Document:

Exhibit 10.9

 

EXHIBIT B

 

REGISTRATION RIGHTS AGREEMENT

 

This
Registration Rights Agreement (this “Agreement”) is made and entered
into as of October 28, 2004, among Power 3 Medical Products, Inc., a New York
corporation (the “Company”), and the purchasers signatory hereto (each
such purchaser is a “Purchaser” and all such purchasers are,
collectively, the “Purchasers”).

 

This Agreement
is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof among the Company and the Purchasers (the “Purchase Agreement”).

 

The Company
and the Purchasers hereby agree as follows:

 

1. Definitions

 

Capitalized terms used and not otherwise
defined herein that are defined in the Purchase Agreement shall have the
meanings given such terms in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
meanings:

 

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

 

“Effectiveness Date” means, with respect to the initial
Registration Statement required to be filed hereunder, the 90th
calendar day following the First Closing Date (120th calendar day in
the event the Registration Statement is reviewed by the Commission) and, with
respect to any additional Registration Statements which may be required
pursuant to Section 3(c), the 90th calendar day following the date
on which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required hereunder (120th
calendar day in the event the Registration Statement is reviewed by the
Commission); provided, however, in the event the Company is
notified by the Commission that one of the above Registration Statements will
not be reviewed or is no longer subject to further review and comments, the
Effectiveness Date as to such Registration Statement shall be the fifth Trading
Day following the date on which the Company is so notified if such date
precedes the dates required above.

 

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

 

“Event” shall have the meaning set forth in Section 2(b).

 

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

 

“Filing Date” means, with respect to the initial Registration
Statement required hereunder, the 45th calendar day following the
First Closing Date and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the

 

 

20th
day following the date on which the Company first knows, or reasonably should
have known that such additional Registration Statement is required hereunder.

 

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

 

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

 

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

 

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

 

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

 

“Prospectus” means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

 

“Registrable Securities” means (i) all of the shares of Common
Stock issuable at the Closings or upon conversion in full of the Debentures,
(ii) all Warrant Shares, (iii) all of the Additional Investment Right Shares,
(iv) any securities issued or issuable upon any stock split, dividend or other
distribution recapitalization or similar event with respect to the foregoing
and (v) any additional shares issuable in connection with any anti-dilution
provisions in the Debentures or the Warrants.

 

“Registration Statement” means the registration statements
required to be filed hereunder and any additional registration statements
contemplated by Section 3(c), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.

 

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

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or

 

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regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.

 

2. Shelf Registration

 

(a) On or prior to each Filing Date, the
Company shall prepare and file with the Commission a “Shelf” Registration
Statement covering the resale of 125% of the Registrable Securities on such
Filing Date for an offering to be made on a continuous basis pursuant to Rule
415.  The Registration Statement shall be
on Form S-3 (except if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3, in which case such registration shall
be on another appropriate form in accordance herewith) and shall contain (unless
otherwise directed by the Holders) substantially the “Plan of Distribution”
attached hereto as Annex A. 
Subject to the terms of this Agreement, the Company shall use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the applicable Effectiveness Date, and shall use its best
efforts to keep such Registration Statement continuously effective under the
Securities Act until all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume restrictions pursuant to
Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”).  The Company shall notify the Holders via
facsimile of the effectiveness of the Registration Statement within 1 Trading
Day of the day that the Company receives notification of the effectiveness from
the Commission.  Failure to so notify the
Holder within 1 Trading Day of such notification shall be deemed an Event under
Section 2(b).

 

(b) If: (i) a Registration Statement is not
filed on or prior to its Filing Date (if the Company files a Registration
Statement without affording the Holders the opportunity to review and comment
on the same as required by Section 3(a), the Company shall not be deemed to
have satisfied this clause (i)), or (ii) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act, within five Trading Days of the date that the Company
is notified (orally or in writing, whichever is earlier) by the Commission that
a Registration Statement will not be “reviewed,” or not subject to further
review, or (iii) prior to its Effectiveness Date, the Company fails to file a
pre-effective amendment and otherwise respond in writing to comments made by
the Commission in respect of such Registration Statement within 10 calendar
days after the receipt of comments by or notice from the Commission that such
amendment is required in order for a Registration Statement to be declared
effective, or (iv) a Registration Statement filed or required to be filed
hereunder is not declared effective by the Commission by its Effectiveness
Date, or (v) after the Effectiveness Date, a Registration Statement ceases for
any reason to remain continuously effective as to all Registrable Securities
for which it is required to be effective, or the Holders are not permitted to
utilize the Prospectus therein to resell such Registrable Securities for 10
consecutive calendar days but no more than an aggregate of 45 calendar days
during any 12-month period (which need not be consecutive Trading Days) (any
such failure or breach being referred to as an “Event”, and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded,

 

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or for purposes of clause (iii) the date which such 10 calendar day
period is exceeded, or for purposes of clause (v) the date on which such 10 or
45 calendar day period, as applicable, is exceeded being referred to as “Event Date”), then in addition
to any other rights the Holders may have hereunder or under applicable law, on
each such Event Date and on each monthly anniversary of each such Event Date
(if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each Holder an amount in
cash, as partial liquidated damages and not as a penalty, equal to 2.0% of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement
for any Registrable Securities then held by such Holder.  If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days after the
date payable, the Company will pay interest thereon at a rate of 18% per annum
(or such lesser maximum amount that is permitted to be paid by applicable law)
to the Holder, accruing daily from the date such partial liquidated damages are
due until such amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event.

 

3. Registration
Procedures

 

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

 

(a)           Not less than five
Trading Days prior to the filing of each Registration Statement or any related
Prospectus and not less than two Trading Days before the filing of any
amendment or supplement thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference), the Company shall, (i)
furnish to each Holder copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities shall reasonably object in
good faith, provided that, the Company is notified of such objection in writing
no later than 5 Trading Days, or 2 Trading Days, as applicable, after the
Holders have been so furnished copies of such documents. Each Holder agrees to
furnish to the Company such information as the Company may reasonably require
to effect such Registration, including a completed Questionnaire substantially
in the form attached to this Agreement as Annex B (a “Selling
Holder Questionnaire”) not less
than two Trading Days prior to the Filing Date or by the end of the fourth
Trading Day following the date on which such Holder receives draft materials in
accordance with this Section.

