Execution Copy
PURCHASE AGREEMENT

PURCHASE AGREEMENT (the “Agreement”), dated as of May 27, 2011, by and between
BACTERIN INTERNATIONAL HOLDINGS, INC., a Delaware corporation (the “Company”),
and LINCOLN PARK CAPITAL FUND, LLC, an Illinois limited liability company (the
“Investor”).

WHEREAS:
 
Subject to the terms and conditions set forth in this Agreement, the Company has
the right to sell to the Investor, and the Investor has the obligation to buy
from the Company, up to Thirty One Million Dollars ($31,000,000) of the
Company's common stock, $.000001 par value per share (the “Common Stock”). The
shares of Common Stock to be purchased hereunder are referred to herein as the
“Purchase Shares.”
 
NOW THEREFORE, the Company and the Investor hereby agree as follows:
 
1.           CERTAIN DEFINITIONS.

For purposes of this Agreement, the following terms shall have the following
meanings:

(a)          “Available Amount” means initially Thirty One Million Dollars
($31,000,000) in the aggregate which amount shall be reduced by the Purchase
Amount each time the Investor purchases shares of Common Stock pursuant to
Section 2 hereof.

(b)         “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

(c)          “Business Day” means any day on which the Principal Market is open
for trading including any day on which the Principal Market is open for trading
for a period of time less than the customary time.

(d)         “Closing Sale Price” means, for any security as of any date, the
last closing sale price for such security on the Principal Market as reported by
the Principal Market, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing sale
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by the Principal Market.

(e)          “Confidential Information” means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) Business Days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.
Confidential Information shall not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party’s files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party’s obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party’s Confidential Information, as shown
by documents and other competent evidence in the receiving party’s possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.

 
 

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(f)           “Custodian” means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

(g)          “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

(h)          “Maturity Date” means the date that is 720 Business Days (36
Monthly Periods) from the Commencement Date.

(i)           “Monthly Period” means each successive 20 Business Day period
commencing with the Commencement Date.

(j)           “Person” means an individual or entity including but not limited
to any limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization and a government or any department or
agency thereof.

(k)          “Principal Market” means the NYSE Amex; provided however, that in
the event the Company’s Common Stock is ever listed or traded on the Nasdaq
Capital Market, the Nasdaq Global Select Market, the New York Stock Exchange,
the Nasdaq Global Market, or the OTC Bulletin Board (it being understood that as
used herein “OTC Bulletin Board” shall also mean any successor or comparable
market quotation system or exchange to the OTC Bulletin Board such as the OTCQB
operated by the OTC Markets Group, Inc.), then the “Principal Market” shall mean
such other market or exchange on which the Company’s Common Stock is then listed
or traded.

(l)           “Purchase Amount” means, with respect to any particular purchase
made hereunder, the Regular Purchase to be purchased by the Investor pursuant to
Section 2 hereof multiplied by the Purchase Price.

(m)         “Purchase Date” means with respect to any particular purchase made
hereunder, the Business Day on which the Investor receives by 10:00 a.m. eastern
time of such Business Day a valid Purchase Notice that the Investor is to buy
Purchase Shares pursuant to Section 2 hereof.

(n)          “Purchase Price” means the lower of the (A) the lowest Sale Price
of the Common Stock on the Purchase Date and (B) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during the ten (10)
consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).

(o)          “Purchase Notice” shall mean a written notice from the Company to
the Investor directing the Investor to buy such Purchase Amount in Purchase
Shares as specified by the Company therein on the Purchase Date.

 
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(p)          “Sale Price” means any sale price for the shares of Common Stock on
the Principal Market as reported by the Principal Market.

(q)          “SEC” means the United States Securities and Exchange Commission.

(r)           “Securities Act” means the Securities Act of 1933, as amended.

(s)          “Signing Market Price” means $3.06, representing the consolidated
closing  price of the Common Stock on the Principal Market on the Business Day
immediately preceding the date of this Agreement.

(t)           “Transfer Agent” means the transfer agent of the Company,
currently Corporate Stock Transfer, or such other person who is then serving as
the transfer agent for the Company in respect of the Common Stock.

2.  PURCHASE OF COMMON STOCK.
 
Subject to the terms and conditions set forth in this Agreement, the Company has
the right to sell to the Investor, and the Investor has the obligation to
purchase from the Company, Purchase Shares as follows:
 
(a)              Initial Purchase of Common Stock.  Upon the execution of this
Agreement, the Company shall sell to the Investor and the Investor shall
purchase from the Company $1,000,000 worth of Purchase Shares (such purchase the
"Initial Purchase" and such Purchase Shares are referred to herein as "Initial
Purchase Shares”) and warrants in the form of Exhibit F attached hereto to
purchase shares of Common Stock equivalent to 40% of the Initial Purchase Shares
(the "Warrants" and the shares of Common Stock underlying such Warrants, the
"Warrant Shares"), at a purchase price per share of the Initial Purchase Shares
equal to the Signing Market Price.  The Warrants shall have a term of five (5)
years and an exercise price equal to the Signing Market Price per Warrant
Share.   Upon receipt of such Initial Purchase Shares and Warrants, the Investor
shall pay to the Company as the purchase price for such Initial Purchase Shares
and Warrants, the sum of $1,000,000 via wire transfer.

