Document:

Exhibit 4.12

 

POWER
MEDICAL INTERVENTIONS, INC.

2004
Stock Incentive Plan

1.             Purpose.

The purpose of this plan
(the “Plan”) is to secure for Power Medical Interventions, Inc., a Delaware corporation (the “Company”)
and its shareholders the benefits arising from capital stock ownership by
employees, officers and directors of, and consultants or advisors to, the
Company and its parent and subsidiary corporations who are expected to
contribute to the Company’s future growth and success.  Under the Plan recipients may be awarded both
(i) Options (as defined in Section 2.1) to purchase the Company’s common stock,
par value $0.001 (“Common Stock”) and (ii) shares of the Common Stock (“Restricted
Stock Awards”).  Except where the context
otherwise requires, the term “Company” shall include any parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the “Code”).  Those provisions of the
Plan which make express reference to Section 422 of the Code shall apply only
to Incentive Stock Options (as that term is defined below).

2.             Types of Awards and Administration.

2.1           Options.  Options granted
pursuant to the Plan (“Options”) shall be authorized by action of the Board of
Directors of  Power Medical Interventions, Inc. (the “Board” or “Board of Directors”)
and may be either incentive stock options (“Incentive Stock Options”) meeting
the requirements of Section 422 of the Code or non-statutory Options which are
not intended to meet the requirements of Section 422.  The vesting of Options may be conditioned
upon the completion of a specified period of employment with the Company and/or
such other conditions or events as the Board may determine.  The Board may also provide that Options are
immediately exercisable subject to certain repurchase rights in the Company
dependent upon the continued employment of the optionee and/or such other
conditions or events as the Board may determine.

2.1.1        Incentive Stock Options.  All Options when granted are
intended to be non-statutory Options, unless the applicable Option Agreement
(as defined in Section 5.1) explicitly states that the Option is intended to be
an Incentive Stock Option.  Incentive
Stock Options may only be granted to employees of the Company.  For so long as the Code shall so provide,
Options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
Options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than
$100,000.  If an Option is intended to be
an Incentive Stock Option, and if for any reason such Option (or any portion
thereof) shall not qualify as an Incentive Stock Option, then, to the extent of
such nonqualification, such Option (or portion thereof) shall be regarded as a
non-statutory Option appropriately granted under the Plan provided that such
Option (or portion thereof) otherwise meets the Plan’s requirements relating to
non-statutory Options.

 

2.2           Restricted Stock Awards. 
The Board in
its discretion may grant Restricted Stock Awards, entitling the recipient to
acquire, for a purchase price determined by the Board, shares of Common Stock
subject to such restrictions and conditions as the Board may determine at the time
of grant (“Restricted Stock”), including continued employment and/or
achievement of pre-established performance goals and objectives.

2.3           Administration.  The Plan shall be administered by the
Board, whose construction and interpretation of the terms and provisions of the
Plan shall be final and conclusive.  The
Board may in its sole discretion issue Restricted Stock and grant Options and
issue shares upon exercise of such Options as provided in the Plan.  The Board shall have authority, subject to
the express provisions of the Plan, to construe Restricted Stock Agreements,
Option Agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of
Restricted Stock Agreements and Option Agreements, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the Plan.  The Board
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Restricted Stock Agreement or Option Agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency.  No director or person acting pursuant to
authority delegated by the Board shall be liable for any action or
determination under the Plan made in good faith.  The Board may, to the full extent permitted
by or consistent with applicable laws or regulations, delegate any or all of its
powers under the Plan to a committee (the “Committee”) appointed by the Board,
and if the Committee is so appointed all references to the Board in the Plan
shall mean and relate to such Committee, other than references to the Board in
this sentence and in Section 19 (as to amendment or termination of the Plan)
and Section 22.

3.             Eligibility.

Options may be granted, and
Restricted Stock may be issued, to persons who are, at the time of such grant
or issuance, employees, officers or directors of, or consultants or advisors
to, the Company; provided, that
the class of persons to whom Incentive Stock Options may be granted shall be
limited to employees of the Company.

3.1           10% Shareholder.  If any employee to whom an Incentive Stock Option is to be
granted is, at the time of the grant of such Option, the owner of stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (after taking into account the attribution of stock
ownership rules of Section 424(d) of the Code) (a “Greater Than 10% Shareholder”),
any Incentive Stock Option granted to such individual must:  (i) have an exercise price per share of not
less than 110% of the fair market value of one share of Common Stock at the
time of grant; and (ii) expire by its terms not more than five years from the
date of grant.

4.             Stock Subject to Plan.

Subject to adjustment as
provided in Section 15.2 below, the maximum number of shares of Common Stock
which may be issued under the Plan is 3,749,693 shares.  If an Option shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares 

 

 

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subject to such Option shall
again be available for subsequent Option grants or Restricted Stock Awards
under the Plan.  If shares of Restricted
Stock shall be forfeited to, or otherwise repurchased by, the Company pursuant
to a Restricted Stock Agreement, such repurchased shares shall again be
available for subsequent Option grants or Restricted Stock Awards under the
Plan.  If shares issued upon exercise of
an Option are tendered to the Company in payment of the exercise price of an
Option, such tendered shares shall again be available for subsequent Option
grants or Restricted Stock Awards under the Plan.

5.             Forms of Restricted Stock Agreements
and Option Agreements.

5.1           Option Agreement.  As a condition to the grant of an Option,
each optionee shall execute an option agreement (“Option Agreement”) in such
form not inconsistent with the Plan as may be approved by the Board.  Such Option Agreements may differ among
recipients.

5.2           Restricted Stock Agreement.  As a condition to
the issuance of Restricted Stock, each recipient thereof shall execute an
agreement (“Restricted Stock Agreement”) in such form not inconsistent with the
Plan as may be approved by the Board. 
Such Restricted Stock Agreements may differ among recipients.

5.3           “Lock-Up” Agreement.  Unless the Board
specifies otherwise, each Restricted Stock Agreement and Option Agreement shall
provide that upon the request of the Company or the managing underwriter(s),
the holder of any Option or the purchaser of any Restricted Stock shall, in
connection with any registration of securities of the Company under the United
States Securities Act of 1933, as amended from time to time (the “Act”), agree
in writing that for a period of time (not to exceed 180 days) from the
effective date of the registration statement under the Act for such offering,
the holder or purchaser will not sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any shares of the common
stock of the Company owned or controlled by him or her.

6.             Purchase Price.

6.1           General.  The purchase price
per share of Restricted Stock and per share of stock deliverable upon the
exercise of an Option shall be determined by the Board, provided, however, that
in the case of an Incentive Stock Option, the exercise price shall not be less
than 100% of the fair market value of such stock, as determined by the Board,
at the time of grant of such Option, or less than 110% of such fair market
value in the case of any Incentive Stock Option granted to a Greater Than 10%
Shareholder.

6.2           Payment of Purchase Price.  Option Agreements may provide for the
payment of the exercise price by delivery of cash or a check to the order of
the Company in an amount equal to the exercise price of such Options, or, to
the extent provided in the applicable Option Agreement, by one of the following
methods:

      (i) with the consent of the Board, by delivery to the Company of shares
of Common Stock of the Company that either have been purchased by the optionee
on the open market, or have been beneficially owned by the optionee for a
period of at least six months and are not then subject to restriction under any
Company plan (“mature shares”); 

 

 

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such surrendered shares
shall have a fair market value equal in amount to the exercise price of the
Options being exercised,

      (ii) with the consent of the Board, a personal recourse note issued by
the optionee to the Company in a principal amount equal to such aggregate
exercise price and with such other terms, including interest rate and maturity,
as the Company may determine in its discretion; provided,
however, that the interest rate borne by such note shall not be less
than the lowest applicable federal rate, as defined in Section 1274(d) of the
Code,

      (iii) with the consent of the Board, if the class of Common Stock is
registered under the Securities Exchange Act of 1934 at such time, subject to
rules as may be established by the Board, by delivery to the Company of a
properly executed exercise notice along with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and
acceptable to the Company for the purchase price,

      (iv) with the consent of the Board, by reducing the number of Option
shares otherwise issuable to the optionee upon exercise of the Option by a
number of shares of Common Stock having a fair market value equal to such
aggregate exercise price; provided, however, that the optionee otherwise holds
an equal number of mature shares,

      (v) with the consent of the Board, by any combination of such methods
of payment.