 

(b)           (i) Prepare and file
with the Commission such amendments, including post-effective amendments, to a
Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in order to
register for resale under the

 

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Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to a Registration Statement
or any amendment thereto and as promptly as reasonably possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to a Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by a
Registration Statement during the applicable period in accordance (subject to
the terms of this Agreement) with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented.

 

(c)           If during the
Effectiveness Period, the number of Registrable Securities at any time exceeds
90% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall, as necessary, file as soon as reasonably
practicable but in any case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not less than 125%
of the number of such Registrable Securities.

 

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

 

5

 

misleading;
and (vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in
the determination of the Company, makes it not in the best interest of the
Company to allow continued availability of the Registration Statement or
Prospectus; provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder’s agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

 

(e)           Use its best efforts to
avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order
suspending the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.

 

(f)            Furnish to each
Holder, without charge, at least one conformed copy of each such Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference to the extent requested by such Person, and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.

 

(g)           Promptly deliver to
each Holder, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request in connection with resales by the Holder of
Registrable Securities.  Subject to the
terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except
after the giving on any notice pursuant to Section 3(d).

 

(h)           Prior to any resale of
Registrable Securities by a Holder, use its commercially reasonable efforts to
register or qualify or cooperate with the selling Holders in connection with
the registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder reasonably requests in writing, to keep each registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by each Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.

 

(i)            If requested by the
Holders, cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement and applicable law, of
all restrictive legends, and to enable

 

6

 

such
Registrable Securities to be in such denominations and registered in such names
as any such Holders may request.

 

(j)            Upon the occurrence of
any event contemplated by this Section 3, as promptly as reasonably possible
under the circumstances taking into account the Company’s good faith assessment
of any adverse consequences to the Company and its stockholders of the
premature disclosure of such event, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  If the Company notifies
the Holders in accordance with clauses (ii) through (v) of Section 3(d) above
to suspend the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of such
Prospectus.  The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as
is practicable.  The Company shall be
entitled to exercise its right under this Section 3(j) to suspend the
availability of a Registration Statement and Prospectus, subject to the payment
of partial liquidated damages pursuant to Section 2(b), for a period not to
exceed 60 days (which need not be consecutive days) in any 12 month period.

 

(k)           Comply in all material
respects with all applicable rules and regulations of the Commission.

 

(l)            The Company may
require each selling Holder to furnish to the Company a certified statement as
to the number of shares of Common Stock beneficially owned by such Holder and,
if required by the Commission, the person thereof that has voting and dispositive
control over such shares. During any periods that the Company is unable to meet
its obligations hereunder with respect to the registration of the Registrable
Securities solely because any Holder fails to furnish such information within
three Trading Days of the Company’s request, any liquidated damages that are
accruing at such time as to such Holder only shall be tolled and any Event that
may otherwise occur solely because of such delay shall be suspended as to such
Holder only, until such information is delivered to the Company.

 

4. Registration
Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection
with Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders), (ii)
printing expenses (including, without 

 

7

 

limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in a Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of counsel for the Company, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. 
In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange as required hereunder.  In no
event shall the Company be responsible for any underwriting discounts, broker
or similar commissions, transfer taxes applicable to the sale of Registrable
Securities or, except to the extent provided for in the Transaction Documents,
any legal fees or other costs of the Holders.

 

5. Indemnification

 

(a) Indemnification by the Company.
The Company shall, notwithstanding any termination of this Agreement, indemnify
and hold harmless each Holder, the officers, directors, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees)
and expenses (collectively, “Losses”), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in a Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (i) such untrue statements or
omissions are based upon information furnished in writing to the Company by
such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in a Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose), (ii)
in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d), or (iii) the failure of Holder to deliver at or
prior to the written confirmation of sale, the most recent Prospectus, as
amended or supplemented.  The Company
shall notify the Holders

 

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promptly of the institution,
threat or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is aware.

 

(b) Indemnification by Holders. Each
Holder shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, to the extent arising
out of or based solely upon: (x) such Holder’s failure to comply with the
prospectus delivery requirements of the Securities Act or (y) any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading (i)
to the extent, but only to the extent, that such untrue statement or omission is
made in reliance upon and in conformity with any information so furnished in
writing by such Holder to the Company specifically for inclusion in such
Registration Statement or such Prospectus, as amended or supplemented, or (ii)
to the extent that (1) such untrue statements or omissions are based solely
upon information regarding such Holder furnished in writing to the Company by
such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement (it being
understood that the Holder has approved Annex A hereto for this purpose), such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in
Section 3(d)(ii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(d), or (3) the failure of the Holder to
otherwise deliver at or prior to the written confirmation of sale, the most
recent Prospectus, as amended or supplemented. In no event shall the liability
of any selling Holder hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

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

 

9

 

An Indemnified
Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties
unless:  (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; (2) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall reasonably believe, based upon the written
opinion of counsel, that a material conflict of interest is likely to exist if
the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of one separate
counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the
terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.

 

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

 

10

 

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

 

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

 

6. Miscellaneous

 

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

 

(b)           No Piggyback on Registrations.
Except as set forth on Schedule 6(b) attached hereto, neither the
Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities.  The Company shall not file any other
registration statements (except Registration Statements on Form S-8) until the
initial Registration Statement required hereunder is declared effective by the
Commission, provided that this Section 6(b) shall not prohibit the Company from
filing amendments to registration statements already filed.

 

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

 

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

 

11

 

Statement.  The Company will use its best efforts to
ensure that the use of the Prospectus may be resumed as promptly as it
practicable.  The Company agrees and
acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).

 

(e)           Piggy-Back Registrations. If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) 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 the stock option or other employee benefit plans, then the
Company shall send to each Holder a written notice of such determination and,
if within fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such holder requests to be
registered; provided, that, the Company shall not be required to register any
Registrable Securities pursuant to this Section 6(e) that are eligible for
resale pursuant to Rule 144(k) promulgated under the Securities Act or that are
the subject of a then effective Registration Statement.

 

(f)            Amendments and Waivers. The
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and each Holder of the then outstanding
Registrable Securities.  Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.

 

(g)           Notices. Any and all notices or
other communications or deliveries required or permitted to be provided hereunder
shall be delivered as set forth in the Purchase Agreement.