   (b)              Additional Purchases. Within one (1) Business Day following
the satisfaction of the conditions (the "Commencement") as set forth in Sections
7 and 8 below (the date of satisfaction of such conditions, the "Commencement
Date"), the Company shall have the right but not the obligation on each Business
Day during the term of this Agreement to direct the Investor by its delivery to
the Investor of a Purchase Notice from time to time to buy up to One Hundred
Thousand Dollars ($100,000.00) worth of Purchase Shares (each such purchase a
“Regular Purchase”) at the Purchase Price on the Purchase Date.  The Regular
Purchase Amount may be increased to up to Two Hundred Thousand Fifty Dollars
($250,000.00) per Regular Purchase Notice if the Closing Sale Price of the
Common Stock is not below $4.00 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) on the Purchase Date.  The Regular Purchase Amount may be
increased to up to Five Hundred Thousand Dollars ($500,000.00) per Regular
Purchase Notice if the Closing Sale Price of the Common Stock is not below $5.50
(subject to equitable adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction) on the Purchase
Date.  The Regular Purchase Amount may be increased to up to One Million Dollars
($1,000,000.00) per Regular Purchase Notice if the Closing Sale Price of the
Common Stock is not below $9.00 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) on the Purchase Date. With respect to each such Regular
Purchase, the Company must deliver an instruction letter to the Company’s
transfer agent requesting delivery of the Purchase Shares on the Business Day
following the Purchase Date.  If on any Purchase Date the Closing Sale Price of
the Common Stock is below the Regular Purchase threshold price, such Regular
Purchase shall automatically be reduced to the next lowest applicable Regular
Purchase Amount.  The Company may deliver a Regular Purchase Notice to the
Investor each Business day during the term of this Agreement, so long as the
Transfer Agent has made available for delivery or delivered all shares of common
stock to be issued in connection with all prior Regular Purchases.

 
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(c)              Payment for Purchase Shares.   The Investor shall pay to the
Company an amount equal to the Purchase Amount with respect to such Purchase
Shares as full payment for such Purchase Shares via wire transfer of immediately
available funds on the same Business Day that the Investor receives such
Purchase Shares if they are received by the Investor before 1:00 p.m. eastern
time or if received by the Investor after 1:00 p.m. eastern time, the next
Business Day. The Company shall not issue any fraction of a share of Common
Stock upon any purchase. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such fraction of a
share of Common Stock up or down to the nearest whole share. All payments made
under this Agreement shall be made in lawful money of the United States of
America or wire transfer of immediately available funds to such account as the
Company may from time to time designate by written notice in accordance with the
provisions of this Agreement. Whenever any amount expressed to be due by the
terms of this Agreement is due on any day that is not a Business Day, the same
shall instead be due on the next succeeding day that is a Business Day.
 
(d)              Compliance with Rules of Principal Markets.

(i)           Exchange Cap.  Subject to Section 2(d)(ii) below, the Company
shall not issue or sell any Purchase Shares, and the Investor shall not purchase
or acquire any Purchase Shares, to the extent that after giving effect thereto
the aggregate number of Purchase Shares to be issued pursuant to this Agreement
shall exceed 7,782,958 shares of Common Stock (19.99% of the 38,934,258
outstanding shares of Common Stock on the date of this Agreement) (the “Exchange
Cap”) unless and until the Company elects to solicit shareholder approval of the
transactions contemplated by this Agreement and the shareholders of the Company
approve the transactions contemplated by this Agreement.  For the avoidance of
doubt, the Company may, but shall be under no obligation to, request its
shareholders to approve the transactions contemplated by this Agreement.

(ii)           At-Market Transaction.  Notwithstanding Section 2(d)(i) above,
the Exchange Cap shall not be applicable for any purposes of this Agreement and
the transactions contemplated hereby solely to the extent that (and only for so
long as) the Average Price shall equal or exceed the Base Price (it being hereby
acknowledged and agreed that the Exchange Cap shall be applicable for all
purposes of this Agreement and the transactions contemplated hereby at all other
times during the term of this Agreement unless the shareholder approval referred
to in Section 2(d)(i) is obtained). “Average Price” means a price per Purchase
Share (rounded to the nearest tenth of a cent) equal to the quotient obtained by
dividing (i) the aggregate Purchase Price paid by the Investor for all Purchase
Shares purchased pursuant to this Agreement by (ii) the aggregate number of
Purchase Shares issued pursuant to this Agreement. “Base Price” means a price
per Purchase Share equal to $3.11 (subject to adjustment for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction that occurs on or after the date of this Agreement).

(iii)           General.  The Company shall not issue any Purchase Shares
pursuant to this Agreement if such issuance would reasonably be expected to
result in a breach of the Company’s obligations under the rules and regulations
of the Principal Markets.  The provisions of this Section 2(d) shall be
implemented in a manner otherwise than in strict conformity with the terms
hereof only if necessary to ensure compliance with the rules and regulations of
the Principal Markets.

 
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(e)              Beneficial Ownership Limitation.  Notwithstanding anything to
the contrary contained in this Agreement, the Company shall not issue or sell,
and the Investor shall not purchase or acquire, any shares of Common Stock under
this Agreement which, when aggregated with all other shares of Common Stock then
beneficially owned by the Investor and its affiliates (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would
result in the beneficial ownership by the Investor and its affiliates of more
than 9.99% of the then issued and outstanding shares of Common Stock (the
“Beneficial Ownership Limitation”).  Upon the written or oral request of the
Investor, the Company shall confirm orally or in writing to the Investor within
two (2) Business Days of such request the number of shares of Common Stock then
outstanding.  The Investor and the Company shall each cooperate in good faith in
the determinations required hereby and the application hereof.
 
(f)              Purchase Price Floor.   The Company and the Investor shall not
effect any sales and purchases under this Agreement on any Purchase Date where
the Purchase Price for any purchases of Purchase Shares would be less than the
Floor Price. "Floor Price" means $2.00, which shall be appropriately adjusted
for any reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction.
 
3.           INVESTOR'S REPRESENTATIONS AND WARRANTIES.

The Investor represents and warrants to the Company that as of the date hereof
and as of the Commencement Date:

(a)           Investment Purpose.   The Investor is acquiring the Purchase
Shares, and Commitment Shares (“Securities”) as principal for its own account
and not with a view to or for distributing or reselling such Securities or any
part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this representation
and warranty not limiting the Investor’s right to sell the Securities at any
time pursuant to the registration statement described herein or otherwise in
compliance with applicable federal and state securities laws and with respect to
the Commitment Shares, subject to Section 5(e) hereof).  The Investor is
acquiring the Securities hereunder in the ordinary course of its business.
 
(b)           Accredited Investor Status.  The Investor is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.

(c)           Reliance on Exemptions.  The Investor understands that the
Securities may be offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and the
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.

(d)           Information.  The Investor understands that its investment in the
Securities involves a high degree of risk.  The Investor (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities.  Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its representatives shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained in Section 4 below.  The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.