                The fair market value of any
shares of the Common Stock or other non-cash consideration which may be
delivered upon exercise of an Option shall be determined by the Board.  Restricted Stock Agreements may provide for
the payment of any purchase price in any manner approved by the Board at the
time of authorizing the issuance thereof. 
In determining the method of payment that it will accept with respect to
a given Option, the Board shall not be
required to take the same action as it has taken with any other Option.

7.             Option Period.

Notwithstanding any other
provision of the Plan or any Option Agreement, each Option and all rights
thereunder shall expire on the date specified in the applicable Option
Agreement, provided that such date shall not be later than ten years after the
date on which the Option is granted (or five years in the case of an Incentive
Stock Option granted to a Greater Than 10% Shareholder), and in either case,
shall be subject to earlier termination as provided in the Plan or Option
Agreement.

8.             Exercise of Options.

8.1           General.  Each Option shall
be exercisable either in full or in installments at such time or times and
during such period as shall be set forth in the agreement evidencing such
Option, subject to the provisions of the Plan. 
To the extent not exercised, installments shall accumulate and be exercisable,
in whole or in part, at any time after becoming exercisable, but not later than
the date the Option expires.

 

 

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8.2           Notice of Exercise.  An Option may be
exercised by the optionee by delivering to the Company on any business day a
written notice specifying the number of shares of Common Stock the optionee
then desires to purchase and specifying the address to which the certificates
for such shares are to be mailed (the “Notice”), accompanied by payment for
such shares.  In addition, the Company
may require any individual to whom an Option is granted, as a condition of
exercising such Option, to give written assurances in a substance and form
satisfactory to the Company to the effect that such individual is acquiring the
Common Stock subject to the Option for his or her own account for investment
and not with a view to the resale or distribution thereof, and to such other
effects as the Company deems necessary or advisable in order to comply with any
securities law(s).

8.3           Delivery.  As promptly as practicable after receipt
of such written notification and payment, the Company shall deliver or cause to
be delivered to the optionee certificates for the number of shares with respect
to which such Option has been so exercised, issued in the optionee’s name;
provided, however, that such delivery shall be deemed effected for all purposes
when the Company or a stock transfer agent shall have deposited such
certificates in the United States mail, addressed to the optionee, at the
address specified in the Notice.

9.             Transferability of Options.

No Incentive Stock Option
shall be assignable or transferable by the person to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and during the life of an optionee, an Incentive Stock Option
shall be exercisable only by the optionee. 
The Board may, in its discretion, determine the extent to which a
non-statutory Option shall be transferable.

10.          Termination of Employment; Disability;
Death.  Except as may be otherwise expressly provided in the terms
and conditions of the Option Agreement, Options shall terminate on the earliest
to occur of:

(i)
           the date of expiration thereof;

(ii)                                  immediately upon termination of the optionee’s employment with, or
provision of services to, the Company by the Company for Cause (as hereinafter
defined);

(iii)                               3 months (or, in the case of an Incentive Stock Option, 90 days) after the
date of voluntary termination of the optionee’s employment with, or provision
of services to, the Company by the optionee (other than for death or permanent
disability as defined below); or

(iv)                              3 months (or, in the case of an Incentive Stock Option, 90 days) after the
date of termination of the optionee’s employment with, or provision of services
to, the Company by the Company without Cause (other than for death or permanent
disability as defined below).

 

 

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Until the date on which the
Option so expires, the optionee may exercise that portion of his or her Option
which is exercisable at the time of termination of the employment or service
relationship.

An employment or service
relationship between the Company and the optionee shall be deemed to exist during
any period during which the optionee is employed by or providing services to
the Company.  Whether an authorized leave
of absence or an absence due to military or government service shall constitute
termination of the employment relationship between the Company and the optionee
shall be determined by the Board at the time thereof.

For purposes of this Section
10, the term “Cause” shall mean (a) any material breach by the optionee of any
agreement to which the optionee and the Company are both parties, (b) any act
(other than retirement) or omission to act by the optionee which may have a
material and adverse effect on the Company’s business or on the optionee’s
ability to perform services for the Company, including, without limitation, the
commission of any crime (other than minor traffic violations), or (c) any
material misconduct or material neglect of duties by the optionee in connection
with the business or affairs of the Company.

In the event of the
permanent and total disability or death of an optionee while in an employment
or other relationship with the Company and before the date of expiration of
such option, such option shall terminate on the earlier of such date of
expiration or one
year following the date of such disability or death.  After disability or death, the optionee (or
in the case of death, his or her executor, administrator or any person or
persons to whom this option may be transferred by will or by laws of descent
and distribution) shall have the right, at any time prior to such termination,
to exercise the option to the extent the optionee was entitled to exercise such
option as of the date of his or her disability or death.  An optionee is permanently and totally
disabled if he or she is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to last for a continuous period of not less than 12 months;
permanent and total disability shall be determined in accordance with Section
22(e)(3) of the Code and the regulations issued thereunder.

11.          Rights as a Shareholder.  No optionee shall have any rights
as a shareholder with respect to any shares covered by an Option (including,
without limitation, any rights to receive dividends or non-cash distributions
with respect to such shares) until the date of issue of a stock certificate to
him or her for such shares.  No
adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.

12.          Additional Provisions.  The Board may, in its sole
discretion, include additional provisions in Restricted Stock Agreements and
Option Agreements, including, without limitation, restrictions on transfer,
rights of the Company to repurchase shares of Restricted Stock or shares of
Common Stock acquired upon exercise of Options, commitments to pay cash
bonuses, to make, arrange for or guaranty loans or to transfer other property
to optionees upon exercise of Options, or such other provisions as shall be
determined by the Board; provided that
such additional provisions shall not be inconsistent with any other term or
condition of the Plan and such additional provisions shall not be such as to
cause any Incentive Stock Option to fail to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.

 

 

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13.          Acceleration, Extension, Etc. 
The Board may, in its sole discretion, (i) accelerate the date or dates
on which all or any particular Option or Options may be exercised or (ii)
extend the period or periods of time during which all, or any particular,
Option or Options may be exercised.

14.          Right of First Refusal. 
The Board may by reference to this Section 14 subject the recipient of
any Option to the terms set forth in Exhibit A hereto.  No action by the Board regarding whether any optionee
shall be subject to such terms shall serve to bind the Board in its
determination as to whether any other recipient shall be subject to such
terms.  Each recipient of any Option
subject to the terms set forth in Exhibit A hereto is referred to as a “Restricted
Optionee.”

15.          Adjustment Upon Changes in
Capitalization

15.1         No Effect of Options upon
Certain Corporate Transactions. 
The existence of outstanding Options shall not affect in any way the
right or power of the Company to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business, or any merger or consolidation, or any issue of
Common Stock, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

15.2         Adjustment Provisions.  If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets
are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (x) the
maximum number and kind of shares reserved for issuance under the Plan, (y) the
number and kind of shares or other securities subject to any then outstanding
Options, and (z) the price for each share subject to any then outstanding
Options, without changing the aggregate purchase price as to which such Options
remain exercisable.  Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment would cause the Plan to fail to comply with Section 422 of the Code.

15.3         No Adjustment in Certain Cases.  Except as hereinbefore expressly provided,
the issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefore, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Common Stock then subject to outstanding options.

 

 

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15.4         Board Authority to Make
Adjustments.  Any adjustments under this Section 15 will be made by the Board,
whose determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. 
No fractional shares will be issued under the Plan on account of any
such adjustments.

