Document:

Exhibit
4.2

 

THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER SAID ACT AND ANY STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

 

THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO
THE PROVISIONS OF CERTAIN AGREEMENTS BETWEEN THE COMPANY AND ITS SHAREHOLDERS
WHICH ARE ON FILE AT THE COMPANY’S OFFICES.

 

 

	
  No. CS-

  	
   

  	
  Warrant to Purchase up
  to [     ] Shares 

  of Common Stock 

  (subject to adjustment)

  
	
  Date: 

  	
   

  	
   

  

 

WARRANT
TO PURCHASE COMMON STOCK

OF

POWERMED, INC.

 

(Void after [              ]
)

 

This certifies that, for
value received [                   ],
or his registered permitted assigns (“Holder”) is entitled, subject to the
terms and conditions set forth below, to purchase from PowerMed, Inc., a
Pennsylvania corporation (the “Company”), 5,556 shares of common stock $.001
value, of the Company (the “Common Stock”) upon surrender hereof, at the
principal office of the Company referred to below, with the notice of exercise
form attached hereto duly executed, and simultaneous payment therefor in lawful
money of the United States or otherwise as hereinafter provided, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of such shares of Common Stock are subject to adjustment as
provided below.

 

This Warrant is issued
pursuant to the Series A Preferred Stock Purchase Agreement (as amended,
modified or otherwise supplemented from time to time, the “Purchase Agreement”)
of even date herewith by and between, among others, the Company and the
investors named therein. The Holder of this Warrant is subject to certain
restrictions set forth in the Purchase Agreement and the other Transaction
Documents and shall be entitled to certain rights and privileges set forth in
the Purchase Agreement. This Warrant is one of the Warrants referred to as the “Warrants”
in the Purchase Agreement.

 

 

1.                          Term
of Warrant. Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, at any time, or from time to
time during the term (“Term”) commencing at 9:00 a.m., Philadelphia,
Pennsylvania time, on the date hereof and ending at 5:00 p.m., Philadelphia,
Pennsylvania time, on the tenth anniversary thereof, and shall be void
thereafter.

 

2.                          Exercise
Price and Number of Shares. The Exercise Price (per share of Common Stock)
at which this Warrant may be exercised shall be $4.00. The Exercise Price and
the number of shares are subject to adjustment from time to time pursuant to
Section 11 hereof.

 

3.                          Exercise
of Warrant.

 

(a)                      Manner of
Exercise. The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part, at any time, or from time to time, during
the term hereof as described in Section 1 above, by the surrender of this
Warrant and the Notice of Exercise annexed hereto duly completed and executed
on behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company), upon payment
(i) in cash or by check acceptable to the Company, (ii) by cancellation by the
Holder of indebtedness of the Company to the Holder, or (iii) by a combination
of (i) and (ii), of the purchase price of the shares to be purchased.

 

(b)                     Time of
Exercise. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within 10 days thereafter,
the Company at its expense, will issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
shares issuable upon such exercise. In the event that this Warrant is exercised
in part, the Company at its expense, shall execute and deliver a new Warrant of
like tenor exercisable for the remaining number of shares for which this
Warrant may then be exercised.

 

(c)                      Net Issue
Exercise. Notwithstanding any provisions herein to the contrary, if the
fair market value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Warrant for cash, the holder may elect to receive shares equal to the
value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such
election in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:

 

2

 

	
   

  	
  X =

  	
  Y (A-B)

  	
   

  
	
   

  	
  A

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  X =

  	
  the number of shares of Common Stock to be issued to
  the Holder

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y=

  	
  the number of shares of Common Stock purchasable
  under the Warrant or, if only a portion of the Warrant is being exercised,
  the portion of the Warrant being canceled (at the date of such calculation)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A =

  	
  the fair market value of one share of the Company’s
  Common Stock (at the date of such calculation)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B =

  	
  Exercise Price (as adjusted to the date of such
  calculation)

  
					

 

For purposes of the above
calculation, fair market value of one share of Common Stock shall be determined
as set forth in Section 11 hereof. Notwithstanding the foregoing, in the event
the Warrant is exercised in connection with the Company’s initial public
offering of Common Stock, the fair market value per share shall be the per share
offering price to the public of the Company’s initial public offering.

 

4.                          No
Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.

 

5.                          Replacement
of Warrant. On receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of loss, theft or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or, in the case of
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor and amount. Any such new Warrant shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant shall at any time be enforceable by anyone.

 

6.                          Rights
of Shareholders. Subject to Sections 9 and 11of this Warrant, the Holder
shall not be entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or to

 

3

 

receive notice of meetings, or to receive dividends or subscription
rights or otherwise until the Warrant shall have been exercised as provided
herein.

 

7.                          Transfer
of Warrant.

 

(a)                      Warrant
Register. The Company will maintain a register (the “Warrant Register”)
containing the names and addresses of the Holder or Holders. Any Holder of this
Warrant or any portion thereof may change his address as shown on the Warrant
Register by written notice to the Company requesting such change. Any notice or
written communication required or permitted to be given to the Holder may be
delivered or given by mail to such Holder as shown on the Warrant Register and
at the address shown on the Warrant Register. Until this Warrant is transferred
on the Warrant Register of the Company, the Company may treat the Holder as
shown on the Warrant Register as the absolute owner of this Warrant for all
purposes, notwithstanding any notice to the contrary.

 

(b)                     Warrant
Agent. The Company may, by written notice to the Holder, appoint an agent
for the purpose of maintaining the Warrant Register referred to in Section 7(a)
above, issuing the Common Stock or other securities then issuable upon the
exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or
any or all of the foregoing. Thereafter, any such registration, issuance,
exchange, or replacement, as the case may be, shall be made at the office of
such agent.

