Document:

Exhibit 4.14

POWER MEDICAL
INTERVENTIONS, INC.

2007 EMPLOYEE STOCK
PURCHASE PLAN

 

1.             PURPOSE.

The Power Medical
Interventions, Inc. 2007 Employee Stock Purchase Plan (the “Plan”) is intended
to provide a method whereby employees of  Power Medical Interventions, Inc. (the “Company”)
will have an opportunity to acquire an ownership interest (or increase an
existing ownership interest) in the Company through the purchase of shares of
the Common Stock of the Company.  It is
the intention of the Company that the Plan qualify as an “employee stock
purchase plan” under Section 423 of the Internal Revenue Code of 1986, as
amended (the “Code”). The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.

2.             DEFINITIONS.

(a)   “Board”
means the Board of Directors of the Company.

(b)   “Code”
shall have the meaning set forth in Paragraph 1.

(c)   “Committee”
means the Compensation Committee of the Board.

(d)   “Common
Stock” means the common stock, $.001 par value per share, of the Company.

(e)   “Company”
shall also include any subsidiary of Power Medical Interventions, Inc.
designated as a participant in the Plan by the Board, unless the context
otherwise requires.

(f)    “Compensation”
means, for the purpose of any Offering pursuant to this Plan, base pay in
effect as of the Offering Commencement Date (as hereinafter defined).  Compensation shall not include any deferred
compensation other than contributions by an individual through a salary
reduction agreement to a cash or deferred plan pursuant to Section 401(k) of
the Code or to a cafeteria plan pursuant to Section 125 of the Code.

(g)   “Employee”
means any person who is customarily employed at least 20 hours per week and
more than five months in a calendar year by (i) the Company or (ii) any
subsidiary corporation.

(h)   “Investment
Accounts” shall have the meaning set forth in Paragraph 9.

(i)    “Offering”
shall have the meaning set forth in Paragraph 4.

 

 

(j)    “Offering
Commencement Date” shall have the meaning set forth in Paragraph 4.

(k)   “Offering
Termination Date” shall have the meaning set forth in Paragraph 4.

(l)    “Plan”
shall have the meaning set forth in Paragraph 1.

(m)  “Subsidiary
corporation” shall mean any present or future corporation which is or would
constitute a “subsidiary corporation” as that term is defined in Section 425 of
the Code.

3.             ELIGIBILITY.

(a)   Participation
in the Plan is completely voluntary. Participation in any one or more of the
offerings under the Plan shall neither limit, nor require, participation in any
other offering.

(b)   Each
employee of the Company shall be eligible to participate in the Plan on the
first Offering Commencement Date, as hereafter defined, following the
completion of twelve months of continuous service with the Company and/or its
subsidiary corporations.  Notwithstanding
the foregoing, no employee shall be granted an option under the Plan:

(i)            if, immediately after the grant, such employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Company or any subsidiary corporation; for purposes of this Paragraph the rules
of Section 425(d) of the Code shall apply in determining stock ownership of any
employee; or

(ii)           which permits his rights to purchase stock under all Section
423 employee stock purchase plans of the Company and its subsidiary
corporations to exceed $25,000 of the fair market value of the stock (determined
at the time such option is granted) for each calendar year in which such option
is outstanding; for purposes of this Paragraph, the rules of Section 423(b)(8)
of the Code shall apply.

4.             OFFERING DATES.

The right to purchase stock
hereunder shall be made available by a series of  six-month
offerings (the “Offering” or “Offerings”) to employees eligible in accordance
with Paragraph 3 hereof. The Committee will, in its discretion, determine the
applicable date of commencement (“Offering Commencement Date”) and termination
date (“Offering Termination Date”) for each Offering.  Participation in any one or more of the
Offerings under the Plan shall neither limit, nor require, participation in any
other Offering.

 

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5.             PARTICIPATION.

Any eligible employee may
become a participant by completing a payroll deduction authorization form
provided by the Company and filing it with the office of the Company’s
Treasurer [not less than ten business days; TBD by Board]
prior to each applicable Offering Commencement Date, as determined by the
Committee pursuant to Paragraph 4.

6.             PAYROLL DEDUCTIONS.

(a)   At
the time a participant files his authorization for a payroll deduction, he
shall elect to have deductions made from his pay on each payday during any
Offering in which he is a participant at a specified percentage of his
Compensation as determined on the applicable Offering Commencement Date; said
percentage shall be in increments of one percent up to a maximum percentage of 5%.

(b)   Payroll
deductions for a participant shall commence on the applicable Offering
Commencement Date when his authorization for a payroll deduction becomes
effective and shall end on the Offering Termination Date of the Offering to
which such authorization is applicable unless sooner terminated by the
participant as provided in Paragraph 10.

(c)   All
payroll deductions made for a participant shall be credited to his account
under the Plan.  A participant may not
make any separate cash payment into such account.

(d)   A
participant may withdraw from the Plan at any time during the applicable
Offering period.

7.             GRANTING OF OPTION.

(a)   On
the Offering Termination Date of each Offering, a participating employee shall
be deemed to have been granted an option to purchase a maximum number of shares
of the Common Stock equal to an amount determined by dividing 85% of the market
value per share of the Common Stock on the applicable Offering Termination Date
into an amount equal to the sum of (i) the payroll deductions that have been
withheld for the account of the participating employee during the applicable
Offering period plus (ii) any amounts in the employee’s account on the Offering
Commencement Date that have been carried forward from prior Offerings. Such
market value per share of the Common Stock shall be determined as provided in
clause (i) of Paragraph 7(b).

(b)       The
option price of the Common Stock purchased with payroll deductions made during
each such Offering for a participant therein shall be 85% of the last sale
price as reported by The Nasdaq Stock Market LLC or, if the Common Stock is
listed on another exchange, the closing price of the Common Stock on the
exchange, in each case on the Offering Termination Date applicable to such
Offering (or on the next regular business date on which shares of the Common
Stock shall be traded in the event that no shares of the Common Stock have been
traded on the Offering 

 

 

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Termination
Date); or if the Common Stock is not listed on Nasdaq or on another exchange,
85% of the fair market value on the Offering Termination Date as determined by
the Committee.

8.             EXERCISE OF OPTION.

(a)   Unless
a participant gives written notice to the Treasurer of the Company as hereinafter
provided, his option for the purchase of Common Stock with payroll deductions
made during any Offering will be deemed to have been exercised automatically on
the Offering Termination Date applicable to such Offering for the purchase of
the number of whole shares of Common Stock which the accumulated payroll
deductions in his account at that time will purchase at the applicable option
price (but not in excess of the number of shares for which options have been
granted the employee pursuant to Paragraph 7(a)), and any excess in his account
at that time will be returned to the Participant.

(b)   Fractional
shares will not be issued under the Plan and any accumulated payroll deductions
which would have been used to purchase fractional shares shall be automatically
carried forward to the next Offering unless the participant elects, by written
notice to the Treasurer of the Company, to have the excess cash returned to
him.

9.             DELIVERY OF SHARES.

The
Company shall deliver to each participant (as promptly as possible after the
appropriate Offering Termination Date), through book entry or, at the written
request of the participant made not less than five business days prior to the
Offering Termination Date, by delivery of a certificate representing such
shares, the shares of Common Stock purchased upon exercise of his or her
option.

10.           WITHDRAWAL AND TERMINATION.

(a)   Prior
to the Offering Termination Date for an Offering, any participant may withdraw
the payroll deductions credited to his account under the Plan for such Offering
by giving written notice to the Treasurer of the Company.  All of the participant’s payroll deductions
credited to such account will be paid to him promptly after receipt of notice
of withdrawal, without interest, and no future payroll deductions will be made
from his pay during such offering.

(b)   A
participant’s election not to participate in, or withdrawal from, any Offering
will not have any effect upon his eligibility to participate in any succeeding
Offering or in any similar plan which may hereafter be adopted by the Company.

(c)   Upon
termination of the participant’s employment for any reason, including
retirement but excluding death, the payroll deductions credited to his account
will be returned to him, or, in the case of his death, to the person or persons
entitled thereto under Paragraph 14.

 

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(d)   Upon
termination of the participant’s employment because of death, his beneficiary
(as defined in Paragraph 14) shall have the right to elect, by written notice
given to the Company’s Treasurer prior to the expiration of a period of 90 days
commencing with the date of the death of the participant, either:

(i)            to withdraw all of the payroll deductions credited to the
participant’s account under the Plan; or

(ii)           to exercise the participant’s option for the purchase of
stock on the Offering Termination Date next following the date of the
participant’s death for the purchase of the number of full shares which the
accumulated payroll deductions in the participant’s account at the date of the
participant’s death will purchase at the applicable option price (subject to
the limitation contained in Paragraph 7(a)), and any excess in such account
will be returned to said beneficiary.  In
the event that no such written notice of election shall be duly received by the
office of the Company’s Treasurer, the beneficiary shall automatically be
deemed to have elected to withdraw the payroll deductions credited to the
participant’s account at the date of the participant’s death and the same will
be paid promptly to said beneficiary.

11.           INTEREST.

No interest will be paid or
allowed on any money paid into the Plan or credited to the account of any
participating employee.

12.           STOCK.

(a)   The
maximum number of shares of Common Stock available for issuance and purchase by
employees under the Plan, subject to adjustment upon changes in capitalization
of the Company as provided in Paragraph 17, shall be 1,200,000 shares of Common
Stock, $.001 par value per share, of the Company, subject to adjustment for splits
and recapitalizations.  If the total
number of shares for which options are exercised on any Offering Termination
Date in accordance with Paragraph 8 exceeds the maximum number of shares for
the applicable Offering, the Company shall make a pro rata allocation of the
shares available for delivery and distribution in an equitable manner, and the balances
of payroll deductions credited to the account of each participant under the
Plan shall be returned to the participant.

(b)   The
participant will have no interest in stock covered by his option until such
option has been exercised.

13.           ADMINISTRATION.

The Plan shall be
administered by the Committee. The interpretation and construction of any
provision of the Plan and adoption of rules and regulations for administering
the Plan shall be made by the Committee. Determinations made by the Committee
with respect to any matter or provision contained in the Plan shall be final,
conclusive and binding upon the Company and upon all participants, their heirs
or legal representatives. Any rule or regulation adopted by the 

 

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Committee shall remain in
full force and effect unless and until altered, amended, or repealed by the
Committee.