16.          Effect of Certain Transactions

16.1         General.  In the event of a consolidation or merger or
sale of all or substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for securities, cash or other
property of any other corporation or business entity, or in the event of a
liquidation of the Company, the Board, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to some or all outstanding
Options (and need not take the same action as to each such Option): (i) provide
that such Options shall be assumed, or equivalent Options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate thereof), provided that any such Options substituted
for Incentive Stock Options shall meet the requirements of Section 424(a) of
the Code, (ii) upon written notice to the optionees, provide that all
unexercised Options will terminate immediately prior to the consummation of
such transaction unless exercised by the optionee to the extent otherwise then
exercisable  within a
specified period following the date of such notice, (iii) in the event of a
merger under the terms of which holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the merger (the “Merger Price”), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such outstanding Options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding Options, in exchange for the
termination of such Options, and (iv) provide that all or any outstanding
Options shall become exercisable in part or in full immediately prior to such
event.

16.2         Substitute Options.  The Company may grant Options in substitution
for options held by employees of another corporation who become employees of
the Company, as the result of a merger or consolidation of the employing
corporation with the Company or as a result of the acquisition by the Company,
of property or stock of the employing corporation.  The Company may direct that substitute
Options be granted on such terms and conditions as the Board considers
appropriate in the circumstances.

16.3         Restricted Stock.  In the event of a business combination or
other transaction of the type detailed in Section 16.1, any securities, cash or
other property received in exchange for shares of Restricted Stock shall
continue to be governed by the provisions of any Restricted Stock Agreement
pursuant to which they were issued, including any provision regarding vesting,
and such securities, cash, or other property may be held in escrow on such
terms as the Board may direct, to ensure compliance with the terms of any such
Restricted Stock Agreement.

 

 

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17.          No Special Employment Rights.  Nothing contained
in the Plan or in any Option or Restricted Stock Agreement shall confer upon
any optionee or holder of Restricted Stock any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of such person.

18.          Other Employee Benefits.  The amount of
any compensation deemed to be received by an employee as a result of the
issuance of shares of Restricted Stock or the grant or exercise of an Option or
the sale of shares received upon such award or exercise will not constitute
compensation with respect to which any other employee benefits of such employee
are determined, including, without limitation, benefits under any bonus,
pension, profit-sharing, life insurance or salary continuation plan, except as
otherwise specifically determined by the Board.

19.          Amendment of the Plan.

19.1         The Board
may at any time, and from time to time, modify or amend in any respect or
terminate the Plan.  If shareholder
approval is not obtained within twelve months after any amendment increasing
the number of shares authorized under the Plan or changing the class of persons
eligible to receive Options under the Plan, no Options granted pursuant to such
amendments shall be deemed to be Incentive Stock Options and no Incentive Stock
Options shall be issued pursuant to such amendments thereafter.

19.2         The
termination or any modification or amendment of the Plan shall not, without the
consent of an optionee or the holder of Restricted Stock, adversely affect his
or her rights under an Option or Restricted Stock Award previously granted to
him or her.  With the consent of the
recipient of Restricted Stock or optionee affected, the Board may amend
outstanding Restricted Stock Agreements or Option Agreements in a manner not
inconsistent with the Plan.  The Board
shall have the right to amend or modify the terms and provisions of the Plan
and of any outstanding Incentive Stock Options to the extent necessary to
qualify any or all such Options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code.

20.          Withholding.  The Company shall
have the right to deduct from payments of any kind otherwise due to the
optionee or recipient of Restricted Stock, any federal, state or local taxes of
any kind required by law to be withheld with respect to issuance of any shares
of Restricted Stock or shares issued upon exercise of Options.  Prior to delivery of any Common Stock
pursuant to the terms of this Plan, the Board has the right to require that the
optionee or recipient of Restricted Stock remit to the Company an amount
sufficient to satisfy any minimum tax withholding obligation.  Subject to the prior approval of the Company,
which may be withheld by the Company in its sole discretion, the obligor may
elect to satisfy any minimum withholding obligations, in whole or in part, (i)
by causing the Company to withhold shares of Common Stock otherwise issuable,
or (ii) by delivering to the Company a sufficient number of mature shares of
Common Stock of the Company.  The shares
so withheld shall have a fair market value equal to such minimum withholding
obligation.  The fair market value of the
shares used to satisfy such minimum withholding obligation shall be determined
by the Company as of the date that the amount of tax to be withheld is to be
determined.  A person who has made an
election pursuant to this Section 20 may only satisfy his or her withholding
obligation with 

 

 

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shares of Common Stock which are not subject
to any repurchase, forfeiture, unfulfilled vesting or other similar
restrictions.

21.          Effective Date and Duration of the
Plan.

21.1         Effective Date.  The Plan shall become effective when adopted
by the Board of Directors.  If
shareholder approval is not obtained within twelve months after the date of the
Board’s adoption of the Plan, no Options previously granted under the Plan
shall be deemed to be Incentive Stock Options and no Incentive Stock Options
shall be granted thereafter.  Amendments
to the Plan not requiring shareholder approval shall become effective when
adopted by the Board.  Amendments
requiring shareholder approval shall become effective when adopted by the
Board, but if shareholder approval is not obtained within twelve months of the
Board’s adoption of such amendment, any Incentive Stock Options granted
pursuant to such amendment shall be deemed to be non-statutory Options provided
that such Options are authorized by the Plan. 
Subject to this limitation, Options may be granted under the Plan at any
time after the effective date and before the date fixed for termination of the
Plan.

21.2         Termination.  Unless sooner terminated by action of the
Board of Directors, the Plan shall terminate upon the close of business on the
day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors.

22.          Requirements
of Law.  The Company shall not be required
to sell or issue any shares under any Option or Restricted Stock Agreement if
the issuance of such shares shall constitute a violation by the optionee, the
Restricted Stock Award recipient, or by the Company of any provisions of any
law or regulation of any governmental authority.  In addition, in connection with the Act, the
Company shall not be required to issue any shares upon exercise of any Option
unless the Company has received evidence satisfactory to it to the effect that
the holder of such Option will not transfer such shares except pursuant to a
registration statement in effect under the Act or unless an opinion of counsel
satisfactory to the Company has been received by the Company to the effect that
such registration is not required in connection with any such transfer. Any
determination in this connection by the Board shall be final, binding and
conclusive.  In the event the shares
issuable on exercise of an Option are not registered under the Act or under the
securities laws of each relevant state or other jurisdiction, the Company may
imprint on the certificate(s) appropriate legends that counsel for the Company
considers necessary or advisable to comply with the Act or any such state or
other securities law.  The Company may
register, but in no event shall be obligated to register, any securities
covered by the Plan pursuant to the Act; and in the event any shares are so
registered the Company may remove any legend on certificates representing such
shares.  The Company shall not be
obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority.

23.          Governing
Law.  This Plan and each Option or
Restricted Stock Agreement shall be governed by the laws of Pennsylvania, without regard to its
principles of conflicts of law.

 

 

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Right of First Refusal

1.             General.  In the event that a Restricted
Optionee (which term for purposes of this section shall mean the Restricted Optionee
and his or her executors, administrators and any other person to whom any
Option held by the Restricted Optionee may be transferred by will or the laws
of descent and distribution) desires to sell, assign or otherwise transfer
during the Restricted Period (as defined below) any of the shares issued upon
the exercise of any Option, the Restricted Optionee shall first offer such
shares to the Company by giving written notice of the Restricted Optionee’s
desire so to sell, assign or transfer such shares.  For the purposes of this Right of First
Refusal, “Restricted Period” means, with respect to any Restricted Optionee,
the period of time commencing upon the grant of any Option to such Restricted
Optionee and ending immediately prior to the effective date of a registration
statement under the Act that covers a public offering of its Common Stock.  Terms used but not otherwise defined in this Exhibit
A have the meanings set forth in the 2004 Stock Incentive Plan to which it
is an exhibit.

2.             Notice of Intended Transfer.  The notice shall state the
number of shares offered, the name of the person or persons to whom it is
proposed to sell, assign or transfer such shares and the price at which such
shares are intended to be sold, assigned or transferred.  Such notice shall constitute an offer to the
Company for the Company to purchase the number of shares set forth in the notice
at a price per share equal to the price stated therein.

