will or the laws of descent and distribution or pursuant
      to a qualified domestic relations order as defined by Code or Title I of the
      Employee Retirement Income Security Act of 1974, as amended.  Any
      attempt to do so contrary to the provisions hereof shall be null and
      void.   No
      assignment of the Options herein granted shall be effective to bind the Company
      unless the Company shall have been furnished with written notice thereof and
      a
      copy of such documents and evidence as the Company may deem necessary to
      establish the validity of the assignment and the acceptance by the assignee
      or
      assignees of the terms and conditions hereof.

    

    7.   
      No Stockholder
      Rights.  The Optionee shall have no rights as a stockholder of
      the Company with respect to the Option Shares unless and until certificates
      evidencing such Option Shares shall have been issued by the Company to the
      Optionee.  Until such time, the Optionee shall not be entitled to
      dividends or distributions in respect of any Option Shares or to vote such
      shares on any matter submitted to the stockholders of the Company.  In
      addition, except as to adjustments that may from time to time be made by the
      Committee in accordance with the Long-Term Incentive Plan (and Paragraph 14
      below), no adjustment shall be made or required to be made in respect of
      dividends (ordinary or extraordinary, whether in cash, securities or any other
      property) or distributions paid or made by the Company or any other rights
      granted in respect of any Option Shares for which the record date for such
      payment, distribution or grant is prior to the date upon which certificates
      evidencing such Option Shares shall have been issued by the
      Company.

    

    8.    Administration.  The
      Committee shall have the power to interpret the Long-Term Incentive Plan, the
      Notice of Grant and this Award, and to adopt such rules for the administration,
      interpretation, and application of the Long-Term Incentive Plan as are
      consistent therewith and to interpret or revoke any such rules.  All
      actions taken and all interpretations and determinations made by the Committee
      shall be final and binding upon the Optionee, the Company, and all other
      interested persons.  No member of the Committee shall be personally
      liable for any action, determination, or interpretation made in good faith
      with
      respect to the Long-Term Incentive Plan or this Award.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    9.  
      Tax Withholding.  The Company may make such provision as it
      may deem appropriate for the withholding of any taxes that it determines is
      required in connection with the Options granted pursuant to this
      Agreement.  However, the Optionee may pay all or any portion of the
      taxes required to be withheld by the Company or paid by the Optionee in
      connection with the exercise of all or any portion of such Options by electing
      to have the Company withhold a portion of the Option Shares or by delivering
      shares of Common Stock theretofore owned by the Optionee having a Fair Market
      Value on the date of exercise, as determined in accordance with Paragraphs
      2 and
      9 of the Long-Term Incentive Plan, equal to the amount required to be withheld
      or paid.  The Optionee must make the foregoing election on or before
      the date upon which the amount of the taxes to be withheld is determined. If
      the
      Optionee is subject to the short-swing profits recapture provisions of Section
      16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      any such election shall be subject to such additional restrictions as may be
      imposed by the Committee to ensure that the satisfaction of withholding
      requirements by the withholding of a portion of the Option Shares or by delivery
      of shares of Common Stock theretofore owned by the Optionee shall be exempt
      from
      the short-swing profits recapture provisions of Section 16(b) of the Exchange
      Act.

    

    10.  
Restrictions
      and
      Related Representations. Upon the acquisition of any Option Shares pursuant
      to the exercise of the Options granted pursuant hereto, the Optionee may be
      required to enter into such written representations, warranties and agreements
      as the Company may reasonably request in order to comply with applicable
      securities laws, the Long-Term Incentive Plan or with this
      Agreement.  In addition, the certificate or certificates representing
      any Option Shares purchased upon the exercise of the Options will be stamped
      or
      otherwise imprinted with a legend in such form as the Company may require with
      respect to any applicable restrictions on sale or transfer, and the stock
      transfer records of the Company will reflect stop-transfer instructions, as
      appropriate, with respect to such shares.

    

    11.   Notices
      and
      Electronic Delivery.  Unless otherwise provided herein, any
      notice or other communication hereunder shall be in writing and shall be given
      by registered or certified mail unless the Company, in its sole discretion,
      decides to deliver any documents relating to the Option or future options that
      may be granted under the Long-Term Incentive Plan by electronic means to request
      Optionee’s consent to participate in the Long-Term Incentive Plan by electronic
      means.  Optionee hereby consents to receive such documents by
      electronic delivery and, if requested, to agree to participate in the Long-Term
      Incentive Plan through an on-line or electronic system established and
      maintained by the Company or another third party designated by the
      Company.  All notices of the exercise by the Optionee of the Options
      granted pursuant hereto shall be directed to Fossil, Inc., Attention: Secretary,
      at the Company’s then current address unless the Company, in writing or
      electronically, directs Optionee otherwise.  Any notice given by the
      Company to the Optionee directed to him at his address on file with the Company,
      and shall be effective to bind any other person who shall acquire rights
      hereunder.  The Company shall be under no obligation whatsoever to
      advise or notify the Optionee of the existence, maturity or termination of
      any
      rights hereunder and the Optionee shall be deemed to have familiarized himself
      with all matters contained herein and in the Long-Term Incentive Plan which
      may
      affect any of the Optionee’s rights or privileges hereunder.