 
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(e)        No Governmental Review.  The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

(f)         Transfer or Sale.  The Investor understands that(i) the Securities
may not be offered for sale, sold, assigned or transferred unless (A) registered
pursuant to the Securities Act or (B) an exemption exists permitting such
Securities to be sold, assigned or transferred without such registration; (ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the  Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder.

(g)        Validity; Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

(h)        Residency.  The Investor is a resident of the State of Illinois.

(i)         No Prior Short Selling.  The Investor represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Investor, its agents, representatives or affiliates engaged in or effected, in
any manner whatsoever, directly or indirectly, any (i) "short sale" (as such
term is defined in Section 242.200 of Regulation SHO of the Exchange Act) of the
Common Stock or (ii) hedging transaction, which establishes a net short position
with respect to the Common Stock.

4.          REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Investor that as of the date hereof
and as of the Commencement Date:

(a)        Organization and Qualification. The Company and each of the
Subsidiaries (which for purposes of this Agreement means any entity in which the
Company, directly or indirectly, owns 50% or more of the voting stock or capital
stock or other similar equity interests) is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate or articles
of incorporation, bylaws or other organizational or charter documents.  Each of
the Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.  The Company has no
Subsidiaries except as set forth on Schedule 4(a).

 
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(b)         Authorization; Enforcement; Validity.  (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement  and each of
the other agreements entered into by the parties on the Commencement Date and
attached hereto as exhibits to this Agreement (collectively, the “Transaction
Documents”), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the issuance of the Commitment Shares and
the reservation for issuance and the issuance of the Purchase Shares issuable
under this Agreement, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its shareholders, (iii) this Agreement has been, and
each other Transaction Document shall be on the Commencement Date, duly executed
and delivered by the Company and (iv) this Agreement constitutes, and each other
Transaction Document upon its execution on behalf of the Company, shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.  The
Board of Directors of the Company has approved the resolutions (the “Signing
Resolutions”) substantially in the form as set forth as Exhibit C attached
hereto to authorize this Agreement and the transactions contemplated
hereby.  The Signing Resolutions are valid, in full force and effect and have
not been modified or supplemented in any respect.    No other approvals or
consents of the Company’s Board of Directors and/or shareholders is necessary
under applicable laws and the Company’s Certificate of Incorporation and/or
Bylaws to authorize the execution and delivery of this Agreement or any of the
transactions contemplated hereby, including, but not limited to, the issuance of
the Commitment Shares and the issuance of the Purchase Shares.

(c)         Capitalization.  As of the date hereof, the authorized capital stock
of the Company is set forth on Schedule 4(c).  Except as disclosed in Schedule
4(c), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company, (ii) there are no outstanding debt securities, (iii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement.  The Company has furnished to the Investor true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of Incorporation”), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents containing the
material rights of the holders thereof in respect thereto, except that the
Company is not required to provide copies of all warrant agreements.

 
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(d)         Issuance of Securities.  Upon issuance and payment therefor in
accordance with the terms and conditions of this Agreement, the Purchase Shares,
including without limitation the Initial Purchase Shares, shall be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.  Upon issuance and payment therefor in
accordance with the terms and conditions of the Warrant, the Warrant Shares
shall be validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock.  The Commitment
Shares have been duly authorized and, upon issuance in accordance with the terms
hereof, the Commitment Shares shall be (i) validly issued, fully paid and
non-assessable and (ii) free from all taxes, liens and charges with respect to
the issue thereof.   5,000,000 shares of Common Stock have been duly authorized
and reserved for issuance upon purchase under this Agreement as Purchase
Shares.  164,675 shares of Common Stock (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) have been duly authorized and reserved for issuance as
Additional Commitment Shares in accordance with this Agreement.

(e)         No Conflicts.  Except as disclosed in Schedule 4(e), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase Shares) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market applicable to the Company or any
of its Subsidiaries) or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected, except in the case of conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
under clause (ii), which could not reasonably be expected to result in a
Material Adverse Effect.  Except as disclosed in Schedule 4(e), neither the
Company nor its Subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation, any Certificate of Designation, Preferences
and Rights of any outstanding series of preferred stock of the Company or
By-laws or their organizational charter or by-laws, respectively.  Except as
disclosed in Schedule 4(e), neither the Company nor any of its Subsidiaries is
in violation of any term of or is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect.  The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations, the
sanctions for which either individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect.  Except as specifically
contemplated by this Agreement and as required under the Securities Act or
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof.  Except as disclosed in Schedule 4(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence shall be obtained or effected on or prior to
the Commencement Date.  Except as listed in Schedule 4(e), since one year prior
to the date hereof,  the Company has not received nor delivered any notices or
correspondence from or to the Principal Market.  The Principal Market has not
commenced any delisting proceedings against the Company.

 
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(f)          SEC Documents; Financial Statements. Except as disclosed in
Schedule 4(f) the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by the Company under the Securities Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Documents”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Documents prior to the expiration of any such
extension.  As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable, and none of the SEC Documents, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing.  Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.  The
SEC has not commenced any enforcement proceedings against the Company or any of
its subsidiaries.

(g)         Absence of Certain Changes.  Except as disclosed in Schedule 4(g),
since March 31, 2011, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries.  The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings.  The Company is financially solvent and is
generally able to pay its debts as they become due.

(h)         Absence of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, which
could reasonably be expected to have a Material Adverse Effect.   A description
of each action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
which, as of the date of this Agreement, is pending or threatened in writing
against or affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or
directors in their capacities as such, is set forth in Schedule 4(h).

 
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(i)          Acknowledgment Regarding Investor's Status.  The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby.  The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor's purchase of the Securities.  The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.

(j)          No General Solicitation.  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.

(k)         Intellectual Property Rights.  The Company and its Subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted.  Except as set forth on Schedule 4(k), none of the
Company's material trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement.  The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 4(k), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.

(l)          Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
 
 
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(m)         Title.  The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of
the Company and the Subsidiaries, in each case free and clear of all liens,
encumbrances and defects (“Liens”), except for Liens as do not materially affect
the value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries, and
Liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties.  Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries. Any real property and facilities
held under lease by the Company and any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.