14.           DESIGNATION OF BENEFICIARY.

A participant shall file
with the Treasurer of the Company a written designation of a beneficiary who is
to receive any Common Stock and/or cash under the Plan. Such designation of
beneficiary may be changed by the participant at any time by written notice.
Upon the death of a participant and upon receipt by the Company of proof of the
identity and existence at the participant’s death of a beneficiary validly
designated by him under the Plan, the Company shall deliver such Common Stock
and/or cash to such beneficiary. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant’s death, the Company shall deliver such Common
Stock and/or cash to the executor or administrator of the estate of the
participant. No beneficiary shall prior to the death of the participant by whom
he has been designated, acquire any interest in the Common Stock and/or cash
credited to the participant under the Plan.

15.           TRANSFERABILITY.

Neither payroll deductions
credited to a participant’s account nor any rights with regard to the exercise
of an option or to receive Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by the participant
other than by will or the laws of descent and distribution. Any such attempted
assignment, transfer, pledge, or other disposition shall be without effect.

16.           USE OF FUNDS.

All payroll deductions
received or held by the Company under this Plan may be used by the Company for
any corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.

17.           EFFECT OF CHANGES OF COMMON STOCK.

If the Company shall
subdivide or reclassify the Common Stock which has been or may be optioned
under this Plan, or shall declare thereon any dividend payable in shares of
such Common Stock, or shall take any other action of a similar nature affecting
such Common Stock, then the number and class of shares of Common Stock which
may thereafter be optioned (in the aggregate and to any participant) shall be
adjusted accordingly and in the case of each option outstanding at the time of
any such action, the number and class of shares which may thereafter be
purchased pursuant to such option and the option price per share shall be
adjusted to such extent as may be determined by the Committee, with the
approval of independent public accountants and counsel, to be necessary to
preserve the rights of the holder of such option.

18.           AMENDMENT OR TERMINATION.

The Board may at any time
terminate or amend the Plan. No such termination shall affect options
previously granted, nor may an amendment make any change in any option
theretofore 

 

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granted which would
adversely affect the rights of any participant holding options under the Plan.

19.           NOTICES.

All notices or other
communications by a participant to the Company under or in connection with the
Plan shall be deemed to have been duly given when received by the Treasurer of
the Company.

20.           MERGER OR CONSOLIDATION.

If the Company shall at any
time merge into or consolidate with another corporation, the holder of each
option then outstanding will thereafter be entitled to receive at the next
Offering Termination Date upon the exercise of such option for each share as to
which such option shall be exercised, the securities or property which a holder
of one share of the Common Stock was entitled to upon and at the time of such
merger or consolidation.  In accordance
with this Paragraph and Paragraph 17, the Committee shall determine the kind
and amount of such securities or property which such holder of an option shall
be entitled to receive.  A sale of all or
substantially all of the assets of the Company shall be deemed a merger or
consolidation for the foregoing purposes.

21.           APPROVAL OF STOCKHOLDERS.

The Plan is subject to the
approval of the stockholders of the Company by written consent or at their next
annual meeting or at any special meeting of the stockholders for which one of
the purposes of such a special meeting shall be to act upon the Plan.

22.           GOVERNMENTAL AND OTHER REGULATIONS.

The Plan, and the grant and
exercise of the rights to purchase shares hereunder, and the Company’s obligation
to sell and deliver shares upon the exercise of rights to purchase shares,
shall be subject to all applicable federal, state and foreign laws, rules and
regulations, and to such approvals by any regulatory or governmental agency as
may, in the opinion of counsel for the Company, be required.  The Plan shall be governed by, and construed
and enforced in accordance with, the provisions of Sections 421, 423 and 424 of
the Code and the substantive laws of the Commonwealth of Massachusetts.  In the event of any inconsistency between such
provisions of the Code and any such laws, said provisions of the Code shall
govern to the extent necessary to preserve favorable federal income tax
treatment afforded employee stock purchase plans under Section 423 of the Code.

*  *  *

 

7Exhibit
10.1

 

	
  CAW/12-20-05

  	
  MELF #24-9-645

  	
   

  

 

MACHINERY AND EQUIPMENT
LOAN FUND

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT, MADE
this 21 day of December, 2005, effective as of December 21, 2005 (the “Effective
Date”) BY AND BETWEEN POWER MEDICAL INTERVENTIONS, INC., a corporation
organized and existing under the laws of Delaware and having an address of 2021
Cabot Boulevard West, Langhorne, Pennsylvania 19047 (the “Borrower”) and THE
COMMONWEALTH OF PENNSYLVANIA, acting by and through the DEPARTMENT OF COMMUNITY
AND ECONOMIC DEVELOPMENT, having its principal place of business at
Commonwealth Keystone Building, 400 North Street, Fourth Floor, Harrisburg,
Pennsylvania 17120 (the “Department”).

 

NOW, THEREFORE, the
parties hereto, in consideration of the mutual promises herein contained, and
intending to be legally bound hereby, covenant and agree as follows:

 

ARTICLE I

 

DEFINITIONS AND
BACKGROUND

 

Section 1.01.   When used herein the following
words and phrases shall have the following meanings:

 

“Act” means Chapter 29 of
the Job Enhancement Act, Act of February 12, 2004, No. 12, P.L. 99, codified at
12 P.S. § 2901 et seq.

 

“Application” means the
application for the Loan submitted by the Borrower to the Department, including
all attachments and exhibits thereto.

 

“CERCLA” means The
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended.

 

1

 

“Collateral” means that
certain machinery and equipment the Borrower has purchased or intends to purchase
or has upgraded or intends to upgrade for use at the Premises as more fully
described at Exhibit “A”, which is incorporated herein by reference and made a
part hereof.

 

“Commitment” means the
Department’s letter of March 1, 2005 setting forth its agreement to make the
Loan, and the conditions under which the Loan would be made.

 

“Control” shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether through the ownership
of voting securities, by contract or otherwise.

 

“Cost” or “Costs” means
the costs of the purchase and installation of the Collateral.

 

“Due Inquiry” shall mean
that the Borrower, consistent with good commercial or customary practice, has
caused to be made by a responsible officer or agent of the Borrower appropriate
inquiry among those directors, officers, employees, agents, accountants and
attorneys for the Borrower who might reasonably be expected to have knowledge
of the particular matter and, when such matter includes the condition of the
Collateral, the Premises or other facility, has further undertaken appropriate
inquiries into the present and past ownership and uses thereof.

 

“Eligible Activity” means
manufacturing, industrial processes, mining, Production Agriculture,
information technology, biotechnology, services as a Medical Facility or other
industrial or technology sectors as defined by the Department.

 

“Environmental Laws”
shall mean The Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, The
Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and
Solid Waste Amendments of 1984, The Clean Water Act, The Toxic Substances
Control Act, The Clean Air Act, the Pennsylvania Hazardous Sites Cleanup Act,
the Pennsylvania Solid Waste Management Act, the Pennsylvania Storage Tank and
Spill Prevention Act, the Pennsylvania Worker and Community Right to Know Act,
the Pennsylvania Clean Streams Law, as amended, or any rule or regulation
promulgated pursuant to any of the foregoing statutes, or any other applicable
law, statute, rule, regulation or ordinance regulating the manufacture, use,
possession, discharge or disposal of substances injurious to the natural
environment or to human health, whether federal, state or local.

 

“ER1SA” means the
Employee Retirement Income Security Act of 1974, as amended.

 

2

 

“Event of Default” means
those occurrences listed in Section 7.01 herein.

 

“Hazardous Materials”,
shall include, without limitation, asbestos (including, without limitation,
asbestos in friable form), polychlorinated biphenyls, petroleum products,
flammable or explosive materials, radioactive materials, hazardous materials,
hazardous waste, hazardous or toxic substances or related materials, each as
defined under or pursuant to any Environmental Law.

 

“Indemnified Party” means
the Department and its employees and agents, including, without limitation, any
engineer or environmental consultant retained by the Department.

 

“Loan” means a loan in
the maximum principal amount of Five Hundred Thousand Dollars ($500,000) to be
used exclusively by the Borrower to defray a portion of the Cost not to exceed
50%.

 

“Loan Documents” means
this Loan Agreement, the Note, the Security Agreement, the opinions of counsel
hereinafter referred to, and all other agreements, instruments and documents to
be delivered hereunder.

 

“Medical Facility” means
an entity licensed as a hospital under the act of June 13,1967 (P.L. 31,
No.21), known as the Public Welfare Code, or the act of July 19, 1979 (P.L.
130, No. 48), known as the Health Care Facilities Act.

 

“Note” means the $500,000
promissory note given by the Borrower to the Department, effective as of the
Effective Date.

 

“Participation Percentage”
means fifty percent (50%).

 

“Permitted Lien” – a lien
in the amount of $10,000,000 in favor of General Electric Capital Corporation.

 

“Premises” means a tract
of land in Langhorne, Bucks County, Pennsylvania.

 

“Production Agriculture”
means the management and use of a normal agricultural operation for the
production of a farm commodity.

 

“Project” means the
purchase and installation of new machinery and equipment or the upgrade of existing
machinery and equipment that is directly related to the business process.

 

“Security Documents”
means the Security Agreement and financing statements given by the Borrower to
the Department which constitutes not less than a first lien upon the Collateral.

 

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Section 1.02.                                     The
Borrower has purchased or intends to purchase or has upgraded or intends to
upgrade certain machinery and equipment for use at the Premises. The Borrower
has filed with the Department the Application and accepted from the Department
the Commitment for the Loan, to be used exclusively to defray a portion of the
Cost. The Department is willing to make the Loan upon the terms and subject to
the conditions hereinafter set forth.

 

ARTICLE II

 

THE LOAN

 

Section 2.01.                                     The
Loan. Subject to the conditions set forth herein, the Department agrees to
make the Loan to the Borrower, and the Borrower agrees to accept the Loan from
the Department, for the purposes set forth in the Application.

 

ARTICLE III

 

THE NOTE AND SECURITY
DOCUMENTS

 

Section 3.01.                                     The
Note. The Loan shall be evidenced by the Note, which shall be executed by
the Borrower.

 

Section 3.02.                                     The
Security Documents. Payment of the Note and satisfaction of all obligations
of the Borrower hereunder and under the Note and any other present or future
obligations of the Borrower to the Department shall be secured by a perfected
security interest in the Collateral given by the Borrower to the Department
under the Security Documents. The Security Documents shall be dated the date of
the Note and shall create a perfected first lien upon the Collateral. The
Borrower agrees that whatever right, title and interest which it and its
successors and assigns may have in and to the Collateral shall be, and the same
are hereby expressly made subject and subordinate to the lien of the Security
Documents and any other judgment, lien or encumbrance pursuant to the Note, the
Security Documents or this Loan Agreement.