3.             Company to Accept or Decline Within
30 Days.  The Company may accept the
offer as to all, but not less than all, such shares by notifying the Restricted
Party in writing within 30 days after receipt of such notice of its acceptance
of the offer.  If the offer is accepted,
the Company shall have 60 days within which to purchase the offered shares at a
price per share as aforesaid.  If within
the applicable time periods the Restricted Party does not receive notice of the
Company’s intention to purchase the offered shares, or if payment in full of
the purchase price is not made by the Company, the offer shall be deemed to
have been rejected and the Restricted Party may transfer title to such shares
within 90 days from the date of the Restricted Party’s written notice to the
Company of the Restricted Party’s intention to sell, but such transfer shall be
made only to the proposed transferee and at the proposed price as stated in
such notice and after compliance with any other provisions of any Option
applicable to the transfer of such shares.

4.             Transferred Shares to Remain
Subject to Right of First Refusal.  Shares that are
so transferred to such transferee shall remain subject to the rights of the
Company set forth in this Exhibit A. 
As a condition to such transfer, such transferee shall execute and
deliver all such documents as the Company may require to evidence the binding
agreement of such transferee so to remain subject to the rights of the Company.

5.             Remedies of Company.  No sale, assignment, pledge
or transfer of any of the shares covered by any Option shall be effective or
given effect on the books of the Company unless all of the applicable
provisions of this Exhibit A have been duly complied with, and the
Company may inscribe on the face of any certificate representing any of such
shares a legend referring to the provisions of this Exhibit A.  If any transfer of shares is made or
attempted in violation of the foregoing restrictions, or if shares are not
offered to the Company as required 

 

 

11

hereby, the Company shall
have the right to purchase such shares from the owner thereof or his transferee
at any time before or after the transfer, as herein provided.  In addition to any other legal or equitable
remedies which it may have, the Company may enforce its rights by actions for
specific performance (to the extent permitted by law) and may refuse to
recognize any transferee as one of its stockholders for any purpose, including,
without limitation, for purposes of dividend and voting rights, until all
applicable provisions hereof have been complied with.

6.             Shares Subject to Right of First Refusal.  For purposes of the Right of First Refusal
pursuant to this Exhibit A, the term “shares” shall mean any and all
new, substituted or additional securities or other property issued to the
Restricted Party, by reason of his or her ownership of Common Stock pursuant to
the exercise of any Option, in connection with any stock dividend, liquidating
dividend, stock split or other change in the character or amount of any of the
outstanding securities of the Company, or any consolidation, merger or sale of
all or substantially all of the assets of the Company.

7.             Legends on Stock Certificates.  Any certificate representing
shares of stock subject to the provisions of this Exhibit A may have
endorsed thereon one or more legends, substantially as follows:

(i)                                     “Any
disposition of any interest in the securities represented by this certificate
is subject to restrictions, and the securities represented by this certificate
are subject to certain restrictions, contained in a an agreement between the
record holder hereof and the Company, a copy of which will be mailed to any
holder of this certificate without charge upon receipt by the Company of a
written request therefor.”

(ii)                                  “The shares of
stock represented by this certificate have not been registered under the
Securities Act of 1933 or under the securities laws of any state and may not be
pledged, hypothecated, sold or otherwise transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company, in form and substance satisfactory to the Company,
that such registration is not required.”

 

 

12

NON-STATUTORY STOCK OPTION

Granted by

POWER MEDICAL INTERVENTIONS, INC. (the “Company”)

Under the 2004 Stock Incentive Plan

 

This Option is and shall be
subject in every respect to the provisions of the Company’s 2004 Stock
Incentive Plan, as amended from time to time, which is incorporated herein by
reference and made a part hereof.  The
optionee (the “Optionee”) hereby accepts this Option subject to all the terms
and provisions of the Plan and agrees that (a) in the event of any conflict
between the terms hereof and those of the Plan, the latter shall prevail, and
(b) all decisions under and interpretations of the Plan by the Board or the
Committee shall be final, binding and conclusive upon the Optionee and his or
her heirs and legal representatives.

1.             Name
of Optionee:

2.             Date
of Grant:

3.                                       Maximum number of shares for

which this Option is exercisable:

4.             Exercise
(purchase) price per share:

5.             Payment
method:

a personal, certified or
bank check or postal money order payable to the order of the Company for an
amount equal to the exercise price of the shares being purchased plus any
applicable withholding taxes; or

with the consent of the
Board, any of the other methods set forth in the Plan.

6.                                       Expiration Date of Option:

7.                                       Vesting Schedule:  This Option
shall become exercisable for 25% of the maximum number of shares granted on the
first anniversary of the Date of Grant, and shall become exercisable for an
additional 6.25% of such total number at the end of each 3-month period
thereafter; so that the Option shall be fully vested on the fourth anniversary
of the Date of Grant.  All vesting shall
cease upon the date of termination of employment or provision of services.  See
the vesting schedule attached hereto as Exhibit A.

8.                                       Termination
of Employment.  This Option shall terminate
on the earliest to occur of:

(i)
           the date of expiration thereof;

 

 

13

(ii)                                  immediately upon termination of the Optionee’s employment with or
services to the Company by the Company for Cause (as defined in the Plan);

(iii)                               3 months after the date of voluntary termination of
employment or services by the Optionee (other than for death or permanent
disability as defined in the Plan); or

(iv)                              3 months after the date of termination of the Optionee’s
employment with or services to the Company by the Company without Cause (other
than for death or permanent disability as defined in the Plan).

9.                                       Company’s Right of First Refusal.   Prior to the effective
date of a registration statement covering shares of the Company’s Common Stock,
any shares of stock issued pursuant to exercise of this Option shall be subject
to the Company’s right of first refusal as set forth in Section 14 of the Plan.

10.                                 Lock-Up Agreement.  The
Optionee agrees for a period of up to 180 days from the effective date of any
registration of securities of the Company under the Securities Act of 1933, as
amended (the “Securities Act”), upon request of the Company or underwriters
managing any underwritten offering of the Company’s securities, not to sell,
make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any shares issued pursuant to the exercise of this Option,
without the prior written consent of the Company and such underwriters.

11.                                 Tax Withholding.  The
Company’s obligation to deliver shares shall be subject to the Optionee’s
satisfaction of any federal, state and local income and employment tax
withholding requirements.

12.                                 Notice.
 Any notice to be given to the
Company hereunder shall be deemed sufficient if addressed to the Company and
delivered to the office of the Company, Power
Medical Interventions, Inc., 110 Union Square Drive, New Hope, PA 18938,
Attention: Chief Financial Officer or Vice President - Finance, or such other
address as the Company may hereafter designate.

Any
notice to be given to the Optionee hereunder shall be deemed sufficient if
addressed to and delivered in person to the Optionee at his or her address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Optionee at such address.

 

 

14

IN WITNESS WHEREOF, the
parties have executed this Option, or caused this Option to be executed, as of
the Date of Grant.

	
   

  	
  POWER MEDICAL
  INTERVENTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 

The
undersigned Optionee hereby acknowledges receipt of a copy of the Plan and this
Option and agrees to the terms of this Option and the Plan.

 

	
   

  	
   

  	
   

  
	
  Optionee

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  

 

 

15

Exhibit A

[Insert Vesting Schedule Here]

 

16

Exhibit A

POWER
MEDICAL INTERVENTIONS, INC.

Form of
Exercise of Non-Statutory Stock Option

(To be completed and signed only on exercise of Option)

I hereby exercise the
Non-Statutory Stock Option (the “Option”) granted by Power Medical
Interventions, Inc. (the “Company”) to me on ______________________, 20__,
subject to all the terms and provisions thereof as contained in the Option and
in the Power Medical Interventions, Inc. 2004 Stock Incentive Plan (the “Plan”)
referred to therein, and notify you of my desire to purchase shares pursuant to
the Option.

Enclosed is my check in the
amount of $___________ in full payment for _________ shares of the Company’s
Common Stock, $0.001 par value per share (the “Shares”), and any applicable
withholding taxes.

I understand that the Shares
have not been registered under the Securities Act of l933, as amended (the “Act”),
or registered or qualified under the securities or “Blue Sky” laws of any
jurisdiction, and are being sold pursuant to exemptions contained in the Act
and exemptions contained in other applicable securities or “Blue Sky” laws.