(n)          Insurance.  The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged.  Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.

(o)         Regulatory Permits.  The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

(p)         Tax Status.  The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

(q)         Transactions With Affiliates.   Except as set forth in the SEC
Documents, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $100,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.
 
 
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(r)         Application of Takeover Protections.  The Company and its board of
directors have taken or will take prior to the Commencement Date all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Securities and the Commitment Shares and the Investor's ownership of the
Securities and the Commitment Shares.

(s)        Disclosure.  Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided
the Investor or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information which is not
otherwise disclosed in the Registration Statement or prospectus supplements
thereto or otherwise made publicly available.   The Company understands and
confirms that the Investor will rely on the foregoing representation in
effecting purchases and sales of securities of the Company.  All of the
disclosure furnished by or on behalf of the Company to the Investor regarding
the Company, its business and the transactions contemplated hereby, including
the disclosure schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading.  The Company acknowledges
and agrees that the Investor neither makes nor has made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3 hereof.

(t)         Foreign Corrupt Practices.   Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

5.         COVENANTS.

(a)        Filing of Form 8-K and Registration Statement.  The Company agrees
that it shall, within the time required under the Exchange Act file a Report on
Form 8-K disclosing this Agreement and the transaction contemplated hereby.  The
Company shall also file within forty-five (45) days from the date hereof a new
registration statement (“Registration Statement”) covering only the sale of the
Purchase Shares, Warrant Shares and the Commitment Shares, in accordance with
the terms of the Registration Rights Agreement between the Company and the
Investor, dated as of the date hereof (“Registration Rights Agreement”).  Any
securities issuable under this Agreement that have not been registered under the
Securities Act shall bear the following restrictive legend (the “Restrictive
Legend”):

 
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
  
(b)         Blue Sky. The Company shall use its best efforts to take such
action, if any, as is reasonably necessary in order to obtain an exemption for
or to qualify (i) the initial sale of the Commitment Shares and any Purchase
Shares to the Investor under this Agreement and (ii) any subsequent resale of
the Commitment Shares and any Purchase Shares by the Investor, in each case,
under applicable securities or “Blue Sky” laws of the states of the United
States in such states as is reasonably requested by the Investor from time to
time, and shall provide evidence of any such action so taken to the Investor.

(c)         Listing.  The Company shall promptly secure the listing of all of
the Purchase Shares and Commitment Shares upon each national securities exchange
and automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents.  The Company shall maintain the Common Stock's authorization for
quotation on the Principal Market.    The Company shall promptly, and in no
event later than the following Business Day, provide to the Investor copies of
any notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange.  The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section.

(d)         Limitation on Short Sales and Hedging Transactions.  The Investor
agrees that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11, the Investor and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) “short sale” (as such term is
defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.

(e)         Issuance of Commitment Shares.  Upon the execution of this
Agreement, the Company shall submit an Additional Listing Application to the
NYSE Amex, and immediately following approval by the NYSE Amex, the Company will
issue to the Investor as consideration for the Investor entering into this
Agreement 128,506 shares of Common Stock (the “Initial Commitment Shares”) and
shall deliver to the Transfer Agent a letter in the form as set forth as Exhibit
E attached hereto with respect to the issuance of the Initial Commitment
Shares.  In connection with each purchase of Purchase Shares hereunder, the
Company agrees to issue to the Investor a number of shares of Common Stock (the
“Additional Commitment Shares” and together with the Initial Commitment Shares,
the “Commitment Shares”) equal to the product of (x) 164,675 and (y) the
Purchase Amount Fraction.  The “Purchase Amount Fraction” shall mean a fraction,
the numerator of which is the Purchase Amount purchased by the Investor with
respect to such purchase of Purchase Shares and the denominator of which is
Thirty Million Dollars ($30,000,000).  The Additional Commitment Shares shall be
equitably adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction.  The Initial Commitment Shares shall
be issued in certificated form and shall bear the Restrictive Legend.  The
Investor agrees that the Investor shall not pledge, transfer or sell the
Commitment Shares until the earlier of (a) 720 Business Days (36 Monthly
Periods) from the date hereof or (b) the date on which this Agreement has been
terminated, provided, however, that such restrictions shall not apply: (i) in
connection with any transfers to or among affiliates (as defined in the Exchange
Act), (ii) if an Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default, including any failure by
the Company to timely issue Purchase Shares under this Agreement, or (iii) in
the event that the Registration Statement is not declared effective by the SEC
within 180 days from the date hereof.  Notwithstanding the forgoing, the
Investor may transfer Commitment Shares to a third party in order to settle a
sale made by the Investor where the Investor reasonably expects the Company to
deliver additional Purchase Shares to the Investor under this Agreement so long
as the Investor maintains ownership of the amount of Commitment Shares received
up to that point by "replacing" such Commitment Shares so transferred with new
Purchase Shares when the new Purchase Shares are actually issued by the Company
to the Investor.

 
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(f)          Due Diligence.  The Investor shall have the right, from time to
time as the Investor may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours.  The Company and its
officers and employees shall provide information and reasonably cooperate with
the Investor in connection with any reasonable request by the Investor related
to the Investor's due diligence of the Company.  Each party hereto agrees not to
disclose any Confidential Information of the other party to any third party and
shall not use the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions contemplated
hereby.  Each party hereto acknowledges that the Confidential Information shall
remain the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party.  The Company confirms that neither it nor any
other Person acting on its behalf shall provide the Investor or its agents or
counsel with any information that it believes constitutes or might constitute
material, non-public information which is not otherwise disclosed in the
Registration Statement or prospectus supplements thereto or otherwise publicly
disclosed.
 
(g)         Purchase Records. The Investor and the Company shall each maintain
records showing the remaining Available Amount at any given time and the dates
and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Investor and the Company.
 
(h)         Taxes.  The Company shall pay any and all transfer, stamp or similar
taxes that may be payable with respect to the issuance and delivery of any
shares of Common Stock to the Investor made under this Agreement.
 