 

4

 

ARTICLE IV

 

REPRESENTATIONS AND
WARRANTIES OF THE BORROWER

 

The Borrower makes the
following representations and warranties to the Department and the Borrower,
which shall survive and continue until the Loan is paid in full and all of the
Borrower’s obligations hereunder have been satisfied:

 

Section 4.01.                                     Organization.
The Borrower is a corporation validly existing and in good standing under the
laws of the state of Delaware and is qualified to do business in the
Commonwealth of Pennsylvania.

 

Section 4.02.                                     Power
and Authority. The Borrower has all necessary power and authority to
purchase, own, encumber, and sell its property and to carry on its business as
now being conducted, and to carry out the transactions contemplated by the Loan
Documents.

 

Section 4.03.                                     Loan
Documents Consistent with Law and Agreements. The execution and delivery of
this Agreement and of each of the Loan Documents to be executed and delivered
by the Borrower, consummation of the transactions herein contemplated, and
compliance with the terms and provisions hereof and of the Loan Documents which
Borrower has executed and delivered or to which it is otherwise subject do not
(i) contravene any provision of law, statute, rule or regulation to which
Borrower is subject or any judgment, decree, franchise, order or permit
applicable to the Borrower or (ii) conflict with, or result in, a breach of any
of the terms, conditions or provisions of the organizational documents of the
Borrower, or of any material agreement, indenture or other instrument to which
the Borrower is a party or by which it is bound or to which it or its property
is subject.

 

Section 4.04.                                     Due
Authorization. The execution, delivery and performance of this Agreement,
the performance of the transactions contemplated by the provisions hereof, and
the execution, issuance and delivery of each of the Loan Documents to be
executed and delivered by the Borrower hereunder have each been duly authorized
by all necessary action on the part of the Borrower.

 

Section 4.05.                                     Execution
and Delivery. This Agreement and each of the Loan Documents being executed
and delivered by Borrower concurrently herewith have been duly and validly
executed and delivered by the Borrower and constitute valid and legally binding

 

5

 

obligations of the Borrower, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other substantially similar laws of general
application relating to or affecting the enforcement of creditors’ rights or by
general principles of equity.

 

Section 4.06.                                     Litigation.
There is no material litigation or governmental proceeding pending or, to the
knowledge of the Borrower, threatened against the Borrower other than that
which has been previously disclosed to the Department in writing. If such
litigation or proceeding exists or is threatened, it shall be set forth on
Exhibit “G” which shall be attached hereto and made apart hereof.

 

Section 4.07.                                     Taxes.
The Borrower has filed all required federal, state and local tax returns and
has paid all taxes shown on such returns as such taxes have become due unless
the obligation to file such return or pay such tax is the subject of a pending
administrative or judicial appeal or proceeding with respect to which the
Borrower has posted or caused to be posted a bond or other security
satisfactory to the Department in an amount which is at least equal to the sum
which is the subject of the appeal or proceeding, together with all interest,
costs, and charges relating thereto.

 

Section 4.08.                                     No
Default For Borrowed Money. No default with respect to any agreement
pursuant to which the Borrower has borrowed money or guaranteed the obligations
of others has occurred and is continuing as of the date hereof nor has any such
event occurred which with the passage of time and/or giving of notice would
constitute such a default.

 

Section 4.09.                                     Financial
Statements and Financial Condition. All financial statements of the
Borrower (including all related notes) and all supplementary financial
information of the Borrower delivered to the Department fairly present what
they purport to present as of the dates and for the respective fiscal periods
presented, and in the case of any audited financial statements of the Borrower,
were prepared in accordance with generally accepted accounting principles
consistently applied, except as disclosed in such financial statements. The
Borrower has no material liabilities, direct or indirect, fixed or contingent,
as of the date of such financial statements which are not reflected therein.
There has been no material adverse change in the financial condition of the
Borrower from that disclosed in the most recent annual financial statements
delivered to the Department prior to the initial approval of the Loan by the
Department.

 

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Section 4.10.                                     Employee
Benefits. Any employee pension benefit plans and employee welfare benefit
plans, collectively referred to as employee benefit plans, within the meaning
of ERISA maintained by the Borrower or any subsidiary of the Borrower comply in
all material respects with the reporting and disclosure and fiduciary
responsibility provisions of Title I of ERISA.

 

Section 4.11.                                     Environmental
Violations. Any transportation, storage, handling or usage of Hazardous
Materials by the Borrower, whether on the Premises or otherwise, has been in
compliance with all Environmental Laws. Borrower further represents and
warrants that, to the best of its knowledge, no spill, release, discharge, or
disposal of Hazardous Materials has occurred on the Premises to date, and that
the soil and groundwater on the Premises are free of Hazardous Materials.

 

Section 4.12.                                     Bankruptcy,
etc. The Borrower has not within seven (7) years prior to the date hereof
filed any voluntary petition for relief under the U.S. Bankruptcy Code.

 

Section 4.13.                                     Criminal
Convictions. Neither the Borrower, nor to the Borrower’s knowledge, any
owner, director, officer or person employed or engaged by the Borrower in a
senior management capacity or as a manager or comptroller, has been convicted
by any court of any felony or any misdemeanor involving theft, dishonesty,
deception, false swearing, or the filing or submission of any false or
misleading information to any agency of government.

 

Section 4.14.                                     No
Consent Required. No consent or approval to the execution and performance
of this Agreement and the transactions contemplated hereby not already obtained
is required to be obtained by the Borrower from any governmental body,
authority, agency, court or other person or entity, public or private, other
than the Department;

 

Section 4.15.                                     No
Removal of Jobs. The establishment of the Project by the Borrower at the
Premises will not cause the removal of any business operation from one area of
Pennsylvania to another area of Pennsylvania, nor result in the reduction of
the number of employees at any other plant controlled by Borrower presently
located in Pennsylvania.

 

Section 4.16.                                     Eligible
Activity at the Premises. The Borrower engages in an Eligible Activity at
the Premises.

 

7

 

ARTICLE V

 

BORROWING PROCEDURES AND
AGREEMENTS

 

Section 5.01.                                     Conditions
Precedent to All Advances. The obligation of the Department to make the
initial advance of the proceeds of the Loan to the Borrower and to make each
subsequent advance thereof is subject to the satisfaction of the following
conditions precedent at the time of each such advance:

 

(a)                      The Borrower
has satisfied all conditions set forth in the Commitment, the closing
requirements transmitted by the Department’s counsel to the Borrower’s counsel
following issuance of the Commitment have been satisfied; the Loan Documents
shall have been properly executed and, where appropriate, delivered to the
Department; and the Security Documents and any other document requested to be
filed or recorded by the Department shall have been duly acknowledged and
delivered for filing or recording in the appropriate public office.

 

(b)                     Each and all
of the representations and warranties of the Borrower set forth in Articles IV
hereof, and in any of the other Loan Documents, shall be true and correct in
all respects, as though separately and independently made on and as of the date
of each such advance, (except where speaks as of an earlier date).

 

(c)                      There shall
be no event of default under any of the Loan Documents or any event which, with
the passage of time or the giving of notice, or both, could constitute an event
of default under any of the Loan Documents.

 

(d)                     There shall
have been no material adverse change in the financial condition of the Borrower
from that disclosed in financial statements heretofore delivered to and
approved by the Department.

 

(e)                      In the event
there is any material change in the Project, Department may refuse to make
further advances under this Agreement until the matter is resolved to the
Department’s reasonable satisfaction, whether or not the Department has
declared an Event of Default hereunder or such revocation, rescission,
suspension, or material adverse effect would comprise an Event of Default
hereunder.

 

The Borrower agrees that
by making a request for an advance hereunder, the Borrower shall be deemed to
be reconfirming to the Department that all representations and warranties of
the Borrower set forth in this Agreement and all related instruments,
agreements and documents remain true and correct as of the date of each request
(except where speaks as of an earlier date).

 

8

 

ARTICLE VI

 

BORROWER’S COVENANTS

 

Until the Loan has been
entirely repaid and all of Borrower’s obligations to the Department in
connection therewith and herewith have been satisfied, the Borrower hereby
covenants that:

 

Section 6.01.                                     Use
of Proceeds. The Borrower shall use the proceeds of the Loan solely for the
purpose of defraying a portion of the Cost.

 

Section 6.02.                                     Preservation
of Existence. The Borrower will (a) maintain and preserve its existence as
a corporation, limited liability company, limited partnership, general
partnership, or Medical Facility, as the case may be, and the right to carry on
its Eligible Activity at the Premises, and (b) duly procure and maintain all
necessary licenses, franchises, permits and other documents necessary or
appropriate in connection therewith and all necessary renewals and extensions
thereof.

 

Section 6.03                                        Debt
Secured by Collateral. Without the prior written consent of the Department,
the Borrower shall not take any action to cause or permit any lien or
encumbrance to be placed against the Collateral or any interest therein, except
the Permitted Lien and such other liens and encumbrances as may be expressly
permitted by the Security Documents.

 

Section 6.04.                                     Nondiscrimination/Sexual
Harassment. The Borrower and its subsidiaries will not discriminate against
or intimidate any employee or any applicant for employment because of gender,
race, creed, or color, in any manner, including but not limited to the
following activities: employment; upgrading, demotion or transfer; recruitment
or recruitment advertising; layoff or termination; rates of pay or other forms
of compensation; and selection for training, including apprenticeship. The
Borrower hereby accepts and agrees to be bound by the nondiscrimination/sexual
harassment provisions set forth in Exhibit “B” hereto, and will cause
comparable nondiscrimination/sexual harassment provisions to be inserted into
all Project contracts.

 

Section 6.05.                                     Filing
and Other Costs. The Borrower shall pay all the costs of filing or
recording and any other costs that the Department may incur in connection with
closing the Loan.

 

Section 6.06.                                     Inspection.
The Borrower shall provide proper facilities at all times for inspection of the
Project before and after completion thereof by the Department and the

 

9

 

Department’s authorized representatives (including, without limitation,
any engineer or environmental consultant retained by the Department), and afford
full and free access to the Project and Premises to such persons as may from
time to time be designated by the Department.

 

Section 6.07.   Operations and Number of
Jobs. The Borrower will create, or retain, as the case may be, at the
Premises within three years from the date of the Loan closing, no less than the
number of jobs specified to be created or retained in the Application.

 

(a)                      A breach by
the Borrower of this Section 6.07 shall be an Event of Default under this Loan
Agreement. The remedies of the Department for an Event of Default arising
solely from a breach by the Borrower of this Section 6.07 are governed by
Section 7.03 of this Loan Agreement.

 

(b)                     The
Department Policy For Failure to Meet Job Projections (the “Department Policy”)
is incorporated herein by reference and is attached hereto as Exhibit F and the
Department may, in compliance with the Department Policy and such other
regulations and statements of policy, if any, as are then in effect, raise the
rate of interest on the Loan as permitted under the Note.