I am acquiring the Shares
for my own account for investment, and not for, with a view to, or in
connection with the resale, distribution or disposition thereof.  I have no present intention to sell,
hypothecate, distribute or otherwise transfer any of the Shares or any interest
therein.  The nature and amount of my
investment in the Shares are consistent with my investment objectives,
abilities, and resources.  I understand
that the Shares are an illiquid investment, which will not become freely
transferable by reason of any “change of circumstances” whatsoever.  I have adequate means of providing for my
current needs and possible contingencies and have no need for liquidity in my
investment.

I understand that the Shares
will constitute “restricted securities” within the meaning of Rule l44
promulgated under the Act and that, as such, the Shares must be held
indefinitely unless they are subsequently registered under the Act or unless an
exemption from the registration requirements thereof is available.  I have been advised that Rule 144, which
permits the resale, subject to various terms and conditions, of small amounts
of such “restricted securities” after they have been held for one year, does
not now apply to the Company, because the Company is not now required to file,
and does not file, reports under the Securities Exchange Act of l934, and
because information concerning the Company substantially equivalent to that
which would be available if the Company were required to file such reports is
not now publicly available.  I understand
that the Company may become a reporting entity at some future date, but that no
assurance can be given that it will do so and the Company has no obligation to
me to do so.

In connection with my
purchase of the Shares, I accept the condition that the Company will maintain “stop
transfer” orders with respect to the Shares. 
I understand that any certificate or other instrument is issued to
represent the Shares will bear a conspicuous legend in substantially the
following form:

 

 

A-1

“Any disposition of any
interest in the securities represented by this certificate is subject to
restrictions, and the securities represented by this certificate are subject to
certain options, contained in a certain agreement between the record Optionee
hereof and the Company, a copy of which will be mailed to any Optionee of this
certificate without charge upon receipt by the Company of a written request
therefor.”

“The shares of stock
represented by this certificate have not been registered under the Securities
Act of 1933 or under the securities laws of any state and may not be pledged,
hypothecated, sold or otherwise transferred except upon such registration or
upon receipt by the Company of an opinion of counsel satisfactory to the
Company, in form and substance satisfactory to the Company, that such
registration is not required.”

I understand that I may be
required to enter into a “lock-up” agreement with respect to the Shares
pursuant to Section 5.3 of the plan.

I understand that the Shares
will be subject to the right of first described in Section 14 of the Plan.

I have fully investigated
the Company and its business and financial condition and have knowledge of the
Company’s current activities and financial condition.  I acknowledge that the Company has granted me
and my attorney or accountant access to all information about the Company which
we have requested and has offered each of us access to all further information
which we deemed relevant to an investment decision with respect to the Shares.  I, as well as my attorney or accountant, have
had the opportunity to ask questions of, and receive answers from,
representatives of the Company concerning such information and the Company’s
financial condition and prospects.  I
believe that the nature and amount of the Shares I am purchasing is consistent
with my investment objectives, abilities and resources.

	
   

  	
   

  
	
   

  	
  Signature
  of Option Optionee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Printed
  Name of Option Optionee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  

A-2Exhibit 4.13

POWER MEDICAL INTERVENTIONS, INC.

2007 EQUITY INCENTIVE PLAN

 

SECTION 1. 
General Purpose of the Plan; Definitions

The purpose of this Power
Medical Interventions, Inc. 2007 Equity Incentive Plan (the “Plan”) is to
encourage and enable officers and employees of, and other persons providing
services to, Power Medical Interventions, Inc.  (the
“Company”) and its Affiliates to acquire a proprietary interest in the
Company.  It is anticipated that
providing such persons with a direct stake in the Company’s welfare will assure
a closer identification of their interests with those of the Company and its
shareholders, thereby stimulating their efforts on the Company’s behalf and
strengthening their desire to remain with the Company.

The
following terms shall be defined as set forth below:

“Affiliate”  means a parent corporation, if any, and
each subsidiary corporation of the Company, as those terms are defined in
Section 424 of the Code.

“Award” or “Awards”, except
where referring to a particular category of grant under the Plan, shall include
Incentive Stock Options, Non-Statutory Stock Options, Restricted Stock Awards,
Unrestricted Stock Awards, Performance Share Awards and Stock Appreciation
Rights.  Awards shall be evidenced by a
written agreement (which may be in electronic form and may be electronically
acknowledged and accepted by the recipient) containing such terms and
conditions not inconsistent with the provisions of this Plan as the Committee
shall determine.

“Board”
means the Board of Directors of the Company.

“Cause” shall mean, with
respect to any Award holder, a determination by the Company (including the
Board) or any Affiliate that the Holder’s employment or other relationship with
the Company or any such Affiliate should be terminated as a result of (i) a
material breach by the Award holder of any agreement to which the Award holder
and the Company (or any such Affiliate) are parties, (ii) any act (other than
retirement) or omission to act by the Award holder that may have a material and
adverse effect on the business of the Company, such Affiliate or any other
Affiliate or on the Award holder’s ability to perform services for the Company
or any such Affiliate, including, without limitation, the proven or admitted
commission of any crime (other than an ordinary traffic violation), or (iii)
any material misconduct or material neglect of duties by the Award holder in
connection with the business or affairs of the Company or any such Affiliate.

“Change
of Control” shall have the meaning set forth in Section 15.

“Code” means the Internal
Revenue Code of 1986, as amended, and any successor Code, and related rules,
regulations and interpretations.

“Committee”
shall have the meaning set forth in Section 2.

 

“Disability” means
disability as set forth in Section 22(e)(3) of the Code.

“Effective Date” means the
date on which the Plan is approved by the Board of Directors as set forth in
Section 17.

“Eligible
Person” shall have the meaning set forth in Section 4.

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

“Fair Market Value” on any
given date means the closing price per share of the Stock on such date as
reported by such registered national securities exchange on which the Stock is
listed, including the Nasdaq Global Market, or, if the Stock is not listed on
such an exchange, as quoted on NASDAQ; provided, that, if there is no trading
on such date, Fair Market Value shall be deemed to be the closing price per
share on the last preceding date on which the Stock was traded.  If the Stock is not listed on any registered
national securities exchange or quoted on NASDAQ, the Fair Market Value of the
Stock shall be determined in good faith by the Committee.

“Incentive Stock Option”
means any Stock Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.

“Non-Employee Director”
means any director who: (i) is not currently an officer of the Company or an
Affiliate, or otherwise currently employed by the Company or an Affiliate, (ii)
does not receive compensation, either directly or indirectly, from the Company
or an Affiliate, for services rendered as a consultant or in any capacity other
than as a director, except for an amount that does not exceed the dollar amount
for which disclosure would be required pursuant to Rule 404(a) of Regulation
S-K promulgated by the SEC, (iii) does not possess an interest in any other
transaction for which disclosure would be required pursuant to Rule 404(a)
of  Regulation S-K, and (iv) is not
engaged in a business relationship for which disclosure would be required
pursuant to Rule 404(b) of Regulation S-K.

“Non-Statutory Stock Option”
means any Stock Option that is not an Incentive Stock Option.

“Normal Retirement” means
retirement in good standing from active employment with the Company and its
Affiliates in accordance with the retirement policies of the Company and its
Affiliates then in effect.

“Option” or “Stock Option”
means any option to purchase shares of Stock granted pursuant to Section 5.

“Outside Director” means any
director who (i) is not an employee of the Company or of any “affiliated
group,” as such term is defined in Section 1504(a) of the Code, which includes
the Company (an “Affiliated Group Member”), (ii) is not a former employee of
the Company or any Affiliated Group Member who is receiving compensation for
prior services (other than benefits under a tax-qualified retirement plan)
during the Company’s or any Affiliated Group Member’s taxable year, (iii) has
not been an officer of the Company or any Affiliated Group Member and (iv) does
not receive remuneration from the Company or any Affiliated Group Member,
either directly or indirectly, in any capacity other than as a director.  “Outside Director” shall be determined in
accordance with Section 162(m) of the Code and the Treasury regulations issued
thereunder.