 
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(i)          No Variable Rate Transactions.  From the date hereof until the
Maturity Date the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents for cash consideration (or a
combination of units thereof) involving a Variable Rate Transaction other than
in connection with an Exempt Issuance.  “Variable Rate Transaction” means a
transaction in which the Company (i) issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price that is based
upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (including, without limitation any “full ratchet” or “weighted
average” anti-dilution provisions) or (ii) enters into any agreement, including,
but not limited to, an equity line of credit or at the market offering, whereby
the Company may sell securities at a future determined price. “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers, directors or vendors of the Company pursuant to any stock or option
plan duly adopted for such purpose, by the Board of Directors or a majority of
the members of a committee of directors established for such purpose, (b)
securities upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities,
except that the Company may amend the terms of existing warrants that contain
ratchet provisions, even if such amendments may increase the number of shares
issuable upon the exercise of such existing warrants, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by the directors of
the Company, which acquisitions or strategic transactions can have a Variable
Rate Transaction component,  provided that any such issuance shall only be to a
Person (or to the equity holders of a Person) which is, itself or through its
subsidiaries, an operating company or an asset in a business synergistic with
the business of the Company and shall provide to the Company additional benefits
in addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities. For
twelve (12) Monthly Periods from the date hereof, the Company agrees that prior
to entering into each and any definitive agreement for the sale directly or
indirectly of any debt, Common Stock or Common Stock Equivalents, a (“Subsequent
Transaction”), the Company shall provide notice to the Investor (“Offering
Notice”) not less than three (3) Business Days nor more than five (5) Business
Days prior to entering into any such Subsequent Transaction, including the
relevant terms and conditions of such Subsequent Transaction, and the Investor
shall have the right to participate on equivalent terms and conditions in up to
10% of such Subsequent Transaction by delivering notice to the Company not later
than two (2) Business Days after receipt of the Offering Notice, which notice
from Investor shall indicate Investor’s intention to participate in the
Subsequent Transaction and the amount of its participationThe Company shall
deliver an Offering Notice for each and any Subsequent Transaction and agrees
that it shall not execute any definitive documentation for any Subsequent
Transaction whatsoever, unless it has first complied with this Section 5(i).
 Notwithstanding anything to the contrary in this Section 5(i) and unless
otherwise agreed to by Investor, the Company shall either confirm in writing to
Investor that the transaction with respect to the Subsequent Transaction has
been abandoned or shall publicly disclose its intention to enter into the
Subsequent Transaction, in either case in such a manner such that Investor will
not be in possession of any material, non-public information, by the tenth
(10th) day following delivery of the Offering Notice. If by such tenth (10th)
day, no public disclosure regarding a transaction with respect to the Subsequent
Transaction has been made, and no notice regarding the abandonment of such
transaction has been received by Investor, such transaction shall be deemed to
have been abandoned and Investor shall not be in possession of any material,
non-public information with respect to the Company or any of its Subsidiaries.
Should the Company decide to pursue such transaction with respect to the
Subsequent Transaction, the Company shall provide Investor with another Offering
Notice in accordance with, and subject to, the terms of this Section 5(i) and
Investor will again have the right of participation set forth in this Section
5(i).

6.         TRANSFER AGENT INSTRUCTIONS.

  On the Commencement Date, provided the Investor has submitted the Shares with
appropriate stock power and instructions to the Transfer Agent, the Company
shall cause any restrictive legend on the Initial Commitment Shares to be
removed and all of the Purchase Shares and Additional Commitment Shares, to be
issued under this Agreement shall be issued without any restrictive legend
unless the Investor expressly consents otherwise.  The Company shall issue
irrevocable instructions to the Transfer Agent, and any subsequent transfer
agent, to issue Purchase Shares in the name of the Investor for the Purchase
Shares in the form agreed to by the parties prior to the Commencement Date (the
“Irrevocable Transfer Agent Instructions”).  The Company warrants to the
Investor that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 6, will be given by the Company to the
Transfer Agent with respect to the Purchase Shares and that the Commitment
Shares and the Purchase Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement.

 
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7.
CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK.

The right of the Company hereunder to commence sales of the Purchase Shares is
subject to the satisfaction of each of the following conditions:

(a)         The Investor shall have executed each of the Transaction Documents
and delivered the same to the Company; and

(b)         A registration statement covering the sale of all of the Commitment
Shares, Warrant Shares and Purchase Shares shall have been declared effective
under the Securities Act by the SEC and no stop order with respect to the
registration statement shall be pending or threatened by the SEC.
 
 
8.
CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK.

The obligation of the Investor to buy Purchase Shares under this Agreement is
subject to the satisfaction of each of the following conditions and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has occurred:

(a)         The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor;

(b)         The Company shall have issued to the Investor the Initial Commitment
Shares without restrictive legend;

(c)         The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the Principal Market and the Purchase Shares and
Commitment Shares shall be approved for listing upon the Principal Market;

(d)         The Investor shall have received the opinions of the Company's legal
counsel dated as of the Commencement Date substantially in the form of Exhibit A
attached hereto;

(e)         The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
4 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date.  The Investor shall
have received a certificate, executed by the CEO, President or CFO of the
Company, dated as of the Commencement Date, to the foregoing effect in the form
attached hereto as Exhibit B;

 
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(f)          The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as Exhibit C which shall be in full
force and effect without any amendment or supplement thereto as of the
Commencement Date;

(g)         As of the Commencement Date, the Company shall have reserved out of
its authorized and unissued Common Stock, (A) solely for the purpose of
effecting purchases of Purchase Shares hereunder, 5,000,000 shares of Common
Stock and (B) as Additional Commitment Shares in accordance with Section 5(e)
hereof, 164,675 shares of Common Stock;

(h)         The Irrevocable Transfer Agent Instructions, in form acceptable to
the parties shall have been delivered to and acknowledged in writing by the
Company and the Company's Transfer Agent;

(i)          The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of the Company in the State of
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Business Days of the Commencement Date;

(j)          The Company shall have delivered to the Investor a certified copy
of the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware within ten (10) Business Days of the Commencement Date;

(k)         The Company shall have delivered to the Investor a secretary's
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as Exhibit D;