 

(c)                      The Borrower
shall be required to meet job projections within the three (3) year period
referred to above and shall not be penalized if there is a reduction in the
number of jobs once the projections have been achieved even if such reduction
occurs within the three (3) year period.

 

Section 6.08.   Certificate re Jobs. The
Borrower will annually provide the Department with a certificate executed by an
authorized officer setting forth the number of employees, and their respective
job classifications (skilled, semi-skilled and unskilled), employed by the
Borrower or any subsidiary during the previous year at the Premises, together
with such other related information as the Department may request.

 

Section 6.09.                                     Employee
Benefit Plans. To the extent that the Borrower maintains any employee
benefit plans subject to the requirements of ERISA, the Borrower and its
subsidiaries shall: (1) fund all of its employee pension benefit plans, to the
extent required, in accordance with the minimum funding standards of Section
302 of ERISA and Section 412 of the Internal Revenue Code of 1986 (the “Code”),
except where the failure to do so would not have a material adverse effect on
the continuing operations of the Borrower; (2) make all payments of

 

10

 

contributions to all employee benefit plans within the time periods
established in ER1SA and the Code, except where the failure to do so would not
have a material adverse effect on the continuing operations of the Borrower;
(3) furnish the Department, upon its request, with copies of all reports or
other statements filed with the United States Department of Labor, the Internal
Revenue Service or the Pension Benefit Guaranty Corporation, or any other agencies,
whether federal, state, or local, with respect to all employee benefit plans;
(4) advise the Department within ten days of the occurrence of any “reportable
event” or “prohibited transaction,” within the respective meanings of these
terms in ERISA and the Code, with respect to any employee benefit plan to which
the Borrower contributes, potentially having a material adverse effect on the
continuing operations of the Borrower; (5) promptly advise the Department of
any audit or investigation of any employee benefit plans by the Internal
Revenue Service or Department of Labor or any other governmental agency or any
threatened or proposed action by any such agency affecting the status of, and
deductibility of contributions to, any employee benefit plans, potentially
having in any such case a material adverse effect on the continuing operations
of the Borrower.

 

Section 6.10.            Environmental Compliance. The
Borrower shall comply with all Environmental Laws.

 

Section 6.11.            Insurance. The Borrower shall
annually submit to the Department evidence of its compliance with the
Department’s insurance requirements set forth in the Security Agreement.

 

Section 6.12.                                     Compliance
with Agreements and Laws; Payment of Obligations. The Borrower will act in
accordance with all applicable agreements, laws, rules, regulations, orders,
judgments, injunctions, decrees, resolutions, permits, franchises,
determinations or awards of any administrative or governmental authority or
administrative or governmental organization, non-compliance with which could
have a material adverse effect on the ability of the Borrower to carry on the
operations at the Premises or make payments or perform and observe its other
material obligations under any of the Loan Documents. The Borrower will pay and
discharge all bills, claims and charges relating to the Project or the
Premises, including without limitation claims for taxes and claims of laborers,
mechanics and materialmen (collectively, “Project Claims”), prior to the time
the holder of any Project Claim lawfully may cause any judgment or writ of
execution to be filed or lodged against the Premises as a result of such
Project Claim,

 

11

 

except where such Project Claim is being challenged in good faith by
appropriate proceedings and Borrower has posted or caused to be posted a bond,
monies held in escrow or other security satisfactory to the Department in an
amount which is at least equal to the Project Claim, together with all
interest, costs, and charges relating thereto.

 

Section 6.13.                                     Financial
Statements. During the term of the Loan, the Borrower will provide the
Department with:

 

(a)                      financial
statements for the Borrower within one hundred twenty (120) days after the
close of each fiscal year including balance sheets, statements of income and
reconciliations of equity, in accordance with generally accepted accounting
principles, reviewed by an independent certified public accountant satisfactory
to the Department, provided that if the Borrower is a corporation subject to
the reporting requirements of the Exchange Act, the relevant entity’s
obligation under this paragraph shall be satisfied by delivery to the
Department of the financial statements required to be filed by the Borrower
under the Exchange Act in its annual reports;

 

(b)                     with
reasonable promptness, such other information respecting the business,
operations and condition (financial or otherwise) of the Borrower as the
Department may from time to time reasonably request, including information relating
to the Project; and

 

(c)                      with
reasonable promptness, after it becomes known to the Borrower, reasonably
complete information on material adverse developments which may reasonably be
expected to threaten the completion or continued operation of the Project.

 

The Department will not
disclose any confidential information submitted to it by the Borrower pursuant
to this Section 6.13 to any third party, except as may be required by
applicable law or court order, or to fulfill the requirements of the Act.

 

Section 6.14.                                     Compliance
Certificates. If the Department shall so request, the Borrower will provide
the Department with annual Compliance Certificates, executed (in the case of
entities other than natural persons) by officers authorized to execute and deliver
the same, within 120 days of each fiscal year’s end reciting compliance with
representations, warranties and covenants.

 

12

 

Section 6.15.                                     Accuracy
of Information Supplied. The Borrower will ensure that all information
prepared by the Borrower and supplied to the Department or any third party
under the provisions of this Agreement for the purpose of any report or
certificate to be furnished to the Department in connection with this Agreement
or any of the Loan Documents will at the time it is supplied be true and
accurate in all material respects, except that (i) financial statements and
other statements expressly effective as of a particular date prior to the date
when furnished are required only to be true and accurate or (in the case of
financial statements) fairly to present what they purport to present, in either
case as of the effective date thereof, and (ii) to the extent any such
information is based upon or constitutes a forecast, projection or other data
which by its nature is uncertain, the Borrower is committed only to act in good
faith and utilize due and careful consideration and the best information then
known to it in preparing such information. With respect to all information
prepared by third parties and supplied by the Borrower to the Department and/or
any third party under the provisions hereof for the purpose of any report or
certificate to be furnished to the Department in connection with this Agreement
or any of the Loan Documents, the Borrower shall deliver a written notice to
the Department as soon as possible if it believes that such information is not
complete and accurate in all material respects, which written notice shall
include the basis for such belief.

 

Section 6.16.                                     Notice
of Defaults. The Borrower will give prompt notice to the Department of the
occurrence of any Event of Default under the Loan Documents cither on its part,
or on the part of the Borrower of which the Borrower becomes aware.

 

Section 6.17.                                     Further
Assurances. The Borrower will make, execute or endorse, and acknowledge and
deliver or file, all such vouchers, invoices, notices and certifications and
additional agreements, undertakings, conveyances, transfers, assignments,
financing statements, continuation statements or further assurances, and take
any and all such other actions, as the Department may reasonably deem necessary
or advisable from time to time in connection with the Loan or the Loan
Documents to assure or confirm to the Department and perfect all or any part of
the security for the Loan and any other obligations of the Borrower.

 

Section 6.18.                                     Indemnification.
The Borrower hereby indemnifies and holds harmless the Indemnified Party from
and against any and all claims, damages, losses, liabilities, costs or expenses
(including all reasonable fees or expenses resulting from the settlement of any
claims or

 

13

 

liabilities and reasonable attorneys’ fees) (collectively, “Indemnified
Claims”) whatsoever which the Indemnified Party may incur (or which may be
claimed against the Indemnified Party by any person or entity whatsoever) by
reason of or in connection with (a) the issuance of the Loan, (b) any breach by
the Borrower of any representation, warranty, covenant, term or condition in,
or the occurrence of any default under, this Agreement or the Loan Documents,
and (c) involvement of the Indemnified Party in any legal suit, investigation,
proceeding, inquiry or action as a consequence, direct or indirect, of the
Department’s issuance of the Loan, the Department’s or the Borrower’s entering
into this Agreement or any of the Loan Documents or any other event or
transaction contemplated by any of the foregoing; provided, however, that (i)
the Indemnified Party shall within sixty (60) days of becoming aware of (A) its
actual or potential liability for any Indemnified Claim or (B) the formal
assertion against it in writing of any Indemnified Claim, have notified the
Borrower of such Indemnified Claim and tendered to the Borrower the defense of
such claim; (ii) that no Indemnified Claim shall be paid or compromised without
the consent of the Borrower, which shall not unreasonably be withheld and shall
be deemed given if the Borrower does not object, by a notice in writing to the
indemnified Party, to the payment or compromise of such Indemnified Claim
within 10 calendar days after the Indemnified Party has given to the Borrower
notice of the proposed payment or compromise thereof, and (iii) the Borrower
shall not be required to indemnify an Indemnified Party hereunder for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by the negligence or willful misconduct of such
Indemnified Party.

 

The liability under this Section
6.18 shall in no way be limited or impaired by (i) any extension of time for
performance required by any of the Loan Documents, (ii) any sale, assignment or
foreclosure of the Note or any sale or transfer of all or part of the
Collateral or the Premises, (iii) the discharge of the Note, (iv) any
exculpatory provisions in any of the Loan Documents limiting the Department’s
recourse to any other security, (v) the accuracy or inaccuracy of the
representations and warranties made by the Borrower; (vi) the release of the
Borrower or any other person from performance or observance of any of the
agreements, covenants, terms or conditions contained in any of the Loan
Documents by operation of law, the Department’s voluntary act (other than the
execution and delivery by the Department of an instrument of release expressly
and specifically referring to Borrower’s indemnification

 

14

 

obligations), or otherwise, (vii) the release or substitution in whole
or in part of any security for the Note; or (viii) the Department’s failure to
file any mortgage or UCC financing statements (or the Department’s improper
filing of any thereof) or to otherwise perfect, protect, secure or insure any
mortgage, security interest or lien given as security for the Note; and, in any
such case, whether with or without notice to the Borrower and with or without
consideration.

 

The indemnity provisions
contained in this Section 6.18 hereof shall survive any judicial foreclosure,
foreclosure by power of sale, deed in lieu of foreclosure, transfer of the
property by the Borrower or the Department, and payment of the Loan in full,
provided, however, that such indemnity provisions shall at no time accrue to,
or be construed to benefit, any other third-party entity (other than an
Indemnified Party or a successor in interest or assign of the Department) no
matter how such other third-party entity obtains title or any interest in the
Project or Premises.

 

The liability covered by
the indemnity provision shall include, but not be limited to, losses sustained
by an Indemnified Party for (i) amounts owing under the Loan and the Loan
Documents, (ii) amounts arising out of personal injury or death claims, (iii)
amounts charged to an Indemnified Party for any environmental or Hazardous
Materials clean up costs and expenses, liens, or other such charges or
impositions, (iv) payment for fees, court costs, environmental tests and design
studies, and (v) any other amounts reasonably expended by an Indemnified Party.