 

2

 

“Performance Share Award”
means an Award pursuant to Section 8.

“Restricted Stock Award”
means an Award granted pursuant to Section 6.

“SEC” means the Securities
and Exchange Commission or any successor authority.

“Stock” means the common
stock, $.001 par value per share, of the Company, subject to adjustments
pursuant to Section 3.

“Stock Appreciation Right”
means an Award granted pursuant to Section 9.

“Unrestricted
Stock Award” means Awards granted pursuant to Section 7.

SECTION 2.  Administration of
Plan; Committee Authority to Select Participants and Determine Awards.

(a)           Committee.  It is intended that the Plan shall be
administered by the Compensation Committee of the Board (the “Committee”),
consisting of not less than two (2) persons each of whom qualifies as an
Outside Director and a Non-Employee Director, but the authority and validity of
any act taken or not taken by the Committee shall not be affected if any person
administering the Plan is not an  Outside
Director or a Non-Employee Director. 
Except as specifically reserved to the Board under the terms of the
Plan, and subject to any limitations set forth in the charter of the Committee,
the Committee shall have full and final authority to operate, manage and
administer the Plan on behalf of the Company.

(b)           Powers of Committee.  The Committee shall have the power and
authority to grant and modify Awards consistent with the terms of the Plan,
including the power and authority:

(i)            to select the persons to whom Awards
may from time to time be granted;

(ii)           to determine the time or times of
grant, and the extent, if any, of Incentive Stock Options, Non-Statutory Stock
Options, Restricted Stock, Unrestricted Stock, Performance Shares and Stock
Appreciation Rights, or any combination of the foregoing, granted to any one or
more participants;

(iii)          to determine the number of shares to
be covered by any Award;

(iv)          to determine and modify the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards; provided, however, that no such action shall adversely
affect rights under any outstanding Award without the participant’s consent;

 

3

 

(v)           to accelerate the exercisability or
vesting of all or any portion of any Award;

(vi)          to extend the period in which any
outstanding Stock Option or Stock Appreciation Right may be exercised; and

(vii)         to adopt, alter and repeal such rules,
guidelines and practices for administration of the Plan and for its own acts
and proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written instruments);
to make all determinations it deems advisable for the administration of the
Plan; to decide all disputes arising in connection with the Plan; and to
otherwise supervise the administration of the Plan.

All decisions and
interpretations of the Committee shall be binding on all persons, including the
Company and Plan participants.  No member
or former member of the Committee or the Board shall be liable for any action
or determination made in good faith with respect to this Plan.

SECTION 3. 
Shares Issuable under the Plan; Mergers; Substitution.

(a)           Shares Issuable.

(i)            The maximum number of shares of
Stock which may be issued in respect of Awards (including Stock Appreciation
Rights) granted under the Plan, shall be the sum of 
(A) 10,890,550 plus (B) the number of shares subject to Prior Plan
Forfeitures as defined Section 3(a)(ii) below, provided, that in no event shall the number of
shares deemed to be subject to Prior Plan Forfeitures for purposes of this
clause (B) exceed 38,959,759 (subject, in each case, to adjustment upon
changes in capitalization of the Company as provided in this Section 3).  For
purposes of the limitations in the previous sentence, the shares of Stock
underlying any Awards which are forfeited, cancelled, reacquired by the Company
or are
tendered in payment of the exercise price or otherwise terminated (other
than by exercise) shall be added back to the shares of Stock with respect to
which Awards may be granted under the Plan. 
Shares issued under the Plan may be authorized but unissued shares or
shares reacquired by the Company.

(ii)           If an option or award granted pursuant to
either the Company’s 2000 Stock Option Plan (the “2000 Plan”) or 2004 Stock Incentive Plan
(the “2004 Plan”)
shall be forfeited, cancelled, reacquired, expire, be tendered in payment of
the exercise price, or otherwise terminate, for any reason (other than by
exercise), the number of shares of Stock subject to such option or award shall
be deemed to have been subject to a “Prior Plan Forfeiture” for purposes of
Section 3(a)(i) above.

(b)           Limitation on Awards.  In no event may any Plan participant be
granted Awards (including Stock Appreciation Rights) with respect to more than
10,000,000 shares of Stock in any calendar year. The number of shares of Stock
relating to an Award granted to a Plan participant in a calendar year that is
subsequently forfeited, cancelled or otherwise terminated shall continue to
count toward the foregoing limitation in such calendar year.  In addition, if the exercise price of an
Award is subsequently reduced, the transaction shall be deemed a 

 

4

 

cancellation of the original
Award and the grant of a new one so that both transactions shall count toward
the maximum shares issuable in the calendar year of each respective
transaction.

(c)           Stock Dividends, Mergers,
etc.  In the event that after
approval of the Plan by the stockholders of the Company in accordance with
Section 17, the Company effects a stock dividend, stock split or similar change
in capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind of shares of stock or securities with
respect to which Awards may thereafter be granted (including without limitation
the limitations set forth in Sections 3(a) and (b) above), (ii) the number and
kind of shares remaining subject to outstanding Awards, and (iii) the option or
purchase price in respect of such shares. 
In the event of any merger, consolidation, dissolution or liquidation of
the Company, the Committee in its sole discretion may, as to any outstanding
Awards, make such substitution or adjustment in the aggregate number of shares
reserved for issuance under the Plan and in the number and purchase price (if
any) of shares subject to such Awards as it may determine and as may be
permitted by the terms of such transaction, or accelerate, amend or terminate
such Awards upon such terms and conditions as it shall provide (which, in the
case of the termination of the vested portion of any Award, shall require
payment or other consideration which the Committee deems equitable in the
circumstances), subject, however, to the provisions of Section 15.

(d)           Substitute Awards.  The Committee may grant Awards under the Plan
in substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or an Affiliate as
the result of a merger or consolidation of the employing corporation with the
Company or an Affiliate or the acquisition by the Company or an Affiliate of
property or stock of the employing corporation. 
The Committee may direct that the substitute awards be granted on such
terms and conditions as the Committee considers appropriate in the
circumstances.

SECTION 4. 
Eligibility.

Awards may be granted to
officers, directors and employees of, and consultants and advisers to, the Company
or its Affiliates (“Eligible Persons”).

SECTION 5. 
Stock Options.

The
Committee may grant to Eligible Persons options to purchase stock.

Any Stock Option granted
under the Plan shall be in such form as the Committee may from time to time
approve.

Stock Options granted under
the Plan may be either Incentive Stock Options (subject to compliance with
applicable law) or Non-Statutory Stock Options. 
Unless otherwise so designated, an Option shall be a Non-Statutory Stock
Option.  To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a
Non-Statutory Stock Option.

No Incentive Stock Option
shall be granted under the Plan after the tenth anniversary of the date of
adoption of the Plan by the Board.

 

5

 

The Committee in its
discretion may determine the effective date of Stock Options, provided,
however, that grants of Incentive Stock Options shall be made only to persons
who are, on the effective date of the grant, employees of the Company or an
Affiliate.  Stock Options granted
pursuant to this Section 5 shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

(a)           Exercise Price.  The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5 shall be
determined by the Committee at the time of grant but shall be not less than one
hundred percent (100%) of Fair Market Value on the date of grant.  If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than ten percent (10%) of the combined voting power of all classes of
stock of the Company or any subsidiary or parent corporation and an Incentive
Stock Option is granted to such employee, the option price shall be not less
than one hundred ten percent (110%) of Fair Market Value on the date of grant.

(b)           Option Term.  The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable more than
seven (7)  years after the date the
option is granted.  If an employee owns
or is deemed to own (by reason of the attribution rules of Section 424(d) of
the Code) more than ten percent (10%) of the combined voting power of all
classes of stock of the Company or any subsidiary or parent corporation and an
Incentive Stock Option is granted to such employee, the term of such option
shall be no more than five (5) years from the date of grant.

(c)           Exercisability; Rights of
a Shareholder.  Stock Options
shall become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee.  The Committee may at any time accelerate the
exercisability of all or any portion of any Stock Option.  An optionee shall have the rights of a
shareholder only as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.