(l)           A registration statement covering the sale of all of the Purchase
Shares, including without limitation, the Initial Purchase Shares, Warrant
Shares and Commitment Shares shall have been declared effective under the
Securities Act by the SEC and no stop order with respect to the registration
statement shall be pending or threatened by the SEC.  The Company shall have
prepared and delivered to the Investor a final and complete form of prospectus,
dated and current as of the Commencement Date, to be used by the Investor in
connection with any sales of any Purchase Shares or Commitment Shares, and to be
filed by the Company one Business Day after the Commencement Date. The Company
shall have made all filings under all applicable federal and state securities
laws necessary to consummate the issuance of the Commitment Shares and Purchase
Shares pursuant to this Agreement in compliance with such laws;

(m)        No Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred;

(n)         On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the
Investor, in order to render inapplicable any control share acquisition,
business combination, shareholder rights plan or poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation or the laws of the state of its
incorporation which is or could become applicable to the Investor as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and the Investor's ownership of the
Securities; and

(o)         The Company shall have provided the Investor with the information
requested by the Investor in connection with its due diligence requests made
prior to, or in connection with, the Commencement, in accordance with the terms
of Section 5(f) hereof.

 
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9.
INDEMNIFICATION.

In consideration of the Investor's execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Investor and all of its
affiliates, shareholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which result from the gross negligence or willful misconduct of the
Indemnitee. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Payment under this indemnification shall be
made within thirty (30) days from the date Investor makes written request for
it. A certificate containing reasonable detail as to the amount of such
indemnification submitted to the Company by Investor shall be conclusive
evidence, absent manifest error, of the amount due from the Company to Investor.

 
10. 
EVENTS OF DEFAULT.

An “Event of Default” shall be deemed to have occurred at any time as any of the
following events occurs:

(a)         the effectiveness of a registration statement registering the
Purchase Shares, Warrant Shares or Commitment Shares lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to the Investor for sale of any or all of the Purchase Shares, Warrant Shares or
Commitment Shares (“Registrable Securities”), and such lapse or unavailability
continues for a period of ten (10) consecutive Business Days or for more than an
aggregate of thirty (30) Business Days in any 365-day period;

(b)         the suspension from trading or failure of the Common Stock to be
listed on the Principal Market for a period of three (3) consecutive Business
Days;

(c)         the delisting of the Company’s Common Stock from the Principal
Market, provided, however, that the Common Stock is not immediately thereafter
trading on the New York Stock Exchange, the Nasdaq Capital Market, the Nasdaq
Global Select Market, the OTC Bulletin Board (or nationally recognized successor
thereto), or the Nasdaq Global Market;

 
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(d)         the failure for any reason by the Transfer Agent to issue Purchase
Shares to the Investor within five (5) Business Days after the applicable
Purchase Date which the Investor is entitled to receive;

(e)         the Company breaches any representation, warranty, covenant or other
term or condition under any Transaction Document if such breach could have a
Material Adverse Effect and except, in the case of a breach of a covenant which
is reasonably curable, only if such breach continues for a period of at least
five (5) Business Days;

(f)          if any Person commences a proceeding against the Company pursuant
to or within the meaning of any Bankruptcy Law ;

(g)         if the Company pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due; or

(h)         a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.

(i)           if at any time after the Commencement Date, the “Exchange Cap” is
reached. The “Exchange Cap” shall be deemed to be reached at such time if, upon
the purchase of Common Stock under this Agreement, the issuance of such shares
of Common Stock would exceed that number of shares of Common Stock which the
Company may issue under this Agreement without breaching the Company's
obligations under the rules or regulations of the Principal Market.

In addition to any other rights and remedies under applicable law and this
Agreement, including the Investor termination rights under Section 11 hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, the Investor shall not be permitted or obligated to
purchase any shares of Common Stock under this Agreement.  If pursuant to or
within the meaning of any Bankruptcy Law, the Company commences a voluntary case
or any Person commences a proceeding against the Company, a Custodian is
appointed for the Company or for all or substantially all of its property, or
the Company makes a general assignment for the benefit of its creditors, (any of
which would be an Event of Default as described in Sections 10(f), 10(g) and
10(h) hereof) this Agreement shall automatically terminate without any liability
or payment to the Company without further action or notice by any Person.  No
such termination of this Agreement under Section 11(a) or 11(d) shall affect the
Company's or the Investor's obligations under this Agreement with respect to
pending purchases and the Company and the Investor shall complete their
respective obligations with respect to any pending purchases under this
Agreement.

11.        TERMINATION

This Agreement may be terminated only as follows:
 
(a)          If pursuant to or within the meaning of any Bankruptcy Law, the
Company commences a voluntary case or any Person commences a proceeding against
the Company, a Custodian is appointed for the Company or for all or
substantially all of its property, or the Company makes a general assignment for
the benefit of its creditors, (any of which would be an Event of Default as
described in Sections 10(f), 10(g) and 10(h) hereof) this Agreement shall
automatically terminate without any liability or payment to the Company without
further action or notice by any Person.  No such termination of this Agreement
under this Section 11(a) shall affect the Company's or the Investor's
obligations under this Agreement with respect to pending purchases and the
Company and the Investor shall complete their respective obligations with
respect to any pending purchases under this Agreement.

 
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(b)         In the event that the Commencement shall not have occurred, the
Company shall have the option to terminate this Agreement for any reason or for
no reason without any liability whatsoever of any party to any other party under
this Agreement.

(c)         In the event that the Commencement shall not have occurred on or
before October 31, 2011, due to the failure to satisfy the conditions set forth
in Sections 7 and 8 above with respect to the Commencement, the non-breaching
party shall have the option to terminate this Agreement at the close of business
on such date or thereafter without liability of any party to any other party.

(d)         At any time after the Commencement Date, the Company shall have the
option to terminate this Agreement for any reason or for no reason by delivering
notice (a “Company Termination Notice”) to the Investor electing to terminate
this Agreement without any liability whatsoever of any party to any other party
under this Agreement.  The Company Termination Notice shall not be effective
until one (1) Business Day after it has been received by the Investor. No such
termination of this Agreement under this Section 11(d) shall affect the
Company's or the Investor's obligations under this Agreement with respect to
pending purchases and the Company and the Investor shall complete their
respective obligations with respect to any pending purchases under this
Agreement.