 

Section 6.19.                                     Negative
Covenants.

 

(a)                      Without the
prior written consent of the Department, the Borrower shall not permit, allow
or suffer to exist, any lien or encumbrance to be placed against the Collateral
or any interest therein or enter into any agreement requiring, contemplating or
providing for placement of any such lien or encumbrance, except (i) the
Permitted Lien and such other liens and encumbrances expressly provided for in
the Application which the Department has permitted in writing, and (ii) that
the terms of this Section 6.19(a) shall not be deemed to prohibit execution of
any note or credit instrument not providing for any specific lien against the
Premises but permitting confession of judgment against the Borrower subsequent
to an event of default thereunder so long as judgment is not confessed
thereunder.

 

(b)                     The Borrower
will not change its name without notice to the Department.

 

15

 

(c)                      Without the
prior written consent of the Department, the Borrower may not (i) merge or
consolidate with any other corporation or other entity or dispose of all or any
substantial portion of its assets, except in the ordinary course of business,
unless the Borrower or the surviving corporation, as the case may be, shall
have a tangible net worth (after giving effect to such merger, consolidation or
sale of assets) not less than that shown in the most recent audited financial
statements for the Borrower, delivered to the Department prior to approval of the
Loan, and, if a corporation different from the Borrower shall have expressly
assumed the obligations of the Borrower hereunder, or (ii) take any corporate
action to permit or facilitate any change in control from that set forth in the
Application.

 

For purposes of paragraph
(c), a “change in control” shall mean any person or group of persons (within
the meaning of Section 13 or l4 of the Securities Exchange Act of 1934), who is
not currently a stockholder of the Borrower, shall have acquired beneficial ownership
(within the meaning of Rule 13dd-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 50.1% or more of the
issued and outstanding shares of capital stock of Borrower, excluding any
person or group of persons who is a venture capital company or other
institutional or similar investor.

 

ARTICLE VII

 

EVENTS OF DEFAULT

 

Section 7.01.                                     Events
of Default. The following shall each constitute an Event of Default
hereunder:

 

(a)                      Payment
Default. The Borrower shall fail to pay when due any amount payable under any
of the Loan Documents and such failure shall continue for a period of thirty
(30) days;

 

(b)                     False
Representation. Any representation, warranty or statement made by the Borrower
herein or in the Application or in any of the Loan Documents or in any
certificate or financial or other statement furnished pursuant to the
provisions of any of the Loan

 

16

 

Documents or the
Application (except for any representation, warranty or statement expressly
made effective as of a date prior to the date when made or furnished), shall
have been false or misleading in any material respect as of the time made or
furnished or as of the date hereof, whichever is later; any representation,
warranty or statement expressly made effective as of a date prior to the date
when made or furnished shall have been false or misleading in any material
respect as of the effective date thereof;

 

(c)                      Borrower
Insolvency. The Borrower shall (i) become insolvent, after thirty (30) day
opportunity to cure, (ii) admit its inability to pay its debts as they come
due, (iii) make an assignment to the benefit of its creditors, (iv) be
adjudicated bankrupt or insolvent, (v) voluntarily initiate proceedings under
any bankruptcy or reorganization law either now or hereafter in effect, (vi)
become the subject of any involuntary proceedings under any bankruptcy or
reorganization law either now or hereafter in effect that shall not have been
discharged within ninety (90) days of the initiation thereof, or (vii) seek to
take advantage of any moratorium law either now or hereafter in effect;

 

(d)                     Receiver
Appointed. A receiver, liquidator or trustee shall be appointed for the
Borrower and shall not have been discharged within ninety (90) days;

 

(e)                      Covenant
Default. The Borrower shall fail to observe or perform any of the terms,
covenants, promises and agreements on the Borrower’s part to be observed and
performed under this Agreement or under the Note, Security Agreement or any of
the other Loan Documents and fails to cure the default within thirty (30) days;

 

(f)                        Default
Under Other Financing. A default in the due and punctual payment of
principal or interest or the due and punctual observance or performance of any
covenants or agreements on any loan or debt instrument after any applicable
notice or grace periods;

 

(g)                     Collateral
Default. The Collateral is (i) sold, leased, liened or encumbered
(excluding the Permitted Lien) without the prior written consent of the Department,
which consent shall not be unreasonably withheld; (ii) the Collateral is seized
or levied upon under any legal or governmental process against the Debtor or
against the Collateral; or (iii) the Collateral is lost, stolen, substantially
damaged, destroyed, or moved from the Property without the consent of the
Department; or.

 

17

 

(h)                     Change in
the Project. The Borrower makes substantial changes to or does not complete
the Project as described in the Application.

 

Section 7.02.                                     Remedies
Upon an Event of Default. Immediately and without further notice to the
Borrower, upon the occurrence of an Event of Default, other than an Event of
Default, arising solely from a breach by the Borrower of Section 6.07 “Operations
and Number of Jobs” pertaining to job creation or retention, the Department, or
any subsequent holder of the Note, may exercise any one or more of the
following remedies:

 

(a)                      cease making
any further disbursements of advances hereunder;

 

(b)                     declare the
Note and interest accrued thereon and all liabilities of the Borrower
thereunder to be immediately due and payable, and the same shall thereupon
become and be due and payable;

 

(c)                      raise the
rate of interest on the Loan as provided in the Note;

 

(d)                     bring an
action (which may be by confession of judgment to the extent permitted by the
particular instrument) against the Borrower under the Note; or

 

(e)                      exercise any
other remedy available to it under any of the Loan Documents or applicable law,
including the Pennsylvania Uniform Commercial Code.

 

Except as expressly
required by the particular Loan Document pursuant to which such remedies are
exercised or by applicable law, the Department may exercise any of the
foregoing remedies without presentment, demand, protest or notice of any kind
to any person (including, without limitation, the Borrower), all of which are
hereby expressly and knowingly waived.

 

Subject solely to the
limitation that the Department is limited to one recovery for the aggregate
amounts due and owing under the Loan Documents, the Department’s remedies under
the Loan Documents are cumulative and concurrent and may, in the Department’s
sole discretion, be exercised, deferred, compromised, settled or discontinued
without affecting any other remedy available to the Department under any of the
Loan Documents or under applicable law.

 

Section 7.03.                                     Remedies
for Event of Default Arising From Failure to Create or Retain Jobs. Upon
the occurrence of an Event of Default arising solely from a breach by the
Borrower of Section 6.07 “Number of Jobs” of this Agreement, the Department
may, in compliance with such regulations and statements of policy, if any, as
are then in effect, raise the rate of interest on the Loan as permitted under
the Note.

 

18

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01.                                     Obligations
Unconditional. The obligations to the Department under this Agreement and
each of the Loan Documents shall be absolute and unconditional without defense
or set-off by reason of any default by the contractors under the contracts
relating to the Project or by the Department under this Agreement, any of the
Loan Documents, or under any other agreement between the Borrower and the
Department, or for any other reason, including without limitation failure to
complete the Project, any acts or circumstances that may constitute failure of
consideration, destruction of or damage to the Project, commercial frustration
of purpose, or failure of the Department to perform and observe any agreement,
whether express or implied, or any duty, liability or obligation arising out of
or connected with this Agreement, it being the intention of the parties that
the payments required under each of the Loan Documents will be paid in full
when due without any delay or diminution whatsoever. Payments and additional
sums required to be paid to the Department under any of the Loan Documents
shall be received by the Department as net sums and the Borrower agrees to pay
or cause to be paid all charges against or which might diminish such net sums.
The provisions of this Section shall not impair the ability of the Borrower or
any other persons to bring an independent action against the Department with
respect to any cause of action such person may have against the Department.

 

Section 8.02.                                     Provisions
Complementary. The provisions of this Agreement shall be in addition to
those of any other Loan Document. All of such provisions shall be construed as
complementary to each other. Nothing contained herein shall prevent the
Department from enforcing any and all of such provisions in accordance with
their respective terms.

 

Section 8.03.                                     Rights
and Remedies. The terms of all Loan Documents shall be liberally construed
in favor of the Department to effectuate the purposes hereof. No delay or
failure on the part of the Department in exercising any right, power or
privilege under any of the Loan Documents shall affect such right, power or
privilege; nor shall any single or partial exercise thereof or any abandonment,
waiver, or discontinuance of steps to enforce such a right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege. The rights and remedies of the Department under any
of the Loan Documents are

 

19

 

cumulative and concurrent and not exclusive of any rights or remedies
which the Department might otherwise have. The Department shall have the right
at all times to enforce the provisions of each of the Loan Documents and all
related documentation in strict accordance with the terms hereof and thereof,
notwithstanding any conduct or custom on the part of the Department in
refraining from so doing at any time or times. The failure of the Department at
any time or times to enforce the Department’s rights under such provisions,
strictly in accordance with the same, shall not be construed as having created
a custom in any way or manner contrary to specific provisions of such Loan Documents
or any such documentation, or as having in any way or manner modified or waived
the same.

 

Section 8.04.                                     Writing
Required. Any permit, consent or approval of any kind or character on the
part of the Department under any of the Loan Documents, and any waiver of any
provision or condition thereof, must be in writing and executed by the
Department and shall be effective only to the extent specifically set forth in
such writing.

 

Section 8.05.                                     Duration
of Covenants. All covenants and agreements of the Borrower or any of the
Guarantors in any of the Loan Documents, or otherwise made in writing in
connection herewith, shall survive and continue until the Loan is entirely paid
and all of the obligations of the Borrower hereunder have been entirely satisfied
(excluding indemnification and other obligations that survive termination of
the Loan Documents), unless a longer term is expressly provided for, in which
event such longer term shall apply.

 

Section 8.06.                                     Pennsylvania
Law to Govern. Each of the Loan Documents shall be deemed to be contracts
made under the laws of the Commonwealth of Pennsylvania and, for all purposes,
shall be construed in accordance with the laws of such Commonwealth, including
its statutes of limitations, but without regard to its rules regarding conflict
of laws.

 

Section 8.07.                                     Counterparts.
Each of the Loan Documents may be executed in as many counterparts as may be
deemed necessary and convenient and each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute but one and the
same instrument. All signatures need not appear on the same copy of any Loan
Document.

 

Section 8.08.                                     Department
Project Inspections Solely for the Department’s Benefit. It is understood
and agreed that the Department, its agents, servants, invitees and employees,
may inspect the plans and specifications for the Project and enter the Premises
and conduct such tests,

 

20

 

surveys, examinations and inspections as it shall, from time to time,
deem appropriate. The Borrower hereby acknowledges and agrees (i) that such
project inspections are solely for the protection and benefit of the
Department, and (ii) that the Department, its agents, servants, invitees and
employees carry no responsibility whatsoever for the Project, its quality or
the compliance or lack of compliance with the plans and specifications.