    

    12.   Scope
      of
      Certain Terms.  Whenever the term “Optionee” is used herein under
      circumstances applicable to any other person or persons to whom this award
      may
      be assigned in accordance with the provisions of Paragraph 6 of this Agreement,
      the term “Optionee” shall be deemed to include such person or
      persons.  The term “Long-Term Incentive Plan” as used herein shall be
      deemed to include the 2004 Long-Term Incentive Plan of Fossil, Inc. and any
      subsequent amendments thereto, together with any administrative interpretations
      which have been adopted thereunder by the Committee pursuant to Paragraph 5
      of
      such plan.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    13.  General
      Restrictions.  This Award is subject to the requirement that, if
      at any time the Committee shall determine that (a) the listing, registration
      or
      qualification of the shares of Common Stock subject or related thereto upon
      any
      securities exchange or under any state or federal law; (b) the consent or
      approval of any government regulatory body; or (c) an agreement by the recipient
      of an Award with respect to the disposition of shares of Common Stock, is
      necessary or desirable (in connection with any requirement or interpretation
      of
      any federal or state securities law, rule or regulation) as a condition of,
      or
      in connection with, the granting of such Award or the issuance, purchase or
      delivery of shares of Common Stock thereunder, such Award may not be consummated
      in whole or in part unless such listing, registration, qualification, consent,
      approval or agreement shall have been effected or obtained free of any
      conditions not acceptable to the Committee.

    

    14.  
Adjustments
      for
      Changes in Capitalization.  In the event of any stock dividends,
      stock splits, recapitalizations, combinations, exchanges of shares, mergers,
      consolidations, liquidations, split-ups, split-offs, spin-offs or other similar
      changes in capitalization, or any distributions to stockholders, including
      a
      rights offering, other than regular cash dividends, changes in the outstanding
      stock of the Company by reason of any increase or decrease in the number of
      issued shares of Common Stock resulting from a split-up or consolidation of
      shares or any similar capital adjustment or the payment of any stock dividend,
      any share repurchase at a price in excess of the market price of the Common
      Stock at the time such repurchase is announced or other increase or decrease
      in
      the number of such shares, the Committee shall make appropriate adjustment
      in
      the number and kind of shares authorized by the Long-Term Incentive Plan, in
      the
      number, price or kind of shares covered by the Awards and in any outstanding
      Awards under the Long-Term Incentive Plan.  In the event of any
      adjustment in the number of shares covered by any Award, any fractional shares
      resulting from such adjustment shall be disregarded and each such Award shall
      cover only the number of full shares resulting from such
      adjustment.

    

    15.  Precondition
      of
      Legality.  Notwithstanding anything to the contrary contained
      herein, the Optionee agrees that he will not exercise the Options granted
      pursuant hereto, and that the Company will not be obligated to issue any Option
      Shares pursuant to this Agreement, if the exercise of the Options or the
      issuance of such shares would constitute a violation by the Optionee or by
      the
      Company of any provision of any law or regulation of any governmental authority
      or any national securities exchange or transaction quotation
      system.

    

    16.   Governing
      Law.  The Option grant and the provisions of this Agreement are
      governed by, and subject to, the laws of the State of Delaware, as provided
      in
      the Long-Term Incentive Plan.

    

    17.  
      No Right of
      Employment. Neither the granting of this Option, the exercise of any part
      hereof, nor any provision of the Long-Term Incentive Plan or this Award shall
      constitute or be evidence of any understanding, express or implied, on the
      part
      of the Company or any Subsidiary to employ the Participant for any specified
      period.

    

    18.  Amendment.  This
      Award may be amended only by a writing executed by the Company and the
      Participant which specifically states that it is amending this
      Award.  Notwithstanding the foregoing, this Award may be amended
      solely by the Committee by a writing which specifically states that it is
      amending this Award, so long as a copy of such amendment is delivered to the
      Participant, and provided that no such amendment adversely affecting the rights
      of the Participant hereunder may be made without the Participant’s written
      consent.  Without limiting the foregoing, the Committee reserves the
      right to change, by written notice to the Participant, the provisions of the
      Option or this Award in any way it may deem necessary or advisable to carry
      out
      the purpose of the grant as a result of any change in applicable laws or
      regulations or any future law, regulation, ruling, or judicial decision,
      provided that any such change shall be applicable only to Option which are
      then
      subject to restrictions as provided herein.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    19.  Incorporation
      of the Long-Term Incentive Plan. This Agreement is subject to the Long-Term
      Incentive Plan, a copy of which has been furnished to the Optionee and for
      which
      the Optionee acknowledges receipt.  The terms and provisions of the
      Long-Term Incentive Plan are incorporated by reference herein. In the event
      of a
      conflict between any term or provision contained here in and a term or provision
      of the Long-Term Incentive Plan, the applicable terms and provisions of the
      Long-Term Incentive Plan shall govern and prevail.

    

    20.   Severability.  If
      one or more of the provisions of this Award shall be held invalid, illegal
      or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions shall not in any way be affected or impaired thereby and
      the invalid, illegal or unenforceable provisions shall be deemed null and void;
      however, to the extent permissible by law, any provisions which could be deemed
      null and void shall first be construed, interpreted or revised retroactively
      to
      permit this Award to be construed so as to first the intent of this Award and
      the Long-Term Incentive Plan.

    

    21.   Construction.  The
      Option is being granted pursuant to Section 7 of the Long-Term Incentive Plan
      and are subject to the terms of the Long-Term Incentive Plan.  A copy
      of the Long-Term Incentive Plan has been given to the Optionee, and additional
      copies of the Long-Term Incentive Plan are available upon request during normal
      business hours at the principal executive offices of the Company.  To
      the extent that any provision of this Award violates or is inconsistent with
      an
      express provision of the Long-Term Incentive Plan, the Long-Term Incentive
      Plan
      provision shall govern and any inconsistent provision in this Award shall be
      of
      no force or effect.

     

     

    -5-

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