(e)         This Agreement shall automatically terminate on the date that the
Company sells and the Investor purchases the full Available Amount as provided
herein, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under this Agreement.

(f)          If by the Maturity Date for any reason or for no reason the full
Available Amount under this Agreement has not been purchased as provided for in
Section 2 of this Agreement, this Agreement shall automatically terminate on the
Maturity Date, without any action or notice on the part of any party and without
any liability whatsoever of any party to any other party under this Agreement.

Except as set forth in Sections 11(a) (in respect of an Event of Default under
Sections 10(f), 10(g) and 10(h)), 11(c) and 11(f), any termination of this
Agreement pursuant to this Section 11 shall be effected by written notice from
the Company to the Investor, or the Investor to the Company, as the case may be,
setting forth the basis for the termination hereof.  The representations and
warranties and covenants of the Company and the Investor contained in Sections
3, 4, 5, and 6 hereof, the indemnification provisions set forth in Section 9
hereof and the agreements and covenants set forth in Sections 10, 11 and 12
shall survive the Commencement and any termination of this Agreement.  No
termination of this Agreement shall affect the Company's or the Investor's
rights or obligations (i) under the Registration Rights Agreement which shall
survive any such termination or (ii) under this Agreement with respect to
pending purchases and the Company and the Investor shall complete their
respective obligations with respect to any pending purchases under this
Agreement.

 
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12.        MISCELLANEOUS.

(a)         Governing Law; Jurisdiction; Jury Trial.  The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b)         Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature or
signature delivered by e-mail in a “.pdf” format data file shall be considered
due execution and shall be binding upon the signatory thereto with the same
force and effect as if the signature were an original, not a facsimile signature
or a signature in a “.pdf” format data file.

(c)         Headings.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

(d)         Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

(e)         Entire Agreement.  This Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement, the other Transaction Documents and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters.  The Company
acknowledges and agrees that is has not relied on, in any manner whatsoever, any
representations or statements, written or oral, other than as expressly set
forth in the Transaction Documents.

(f)          Notices.  Any notices, consents or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

 
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If to the Company:
Bacterin International Holdings, Inc.
600 Cruiser Lane
Belgrade, MT 59714
Telephone:               406-388-0480
Facsimile:                406-388-0422
Attention:                 Chief Executive Officer

If to the Investor:
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 620
Chicago, IL 60654
Telephone:               312-822-9300
Facsimile:                312-822-9301
Attention:                 Josh Scheinfeld/Jonathan Cope

 
If to the Transfer Agent:
Corporate Stock Transfer, Inc.
3200 Cherry Creek South Drive
Denver, CO 80209
Telephone:               303-282-4800
Facsimile:                303-282-5800
Attention:                 Carylyn K. Bell
 
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

(g)         Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns.  The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation.  The Investor may not assign its rights or
obligations under this Agreement.

(h)         No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

(i)          Publicity.  The Investor shall have the right to approve before
issuance any press release, SEC filing or any other public disclosure made by or
on behalf of the Company whatsoever with respect to, in any manner, the
Investor, its purchases hereunder or any aspect of this Agreement or the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Investor, to make any press release
or other public disclosure (including any filings with the SEC) with respect to
such transactions as is required by applicable law and regulations so long as
the Company and its counsel consult with the Investor in connection with any
such press release or other public disclosure at least two (2) Business Days
prior to its release.  The Investor must be provided with a copy thereof at
least two (2) Business Days prior to any release or use by the Company
thereof.  The Company agrees and acknowledges that its failure to fully comply
with this provision constitutes a material adverse effect on its ability to
perform its obligations under this Agreement.

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

(k)         No Financial Advisor, Placement Agent, Broker or Finder.    The
Company represents and warrants to the Investor that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby.    The Company shall be responsible for the
payment of any fees or commissions, if any, of any financial advisor, placement
agent, broker or finder relating to or arising out of the transactions
contemplated hereby.  The Company shall pay, and hold the Investor harmless
against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.

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

(m)         Remedies, Other Obligations, Breaches and Injunctive
Relief.  The  remedies provided in this Agreement shall be cumulative and in
addition to all other remedies available to the parties under this Agreement, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit either party’s right to pursue actual damages for any failure by the
other party to comply with the terms of this Agreement.  Each party acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the other party and that the remedy at law for any such breach may be
inadequate.  Each party therefore agrees that, in the event of any such breach
or threatened breach, the other party shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

(n)         Enforcement Costs.  If: (i) this Agreement is placed by either party
in the hands of an attorney for enforcement or is enforced  through any legal
proceeding; or (ii) an attorney is retained to represent the Investor in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent either party in any other proceedings
whatsoever in connection with this Agreement, then the unsuccessful party shall
pay to the prevailing party, all reasonable costs and expenses including
attorneys' fees incurred in connection therewith, in addition to all other
amounts due hereunder.

(o)         Failure or Indulgence Not Waiver.  No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

*     *     *     *     *

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

 
THE COMPANY:
     
BACTERIN INTERNATIONAL HOLDINGS, INC.
       
By:
/s/ Guy S. Cook
 
Name:  Guy S. Cook
 
Title:  CEO
       
INVESTOR:
       
LINCOLN PARK CAPITAL FUND, LLC
 
BY: LINCOLN PARK CAPITAL, LLC
 
BY: ROCKLEDGE CAPITAL CORPORATION
       
By:
/s/ Josh Scheinfeld
 
Name: Josh Scheinfeld
 
Title: President

 
 
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SCHEDULES

Schedule 4(a) 
Subsidiaries

Schedule 4(c) 
Capitalization

Schedule 4(e) 
Conflicts

Schedule 4(f) 
Exchange Act Filings

Schedule 4(g) 
Material Changes

Schedule 4(h) 
Litigation

Schedule 4(k) 
Intellectual Property

EXHIBITS

Exhibit A
Form of Company Counsel Opinion

Exhibit B
Form of Officer’s Certificate

Exhibit C
Form of Resolutions of Board of Directors of the Company

Exhibit D
Form of Secretary’s Certificate

Exhibit E
Form of Letter to Transfer Agent

Exhibit F
Form of Warrant

 
 