(d)
          Method of
Exercise. Stock Options may be exercised in whole or in part, by
delivering written notice of exercise to the Company, specifying the number of
shares to be purchased.  Payment of the
purchase price may be made by delivery of cash or bank check or other
instrument acceptable to the Committee in an amount equal to the exercise price
of such Options, or, to the extent provided in the applicable Option Agreement,
by one or more of the following methods:

(i)            by delivery to the Company of shares
of Stock of the Company having a fair market value equal in amount to the aggregate
exercise price of the Options being exercised; or

(ii)           to the extent permitted by applicable
law, by a personal recourse note issued by the optionee to the Company in a
principal amount equal to such aggregate exercise price and with such other
terms, including interest rate and maturity, as the Company may determine in
its discretion; provided, however, that the
interest rate borne by such note shall not be less than the lowest applicable
federal rate, as defined in Section 1274(d) of the Code; or

 

6

 

(iii)          if the class of Stock is registered
under the Exchange Act at such time, by delivery to the Company of a properly
executed exercise notice along with irrevocable instructions to a broker to
deliver promptly to the Company cash or a check payable and acceptable to the
Company for the purchase price; provided that in the event that the optionee
chooses to pay the purchase price as so provided, the optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity
and other agreements as the Committee shall prescribe as a condition of such
payment procedure (including, in the case of an optionee who is an executive
officer of the Company, such procedures and agreements as the Committee deems
appropriate in order to avoid any extension of credit in the form of a personal
loan to such officer).  The Company need
not act upon such exercise notice until the Company receives full payment of
the exercise price; or

(iv)          by reducing the number of Option
shares otherwise issuable to the optionee upon exercise of the Option by a
number of shares of Common Stock having a fair market value equal to such
aggregate exercise price of the Options being exercised; or

(v)           by any combination of such methods of
payment.

The delivery of certificates
representing shares of Stock to be purchased pursuant to the exercise of a
Stock Option will be contingent upon receipt from the Optionee (or a purchaser
acting in his stead in accordance with the provisions of the Stock Option) by
the Company of the full purchase price for such shares and the fulfillment of
any other requirements contained in the Stock Option or imposed by applicable
law.

(e)           Non-transferability of
Options.  Except as the
Committee may provide with respect to a Non-Statutory Stock Option, no Stock
Option shall be transferable other than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee’s
lifetime, only by the optionee.

(f)            Annual Limit on Incentive
Stock Options.  To the extent
required for “incentive stock option” treatment under Section 422 of the Code,
the aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options granted under this Plan and
any other plan of the Company or its Affiliates become exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.

SECTION
6.         Restricted Stock Awards.

(a)           Nature of Restricted Stock
Award.  The Committee in its
discretion may grant Restricted Stock Awards to any Eligible Person, entitling
the recipient to acquire, for such purchase price, if any, as may be determined
by the Committee, shares of Stock subject to such restrictions and conditions
as the Committee may determine at the time of grant (“Restricted Stock”),
including continued employment and/or achievement of pre-established
performance goals and objectives.

(b)           Acceptance of Award.  A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within sixty (60) days (or such shorter date as
the Committee may specify) following the award date by making payment to the
Company of the specified purchase price, if any, of the 

 

7

 

shares covered by the Award
and by executing and delivering to the Company a written instrument that sets
forth the terms and conditions applicable to the Restricted Stock in such form
as the Committee shall determine.

(c)           Rights as a Shareholder.  Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Award.  Unless the Committee shall otherwise
determine, certificates evidencing shares of Restricted Stock Award shall
remain in the possession of the Company until such shares are vested as
provided in Section 6(e) below.

(d)           Restrictions.  Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein.  In the
event of termination of employment by the Company and its Affiliates for any
reason (including death, Disability, Normal Retirement and for Cause), any
shares of Restricted Stock which have not then vested  shall automatically be forfeited to the
Company. [Board to consider whether to make
exceptions to this for , e.g., disability or normal retirement]

(e)           Vesting of Restricted
Stock.  The Committee at the
time of grant shall specify the date or dates and/or the attainment of
pre-established performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company’s right of
forfeiture shall lapse.  Subsequent to
such date or dates and/or the attainment of such pre-established performance
goals, objectives and other conditions, the shares on which all restrictions
have lapsed shall no longer be Restricted Stock and shall be deemed “vested.”  The Committee at any time may accelerate such
date or dates and otherwise waive or, subject to Section 13, amend any
conditions of the Award.

(f)            Waiver, Deferral and
Reinvestment of Dividends. 
The written instrument evidencing the Restricted Stock Award may require
or permit the immediate payment, waiver, deferral or investment of dividends
paid on the Restricted Stock.

SECTION 7. 
Unrestricted Stock Awards.

(a)           Grant or Sale of
Unrestricted Stock.  The
Committee in its discretion may grant or sell to any Eligible Person shares of
Stock free of any restrictions under the Plan (“Unrestricted Stock”) at a
purchase price, if any, determined by the Committee.  Shares of Unrestricted Stock may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration.

(b)           Restrictions on Transfers.  The right to receive unrestricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered, other than
by will or the laws of descent and distribution.

SECTION 8.  Performance Share
Awards.

A Performance Share Award is
an award entitling the recipient to acquire shares of Stock upon the attainment
of specified performance goals.  The
Committee may make Performance 

 

8

 

Share Awards independent of
or in connection with the granting of any other Award under the Plan.  Performance Share Awards may be granted under
the Plan to any Eligible Person.  The
Committee in its discretion shall determine whether and to whom Performance Share
Awards shall be made, the performance goals applicable under each such Award
(which may include, without limitation, continued employment by the recipient
or a specified achievement by the recipient, the Company or any business unit
of the Company), the periods during which performance is to be measured, and
all other limitations and conditions applicable to the Award or the Stock
issuable thereunder.  Upon the attainment
of the specified performance goal shares of Stock shall be issued pursuant to
the Performance Share Award as soon as practicable thereafter, but in no event
later than two and one-half months after the calendar year in which such
performance goal is attained.

SECTION 9.  Stock Appreciation
Rights.

The Committee in its
discretion may grant Stock Appreciation Rights to any Eligible Person.  A Stock Appreciation Right shall entitle the
participant upon exercise thereof to receive from the Company, upon written
request to the Company at its principal offices (the “Request”), a number of shares
of Stock [or may provide for cash payment or
combination of shares and cash; TBD by Board] having an
aggregate Fair Market Value equal to the product of (a) the excess of Fair
Market Value, on the date of such Request, over the exercise price per share of
Stock specified in such Stock Appreciation Right (which exercise price shall be
not less than one hundred percent (100%) of Fair Market Value on the date of
grant), multiplied by (b) the number of shares of Stock for which such Stock
Appreciation Right shall be exercised.

SECTION 10.  Termination
of Stock Options and Stock Appreciation Rights.

                (a)           Incentive Stock Options:

(i)            Termination by Death.  If any participant’s employment by the
Company and its Affiliates terminates by reason of death, any Incentive Stock
Option owned by such participant may thereafter be exercised to the extent
exercisable at the date of death, by the legal representative or legatee of the
participant, for a period of one (1) year from the date of death, or until the
expiration of the stated term of the Incentive Stock Option, if earlier.

(ii)           Termination by Reason of
Disability or Normal Retirement.

(A)          Any Incentive Stock Option held by a
participant whose employment by the Company and its Affiliates has terminated
by reason of Disability may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of one (1) year from
the date of such termination of employment, or until the expiration of the
stated term of the Option, if earlier.

(B)           Any Incentive Stock Option held by a
participant whose employment by the Company and its Affiliates has terminated
by reason of Normal Retirement may thereafter be exercised, to the extent it
was exercisable at the time of such termination, for a period of ninety (90)
days from the date of such termination of employment, or until the expiration
of the stated term of the Option, if earlier.

 

9

 

(C)           The Committee shall have sole
authority and discretion to determine whether a participant’s employment has
been terminated by reason of Disability or Normal Retirement.

(iii)          Termination for Cause.  If any participant’s employment by the
Company and its Affiliates has been terminated for Cause, as determined by the
Committee in its sole discretion, any Incentive Stock Option held by such
participant shall immediately terminate and be of no further force and effect.