 

Section 8.09.                                     Setoff.
The Borrower agrees that the Common wealth of Pennsylvania may set off the
amount of any state tax liability or other debt of the Borrower or its
subsidiaries that is owed to the Commonwealth and not being contested on appeal
against any payments due the Borrower under this or any other contract with the
Commonwealth.

 

Section 8.10.                                     Contractor
Responsibility. Included in and made a part of this Agreement is Exhibit “C”,
a clause pertaining to Contractor Responsibility.

 

Section 8.11.                                     Contractor
Integrity. The Borrower represents, warrants and covenants that it
currently has no interest and shall not acquire any interest, direct or
indirect, which would conflict in any manner or degree with the performance of
its obligations hereunder. Included in and made a part of this Agreement is
Exhibit “D”, a clause pertaining to Contractor Integrity.

 

Section 8.12.                                     Americans
with Disabilities Act. Included in and made a part of this Agreement is
Exhibit “E”, a clause pertaining to compliance with the Americans with
Disabilities Act.

 

Section 8.13.                                     Successors
and Assigns. This Agreement and each of the Loan Documents shall inure to
the benefit of, and shall be binding upon, the respective successors and
assigns of the Department and the Borrower. Although the Department has no
present intention to convey, pledge or otherwise assign its rights under the
Loan Documents, it may nevertheless do so in whole or in part without notice to
any person (including, without limitation, the Borrower). The Borrower has no
right to assign any of its rights or obligations hereunder or under any of the
Loan Documents without the prior written consent of the Department, and any
such assignment without the prior written consent of the Department shall be
void. The Borrower and the Department intend that no person except Borrower
shall have any claim or interest under this Agreement or right of action
hereunder.

 

Section 8.14.                                     Notices.
Notices required hereunder, or any correspondence concerning this Agreement
shall be directed to the following addresses and shall be deemed properly given

 

21

 

(a) if delivered by hand, (b) if sent by certified mail, return receipt
requested, postage prepaid, or by recognized overnight courier service
(including, without limitation, Federal Express or United Parcel Service
overnight service), charges prepaid; or (c) if sent by facsimile, with a copy
sent by first class U.S. Mail, postage prepaid.

 

To the Department:

 

Department of Community
and Economic Development

Commonwealth Keystone Building

400 North Street, Fourth Floor

Harrisburg, PA 17120

FAX: (717) 772-2890

Attention: Machinery and Equipment loan Fund

 

To Borrower:

 

Power Medical
Interventions, Inc.

2021 Cabot Boulevard West

Langhorne, Pennsylvania 19047

Attention: Patricia A. Steffan, Vice President, Finance

 

Notices and
communications hereunder shall be deemed sufficiently given when dispatched
pursuant to the foregoing provisions. Notices and communications delivered by
hand shall be effective upon receipt; notices and communications sent by fax,
with a copy by first class U.S. Mail, shall be effective upon dispatch provided
they are dispatched between 9:00 a.m. and 5:00 p.m. on a business day; notices
and communications sent by recognized overnight courier service shall be
effective on the business day following dispatch; and notices sent by certified
mail shall be effective on the third business day following dispatch. The
parties hereto may, by a notice given hereunder, designate any further or
different addresses to which any subsequent notice or communication hereunder
shall be sent.

 

Section 8.15.                                     Severability.
If any provision hereof or of the Loan Documents is found by a court of
competent jurisdiction to be prohibited or unenforceable in any jurisdiction,
it shall be ineffective as to such jurisdiction only to the extent of such
prohibition or unenforceability, and such prohibition or unenforceability shall
not invalidate the balance of such provision as to such jurisdiction to the
extent it is not prohibited or unenforceable, nor invalidate such provision in
any other jurisdiction, nor invalidate the other provisions of the Loan
Documents, all of which shall be liberally construed in favor of the Department
in order to effect the provisions of this

 

22

 

Agreement. Notwithstanding anything to the contrary herein contained,
the total liability of the Borrower for payment of interest pursuant hereto
shall not exceed the maximum amount, if any, of such interest permitted by
applicable law to be contracted for, charged or received, and if any payments
by the Borrower to the Department include interest in excess of such a maximum
amount, the Department shall apply such excess to the reduction of the unpaid
principal amount due pursuant hereto, or if none is due, such excess shall be
refunded to the Borrower or the Borrower, as appropriate; provided that, to the
extent permitted by applicable law, in the event the interest is not collected,
is applied to principal or is refunded pursuant to this sentence and interest
thereafter payable pursuant hereto shall be less than such maximum amount, then
such interest thereafter so payable shall be increased up to such maximum
amount to the extent necessary to recover the amount of interest, if any,
theretofore uncollected, applied to principal or refunded pursuant to this sentence.
Any such application or refund shall not cure or waive any Event of Default. In
determining whether or not any interest payable under the Loan Documents
exceeds the highest rate permitted by law, any nonprincipal payment (except
payments specifically stated to be “interest”) shall be deemed, to the extent
permitted by applicable law, to be an expense, fee, premium or penalty rather
than interest.

 

Section 8.16.                                     Consent
to Jurisdiction. The Borrower hereby irrevocably (a) agrees that any suit,
action or other legal proceeding arising out of or relating to this Agreement
or the Loan Documents may be brought in any federal or state court located in
or whose district includes Harrisburg, Pennsylvania or the county wherein the
Project is located and consents to the jurisdiction of such court in any such
suit, action or proceeding, and (b) waives any objection it may have to the
laying of venue of any such suit, action or proceeding in any such court and
any claim that any such suit, action or proceeding has been brought in an
inconvenient forum. The Borrower hereby irrevocably consents to the service of
any and all process in any such suit, action or proceeding by mailing of copies
of such process to the Borrower at its address provided under or pursuant to
Section 8.14. The Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. All mailings under
this section shall be by certified or registered mail, return receipt
requested. Nothing in this section shall affect the right of the Department to
serve legal process in any other manner permitted by law or affect the right

 

23

 

of the Department to bring any suit, action or proceeding against the
Borrower or its property in the courts of any other jurisdiction.

 

Section 8.17.                                     Defined
Terms. In each of the Loan Documents, unless otherwise indicated, (i)
defined terms may be used in the singular or the plural and the use of any
gender includes all genders, (ii) the words, “hereof, “herein”, “hereto”, “hereby”
and “hereunder” refer to the particular Loan Document in which they occur in
such document’s entirety, (iii) the term, the “Loan Documents”, and the words, “thereof,
“therein”, “thereto”, “thereby” and “thereunder” refer to all the Loan
Documents, taken together as a whole, (iv) all references to particular
Articles, Sections or Paragraphs are references to the particular Article,
Section or Paragraph of the particular Loan Document in which such references
occur, and (v) the Borrower shall be referred to as Contractor in the Exhibits
hereto.

 

Section 8.18.                                     Incorporation
by Reference. All exhibits to this Agreement and the terms of all Loan
Documents shall be incorporated herein by reference as though expressly set
forth herein. The Borrower agrees to be bound as the “Contractor” under the
provisions of the exhibits to this Agreement.

 

Section 8.19.                                     Descriptive
Headings. Descriptive headings of the several Articles and Sections of each
of the Loan Documents are intended for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.

 

Section 8.20.                                     Further
Assurances. The Borrower from time to time, shall execute such further
instruments as the Department may reasonably request to further confirm and
assure the interests and rights created or intended to be created in favor of
the Department hereunder or under the Loan Documents.

 

Section 8.21.                                     Complete
Agreement. The Loan Documents constitute the entire agreement between the
Department and the Borrower with respect to the Project and the Loan. The Loan
Documents supersede and replace all prior agreements related to the subject
matter thereof including, without limitation, the Commitment, except to the
extent such prior agreements are expressly incorporated by reference or
otherwise referred to. This Agreement may be modified or amended only by a
written instrument duly executed by the Department and the Borrower. Each of
the remaining Loan Documents may be modified only by a written

 

24

 

instrument duly executed by the Department and the remaining parties to
the particular Loan Document.

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Agreement as of the day and year first
above written.

 

 

	
   

  	
   

  	
  COMMONWEALTH OF PENNSYLVANIA, 

  acting by and through the DEPARTMENT OF 

  COMMUNITY AND ECONOMIC 

  DEVELOPMENT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  	
   

  
	
   

  	
   

  	
  Deputy Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  POWER MEDICAL INTERVENTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Elizabeth McLoughlin

  	
   

  	
   

  	
  By:

  	
  /s/ Michael P.Whitman

  	
   

  
	
  Elizabeth McLoughlin, Secretary

  	
   

  	
  Michael P. Whitman,
  Chief Executive 

  Officer and Treasurer

  	
   

  	
   

  
							

 

25

 

EXHIBIT “A”

 

COLLATERAL

 

The “Collateral”–the
machinery, equipment and other tangible personal property listed below, and all
parts, replacements and/or substitutions, additions and accessions, equipment,
tools and operating manuals thereto, any proceeds of sale or disposition
thereof and any proceeds of insurance thereon or condemnation thereof.

 

	
  Type of Equipment

  	
   

  	
  Vendor/Manufacturer

  	
   

  	
  Model
  No./Serial No.

  
	
  Cartridge, Blue Mold

  	
   

  	
  Medtech

  	
   

  	
   

  
	
  Cartridge, Green Mold

  	
   

  	
  Medtech

  	
   

  	
   

  
	
  Anvil Tool

  	
   

  	
  Precision Metal
  Products Inc.