 

(h)           Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the benefit of each
Holder. The Company may not assign its rights or obligations hereunder without
the prior written consent of all of the Holders of the then-outstanding
Registrable Securities. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.

 

(i)            No Inconsistent Agreements.
Neither the Company nor any of its subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the Holders in
this Agreement or otherwise conflicts

 

12

 

with the
provisions hereof.  Except as set forth
on Schedule 6(b), neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in
full.

 

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

 

(k)           Governing Law.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. 
Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper or inconvenient venue for such
proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  The
parties hereby waive, to the fullest extent permitted by applicable law, all
rights to a trial by jury.  If either
party shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

 

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

 

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

 

13

 

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

 

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

 

(o)           Independent Nature of Holders’ Obligations
and Rights. The obligations of each Holder hereunder are several and
not joint with the obligations of any other Holder hereunder, and no Holder
shall be responsible in any way for the performance of the obligations of any
other Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder pursuant
hereto or thereto, shall be deemed to constitute the Holders as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Holder shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.

 

********************

 

14

 

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

 

 

	
   

  	
  POWER 3 MEDICAL PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Steven B. Rash

  
	
   

  	
   

  	
  Name: Steven B.
  Rash

  
	
   

  	
   

  	
  Title: Chairman
  and CEO

  

 

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

15

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
    Bach
  Farms LLC

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/:Richard H.
  Bach

  	
   

  
	
  Name of
  Authorized Signatory:

  	
     Richard
  H. Bach

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

16

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Citiplatz
  Limited

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
   /s/:
  Francis (Illegible)

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Francis
  (Illegible)

  	
   

  
	
  Title of Authorized
  Signatory:

  	
   

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

17

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Crescent
  International Ltd.

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/:Mel Craw and Maxi Brezzi

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Mel
  Craw and Maxi Brezzi

  	
   

  
	
  Title of
  Authorized Signatory:

  	
         Authorized
  Signatory

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

18

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Crestview
  Capital Master, LLC

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/Stewart R.
  Flink

  	
   

  
	
  Name of
  Authorized Signatory: 

  	
      Stewart
  R. Flink

  	
   

  
	
  Title of
  Authorized Signatory:

  	
          Manager

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

19

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     DKR SoundShore Oasis
  Holding Fund, Ltd.

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/ Barbara Burger

  	
   

  
	
  Name of
  Authorized Signatory:

  	
       Barbara Burger

  	
   

  
	
  Title of
  Authorized Signatory:

  	
        Alternate
  Director

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

20

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Gryphon Master Fund L.P.

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/:E.B. Lyon IV

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      E.B.
  Lyon IV

  	
   

  
	
  Title of
  Authorized Signatory:

  	
         Authorized
  Agent

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

21

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     GSSF Master Fund, LP

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/:E.B. Lyon IV

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      E.B.
  Lyon IV

  	
   

  
	
  Title of
  Authorized Signatory:

  	
         Authorized
  Agent

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

22

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Mohawk Funding

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/:Richard H. Bach

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Richard
  H. Bach

  	
   

  
	
  Title of
  Authorized Signatory:

  	
         Manager
  Member

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

23

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Richard Molinsky

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/ Richard Molinsky

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

24

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Omicron Master Trust

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/Bruce Bernstein

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Bruce
  Bernstein

  	
   

  
	
  Title of
  Authorized Signatory:

  	
         Managing
  Partner

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

25

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Otape Investments LLC

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/ Richard M. Cayne

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Richard
  M. Cayne

  	
   

  
	
  Title of
  Authorized Signatory:

  	
          General
  Counsel

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

26

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Platinum Partners Value
  Arbitrage Fund L.P.

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/Richard Geyser

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Richard
  Geyser

  	
   

  
	
  Title of
  Authorized Signatory:

  	
          Managing
  Director

  	
   

  
						

 

 

[SIGNATURE PAGES
CONTINUE]

 

27

 

[SIGNATURE PAGE OF
HOLDERS TO PWRM RRA]

 

 

	
  Name of
  Investing Entity: 

  	
     Sage Capital Investments
  Limited

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
  /s/ Anthony Thompson

  	
   

  
	
  Name of
  Authorized Signatory:

  	
      Anthony
  Thompson

  	
   

  
	
  Title of
  Authorized Signatory:

  	
          Secretary

  	
   

  
						

 

28

 

Plan of Distribution

 

Each Selling
Stockholder (the “Selling Stockholders”) of the common stock (“Common
Stock”) of Power 3 Medical Products, Inc., a New York corporation (the “Company”)
and any of their pledgees, assignees and successors-in-interest may, from time
to time, sell any or all of their shares of Common Stock on the Trading Market
or any other stock exchange, market or trading facility on which the shares are
traded or in private transactions.  These
sales may be at fixed or negotiated prices. 
A Selling Stockholder may use any one or more of the following methods
when selling shares:

 

•      ordinary brokerage
transactions and transactions in which the broker-dealer solicits purchasers;

 

•      block trades in which the
broker-dealer will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;

 

•      purchases by a broker-dealer
as principal and resale by the broker-dealer for its account;

 

•      an exchange distribution in
accordance with the rules of the applicable exchange;

 

•      privately negotiated
transactions;

 

•      settlement of short sales
entered into after the date of this prospectus;

 

•      broker-dealers may agree
with the Selling Stockholders to sell a specified number of such shares at a stipulated
price per share;

 

•      a combination of any such
methods of sale;

 

•      through the writing or
settlement of options or other hedging transactions, whether through an options
exchange or otherwise; or

 

•      any other method permitted
pursuant to applicable law.

 

The Selling
Stockholders may also sell shares under Rule 144 under the Securities Act of
1933, as amended (the “Securities Act”), if available, rather than under
this prospectus.

 

Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales.  Broker-dealers may
receive commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated.  Each Selling
Stockholder does not expect these commissions and discounts relating to its
sales of shares to exceed what is customary in the types of transactions
involved.

 

In connection with
the sale of our common stock or interests therein, the Selling Stockholders may
enter into hedging transactions with broker-dealers or other financial

 

29

 

institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume.  The Selling Stockholders may also sell shares
of our common stock short and deliver these securities to close out their short
positions, or loan or pledge the common stock to broker-dealers that in turn
may sell these securities.  The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

 

The Selling
Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales.  In
such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.