 

(c)                      Transferability
and Nonnegotiability of Warrant. This Warrant may not be transferred or
assigned in whole or in part without compliance with all applicable federal and
state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if such are requested by the Company). Subject to
the provisions of this Warrant with respect to compliance with the Securities
Act of 1933, as amended (the “Act”) and subject to the First Refusal Agreement
and Purchase Agreement, title to this Warrant may be transferred by endorsement
(by the Holder executing the Assignment Form annexed hereto) and delivery in
the same manner as a negotiable instrument transferable by endorsement and
delivery.

 

(d)                     Exchange
of Warrant Upon a Transfer. On surrender of this Warrant for exchange,
properly endorsed on the Assignment Form and subject to the provisions of this
Warrant with respect to compliance with the Act and with the limitations on
assignments and transfers contained in this Section 7 and the Purchase
Agreement, the Company at its expense shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, for the number of shares issuable upon exercise hereof.

 

(e)                      Restrictions
on Transfer. The Holder of this Warrant by acceptance hereof agrees that
the transfer of this Warrant and the shares of Common Stock issuable upon the
exercise of all or any portion of this Warrant (the “Securities”) are subject
to the provisions of the First Refusal Agreement and Purchase Agreement, which
include restrictions on transfer of the Securities; and this Warrant and the
Securities shall be entitled to all rights and benefits accorded thereto in the

 

4

 

Purchase Agreement, and the applicable provisions of the Purchase
Agreement are hereby incorporated herein by reference.

 

8.                          Reservation
of Stock. The Company covenants that during the term this Warrant is
exercisable, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of this Warrant and, from time to time, will take all steps
necessary to amend its Restated Certificate to provide sufficient reserves of
shares of Common Stock issuable upon exercise of the Warrant. The Company
further covenants that all shares that may be issued upon exercise of the
rights represented by this Warrant and payment of the Exercise Price, all as
set forth herein, will be free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock upon the exercise of this
Warrant.

 

9.                          Notices
of Certain Events.

 

(a)                      In case:

 

(i)                         the
Company shall take a record of the holders of its Common Stock (or other stock
or securities at the time receivable upon the exercise of this Warrant) for the
purpose of entitling them to receive any dividend or other distribution, or any
right to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right, or

 

(ii)                      of any
capital reorganization of the Company, any reclassification of the capital
stock of the Company, any consolidation or merger of the Company with or into
another corporation, or any conveyance of all or substantially all of the
assets of the Company to another corporation, or

 

(iii)                   of any
voluntary dissolution, liquidation or winding-up of the Company, then, and in
each such case, the Company will mail or cause to be mailed to the Holder or
Holders a notice specifying, as the case may be, (A) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of
Common Stock (or such stock or securities at the time receivable upon the
exercise of this Warrant) shall be entitled to exchange their shares of Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed
at least 15 days prior to the date therein specified.

 

(b)                     All such
notices, advices and communications shall be deemed to have been received (i)
when delivered personally, (ii) three business days after being mailed by first
class mail,

 

5

 

postage prepaid, or (iii) one business day after being sent by a
reputable overnight delivery service, postage or deliver charges prepaid.
Notices, advices and communications may also be given by prepaid telegram or
facsimile and shall be effective on the date transmitted if confirmed within 24
hours thereafter by a signed original sent in the manner provided in the
preceding sentence.

 

10.                    Amendments
and Waivers.

 

(a)                      Manner of
Amendment. Any term of this Warrant may be amended or waived upon the
written consent of the Company and the Holder and further provided that the
number of shares of Common Stock subject to the Warrant and the Exercise Price
may not be amended, and the right to exercise this Warrant may not be waived,
without the written consent of the Holder of this Warrant (it being agreed that
an amendment to or waiver under any of the provisions of Section 11 of this
Warrant shall not be considered an amendment of the number of shares subject to
the Warrant or the Exercise Price).

 

(b)                     No
Continuing Waiver. No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, further or continuing waiver of any such term, condition or
provision.

 

11.                    Adjustments.
The Exercise Price and the number of shares purchasable hereunder are subject
to adjustment from time to time as follows:

 

(a)                      Issuance
of Additional Stock.

 

(i)                         In the
event the Corporation, at any time after the Original Issue Date, shall issue
Additional Shares of Common Stock for a consideration per share less than the
Conversion Price for the Series A Preferred Stock in effect on the date of and
immediately prior to such issue, then and in such event, the Conversion Price
for the Series A Preferred Stock shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
the Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at such Conversion Price in effect immediately prior to
such issuance, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued. For the purpose of the above
calculation, the number of shares of Common Stock outstanding shall be
calculated on a fully as-converted basis, as if all shares of Series A
Preferred Stock and all Convertible Securities had been fully converted into
shares of Common Stock and any outstanding warrants, options or other rights
for the purchase of shares of stock or convertible securities had been fully
exercised (and the resulting securities fully converted into shares of Common
Stock if so convertible) as of such date, but not including in the calculation
any additional shares of Common Stock issuable with respect to shares of Series
A Preferred Stock, Convertible Securities, or outstanding options, warrants or
other rights for the purchase of shares of stock or convertible securities,
solely as a result of the adjustment of the Conversion Price for the

 

6

 

Series A Preferred Stock (or other conversion ratios) resulting from
the issuance of the Additional Shares of Common Stock causing the adjustment in
question.