  	
   

  	
   

  
	
  Inducer Sleeve/Ring Tool

  	
   

  	
  Dielectrics

  	
   

  	
   

  
	
  Mold for Staple Retainer

  	
   

  	
  Quickparts

  	
   

  	
   

  
	
  Pusher Insertion Tool

  	
   

  	
  MedTech Automation

  	
   

  	
   

  
	
  Amsco Eagle Series Sterilizer

  	
   

  	
  Medical Resource USA

  	
   

  	
   

  
	
  Crimp Press

  	
   

  	
  Eastern Tool

  	
   

  	
   

  
	
  Overhead cabinets, work stations

  	
   

  	
  Corporate Interiors

  	
   

  	
   

  
	
  Plastic Injection Mold, Staple Housing

  	
   

  	
  Scan Tool

  	
   

  	
   

  
	
  Pusher Finger Single Cavity

  	
   

  	
  Scan Tool

  	
   

  	
   

  
	
  21 mm Pusher Fingers To

  	
   

  	
  Seitz Corporation

  	
   

  	
   

  
	
  Cleanroom Workstations and Tables

  	
   

  	
  J&J Material Handling
  Systems

  	
   

  	
   

  
	
  Laboratory Heat Sealer

  	
   

  	
  Sencorp

  	
   

  	
  12AS002

  
	
  Pusher finger Tool, 06-01924

  	
   

  	
  Seitz Corporation

  	
   

  	
   

  
	
  Qdrive Tool, 06-01916

  	
   

  	
  Seitz Corporation

  	
   

  	
   

  
	
  Telephone System

  	
   

  	
  Eastcomm

  	
   

  	
   

  
	
  Telephone System

  	
   

  	
  Thompson Telephone

  	
   

  	
   

  
	
  Tool, 06-01861-001 Plate

  	
   

  	
  EPC Incorporated

  	
   

  	
   

  
	
  Tool, 06-01864-001 Ring

  	
   

  	
  EPC Incorporated

  	
   

  	
   

  
	
  Tool, 06-01869-001 Tube

  	
   

  	
  EPC Incorporated

  	
   

  	
   

  
	
  Tool, 06-01914

  	
   

  	
  Coining Technologies.

  	
   

  	
   

  
	
  Tool, 09-01910

  	
   

  	
  EPC Incoporated

  	
   

  	
   

  
	
  Vertical Lift Module

  	
   

  	
  V&H Material
  Handling

  	
   

  	
   

  
	
  Vertical Lift Module

  	
   

  	
  V&H Material
  Handling

  	
   

  	
   

  
	
  Single Cavity End Cap Mold

  	
   

  	
  Scan Tool

  	
   

  	
   

  
	
  Alloyd Model Aerg02 Plus Blister Sealing Machine

  	
   

  	
  Alloyd Co. Inc

  	
   

  	
   

  
	
  CNC Video Inspection System

  	
   

  	
  Dengel Associates

  	
   

  	
  VG051501

  
	
  Housing Quick Connect Tool

  	
   

  	
  Seitz Corporation

  	
   

  	
   

  
	
  Lathe

  	
   

  	
  Action Machinery

  	
   

  	
  HLVH-11256-T

  
	
  Milling Machine

  	
   

  	
  Action Machinery

  	
   

  	
  233617

  
	
  Molded Hard Plastic Tote

  	
   

  	
  V&H Material
  Handling

  	
   

  	
   

  
	
  One Cavity Knife Pad Tool

  	
   

  	
  Seitz Corporation

  	
   

  	
   

  
	
  Pressure Monitoring System

  	
   

  	
  Amega Scientific Corp.

  	
   

  	
   

  
	
  Retainer Mold

  	
   

  	
  Moldamatic

  	
   

  	
   

  
	
  Rotomat Filing System

  	
   

  	
  J&J Material
  Handling Systems

  	
   

  	
   

  
	
  Single Cavity Handle Mold

  	
   

  	
  Scan Tool

  	
   

  	
   

  
	
  Spur Gear Clamp Tool

  	
   

  	
  Seitz Corporation

  	
   

  	
   

  
	
  Telephone Additional Equip.

  	
   

  	
  Thompson Telephone

  	
   

  	
   

  
	
  Crimp Die Press

  	
   

  	
  Eastern Tool

  	
   

  	
   

  
	
  NIKON Measuring System MM-40

  	
   

  	
  BDS Technologies

  	
   

  	
   

  
	
  Remstar Vertical Carusel

  	
   

  	
  V&H Material
  Handling

  	
   

  	
   

  
	
  Rousseau Workstations w/ESD Tops

  	
   

  	
  J&J Material
  Handling Systems

  	
   

  	
   

  
	
  Telephone Additional Equip.

  	
   

  	
  Thompson Telephone

  	
   

  	
   

  

 

26

 

EXHIBIT “B”

 

N0NDISCRIMINAT10N CLAUSE

 

During the term of this
contract, the Contractor agree as follows:

 

1.                          The
Contractor shall not discriminate against any employe, applicant for
employment, independent contractor or any other person because of race, color,
religious creed, ancestry, national origin, age or sex. The Contractor shall
take affirmative action to insure that applicants are employed, and that
employes or agents are treated during employment, without regard to their race,
color, religious creed, ancestry, national origin, age or sex. Such affirmative
action shall include, but is not limited to: employment, upgrading, demotion or
transfer, recruitment or recruitment advertising; layoff or termination; rates
of pay or other forms of compensation; and selection for training. The
Contractor shall post in conspicuous places, available to employes, agents,
applicants for employment and other persons, a notice to be provided by the
contracting agency setting forth the provisions of this nondiscrimination
clause.

 

2.                          The
Contractor shall in advertisements or requests for employment placed by it or
on its behalf, state that all qualified applicants will receive consideration
for employment without regard to race, color, religious creed, ancestry,
national origin, age, or sex.

 

3.                          The Contractor
shall send each labor union or workers’ representative with which they have a
collective bargaining agreement or other contract or understanding, a notice
advising said labor union or workers’ representative of their commitment to
this nondiscrimination clause. Similar notice shall be sent to every other
source of recruitment regularly utilized by the Contractor.

 

4.                          It shall
be no defense to a finding of noncompliance with this nondiscrimination clause
that the Contractor had delegated some of its employment practices to any
union, training program or other source of recruitment which prevents it from
meeting its obligations. However, if the evidence indicates that the Contractor
was not on notice of the third-party discrimination or made a good faith effort
to correct it, such factor shall be considered in mitigation in determining
appropriate sanctions.

 

5.                          Where
the practices of a union or of any training program or other source of
recruitment will result in the exclusion of minority group persons, so that the
Contractor will be unable to meet its obligations under this nondiscrimination
clause, the Contractor shall then employ and fill vacancies through other
nondiscriminatory employment procedures.

 

6.                          The
Contractor shall comply with all state and federal laws prohibiting
discrimination in hiring or employment opportunities. In the event of the
Contractor’s noncompliance with the nondiscrimination clause of this contract
or with any such laws, this contract may be terminated or suspended, in whole
or in part, and the Contractor may be declared temporarily ineligible for
further Commonwealth contracts, and other sanctions may be imposed and remedies
invoked.

 

7.                          The
Contractor shall furnish all necessary employment documents and records to, and
permit access to its books, records and accounts by, the contracting agency and
the Office of Administration, Bureau of Affirmative Action, for purposes of
investigation to ascertain compliance with the provisions of this clause. If
the Contractor does not possess documents or records reflecting the necessary
information requested, it shall furnish such information on reporting forms
supplied by the contracting agency or the Bureau of Affirmative Action.

 

8.                          The
Contractor shall actively recruit minority subcontractors or subcontractors
with substantial minority representation among its employes.

 

9.                          The
Contractor shall include the provisions of this nondiscrimination clause in
every subcontract, so that such provisions will be binding upon each
subcontractor.

 

27

 

10.                    The Contractor
obligations under this clause are limited to the Contractor’s facilities within
Pennsylvania or, where the contract is for purchase of goods manufactured
outside of Pennsylvania, the facilities at which such goods are actually
produced.

 

28

 

EXHIBIT “C”

 

CONTRACTOR RESPONSIBILITY
PROVISIONS

 

1.                          The
Contractor certifies that it is not currently under suspension or debarment by
the Commonwealth, any other state, or the federal government, and if the
Contractor cannot so certify, then it agrees to submit it along with the
bid/proposal a written explanation of why such certification cannot be made.

 

2.                          If the
Contractor enters into any subcontracts or employs under this contract any
subcontractors/individuals who are currently suspended or debarred by the
Commonwealth or the federal government or who become suspended or debarred by
the Commonwealth or federal government during the term of this contract or any
extensions or renewals thereof, the Commonwealth shall have the right to
require the Contractor to terminate such subcontracts or employment.

 

3.                          The
Contractor agrees to reimburse the Commonwealth for the reasonable costs of
investigation incurred by the Office of Inspector General for investigations of
the Contractor’s compliance with terms of this or any other agreement between
the Contractor and the Commonwealth which result in the suspension or debarment
of the Contractor. Such costs shall include, but not be limited to, salaries of
investigators, including overtime; travel and lodging expenses; and expert
witness and documentary fees. The Contractor shall not be responsible for
investigative costs for investigations, which do not result in the Contractor’s
suspension or debarment,

 

4.                          The
Contractor may obtain the current list of suspended and debarred contractors by
contacting the:

 

Department of General
Services

Office of Chief Counsel

603 North Office Building

Harrisburg, PA 17125

Telephone No. (717) 783-6472

Fax No. (717) 787-9138

 

29

 

EXHIBIT “D”

 

CONTRACTOR INTEGRITY
PROVISIONS

 

1.                          Definitions.

 

a.                          Confidential
information means information that is not public knowledge, or available to
the public on request, disclosure of which would give an unfair, unethical, or
illegal advantage to another desiring to contract with the Commonwealth.

 

b.                         Consent
means written permission signed by a duly authorized officer or employee of the
Commonwealth, provided that where the material facts have been disclosed, in
writing, by prequalification, bid, proposal, or contractual terms, the
Commonwealth shall be deemed to have consented by virtue of execution of this
Agreement.

 

c.                          Commonwealth
means the Commonwealth of Pennsylvania Acting by and Through its Department of
Community and Economic Development and any agencies and instrumentalities of
the Commonwealth of Pennsylvania for which the Department of Community and
Economic Development provides staff services (including without limitation the
Pennsylvania Industrial Development Authority, Pennsylvania Economic
Development Financing Authority, Pennsylvania Energy Development Authority, and
Pennsylvania Minority Business Development Authority).

 

d.                         Contractor
means the individual or entity that has entered into an agreement with the
Commonwealth, assumed the obligations of another to repay moneys to the
Commonwealth, or is the intended beneficiary of and has knowingly received
benefits under, an agreement between the Commonwealth and a  financial intermediary or educational
institution, including directors, officers, partners, managers, key employees,
and owners of more than a 5% interest.

 

e.                          Financial
Interest means:

 

(1)                      ownership of
more than a 5% interest in any business; or

 

(2)                      holding a
position as an officer, director, trustee, partner, employee, or the like, or
holding any position of management.

 

f.                            Gratuity
means any payment of more than nominal monetary value in the form of cash,
travel, entertainment, gifts, meals, lodging, loans, subscriptions, advances,
deposits of money, services, employment, or contracts of any kind.

 

2.                          The
Contractor shall take no action in violation of state or federal laws,
regulations, or other requirements that govern contracting with the
Commonwealth.