 

The Company is
required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares.  The
Company has agreed to indemnify the Selling Stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.

 

The Selling
Shareholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.

 

Because Selling
Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of
the Securities Act.  In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than under this
prospectus.  Each Selling Stockholder has
advised us that they have not entered into any agreements, understandings or arrangements
with any underwriter or broker-dealer regarding the sale of the resale
shares.  There is no underwriter or
coordinating broker acting in connection with the proposed sale of the resale
shares by the Selling Stockholders.

 

We agreed to keep
this prospectus effective until the earlier of (i) the date on which the shares
may be resold by the Selling Stockholders without registration and without
regard to any volume limitations by reason of Rule 144(k) under the Securities
Act or any other rule of similar effect or (ii) all of the shares have been
sold pursuant to the prospectus or Rule 144 under the Securities Act or any
other rule of similar effect.  The resale
shares will be sold only through registered or licensed brokers or dealers if
required under applicable state securities laws. In addition, in certain
states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.

 

30

 

Under applicable
rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market
making activities with respect to our common stock for a period of two business
days prior to the commencement of the distribution.  In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of our common stock by the Selling Stockholders
or any other person.  We will make copies
of this prospectus available to the Selling Stockholders and have informed them
of the need to deliver a copy of this prospectus to each purchaser at or prior
to the time of the sale.

 

31

 

Annex B

 

Power
3 Medical Products, Inc.

 

Selling
Securityholder Notice and Questionnaire

 

The undersigned beneficial owner of common
stock, par value $0.001 per share (the “Common Stock”), of Power 3
Medical Products, Inc., a New York corporation (the “Company”), (the “Registrable
Securities”) understands that the Company has filed or intends to file with
the Securities and Exchange Commission (the “Commission”) a registration
statement (the “Registration Statement”) for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the “Securities
Act”), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement, dated as of October      ,
2004 (the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

 

Certain legal consequences arise from being
named as a selling securityholder in the Registration Statement and the related
prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects to include the
Registrable Securities owned by it and listed below in Item 3 (unless otherwise
specified under such Item 3) in the Registration Statement.

 

32

 

The undersigned hereby provides the following information to the
Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.             Name.

 

(a)           Full Legal Name of
Selling Securityholder

 

 

 

(b)           Full Legal Name of
Registered Holder (if not the same as (a) above) through which Registrable
Securities Listed in Item 3 below are held:

 

 

 

(c)           Full Legal Name of
Natural Control Person (which means a natural person who directly you
indirectly alone or with others has power to vote or dispose of the securities
covered by the questionnaire):

 

 

 

2.  Address for
Notices to Selling Securityholder:

 

 

	
   

  
	
   

  
	
  Telephone:

  
	
  Fax:

  
	
  Contact
  Person:

  

 

 

3.  Beneficial
Ownership of Registrable Securities:

 

(a)           Type and Principal
Amount of Registrable Securities beneficially owned:

 

 

 

33

 

4. 
Broker-Dealer Status:

 

(a)           Are you a
broker-dealer?

 

Yes   o                                  No   o

 

Note:      If yes, the
Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 

(b)           Are you an
affiliate of a broker-dealer?

 

Yes   o                                  No   o

 

(c)           If you are an
affiliate of a broker-dealer, do you certify that you bought the Registrable
Securities in the ordinary course of business, and at the time of the purchase
of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 

Yes   o                                  No   o

 

Note:      If no, the
Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 

5.  Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.

 

Except as set forth below in this Item 5, the undersigned is
not the beneficial or registered owner of any securities of the Company other
than the Registrable Securities listed above in Item 3.

 

(a)           Type and Amount
of Other Securities beneficially owned by the Selling Securityholder:

 

 

 

34

 

6. 
Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any
of its affiliates, officers, directors or principal equity holders (owners of
5% of more of the equity securities of the undersigned) has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

 

 

The undersigned agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the Registration
Statement remains effective.

 

By signing below, the undersigned consents to
the disclosure of the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the Registration Statement
and the related prospectus.  The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus.

 

IN WITNESS WHEREOF the undersigned, by
authority duly given, has caused this Notice and Questionnaire to be executed
and delivered either in person or by its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
							

 

PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

35Exhibit 10.10

 

SURGICAL SAFETY PRODUCTS, INC.
2003 STOCK COMPENSATION PLAN
 
SECTION 1. PURPOSE OF THE PLAN.
 
The purpose of the 2003 Stock Compensation Plan (“Plan”) is to maintain the ability of Surgical Safety Products, Inc., a New York corporation (the “Company”) and its subsidiaries to attract and retain highly qualified and experienced directors, employees and consultants and to give such directors, employees and consultants a continued proprietary interest in the success of the Company and its subsidiaries. In addition the Plan is intended to encourage ownership of common stock, $.001 par value (“Common Stock”), of the Company by the directors, employees and consultants of the Company and its Affiliates (as defined below) and to provide increased incentive for such persons to render services and to exert maximum effort for the success of the Company’s business. The Plan provides eligible employees and consultants the opportunity to participate in the enhancement of shareholder value by the grants of warrants, options, restricted Common Stock, unrestricted Common Stock and other awards under this Plan and to have their bonuses and/or consulting fees payabl3 in warrants, restricted Common Stock, unrestricted Common Stock and other awards, or any combination thereof. In addition, the Company expects that the Plan will further strengthen the identification of the directors, employees and consultants with the stockholders. Certain options and warrants to be granted under this Plan are intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (“Code”), while other options and warrants granted under this Plan will be nonqualified options or warrants which are not intended to qualify as ISOs (“Nonqualified Options”), either or both as provided in the agreements evidencing the options or warrants described in Section 5. Employees, consultants and directors who participate or become eligible to participate in this Plan from time to time are referred to collectively herein as “Participants”. As used in this Plan, the term “Affiliates” means any “parent corporation” of the Company and any “subsidiary corporation” of the Company within the meaning of Code Sections 424(e) and (f), respectively.
 
SECTION 2. ADMINISTRATION OF THE PLAN.
 