 

For purposes of this
Section 11, “Fair Market Value” per share of Common Stock shall be determined
as follows:

 

(A)                   If
the security is not registered under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), the value of the security shall be
determined in good faith by the Board of Directors of the Company and certified
in a board resolution, taking into consideration, inter  alia, (i)
the most recently completed (but not longer than six months preceding such
date) arm’s length transaction between the Company and a person other than an
affiliate of the Company (ii) if no such transaction shall have occurred on
such date or within such six-month period, the value of the security most
recently determined as of a date within the six months preceding such date by
an Independent Financial Expert or (iii) if neither clause (i) nor (ii) is
applicable, the value of the security as mutually agreed by the Company and the
Holder; provided, however, that if the Company and such Holder are unable to
mutually agree upon such value, the Company shall select an Independent
Financial Expert approved by such Holder (whose consent shall not be
unreasonably withheld or delayed) who shall determine the value of such
security.

 

(B)                     If
the security is registered under the Exchange Act, the average of the daily
market prices for each business day during the period commencing 30 business
days before such date and ending on the date one day prior to such date or, if
the security has been registered under the Exchange Act for less than 30
consecutive business days before such date, then the average of the daily
market prices (as hereinafter defined) for all of the business days before such
date for which daily market prices are available. If the market price is not
determinable for at least 15 business days in such period, the Fair Market
Value of the security shall be determined as if the security was not registered
under the Exchange Act.

 

(C)                     The
“market price” for any security on each business day means: (A) if such
Security is listed or admitted to trading on any securities exchange, the
closing price, regular way, on such day on the principal exchange on which such
security is traded, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day or (B) if such security is not then
listed or admitted to trading on any securities exchange, the last reported
sale price on such day, or if there is no such last reported sale price on such
day, the average of the closing bid and the asked prices on such day, as
reported by a reputable quotation source designated by the Company. If there
are no such prices on a business day, then the market price shall not be
determinable for such business day.

 

(D)                  “Independent
Financial Expert” shall mean a nationally recognized Investment banking
firm selected by the Company (i) that does not (and whose directors, officers,
employees and affiliates do not) have a direct or indirect financial interest
in the Company, (ii) that has not been, and, at the time it is called upon to
serve as an Independent Financial Expert is not (and none of whose directors,
officers, employees or affiliates is) a promoter, director or officer of the
Company, (iii) that has not been retained by the Company for any purpose, other
than to perform an equity valuation, within the preceding twelve months, and
(iv) that, in the reasonable

 

7

 

judgment of the Board of Directors of the Company, is otherwise
qualified to serve as an independent financial advisor. Any such person may
receive customary compensation from and indemnification by the Company for
opinions or services it provides as an Independent Financial Expert.

 

(ii)                      If the
Company shall issue any Additional Stock without consideration or for a
consideration per share less than the Exercise Price in effect immediately
prior to the issuance of such Additional Stock, the Exercise Price in effect
immediately prior to each such issuance shall forthwith be adjusted to a price
per share equal to the product obtained by multiplying the Exercise Price in
effect immediately prior to the issuance of such Additional Stock by a
fraction, (i) the numerator of which is equal to the sum of (x) the number of
shares of Common Stock deemed outstanding on a fully as-converted basis
immediately prior to such issuance (including shares deemed to be outstanding
as provided in Section 11(a)(vii)) and (y) the quotient of the aggregate
consideration received by the Company upon such issuance, divided by the
Exercise Price in effect immediately prior to the issuance of such Additional
Stock, and (ii) the denominator of which is the total number of shares of Common
Stock deemed outstanding on a fully as-converted basis (including shares deemed
outstanding as provided in Section 11(a)(vii)) immediately after (and
including) such issuance.

 

(iii)                   No adjustment
of the Exercise Price shall be made in an amount less than one cent per share,
provided that any adjustments that are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward. No adjustment of such Exercise Price pursuant
to Section 11(a)(i) shall have the effect of increasing the Exercise Price
above the Exercise Price in effect immediately prior to such adjustment.

 

(iv)                  In the case of
the issuance of Common Stock for cash, the consideration shall be deemed to be
the amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the Company for
underwriting or otherwise in connection with the issuance and sale thereof.

 

(v)                   In the case of
the issuance of the Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors irrespective of any
accounting treatment.

 

(vi)                  In the event
Additional Stock is issued together with other shares or securities or other
assets of the Company for consideration which covers both, the consideration
allocable to the Additional Stock shall be the proportion of such consideration
so received, computed as provided in Sections 11(a)(iv) and (v) above, as
determined in good faith by the Board of Directors.

 

(vii)               In the case of the
issuance of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock

 

8

 

or options to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply for all purposes
of this Section 11(a):

 

(1)                       The
aggregate maximum number of shares of Common Stock deliverable upon exercise
(assuming the satisfaction of any conditions to exercisability, including
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Sections 11(a)(iv), (v) and
(vi)) if any, received by the Company upon the issuance of such options or
rights plus the minimum exercise price provided in such options or rights
(without taking into account potential antidilution adjustments) for the Common
Stock covered thereby. Notwithstanding anything to the contrary herein, no
further adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or rights
or the conversion or exchange of such securities.

 

(2)                       The aggregate
maximum number of shares of Common Stock deliverable upon conversion of or in
exchange (assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time, but
without taking into account potential antidilution adjustments) for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Company for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the Company
(without taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the
manner provided in Sections 11(a)(iv), (v) and (vi)). Notwithstanding anything
to the contrary herein, no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.

 

(3)                       In the
event of any change in the number of shares of Common Stock deliverable or in
the consideration payable to the Company upon exercise of such options or
rights or upon conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a change resulting from
the antidilution provisions thereof, the Exercise Price, to the extent in any
way affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of
such securities.