 

3.                          The
Contractor shall not, in connection with this or any other agreement with the
Commonwealth, directly or indirectly offer, confer, or agree to confer any
pecuniary benefit on anyone as consideration for the decision, opinion,
recommendation, vote, other exercise of discretion, or violation of a known
legal duty by any officer or employee of the Commonwealth.

 

4.                          The
Contractor shall not, in connection with this or any other agreement with the
Commonwealth, directly or indirectly offer, give, or agree or promise to give
to anyone any gratuity for the benefit of or at the direction or request of any
officer or employee of the Commonwealth.

 

5.                          Except
with the consent of the Commonwealth, the Contractor shall not have a financial
interest in any other contractor, subcontractor, or supplier providing
services, labor, or material on this project.

 

6.                          The
Contractor, upon being informed that any violation of these provisions has
occurred or may occur, shall immediately notify the Commonwealth in writing.

 

30

 

7.                          The
Contractor, by execution of this Agreement and by the submission of any bills
or invoices for payment pursuant thereto, certifies and represents that he has
not violated any of these provisions.

 

8.                          The
Contractor, upon the inquiry or request of the Inspector General of the
Commonwealth or any of that official’s agents or representatives, shall
provide, or if appropriate, make promptly available for inspection or copying,
any information of any type or form relevant to the Contractor’s compliance
with this Agreement (including without limitation these provisions relating to
Contractor integrity). Such information shall be retained by the Contractor for
a period of three years beyond the termination of the contract unless provided
by law.

 

9.                          For
violation of any of the above provisions, the Commonwealth may declare an event
of default hereunder, subject to applicable notice and cure provisions, and
debar and suspend the Contractor from doing business with the Commonwealth,
including without limitation participation in its financial assistance
programs. These rights and remedies are cumulative, and the use or nonuse of
any one shall not preclude the use of all or any other. These rights and
remedies are in addition to those the Commonwealth may have under law, statute,
regulation, or otherwise.

 

31

 

EXHIBIT “E”

 

AMERICANS WITH
DISABILITIES ACT PROVISIONS

 

During the term of this
contract, the Contractor agrees as follows:

 

1.                          Pursuant
to federal regulations promulgated under the authority of The Americans With
Disabilities Act, 28 C.F.R. § 35.101 et scq., the Contractor understands and
agrees that no individual with a disability shall, on the basis of the
disability, be excluded from participation in this contract or from activities
provided for under this contract. As a condition of accepting and executing
this contract, the Contractor agrees to comply with the “General Prohibitions
Against Discrimination,” 28 C.F.R. § 35.130, and all other regulations
promulgated under Title II of The Americans With Disabilities Act which are
applicable to the benefits, services, programs, and activities provided by the
Commonwealth of Pennsylvania through contracts with outside contractors.

 

2.                          The
Contractor shall be responsible for and agrees to indemnify and hold harmless
the Commonwealth of Pennsylvania from all losses, damages, expenses, claims,
demands, suits, and actions brought by any party against the Commonwealth of
Pennsylvania as a result of the Contractor’s failure to comply with the
provisions of paragraph 1 above.

 

3.                          “Contractor”
means the individual or entity that has entered into this Agreement with the
Commonwealth.

 

32

 

EXHIBIT “F”

 

CRITERIA FOR FAILURE TO
MEET JOB PROJECTIONS

 

Criteria
for Penalty Waiver:

 

The following four
criteria will be evaluated to determine if a valid explanation exists for
failing to meet employment projections. If the Department determines that a
company has provided adequate justification that one of the factors below led
to its failure to meet projections, no penalty will be imposed. The criteria
are: (1) Natural Disaster, (2) Industry
Trend, (3) Labor Force and (4) Loss of Major Supplier.

 

Detailed
Explanation of Above Criteria:

 

If a company fails to
meet its projections because of any of the following four reasons, no penally
will be levied:

 

(1)                     Natural
Disaster. A company will not be held responsible for failing to attain
employment projections if a natural disaster such as a fire, flood or tornado
strikes the business.

 

(2)                     Industry
Trend. If a company can demonstrate to the satisfaction of the
Department that the industry in which the company does a majority of its
business suffered a sales or revenue decline of at least 10%, the company will
not be held responsible for failing to attain employment projections. The
following points will be considered:

 

(i)                         Burden of
proof resides with the company. The company must provide documentation from
industry sources or other verifiable documentation to prove the overall
industry sales or revenue decline. Statistical comparisons must be for a period
of no less than one year and must be from within the project term.

 

(ii)                      The company
must also provide a narrative explaining the business in which it operates, and
how the industry downturn impacted its business operations.

 

(iii)                   If the company
does business in more than one industry, the company must provide evidence that
it’s overall business was dramatically impacted by the failure of its business
within the declining industry.

 

(3)                     Labor
Force If a company can demonstrate to the satisfaction of the
department that there was a lack of an available labor pool, the company will
not be held responsible for failure to attain employment projections. This
demonstration must take the following into consideration:

 

(i)                         The
unemployment rate of the county in which the project is located does not in
itself signify the absence of available labor, particularly for low skilled
jobs; however, if the company requires skilled workers, or those with scarce
skills, this factor could constitute sufficient demonstration.

 

(ii)                      A company
will not be deemed to have experienced lack of an available labor pool if the
wages offered by the company are below average. In this instance, the burden of
proof shall be on the company to demonstrate that it pays employees the average
wage based on the industry-wide average for a particular region. Staff research
utilizing average wage data supplied by the Department of Labor and Industry
will be used to determine the validity of this explanation.

 

(4)                     Loss of a
Major Supplier If the failure of a company to attain employment
projections is the result of a loss of a major supplier, the company will not
be held responsible for failing to attain employment projections.

 

(i)                         Burden of
proof resides with the company. The company must provide financial/accounting
proof that the supplier accounted for at least 25% of its business.

 

(ii)                      The company
must also provide a narrative outlining its dependence on this supplier, and
any attempts that were made to secure a new supplier.

 

90%
Guideline:

 

If a company fails to
create the full job requirement, but achieves at least 90% of the job creation
requirement, the Department will take into consideration other criteria
including the quality of the jobs created, the economic condition of the area,
the strategic importance of the industry to the Commonwealth and other
pertinent criteria, as determined by the Department.

 

33

 

Exhibit “G”

 

SCHEDULE 4.06

 

Litigation

 

1.                          During
March 2005, three related lawsuits were filed against the Borrower in the
German patent infringement court in Dusseldorf, Germany. The Borrower was
served notice in early April 2005. The lawsuits allege infringement of three
European patents held by Ethicon Endo-Surgery, Inc., a wholly owned subsidiary
of Johnson & Johnson, Inc. It is anticipated that it will require 12 to 14
months to complete these proceedings. The Borrower, through its U.S. patent
counsel at Kenyon & Kenyon (New York, NY), has retained the patent firm of
Gleiss Lutz (Stuttgart, Germany) to defend the Borrower in these cases. The Borrower
will vigorously contest all of the claims in these three lawsuits.

 

2.                          In
early December 2004, the Borrower was served with a summons regarding a lawsuit
filed in a Belgian court on September 30, 2004, by a patient and his spouse or
partner against the insurer for a Belgian surgeon and hospital as well as
against the Borrower’s Belgian distributor. The Borrower was brought into the
case by the distributor, at which point the plaintiffs made a claim against the
Borrower as well, and the Borrower has subsequently brought in the surgeon and
hospital (only their insurer was previously named), The original complaint
alleged that the patient suffered injuries as a result of a surgery performed
by the surgeon at the hospital on April 25, 2003, using equipment manufactured
by the Borrower. The complaint alleged that this equipment was “deficient” and
claimed estimated damages in the amount of € 100,000, with “reservation for
modification during the proceedings.” The plaintiffs requested a € 27,500
provisional damages award (i.e., an interim award granted at an early
stage of the proceedings but subject to repayment if the plaintiffs do not
ultimately prevail) against the surgeon’s and hospital’s insurer, the Borrower’s
distributor and the Borrower but, after the Borrower’s briefing, withdrew the
request against the Borrower. The court allowed the patient’s request, to the
extent of € 15,000, against the surgeon’s and hospital’s insurer. The court
also appointed a Belgian physician to serve as a court-appointed expert to
investigate and prepare a report to the court about the responsibility, if any,
of the respective parties. The expert has begun his investigation by
interviewing the plaintiff and examining the equipment used in the surgery; he
is expected to issue a preliminary report with questions he would like the
parties to address and there will then likely be a further dialogue among the
parties and expert. The Borrower has notified its insurance carrier of the
lawsuit, and the carrier has assigned an adjuster and not disclaimed coverage
in any respect. The Borrower will vigorously contest the claim with the
assistance of U.S. and Belgian counsel.

 

3.                          The
U.S Food and Drug Administration (“FDA”)  issued
a Form FDA-483 (“Form
483”) to the Borrower on June 28, 2005, that contained 9
observations. The Borrower has taken corrective actions in response to these
observations. The Borrower expects the FDA to evaluate the corrective actions
during the next inspection and has not been informed of any additional FDA or
other government or civil action stemming from or threatened as a result of or
in connection with the issuance of the Form 483. In addition, the FDA inspector
verified that the

 

34

 

July 10, 2003 Form 483 observations were closed. The Borrower has
provided or made available to the Purchasers copies of the Form 483.

 

4.                          On
November 21, 2005, BW Manufacturing Company, Inc.  (“BW”)  filed and served a complaint against the
Borrower in the United States District Court for the Eastern District of
Pennsylvania. In general, the complaint alleges that the Borrower breached
various contracts between the Borrower and BW by failing to pay BW for goods
that were manufactured by BW and delivered to the Borrower. BW has demanded
damages in the amount of $406,489 plus interest and the cost of collection. The
Borrower is evaluating the complaint with assistance from counsel and intends
to file counterclaims against BW. The Borrower’s answer (and counterclaims) are
due by December 23, 2005.

 

5.                          On
November 9, 2005, H.D.J. Company, Inc. (“HDJ”) initiated an action against the Borrower
in the Court of Common Pleas of Lancaster County, Pennsylvania. To the Borrower’s
knowledge, HDJ has not yet filed or served a complaint in connection with this
action. Based on recent correspondence between the Borrower and HDJ’s counsel,
HDJ alleges that the Borrower breached a contract between the Borrower and HDJ
by failing to pay HDJ $105,303 for goods that were manufactured by HDJ and
delivered to the Borrower. The Borrower has offered to pay HDJ $56,000 to
settle all claims between the parties and HDJ has offered to accept $85,000 to
settle all claims. The Borrower is evaluating HDJ’s claims with assistance from
counsel and negotiations are ongoing.

 

35

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