(a) Committee. The Plan shall be administered by the Board of Directors of the Company (the “Board”) or a committee thereof designated by the Board with the specific authority to administer the Plan. When acting in such capacity the Board is herein referred to as the “Committee”. If the Company is governed by Rule 16b-3 promulgated by the Securities and
 

 
Exchange Commission (“Commission”) pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”), no director shall serve as a member of the Committee unless he or she is a “disinterested person” within the meaning of such Rule 16b-3.
 
(b) Committee Action. The Committee shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum, and all determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing signed by a majority of the members shall be fully as effective as if it had been made by a majority vote of its members at a meeting duly called and held. The Committee may designate the Secretary of the Company or other Company employees to assist the Committee in the administration of the Plan, and may grant authority to such persons to execute award agreements or other documents on behalf of the Committee and the Company. Any duly constituted committee of the Board satisfying the qualifications of this Section 2 may be appointed as the Committee.
 
(c) Committee Expenses. All expenses and liabilities incurred by the Committee in the administration of the Plan shall he borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons.
 
SECTION 3. STOCK RESERVED FOR THE PLAN.
 
Subject to adjustment as provided in Section 5(d)(xiii) hereof the aggregate number of shares that may be optioned subject to conversion or issued under the Plan is 8,000,000 shares of Common Stock, warrants, options, or any combination thereof. The shares subject to the Plan shall consist of authorized but unissued shares of Common Stock and such number of shares shall be and is hereby reserved for sale for such purpose. Any of such shares which may remain unsold and which are not subject to issuance upon exercise of outstanding options or warrants at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan or the termination of the last of the options or warrants granted under the Plan, whichever last occurs, the Company shall at all times reserve a sufficient number of shares to meet the requirements of the Plan. Should any option or warrant expire or be cancelled prior to its exercise in full, the shares theretofore subject to such option or warrant may again be made subject to an option or warrant under the Plan.
 

 
SECTION 4. ELIGIBILITY.
 
The Participants shall include directors, employees including officers, of the Company and its divisions and subsidiaries, and consultants and attorneys who provide bona fide services to the Company. Participants are eligible to be granted warrants, options, restricted Common Stock, unrestricted Common Stock and other awards under this Plan and to have their bonuses and/or consulting fees payable in warrants, restricted Common Stock, unrestricted Common Stock and other awards. A Participant who has been granted an option or warrant hereunder may be granted an additional option or warrant, options or warrants, if the Committee shall so determine.
 
SECTION 5. GRANT OF OPTIONS OR WARRANTS
 
(a)          Committee Discretion. The Committee shall have sole and absolute discretionary authority
 
(b)          (i) to determine, authorize, and designate those persons pursuant to this Plan who are to receive warrants, options, restricted Common Stock, or unrestricted Common Stock under the Plan,
 
(c)          (ii) to determine the number of shares of Common Stock to be covered by such grant or such options or warrants and the terms thereof,
 
(d)         (iii) to determine the type of Common Stock granted: restricted Common Stock, unrestricted Common Stock or a combination of restricted and unrestricted Common Stock, and
 
(e)          (iv) to determine the type of option or warrant granted: ISO, Nonqualified Option or a combination of ISO and Nonqualified Options. The Committee shall thereupon grant options or warrants in accordance with such determinations as evidenced by a written option or warrant agreement. Subject to the express provisions of the Plan, the Committee shall have discretionary authority to prescribe, amend and rescind rules and regulations relating to the Plan, to interpret the Plan, to prescribe and amend the terms of the option or warrant agreements (which need not be identical) and to make all other determinations deemed necessary or advisable for the administration of the Plan.
 
(f)            Stockholder Approval. All ISOs granted under this Plan are subject to, and may not be exercised before, the approval of this Plan by the stockholders prior to the first anniversary date of the Board meeting held to approve the Plan, by the affirmative vote of the holders of a majority of the outstanding shares of the Company present, or represented by proxy, and entitled to vote thereat, or by written consent in accordance with the laws of the State of New York, provided that if such approval by the stockholders of the Company is not forthcoming, all options or warrants and stock awards previously granted under this Plan other than ISOs shall be valid in all respects.
 

 
(g)         Limitation on Incentive Stock Options and Warrants. The aggregate fair market value (determined in accordance with Section 5(d)(ii) of this Plan at the time the option or warrant is granted) of the Common Stock with respect to which ISOs may be exercisable for the first time by any Participant during any calendar year under all such plans of the Company and its Affiliates shall not exceed $1,000,000.
 
(h)         Terms and Conditions. Each option or warrant granted under the Plan shall be evidenced by an agreement, in a form approved by the Committee, which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate:
 
(i)             Option or Warrant Period. The Committee shall promptly notify the Participant of the option or warrant grant and a written agreement shall promptly be executed and delivered by and on behalf of the Company and the Participant, provided that the option or warrant grant shall expire if a written agreement is not signed by said Participant (or his agent or attorney) and returned to the Company within 60 days from date of receipt by the Participant of such agreement. The date of grant shall be the date the option or warrant is actually granted by the Committee, even though the written agreement may be executed and delivered by the Company and the Participant after that date. Each option or warrant agreement shall specify the period for which the option or warrant hereunder is granted (which in no event shall exceed ten years from the date of grant) and shall provide that the option or warrant shall expire at the end of such period. If the original term of an option or warrant is less than ten years from the date of grant, the option or warrant may be amended prior to its expiration, with the approval of the Committee and the Participant, to extend the term so that the term as amended is not more than ten years from the date of grant. However, in the case of an ISO granted to an individual who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its Affiliate (“Ten Percent Stockholder”), such period shall not exceed five years from the date of grant.
 
(ii) Option or Warrant Price. The purchase price of each share of Common Stock subject to each option or warrant granted pursuant to the Plan shall be determined by the Committee at the time the option warrant is granted and, in the case of ISOs, shall not be less than 100% of the fair market value of a share of Common Stock on the date the option or warrant is granted, as determined by the Committee. In the case of an ISO granted to a Ten Percent Stockholder, the option or warrant price shall not be less than 110% of the fair market value of a share of Common Stock on the date the option
 

 
or warrant is granted. The purchase price of each share of Common Stock subject to a Nonqualified Option or Warrant under this Plan shall be determined by the Committee prior to granting the option or warrant. The Committee shall set the purchase price for each share subject to a Nonqualified Option or Warrant at either the fair market value of each share on the date the option or warrant is granted, or at such other price as the Committee in its sole discretion shall determine.
 