 

(4)                       Upon the
expiration of any such options or rights, the termination of any such rights to
convert or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, the Exercise Price, to the extent in
any way

 

9

 

affected by or computed using such options, rights or securities or options
or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.

 

(5)                       The number
of shares of Common Stock deemed issued and the consideration deemed paid
therefor pursuant to Section 11(a)(vii)(1) and (2) shall be appropriately
adjusted to reflect any change, termination, or expiration of the type
described in either Section 11(a)(vii)(3) or (4).

 

(viii) “Additional Stock”
shall mean any shares of Common Stock issued (or deemed to have been issued
pursuant to Section 11(a)(vii)) by the Company other than:

 

(1)                       Common
Stock issued pursuant to the events described in Sections 11(b), (c), (d) or
(e) hereof;

 

(2)                       shares of
Common Stock, not to exceed 270,000 shares, (net of any repurchases of such
shares or cancellations or expirations of options), issuable to consultants,
employees, officers or directors of the Company pursuant to stock options or
stock awards granted or to be granted, provided that the grant of such options
or awards shall have been approved by the Board of Directors;

 

(3)                       shares of
Common Stock issuable pursuant to Warrants issued or to be issued pursuant to
the Purchase Agreement;

 

(4)                       shares of
Series A Preferred Stock issued in respect of Series A Preferred Stock as a
dividend on such stock or issued under the terms of the Restated Certificate,
or the Common Stock issued or issuable upon conversion thereof; or

 

(5)                       shares of
the Common Stock issuable pursuant to the Conversion features of the Series A
Preferred Stock.

 

(b)                   Merger, Sale
of Assets, etc. If at any time while this Warrant, or any portion thereof,
is outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or
into another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company’s capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property whether in the
form of securities, cash or otherwise, or (iii) a sale or transfer of the
Company’s properties and assets as, or substantially as, an entirety to any
other person, this Warrant shall thereafter represent the right to acquire the
number of shares of stock or other securities which the Holder of this Warrant
would have owned immediately after the consummation of such reorganization,
merger, consolidation, sale or transfer,

 

10

 

if the Holder of this Warrant had exercised this Warrant immediately
before the effective date of the reorganization, merger, consolidation, sale or
transfer.

 

(c)                    Reclassification,
etc. If the Company, at any time while this Warrant, or any portion
thereof, remains outstanding and unexpired by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification
or other change and the Exercise Price therefor shall be appropriately
adjusted, all subject to further adjustment as provided in this Section 11.

 

(d)                   Split,
Subdivision or Combination of Shares. If the Company at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, into a different number of securities of the same class, the
Exercise Price for such securities shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.

 

(e)                    Adjustments
for Dividends in Stock or Other Securities. If while this Warrant, or any
portion hereof, remains outstanding and unexpired the holders of the securities
as to which purchase rights under this Warrant exist at the time shall have
received, or, on or after the record date fixed for the determination of
eligible shareholders, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities of the Company by way
of dividend, then and in each case, this Warrant shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Warrant, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities of the
Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Warrant
on the date hereof and had thereafter, during the period from the date hereof
to and including the date of such exercise, retained such shares and/or all
other additional stock available to it as aforesaid during such period, giving
effect to all adjustments called for during such period by the provisions of
this Section 11.

 

(f)                      Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment
pursuant to this Section 11, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and furnish
to each Holder of this Warrant a certificate setting forth, in reasonable
detail, the event requiring the adjustment or readjustment, the amount of such
adjustment or readjustment, the method by which such adjustment or readjustment
was calculated, the Exercise Price at the time in effect, and the number of
shares and the amount, if any, of other property that at the time would be
received upon the exercise of the Warrant. The Company shall upon the written
request, at any time, of any such Holder, furnish or cause to be furnished to
such Holder a like certificate.

 

(g)                   Adjustment in
Number of Shares. Upon each adjustment of the Exercise Price pursuant to
this Section 11, this Warrant shall thereafter evidence the right to receive
upon payment

 

11

 

of the adjusted Exercise Price that number of shares of Common Stock
(calculated to the nearest hundredth) obtained from the following formula:

 

	
  X =

  	
   

  	
  Y x

  	
  A  

  
	
   

  	
   

  	
   

  	
  B

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  X =

  	
   

  	
  the adjusted number of shares of Common Stock
  issuable upon exercise of the Warrant by payment of the adjusted Exercise
  Price.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y =

  	
   

  	
  the number of shares of Common Stock previously
  issuable upon the exercise of the Warrant by payment of the Exercise Price
  prior to adjustment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A =

  	
   

  	
  the Exercise Price prior to adjustment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B =

  	
   

  	
  the adjusted Exercise Price.

  
						

 

*         *         *

 

12.                    Representations
and Warranties. The Company represents and warrants to the Holder that all
shares of Common Stock that may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, and free from all taxes,
liens and charges with respect to the issue thereof (other than pursuant to the
Purchase Agreement and/or any other document to be delivered in connection with
the transactions contemplated by the Purchase Agreement). The Company will from
time to time use its best efforts to take all such action as may be required to
assure that the stated or par value per share of the Common Stock is at all
times no greater than the then effective Exercise Price. The Company shall at
all times have authorized and reserved, free from pre-emptive rights, a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant. The Company shall not take any action which would cause the
number of authorized but unissued shares of Common Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
exercise of the Warrant. The Company shall take all reasonable actions to cause
all shares of Common Stock reserved for the purpose of issuance upon the
exercise of this Warrant to be issued and delivered by the Company pursuant to
an available exemption from registration under applicable federal and state
securities laws.

 

12

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officers thereunto duly
authorized as of the date first above written, intending to be legally bound
hereby.