(iv)          Other Termination.  Unless otherwise determined by the Committee,
if a participant’s employment by the Company and its Affiliates terminates for
any reason other than death, Disability, Normal Retirement or for Cause, any
Incentive Stock Option held by such participant may thereafter be exercised, to
the extent it was exercisable on the date of termination of employment, for
ninety (90) days from the date of termination of employment or until the
expiration of the stated term of the Option, if earlier.

(b)           Non-Statutory Stock
Options and Stock Appreciation Rights.  Any Non-Statutory Stock Option or Stock
Appreciation Right granted under the Plan shall contain such terms and
conditions with respect to its termination as the Committee, in its discretion,
may from time to time determine.

SECTION 11. 
Tax Withholding and Notice.

(a)           Payment by Participant.  Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts
received thereunder first becomes includable in the gross income of the
participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of any Federal,
state, local and/or payroll taxes of any kind required by law to be withheld
with respect to such income.  The Company
and its Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
participant.

(b)           Payment in Shares.  A Participant may elect, with the consent of
the Committee, to have such tax withholding obligation satisfied, in whole or
in part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to an Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
minimum withholding amount due with respect to such Award, or (ii) delivering
to the Company a number of shares of Stock with an aggregate Fair Market Value
(as of the date the withholding is effected) that would satisfy the withholding
amount due.

(c)           Notice of Disqualifying Disposition.  Each holder of an Incentive
Option shall agree to notify the Company in writing immediately after making a
disqualifying disposition (as defined in Section 421(b) of the Code) of any
Stock purchased upon exercise of an Incentive Stock Option.

 

10

 

SECTION 12.  Transfer
and Leave of Absence.

                For purposes of the Plan,
the following events shall not be deemed a termination of employment:

(a)           a transfer to the employment of the Company from an
Affiliate or from the Company to an Affiliate, or from one Affiliate to
another;

(b)           an approved leave of absence for military service or
sickness, or for any other purpose approved by the Company, if the employee’s
right to re-employment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing; provided, that the vesting date or
dates of any unvested Award held by such employee shall automatically be extended
by a period of time equal to the period of such approved leave of absence.

SECTION
13.  Amendments and Termination.

The Board may at any time
amend or discontinue the Plan and the Committee may at any time amend or cancel
any outstanding Award for the purpose of satisfying changes in law or for any
other lawful purpose, but no such action shall adversely affect rights under
any outstanding Award without the holder’s consent.  Notwithstanding the foregoing, neither the
Board nor the Committee shall have the power or authority to decrease the
exercise price of any outstanding Stock Option or Stock Appreciation Right,
whether through amendment, cancellation and regrant, exchange or any other
means, except for changes made pursuant to Section 3(c).

This Plan shall terminate as
of the tenth anniversary of its effective date. 
The Board may terminate this Plan at any earlier time for any
reason.  No Award may be granted after
the Plan has been terminated.  No Award
granted while this Plan is in effect shall be adversely altered or impaired by
termination of this Plan, except upon the consent of the holder of such
Award.  The power of the Committee to
construe and interpret this Plan and the Awards granted prior to the termination
of this Plan shall continue after such termination.

SECTION 14. 
Status of Plan.

With respect to the portion
of any Award which has not been exercised and any payments in cash, Stock or
other consideration not received by a participant, a participant shall have no
rights greater than those of a general creditor of the Company unless the
Committee shall otherwise expressly determine in connection with any Award or
Awards.

SECTION 15.  Change of
Control Provisions.

(a)           Upon the occurrence of a Change of
Control as defined in this Section 15:

(i)            subject to the provisions of clauses
(iii) and (iv) below, after the effective date of such Change of Control, each
holder of an outstanding Stock Option, Restricted Stock Award, Performance
Share Award or Stock Appreciation Right shall be entitled, upon exercise of
such Award, to receive, in lieu of shares of Stock (or consideration based upon
the Fair Market Value of Stock), shares of such stock or other securities, cash
or property (or 

 

11

 

consideration
based upon shares of such stock or other securities, cash or property) as the
holders of shares of Stock received in connection with the Change of Control;
and

(ii)           the Committee may accelerate, fully
or in part, the time for exercise of, and waive any or all conditions and
restrictions on, each unexercised and unexpired Stock Option, Restricted Stock
Award, Performance Share Award and Stock Appreciation Right, effective upon a
date prior or subsequent to the effective date of such Change of Control, as
specified by the Committee;

(iii)          each outstanding Stock Option,
Restricted Stock Award, Performance Share Award and Stock Appreciation Right
may be cancelled by the Committee as of the effective date of any such Change
of Control provided that (x) prior written notice of such cancellation shall be
given to each holder of such an Award and (y) each holder of such an Award
shall have the right to exercise such Award to the extent that the same is then
exercisable or, in full, if the Committee shall have accelerated the time for
exercise of all such unexercised and unexpired Awards, during a period of not
less than ten days following such notice of cancellation and preceding the
effective date of such Change of Control; or

(iv)          in the event of a Change of Control in the form of a merger or
consolidation under the terms of which holders of Stock  will receive 
consideration consisting solely of cash, each
outstanding Stock Option may be cancelled by the Committee as of the effective
date of any such Change of Control, provided that the Company shall have made or
provided for  a cash payment to the
holder of each such Stock Option in an amount 
equal to the product of (a) the amount of cash to be received by the
holder of a share of Stock upon the consummation of the Change in Control, less
the exercise price per share of such Stock Option, multiplied by (b) the number
of shares of Stock subject to such Stock Option.

(b)           “Change
of Control” shall mean the occurrence of any one of the following events:

(i)            any “person” (as such term is used
in Sections 13(d) and 14(d)(2) of the Exchange Act) becomes, after the
Effective Date of this Plan, a “beneficial owner” (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) (other than the Company, any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
stock of the Company), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company’s then outstanding securities; or

(ii)           the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation or
other entity, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%)
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation; or

 

12

 

(iii)          the stockholders of the Company shall
approve, and there shall be consummated, a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.

SECTION  16.  General Provisions.

(a)           No Distribution;
Compliance with Legal Requirements. 
The Committee may require each person acquiring shares pursuant to an
Award to represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.

No shares of Stock shall be
issued pursuant to an Award until all applicable securities laws and other
legal and stock exchange requirements have been satisfied.  The Committee may require the placing of such
stop orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.

(b)           Delivery of Stock
Certificates.  Delivery of
stock certificates to participants under this Plan shall be deemed effected for
all purposes when the Company or a stock transfer agent of the Company shall
have delivered such certificates in the United States mail, addressed to the
participant, at the participant’s last known address on file with the Company.

(c)           Other Compensation Arrangements;
No Employment Rights.  Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.  The adoption of the Plan or any Award under
the Plan does not confer upon any employee any right to continued employment
with the Company or any Affiliate.

(d)           Lock-Up Agreement.   By accepting any Award, the recipient shall be
deemed to have agreed that, if so requested by the Company or by the
underwriters managing any underwritten offering of the Company’s securities,
the recipient will not, without the prior written consent of the Company or
such underwriters, as the case may be, sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any shares
subject to any such Award during the Lock-up Period, as defined below. The
“Lock-Up Period” shall mean a period of time not exceeding 180 days or, if
greater, such number of days as shall have been agreed to by each director and
executive officer of the Company in connection with such offering in a
substantially similar lock-up agreement by which each such director and
executive officer is bound. If requested by the Company or such underwriters,
the recipient shall enter into an agreement with such underwriters consistent
with the foregoing.

SECTION  17. 
Effective Date of Plan.

This Plan shall become effective
upon its adoption by the Company’s Board of Directors. If the Plan shall not be
approved by the shareholders of the Company within twelve months following its
adoption, this Plan shall terminate and be of no further force or effect.

 

13

 

SECTION
18.  Governing Law.

This Plan shall be governed
by, and construed and enforced in accordance with, the substantive laws of the
State of Delaware without regard to its principles of conflicts of laws.

 

 

*
* *

 

14

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