At the time a determination of the fair market value of a share of Common Stock is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate.
 
(iii)       Exercise Period. The Committee may provide in the option or warrant agreement that an option or warrant may be exercised in whole, immediately, or is to be exercisable in increments. In addition, the Committee may provide that the exercise of all or part of an option or warrant is subject to specified performance by the Participant.
 
(iv)      Procedure for Exercise. Options or warrants shall be exercised in the manner specified in the option or warrant agreement. The notice of exercise shall specify the address to which the certificates for such shares are to be mailed. A Participant shall be deemed to be a stockholder with respect to shares covered by an option or warrant on the date specified in the option or warrant agreement. As promptly as practicable, the Company shall deliver to the Participant or other holder of the warrant, certificates for the number of shares with respect to which such option or warrant has been so exercised, issued in the holder’s name or such other name as holder directs; provided, however, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates with a carrier for overnight delivery, addressed to the holder at the address specified pursuant to this Section 6(d).
 
(v)         Termination of Employment. If an executive officer to whom an option or warrant is granted ceases to be employed by the Company for any reason other than death or disability, any option or warrant which is exercisable on the date of such termination of employment may be exercised during a period beginning on such date and ending at the time set forth in the option or warrant agreement; provided, however, that if a Participant’s employment is terminated because of the Participant’s theft or embezzlement from the Company, disclosure of trade secrets of the Company or the commission of a willful, felonious act while in the employment of the Company (such reasons shall hereinafter be collectively referred to as “for cause”), then any option or
 

 
warrant or unexercised portion thereof granted to said Participant shall expire upon such termination of employment. Notwithstanding the foregoing, no ISO may be exercised later than three months after an employee’s termination of employment for any reason other than death or disability.
 
(vi)      Disability or Death of Participant. In the event of the determination of disability or death of a Participant under the Plan while he or she is employed by the Company, the options or warrants previously granted to him may be exercised (to the extent he or she would have been entitled to do so at the date of the determination of disability or death) at any time and from time to time, within a period beginning on the date of such determination of disability or death and ending at the time set forth in the option or warrant agreement, by the former employee, the guardian of his estate, the executor or administrator of his estate or by the person or persons to whom his rights under the option or warrant shall pass by will or the laws of descent and distribution, but in no event may the option or warrant be exercised after its expiration under the terms of the option or warrant agreement. Notwithstanding the foregoing, no ISO may be exercised later than one year after the determination of disability or death. A Participant shall be deemed to be disabled if, in the opinion of a physician selected by the Committee, he or she is incapable of performing services for the Company of the kind he or she was performing at the time the disability occurred by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration. The date of determination of disability for purposes hereof shall be the date of such determination by such physician.
 
(vii)   Assignability. An option or warrant shall not be assignable or otherwise transferable, in whole or in part, by a Participant except that an option or warrant may be transferable to a member of the Participant’s immediate family or to a trust in which the Participant and members of his immediate family are the only beneficiaries.
 
(viii) Incentive Stock Options. Each option or warrant agreement may contain such terms and provisions as the Committee may determine to be necessary or desirable in order to qualify an option or warrant designated as an incentive stock option.
 
(ix)        Restricted Stock Awards. Awards of restricted stock under this Plan shall be subject to all the applicable provisions of this Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine:
 

 
(A)      Awards of restricted stock may be in addition to or in lieu of option or warrant grants. Awards may be conditioned on the attainment of particular performance goals based on criteria established by the Committee at the time of each award of restricted stock. During a period set forth in the agreement (the “Restriction Period”), the recipient shall not be permitted to sell, transfer, pledge, or otherwise encumber the shares of restricted stock; except that such shares may be used, if the agreement permits, to pay the option or warrant price pursuant to any option or warrant granted under this Plan, provided an equal number of shares delivered to the Participant shall carry the same restrictions as the shares so used. Shares of restricted stock shall become free of all restrictions if during the Restriction Period, (i) the recipient dies, (ii) the recipient’s directorship, employment, or consultancy terminates by reason of permanent disability, as determined by the Committee, (iii) the recipient retires after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a division or subsidiary, or (iv) if provided in the agreement, there is a “change in control” of the Company (as defined in such agreement). The Committee may require medical evidence of permanent disability, including medical examinations by physicians selected by it. Unless and to the extent otherwise provided in the agreement, shares of restricted stock shall be forfeited and revert to the Company upon the recipient’s termination of directorship, employment or consultancy during the Restriction Period for any reason other than death, permanent disability, as determined by the Committee, retirement after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a subsidiary or division, or, to the extent provided in the agreement, a “change in control” of the Company (as defined in such agreement), except to the extent the Committee, in its sole discretion, finds that such forfeiture might not be in the best interests of the Company and, therefore, waives all or part of the application of this provision to the restricted stock held by such recipient. Certificates for restricted stock shall be registered in the name of the recipient but shall be imprinted with the appropriate legend and returned to the Company by the recipient, together with a stock power endorsed in blank by the recipient. The recipient shall be entitled to vote shares of restricted stock and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall also be subject to the same restrictions.
 
(B)        Restricted Stock shall become free of the foregoing restrictions upon expiration of the applicable Restriction Period and the Company shall then deliver to the recipient Common Stock certificates evidencing such stock. Restricted stock and any Common
 

 
Stock received upon the expiration of the restriction period shall be subject to such other transfer restrictions and/or legend requirements as are specified in the applicable agreement.
 
(x)           Bonuses and Past Salaries and Fees Payable in Unrestricted Stock.
 
(A)      In lieu of cash bonuses otherwise payable under the Company’s or applicable division’s or subsidiary’s compensation practices to employees and consultants eligible to participate in this Plan, the Committee, in its sole discretion, may determine that such bonuses shall be payable in unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such bonuses shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of unrestricted Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock payable in lieu of a bonus otherwise payable shall be determined by dividing such bonus amount by the fair market value of one share of Common Stock on the date the bonus is payable, with fair market value determined as of such date in accordance with Section 5(d)(ii).
 
(B)        In lieu of salaries and fees otherwise payable by the Company to employees, attorneys and consultants eligible to participate in this Plan that were incurred for services rendered during, prior or after the year of 2003, the Committee, in its sole discretion, may determine that such unpaid salaries and fees shall be payable in unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such awards shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of unrestricted Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock payable in lieu of salaries and fees otherwise payable shall be determined by dividing each calendar month’s of unpaid salary or fee amount by the average trading value of the Common Stock for the calendar month during which the subject services were provided.
 