 

 

	
   

  	
   

  	
  POWERMED, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael P. Whitman

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Michael P. Whitman

  
	
   

  	
   

  	
   

  	
  Title:

  	
  PRESIDENT

  
						

 

13

 

NOTICE
OF EXERCISE

 

To:      POWERMED, INC.

 

The undersigned hereby elects
to purchase                            
shares of Common Stock of PowerMed, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares in
full.

 

Please issue a
certificate or certificates representing said shares of Common Stock in the
name of the undersigned or in such other name as is specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  

 

 

Please issue a new
Warrant for the unexercised portion of the attached Warrant in the name of the
undersigned or in such other name as is specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  

 

(Date)

 

 

ASSIGNMENT
FORM

 

FOR VALUE RECEIVED, the
undersigned registered owner of this Warrant hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
under the within Warrant, with respect to the number of shares of Common Stock
set forth below:

 

	
  Name of Assignee

  	
   

  	
  Address

  	
   

  	
  No. of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

and does hereby irrevocably constitute and appoint Attorney
                                                            
to make such transfer on the books of PowerMed, Inc. maintained for the
purpose, with full power of substitution in the premises.

 

The undersigned also
represents that, by assignment hereof, the Assignee acknowledges that this
Warrant and the shares of stock to be issued upon exercise hereof or conversion
thereof are being acquired for investment and that the Assignee will not offer,
sell or otherwise dispose of this Warrant or any shares of stock to be issued
upon exercise hereof or conversion thereof except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended, or
any state securities laws. Further, the Assignee has acknowledged that upon
exercise of this Warrant, the Assignee shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the shares of
stock so purchased are being acquired for investment and not with a view toward
distribution or resale.

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature of Holder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Print:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DatedExhibit
4.3

 

THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER SAID ACT AND ANY STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

 

THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO
THE PROVISIONS OF CERTAIN AGREEMENTS BETWEEN THE COMPANY AND ITS SHAREHOLDERS
WHICH ARE ON FILE AT THE COMPANY’S OFFICES.

 

 

	
  No. CS -         

  	
   

  	
  Warrant to Purchase up to                     
  

  Shares of Common Stock 

  (subject to adjustment)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: April 30, 2003

  	
   

  	
   

  

 

WARRANT
TO PURCHASE COMMON STOCK
  of 

POWER MEDICAL INTERVENTIONS, INC.

 

(VOID AFTER APRIL 30,
2008)

 

This
certifies that, for value received,                                                                                                  ,
or its registered permitted assigns (“Holder”) is entitled, subject to
the terms and conditions set forth below, to purchase from Power Medical
Interventions, Inc., a Pennsylvania corporation (the “Company”), up to                       
shares (subject to adjustment) of common stock $.001 par value, of the Company
(the “Common Stock”) upon surrender hereof, at the principal office of
the Company referred to below, with the notice of exercise form attached hereto
duly executed, and simultaneous payment therefor in lawful money of the United
States or otherwise as hereinafter provided, at the Exercise Price as set forth
in Section 2 below. The number, character and Exercise Price of such shares of
Common Stock are subject to adjustment as provided below.

 

This
Warrant is issued pursuant to and subject to the terms and conditions of the
Mandatory Convertible Promissory Note (the “Note”) by and between the
Company and the Holder.

 

 

1.                          Term
of Warrant. Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, at any time, or from time to
time during the term (‘Term”) commencing at 9:00 a.m., Philadelphia,
Pennsylvania time, on the date hereof and ending at 5:00 p.m., Philadelphia,
Pennsylvania time, on the fifth anniversary thereof, and shall be void
thereafter.

 

2.                          Exercise
Price and Number of Shares. The Exercise Price per share of Common Stock at
which this Warrant may be exercised shall be $1.10 per share. The number of
shares of Common Stock subject to this warrant is initially as set forth above.
At any time after the date hereof, the number
of shares subject to this warrant may be different from that shown above due to
adjustments and partial exercise.

 

3.                          Exercise
of Warrant.

 

(a)                      Manner of
Exercise. The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part, at any time, or from time to time, during
the term hereof as described in Section 1 above, by the surrender of this
Warrant and the Notice of Exercise annexed hereto duly completed and executed
on behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company), upon payment
(i) in cash or by check acceptable to the Company, (ii) by cancellation by the
Holder of indebtedness of the Company to the Holder, or (iii) by a combination
of (i) and (ii), of the purchase price of the shares to be purchased.

 

(b)                     Time of
Exercise. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within 10 days thereafter,
the Company at its expense, will issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
shares issuable upon such exercise. In the event that this Warrant is exercised
in part, the Company at its expense, shall execute and deliver a new Warrant of
like tenor exercisable for the remaining number of shares for which this
Warrant may then be exercised.

 

(c)                      Net Issue
Exercise. Notwithstanding any provisions herein to the contrary, if the
Fair Market Value (as hereinafter defined) of one share of Common Stock is
greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Notice of Exercise
and notice of such election in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following formula:

 

	
  X =

  	
  Y(A-B)

  	
   

  
	
  A

  	
   

  

 

 

	
  X =

  	
   

  	
  the number of shares of Common Stock to be issued to
  the Holder

  
	
   

  	
   

  	
   

  
	
  Y =

  	
   

  	
  the number of shares of Common Stock purchasable under
  the Warrant or, if only a portion of the Warrant is being exercised, the
  portion of the Warrant being canceled (at the date of such calculation)

  
	
   

  	
   

  	
   

  
	
  A =

  	
   

  	
  the Fair Market Value of one share of the Company’s
  Common Stock (at the date of such calculation)

  
	
   

  	
   

  	
   

  
	
  B =

  	
   

  	
  Exercise Price (as adjusted to the date of such
  calculation)

  

 

For purposes of the above
calculation, Fair Market Value of one share of Common Stock shall be determined
as set forth in subsection 3(d) hereof. Notwithstanding the foregoing, in the
event the Warrant is exercised in connection with the Company’s initial public
offering of Common Stock, the Fair Market Value per share shall be the per
share offering price to the public of the Company’s initial public offering.

 

(d)                   “Fair Market
Value” with respect to the Common Stock means (i) if the Common Stock is
traded on a national securities exchange or the Nasdaq Stock Market, the
average of the high and low sale price regular way on the day in question or,
if no such reported sale occurs on the day in question, the average of the
closing bid and ask price regular way on such day, in each case as reported in
the principal consolidated transaction reporting system in the principal market
in which the Common Stock is traded, or (ii) if the Common Stock is not so
listed or admitted for trading, as determined in good faith by the Company’s
Board of Directors.

 

4.                          No
Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.

 

5.                          Replacement
of Warrant. On receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of loss, theft or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or, in the case of mutilation,
on surrender and cancellation of this Warrant, the Company at its expense shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount. Any such new Warrant shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen, mutilated
or destroyed Warrant shall at any time be enforceable by anyone.

 

6.                          Rights
of Shareholders. Subject to Sections 9 and 11 of this Warrant, the Holder
shall not be entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of

 

 

directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, or change of stock to no par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.

 

7.                          Transfer
of Warrant.

 

(a)                    Warrant
Register. The Company will maintain a register (the “Warrant Register”)
containing the names and addresses of the Holder or Holders. Any Holder of this
Warrant or any portion thereof may change its address as shown on the Warrant
Register by written notice to the Company requesting such change. Any notice or
written communication required or permitted to be given to the Holder may be
delivered or given by mail to such Holder as shown on the Warrant Register and
at the address shown on the Warrant Register. Until this Warrant is transferred
on the Warrant Register of the Company, the Company may treat the Holder as
shown on the Warrant Register as the absolute owner of this Warrant for all
purposes, not with standing any notice to the contrary.

 

(b)                   Warrant Agent.
The Company may, by written notice to the Holder, appoint an agent for the
purpose of maintaining the Warrant Register referred to in Section 7(a) above,
issuing the Common Stock or other securities then issuable upon the exercise of
this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of
the foregoing. Thereafter, any such registration, issuance, exchange, or
replacement, as the case may be, shall be made at the office of such agent.

 

(c)                    Transferability
and Nonnegotiability of Warrant. This Warrant may not be transferred or
assigned in whole or in part without compliance with all applicable federal and
state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if such are requested by the Company). Subject to
the provisions of this Warrant with respect to compliance with the Securities
Act of 1933, as amended (the “Act”) and subject to the provisions of the
Offering Documentation (as such term is defined in the Note) or the Conversion
Documentation (as such term is defined in the Note), as applicable, title to
this Warrant may be transferred by endorsement (by the Holder executing the
Assignment Form annexed hereto) and delivery in the same manner as a negotiable
instrument transferable by endorsement and delivery.

 

(d)                   Exchange of
Warrant Upon a Transfer. On surrender of this Warrant for exchange,
properly endorsed on the Assignment Form and subject to the provisions of this
Warrant with respect to compliance with the Act and with the limitations on
assignments and transfers contained in this Section 7 and the Offering Documentation
or the Conversion Documentation, as the case may be, the Company at its expense
shall issue to or on the order of the Holder a new warrant or warrants of like
tenor, in the name of the Holder or as the Holder (on payment by the Holder of
any applicable transfer taxes) may direct, for the number of shares issuable
upon exercise hereof.

 

 

8.                          Reservation
of Stock. The Company covenants that during the term this Warrant is
exercisable, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of this Warrant and, from time to time, will take all steps
necessary to amend its Amended and Restated Articles of Incorporation to
provide sufficient reserves of shares of Common Stock issuable upon exercise of
the Warrant. The Company further covenants that all shares that may be issued
upon exercise of the rights represented by this Warrant and payment of the
Exercise Price, all as set forth herein, will be free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein). The
Company agrees that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.

 

9.                          Notices
of Certain Events.

 

(a)                      In
case:

 

(i)                       the Company
shall take a record of the holders of its Common Stock (or other stock or
securities at the time receivable upon the exercise of this Warrant) for the
purpose of entitling them to receive any dividend or other distribution, or any
right to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other material right, or

 

(ii)                      of any
capital reorganization of the Company, any reclassification of the capital
stock of the Company, any consolidation or merger of the Company with or into
another corporation, or any conveyance of all or substantially all of the
assets of the Company to another corporation, or

 

(iii)                   of any
voluntary dissolution, liquidation or winding-up of the Company, then, and in
each such case, the Company will mail or cause to be mailed to the Holder or
Holders a notice specifying, as the case may be, (A) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of
Common Stock (or such stock or securities at the time receivable upon the
exercise of this Warrant) shall be entitled to exchange their shares of Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed
at least fifteen (15) days prior to the date therein specified.

 

(b)                   All such
notices, advices and communications shall be deemed to have been received (i)
when delivered personally, (ii) three business days after being mailed by first
class mail, postage prepaid, or (iii) one business day after being sent by a
reputable overnight delivery service, postage or deliver charges prepaid.
Notices, advices and communications may

 

 

also be given by prepaid telegram or facsimile and shall be effective
on the date transmitted if confirmed within 24 hours thereafter by assigned
original sent in the manner provided in the preceding sentence.