(xi)        No Rights as Stockholder. No Participant shall have any rights as a stockholder with respect to shares covered by an option or warrant until the option or warrant is exercised as provided in clause (d) above.
 

 
(xii)     Extraordinary Corporate Transactions. The existence of outstanding options or warrants shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or other securities or subscription rights thereto, or any issuance 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. If the Company recapitalizes or otherwise changes its capital structure, or merges, consolidates, sells all of its assets or dissolves (each of the foregoing a “Fundamental Change”), then thereafter upon any exercise of an option or warrant theretofore granted the Participant shall be entitled to purchase under such option or warrant, in lieu of the number of shares of Common Stock as to which option or warrant shall then be exercisable, the number and class of shares of stock and securities to which the Participant would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Participant had been the holder of record of the number of shares of Common Stock as to which such option or warrant is then exercisable. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of another entity), (ii) the Company sells all or substantially all of its assets to any other person or entity (other than a wholly owned subsidiary), (iii) any person or entity (including a “group” as contemplated by Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control of (including, without limitation, power to vote) more than 50% of the outstanding shares of Common Stock, (iv) the Company is to be dissolved and liquidated, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event in clauses (i) through (v) above is referred to herein as a “Corporate Change”), the Committee, in its sole discretion, may accelerate the time at which all or a portion of a Participant’s option or warrants may be exercised for a limited period of time before or after a specified date.
 
(xiii) Changes in Company’s Capital Structure. If the outstanding shares of Common Stock or other securities of the Company, or both, for which the option or warrant is then exercisable at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, recapitalization, or reorganization, the number and
 

 
kind of shares of Common Stock or other securities which are subject to the Plan or subject to any options or warrants theretofore granted, and the option or warrant prices, shall be adjusted only as provided in the option or warrant.
 
(xiv) Acceleration of Options and Warrants. Except as hereinbefore expressly provided, (i) the issuance by the Company of shares of stock or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, 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, (ii) the payment of a dividend in property other than Common Stock or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to options or warrants theretofore granted or the purchase price per share, unless the Committee shall determine, in its sole discretion, that an adjustment is necessary to provide equitable treatment to Participant. Notwithstanding anything to the contrary contained in this Plan, the Committee may, in its sole discretion, accelerate the time at which any option or warrant may be exercised, including, but not limited to, upon the occurrence of the events specified in this Section 5, and is authorized at any time (with the consent of the Participant) to purchase options or warrants pursuant to Section 6.
 
SECTION 6. RELINQUISHMENT OF OPTIONS OR WARRANTS.
 
(a)          The Committee, in granting options or warrants hereunder, shall have discretion to determine whether or not options or warrants shall include a right of relinquishment as hereinafter provided by this Section 6. The Committee shall also have discretion to determine whether an option or warrant agreement evidencing an option or warrant initially granted by the Committee without a right of relinquishment shall be amended or supplemented to include such a right of relinquishment. Neither the Committee nor the Company shall be under any obligation or incur any liability to any person by reason of the Committee’s refusal to grant or include a right of relinquishment in any option or warrant granted hereunder or in any option or warrant agreement evidencing the same. Subject to the Committee’s determination in any case that the grant by it of a right of relinquishment is consistent with Section 1 hereof, any option or warrant granted under this Plan, and the option or warrant agreement evidencing such option or warrant, may provide:
 

 
(i)             That the Participant, or his or her heirs or other legal representatives to the extent entitled to exercise the option or warrant under the terms thereof, in lieu of purchasing the entire number of shares subject to purchase there under, shall have the right to relinquish all or any part of the then unexercised portion of the option or warrant (to the extent then exercisable) for a number of shares of Common Stock to be determined in accordance with the following provisions of this clause (i):
 
(A)      The written notice of exercise of such right of relinquishment shall state the percentage of the total number of shares of Common Stock issuable pursuant to such relinquishment (as defined below) that the Participant elects to receive;
 
(B)        The number of shares of Common Stock, if any, issuable pursuant to such relinquishment shall be the number of such shares, rounded to the next greater number of full shares, as shall be equal to the quotient obtained by dividing (i) the Appreciated Value by (ii) the purchase price for each of such shares specified in such option or warrant;
 
(C)        For the purpose of this clause (C), “Appreciated Value” means the excess, if any, of (x) the total current market value of the shares of Common Stock covered by the option or warrant or the portion thereof to be relinquished over (y) the total purchase price for such shares specified in such option or warrant;
 
(ii)          That such right of relinquishment may be exercised only upon receipt by the Company of a written notice of such relinquishment which shall be dated the date of election to make such relinquishment; and that, for the purposes of this Plan, such date of election shall be deemed to be the date when such notice is sent by registered or certified mail, or when receipt is acknowledged by the Company, if mailed by other than registered or certified mail or if delivered by hand or by any telegraphic communications equipment of the sender or otherwise delivered; provided, that, in the event the method just described for determining such date of election shall not be or remain consistent with the provisions of Section 16(b) of the Exchange Act or the rules and regulations adopted by the Commission there under, as presently existing or as may be hereafter amended, which regulations exempt from the operation of Section 16(b) of the Exchange Act in whole or in part any such relinquishment transaction, then such date of election shall be determined by such other method consistent with Section 16(b) of the Exchange Act or the rules and regulations there under as the Committee shall in its discretion select and apply;
 

 
(iii)       That the “current market value” of a share of Common Stock on a particular date shall be deemed to be its fair market value on that date as determined in accordance with Paragraph 5(d)(ii); and
 
(iv)      That the option or warrant, or any portion thereof, may be relinquished only to the extent that (A) it is exercisable on the date written notice of relinquishment is received by the Company, and (B) the holder of such option or warrant pays, or makes provision satisfactory to the Company for the payment of, any taxes which the Company is obligated to collect with respect to such relinquishment.
 