 

10.                    Amendments
and Waivers.

 

(a)                    Manner of
Amendment. Any term of this Warrant may be amended or waived upon the
written consent of the Company and the Holder and further provided that the
number of shares of Common Stock subject to the Warrant and the Exercise Price
may not be amended, and the right to exercise this Warrant may not be waived,
without the written consent of the Holder of this Warrant (it being agreed that
an amendment to or waiver under any of the provisions of Section 11 of this Warrant
shall not be considered an amendment of the number of shares subject to the
Warrant or the Exercise Price).

 

(b)                   No Continuing
Waiver. No waivers of, or exceptions to, any term, condition or provision
of this Warrant, in any one or more instances, shall be deemed to be, or
construed as, further or continuing waiver of any such term, condition or
provision.

 

11.                    Adjustments.
The Exercise Price and the number of shares purchasable hereunder are subject
to adjustment from time to time as follows:

 

(a)                    Issuance of
Additional Stock.

 

(i)                       If the
Company shall issue any Additional Stock (as defined in Section 11(a)(vii)
hereof) without consideration or for a consideration per share less than the
Exercise Price in effect immediately prior to the issuance of such Additional
Stock, the Exercise Price in effect immediately prior to each such issuance
shall forthwith be adjusted to a price per share equal to the product obtained
by multiplying the Exercise Price in effect immediately prior to the issuance
of such Additional Stock by a fraction, (i) the numerator of which is equal to
the sum of (x) the number of shares of Common Stock deemed outstanding on a
fully as-converted basis immediately prior to such issuance (including shares
deemed to be outstanding as provided in Section 11(a)(vii)) and (y) the
quotient of the aggregate consideration received by the Company upon such
issuance, divided by the Exercise Price in effect immediately prior to the
issuance of such Additional Stock, and (ii) the denominator of which is the
total number of shares of Common Stock deemed outstanding on a fully
as-converted basis (including shares deemed outstanding as provided in Section
11(a)(vi)) immediately after (and including) such issuance.

 

(ii)                      No
adjustment of the Exercise Price shall be made in an amount less than one cent
per share.

 

(iii)                   In the case of
the issuance of Common Stock for cash, the consideration shall be deemed to be
the amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the Company for
underwriting or otherwise in connection with the issuance and sale thereof.

 

 

(iv)                  In the case of
the issuance of the Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors irrespective of any
accounting treatment.

 

(v)                   In the event
Additional Stock is issued together with other shares or securities or other
assets of the Company for consideration which covers both, the consideration
allocable to the Additional Stock shall be the proportion of such consideration
so received, computed as provided in Sections 11(a) (iii) and (iv) above, as
determined in good faith by the Board of Directors.

 

(vi)                  In the case of
the issuance of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
Section 11(a):

 

(1)                       The
aggregate maximum number of shares of Common Stock deliverable upon exercise
(assuming the satisfaction of any conditions to exercisability, including
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Sections 11(a)(iii),
(iv) and (v)) if any, received by the Company upon the issuance of such options
or rights plus the minimum exercise price provided in such options or rights
(without taking into account potential antidilution adjustments) for the Common
Stock covered thereby. Notwithstanding anything to the contrary herein, no
further adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or rights
or the conversion or exchange of such securities.

 

(2)                       The
aggregate maximum number of shares of Common Stock deliverable upon conversion
of or in exchange (assuming the satisfaction of any conditions to
convertibility or exchangeability, including, without limitation, the passage
of time, but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration, if any,
received by the Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received
by the Company (without taking into account potential antidilution adjustments)
upon the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in Sections 11(a)(iii), (iv) and (v)). Notwithstanding
anything to the contrary herein, no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or exchange of such
securities.

 

 

(3)                       In the
event of any change in the number of shares of Common Stock deliverable or in
the consideration payable to the Company upon exercise of such options or
rights or upon conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a change resulting from
the antidilution provisions thereof, the Exercise Price, to the extent in any
way affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of
such securities.

 

(4)                       Upon the
expiration of any such options or rights, the termination of any such rights to
convert or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, the Exercise Price, to the extent in
any way affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to reflect
the issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.

 

(5)                       The number
of shares of Common Stock deemed issued and the consideration deemed paid
therefor pursuant to Section 11(a)(vi)(l) and (2) shall be appropriately
adjusted to reflect any change, termination, or expiration of the type
described in either Section 11(a)(vi)(3) or (4).

 

(vii)               “Additional
Stock” shall mean any shares of Common Stock issued (or deemed to have been
issued pursuant to Section 11(a)(vi)) by the Company other than:

 

(1)                       shares of
Common Stock issuable or issued pursuant to the events described in Sections
11(c), (d) or (e) hereof;

 

(2)                       shares of
Common Stock issuable or issued to consultants, employees, officers or
directors of the Company pursuant to stock options or stock awards granted or
to be granted, provided that the grant of such options or awards shall have
been approved by the Board of Directors;

 

(3)                       shares of
Common Stock issuable or issued pursuant to Warrants issued or to be issued
pursuant to the Series A Preferred Stock Purchase Agreement;

 

(4)                       shares of
Series A, Series B, Series C, Series D or Series E Preferred Stock issuable or
issued in respect of Series A, Series B, Series C, Series D or Series E
Preferred Stock as a dividend on such stock or issuable or issued under the
terms of the Restated Articles of Incorporation;

 

(5)                       shares of the
Common Stock issuable or issued pursuant to, the Conversion features of the
Series A, Series B, Series C, Series D or Series E Preferred Stock; or

 

 

(6)                       shares of
Common Stock issuable or issued as approved by the Board of Directors (whether
directly or through warrants) as consideration for the provision of goods or
services to the Company (including the lending of money to the Corporation).

 

(b)                   Merger, Sale
of Assets, etc. If at any time while this Warrant, or any portion thereof,
is outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or
into another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company’s capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property whether in the
form of securities, cash or otherwise, or (iii) a sale or transfer of the
Company’s properties and assets as or substantially as, an entirety to any
other person, this Warrant shall thereafter represent the right to acquire the
number of shares of stock or other securities which the Holder of this Warrant
would have owned immediately after the consummation of such reorganization,
merger, consolidation, sale or transfer, if the Holder of this Warrant had
exercised this Warrant immediately before the effective date of the
reorganization, merger, consolidation, sale or transfer.

 

(c)                      Reclassification,
etc. If the Company, at any time while this Warrant, or any portion
thereof, remains outstanding and unexpired by reclassification of securities or,
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification
or other change and the Exercise Price therefor shall be appropriately
adjusted, all subject to further adjustment as provided in this Section 11.

 

(d)                     Split,
Subdivision or Combination of Shares. If the Company at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, into a different number of securities of the same class, the
Exercise Price for such securities shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.

 

(e)                      Adjustments
for Dividends in Stock or Other Securities. If while this Warrant, or any
portion hereof, remains outstanding and unexpired the holders of the securities
as to which purchase rights under this Warrant exist at the time shall have
received, or, on or after the record date fixed for the determination of
eligible shareholders, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities of the Company by way
of dividend, then and in each case, this Warrant shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Warrant, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities of
the Company that such holder would hold on the date of such exercise had it
been the holder of record of the security receivable upon exercise of this

 

 

Warrant on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such
shares and/or all other additional stock available to it as aforesaid during
such period, giving effect to all adjustments called for during such period by
the provisions of this Section 11.

 

(f)                        Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment
pursuant to this Section 11, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and furnish
to each Holder of this Warrant a certificate setting forth, in reasonable
detail, the event requiring the adjustment or readjustment, the amount of such
adjustment or readjustment, the method by which such adjustment or readjustment
was calculated, the Exercise Price at the time in effect, and the number of
shares and the amount, if any, of other property that at the time would be
received upon the exercise of the Warrant. The Company shall upon the written
request, at any time, of any such Holder, furnish or cause to be furnished to
such Holder a like certificate.

 

(g)                     Adjustment
in Number of Shares. Upon each adjustment of the Exercise Price pursuant to
this Section 11, this Warrant shall thereafter evidence the right to receive
upon payment of the adjusted Exercise Price that number of shares of Common
Stock (calculated to the nearest hundredth) obtained from the following
formula:

 

	
  X =

  	
   

  	
  Y x

  	
  A

  
	
   

  	
   

  	
   

  	
  B

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  X =

  	
   

  	
  the adjusted number of shares of Common Stock
  issuable upon exercise of the Warrant by payment of the adjusted Exercise
  Price.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y =

  	
   

  	
  the number of shares of Common Stock previously
  issuable upon the exercise of the Warrant by payment of the Exercise Price
  prior to adjustment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A =

  	
   

  	
  the Exercise Price prior to adjustment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B =

  	
   

  	
  the adjusted Exercise Price.

  

 

12.                    Representations
and Warranties. The Company represents and warrants to the Holder that all
shares of Common Stock that may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, and free from all taxes,
liens and charges with respect to the issue thereof. The Company will from time
to time use its best efforts to take all such action as may be required to
assure that the stated or par value per share of the Common Stock is at all
times no greater than the then effective Exercise Price. The Company shall at
all times have authorized and reserved, free from pre-emptive rights, a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant. The Company shall not take any action which would cause the
number of authorized but unissued shares of Common Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
exercise

 

 

of the Warrant. The Company shall take all reasonable actions to cause
all shares of Common Stock reserved for the purpose of issuance upon the
exercise of this Warrant to be issued and delivered by the Company pursuant to
an available exemption from registration under applicable federal and state
securities laws.

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officers thereunto duly
authorized as of the date first above written, intending to be legally bound
hereby.

 

	
   

  	
   

  	
  POWER MEDICAL INTERVENTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael P. Whitman

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  	
   

  
						

 

 

NOTICE
OF EXERCISE

 

To:                 POWER MEDICAL
INTERVENTIONS, INC.

 

The undersigned hereby
elects to purchase                                    shares
of Common Stock of Power Medical Interventions, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price for such
shares in full.

 

Please issue a
certificate or certificates representing said shares of Common Stock in the
name of the undersigned or in such other name as is specified below:

 

 

	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  

 

Please issue a new
Warrant for the unexercised portion of the attached Warrant in the name of the
undersigned or in such other name as is specified below:

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  (Date)

  	
   

  	
   

  	
   

  	
   

  
					

 

 

ASSIGNMENT
FORM

 

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

 

	
  Name of Assignee

  	
   

  	
  Address

  	
   

  	
  No. of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

and does hereby irrevocably constitute and appoint Attorney                                                 
to make such transfer on the books of Power Medical Interventions, Inc.
maintained for the purpose, with full power of substitution in the premises.

 

The undersigned also
represents that, by assignment hereof, the Assignee acknowledges that this
Warrant and the shares of stock to be issued upon exercise hereof or conversion
thereof are being acquired for investment and that the Assignee will not offer,
sell or otherwise dispose of this Warrant or any shares of stock to be issued
upon exercise hereof or conversion thereof except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended, or
any state securities laws. Further, the Assignee has acknowledged that upon
exercise of this Warrant, the Assignee shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the shares of
stock so purchased are being acquired for investment and not with a view toward
distribution or resale.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature of Holder

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated

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