(b)         The Committee shall have sole discretion to consent to or disapprove, and neither the Committee nor the Company shall be under any liability by reason of the Committee’s disapproval of, any election by a holder of options or warrants to relinquish such options or warrants in whole or in part as provided in Paragraph 6(a), except that no such consent to or approval of a relinquishment shall be required under the following circumstances. Each Participant who is subject to the short-swing profits recapture provisions of Section 16(b) of the Exchange Act (“Covered Participant”) shall not be entitled to receive shares of Common Stock when options or warrants are relinquished during any window period commencing on the third business day following the Company’s release of a quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such release (“Window Period”). A Covered Participant shall be entitled to receive shares of Common Stock upon the relinquishment of options or warrants outside a Window Period.
 
(c)          The Committee, in granting options or warrants hereunder, shall have discretion to determine the terms upon which such options or warrants shall be relinquishable, subject to the applicable provisions of this Plan, and including such provisions as are deemed advisable to permit the exemption from the operation from Section 16(b) of the Exchange Act of any such relinquishment transaction, and options or warrants outstanding, and option agreements evidencing such options, may be amended, if necessary, to permit such exemption. If options or warrants are relinquished, such option or warrant shall be deemed to have been exercised to the extent of the number of shares of Common Stock covered by the option or warrant or part thereof which is relinquished, and no further options or warrants may be granted covering such shares of Common Stock.
 

 
(d)         Any options or warrants or any right to relinquish the same to the Company as contemplated by this Paragraph 6 shall be assignable by the Participant, provided the transaction complies with any applicable securities laws.
 
(e)          Except as provided in Section 6(f) below, no right of relinquishment may be exercised within the first six months after the initial award of any option or warrant containing, or the amendment or supplementation of any existing option or warrant agreement adding, the right of relinquishment.
 
(f)            No right of relinquishment may be exercised after the initial award of any option or warrant containing, or the amendment or supplementation of any existing option or warrant agreement adding the right of relinquishment, unless such right of relinquishment is effective upon the Participant’s death, disability or termination of his relationship with the Company for a reason other than “for cause.”
 
SECTION 7. AMENDMENTS OR TERMINATION.
 
The Board may amend, alter or discontinue the Plan, but no amendment or alteration shall be made which would impair the rights of any Participant, without his consent, under any option or warrant theretofore granted.
 
SECTION 8. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
 
The Plan, the grant and exercise of options or warrants there under, and the obligation of the Company to sell and deliver shares under such options or warrants, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of Common Stock prior to the completion of any registration or qualification of such shares under any federal or state law or issuance of any ruling or regulation of any government body which the Company shall, in its sole discretion, determine to be necessary or advisable. Any adjustments provided for in subparagraphs 5(d)(xii), (xiii) and (xiv) shall be subject to any shareholder action required by the corporate law of the state of incorporation of the Company.
 

 
SECTION 9. PURCHASE FOR INVESTMENT.
 
Unless the options, warrants, and shares of Common Stock covered by this Plan have been registered under the Securities Act of 1933, as amended, or the Company has determined that such registration is unnecessary, each person acquiring or exercising an option or warrant under this Plan may be required by the Company to give a representation in writing that he or she is acquiring such option or warrant or such shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.
 
SECTION 10. TAXES.
 
(a)          The Company may make such provisions as it may deem appropriate for the withholding of any taxes which it determines is required in connection with any options or warrants granted under this Plan.
 
(b)         Notwithstanding the terms of Paragraph 10(a), any Participant may pay all or any portion of the taxes required to be withheld by the Company or paid by him or her in connection with the exercise of a nonqualified option or warrant by electing to have the Company withhold shares of Common Stock, or by delivering previously owned shares of Common Stock, having a fair market value, determined in accordance with Paragraph 5(d)(ii), equal to the amount required to be withheld or paid. A Participant must make the foregoing election on or before the date that the amount of tax to be withheld is determined (“Tax Date”). All such elections are irrevocable and subject to disapproval by the Committee. Elections by Covered Participants are subject to the following additional restrictions: (i) such election may not be made within six months of the grant of an option or warrant, provided that this limitation shall not apply in the event of death or disability, and (ii) such election must be made either six months or more prior to the Tax Date or in a Window Period. Where the Tax Date in respect of an option or warrant is deferred until six months after exercise and the Covered Participant elects share withholding, the full amount of shares of Common Stock will be issued or transferred to him upon exercise of the option or warrant, but he or she shall be unconditionally obligated to tender back to the Company the number of shares necessary to discharge the Company’s withholding obligation or his estimated tax obligation on the Tax Date.
 

 
SECTION 11. REPLACEMENT OF OPTIONS AND WARRANTS.
 
The Committee from time to time may permit a Participant under the Plan to surrender for cancellation any unexercised outstanding option or warrant and receive from the Company in exchange an option or warrant for such number of shares of Common Stock as may be designated by the Committee. The Committee may, with the consent of the holder of any outstanding option or warrant, amend such option or warrant, including reducing the exercise price of any option or warrant to not less than the fair market value of the Common Stock at the time of the amendment and extending the exercise term of any warrant or option.
 
SECTION 12. NO RIGHT TO COMPANY EMPLOYMENT. Nothing in this Plan or as a result of any option or warrant granted pursuant to this Plan shall confer on any individual any right to continue in the employ of the Company or interfere in any way with the right of the Company to terminate an individual’s employment at any time. The option or warrant agreements may contain such provisions as the Committee may approve with reference to the effect of approved leaves of absence.
 
SECTION 13. LIABILITY OF COMPANY. The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or other persons as to:
 
(a) The Non-Issuance of Shares. The non-issuance or sale of shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and 
 
(b) Tax Consequences. Any tax consequence expected, but not realized, by any Participant or other person due to the exercise of any option or warrant granted hereunder.
 
SECTION 14. EFFECTIVENESS AND EXPIRATION OF PLAN. The Plan shall be effective on the date the Board adopts the Plan. The Plan shall expire ten years after the date the Board approves the Plan and thereafter no option or warrant shall be granted pursuant to the Plan.
 

 
SECTION 15. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of restricted stock or stock options or warrants otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
 
SECTION 16. GOVERNING LAW. This Plan and any agreements hereunder shall be interpreted and construed in accordance with the laws of the state of incorporation of the Company and applicable federal law.
 
SECTION 17. CASHLESS EXERCISE. The Committee also may allow cashless exercises as permitted under Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law. The proceeds from such a payment shall be added to the general funds of the Company and shall be used for general corporate purposes.

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