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SCHEDULE 4(a)

SUBSIDIARIES

Bacterin International, Inc., a Nevada corporation
     

 
 

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SCHEDULE 4(c)

CAPITALIZATION

Common Stock, par value $0.000001
 
Issued and Outstanding
    38,934,258            
Options Issued
    5,599,993            
Options Unissued/Available
    400,007            
Warrants
    7,361,249            
Total  (fully diluted)
    52,295,507  

 
We are contractually obligated to issue shares of our common stock to Harborview
Advisors, LLC as follows
 
 
·
if, after 13 months from the closing of the Reverse Merger and the private
placement, our common stock is publicly trading at an average daily closing
price of $3.20 per share for the 30 days immediately preceding the last day of
such thirteen month period, we must issue to such stockholder 187,500 additional
shares of our common stock; and

 
 
·
if, after 13 months from the closing of the Reverse Merger and the private
placement, our common stock is publicly trading at an average daily closing
price of $4.80 per share for the 30 days immediately preceding the last day of
such thirteen month period, we must issue to such stockholder 187,500 additional
shares of our common stock (which shares, for the sake of clarification, shall
be in addition to the shares to be issued pursuant to the second bullet point
above).

 
The 1,570,565 warrants issued in connection with the bridge financings and the
375,000 warrants issued in connection with the WTI financing were accounted for
as derivative liabilities in connection with the price protection provisions of
the warrants in compliance with ASC 815. The lattice model accommodates the
probability of exercise price adjustment features as outlined in the warrant
agreements. Under the terms of the warrant agreement, at any time while the
warrant is outstanding, the exercise price per share can be reduced to the price
per share of future subsequent equity sales of the Company’s common stock or
common stock equivalents that is lower than the exercise price per share as
stated in the warrant agreement.
 
 
 

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SCHEDULE 4(e)
 
CONFLICTS
 
 
 

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SCHEDULE 4(f)
 
EXCHANGE ACT FILINGS
 
 
 

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SCHEDULE 4(g)
 
MATERIAL CHANGES
 
 
 

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SCHEDULE 4(h)

LITIGATION

In November 2009, we were served a complaint in connection with the following
court action filed in Utah state court:  Yanaki and Activatek v. Cook and
Bacterin International, Inc., case number 090912772.  This action involves the
plaintiff’s attempt to sell shares of our common stock to a third party in a
private sale and claims, as its primary allegation, tortuous interference with
the sales contract. Plaintiff seeks $300,000, 358,904 shares of our common
stock, attorneys fees and costs.  Discovery is proceeding and a mediation has
been scheduled for May 2011. 

We have been served a complaint in connection with Civil Action No.
8:10-cv-01589-VMC-EAJ filed by minSURG International, Inc., or minSURG, in the
United States District Court in the Middle District of Florida.  In this action,
minSURG alleges infringement of U.S. Patent No. 7,708,761, entitled “Spinal Plug
for a Minimally Invasive Facet Joint Fusion System” by many companies in our
industry.  minSURG seeks an injunction against alleged patent infringement plus
unspecified commercial monetary damages. We have entered into a joint defense
agreement with many of the other defendants in this action and plan a vigorous
defense.  Regardless of the outcome of this case, we do not anticipate this
notice to have a material impact on our overall sales or operating
results.  Plaintiff’s request for a preliminary injunction was denied and a
Markman hearing has been scheduled by the Court.

 
 

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SCHEDULE 4(k)

INTELLECTUAL PROPERTY
 
We recently received a cease and desist letter in connection with ICU Medical’s
patent litigation with RyMed regarding RyMed’s InVision-Plus connector.  Since
we only coat one of the components provided by RyMed, and do not manufacture,
produce or supply any of the components, we think ICU’s claims should be limited
to RyMed and do not expect to become involved in the litigation process.

 
 

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EXHIBIT A

FORM OF COMPANY COUNSEL OPINION

Capitalized terms used herein but not defined herein, have the meaning set forth
in the Purchase Agreement.  Based on the foregoing, and subject to the
assumptions and qualifications set forth herein, we are of the opinion that:

1.      The Company is a corporation existing and in good standing under the
laws of the State of Delaware.
 
2.      The Company has the corporate power to execute and deliver, and perform
its obligations under, each Transaction Document to which it is a party.  The
Company has the corporate power to conduct its business as, to the best of our
knowledge, it is now conducted, and to own and use the properties owned and used
by it.
 
3.      The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Company.  The execution and
delivery of the Transaction Documents by the Company, the performance of the
obligations of the Company thereunder and the consummation by it of the
transactions contemplated therein have been duly authorized and approved by the
Company's Board of Directors and no further consent, approval or authorization
of the Company, its Board of Directors or its stockholders is required.  The
Transaction Documents to which the Company is a party have been duly executed
and delivered by the Company and are the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting creditor’s rights and remedies or other
reasonable exceptions to be set forth in such opinion.
 
4.      The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby including the offering, sale and issuance of the Commitment
Shares, and the Purchase Shares in accordance with the terms and conditions of
the Purchase Agreement, and fulfillment and compliance with terms of the
Transaction Documents, does not and shall not: (i) conflict with, constitute a
breach of or default (or an event which, with the giving of notice or lapse of
time or both, constitutes or could constitute a breach or a default), under (a)
the Certificate of Incorporation or the Bylaws of the Company, (b) any material
agreement, note, lease, mortgage, deed or other material instrument to which to
our knowledge the Company is a party or by which the Company or any of its
assets are bound, (ii) result in any violation of any statute, law, rule or
regulation applicable to the Company, or (iii) to our knowledge, violate any
order, writ, injunction or decree applicable to the Company or any of its
subsidiaries.
 
 
 

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5.      The issuance of the Purchase Shares, and Commitment Shares pursuant to
the terms and conditions of the Transaction Documents has been duly authorized
and the Initial Commitment Shares are validly issued, fully paid and
non-assessable, to our knowledge, free of all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights. ____ shares of
Common Stock have been properly reserved for issuance under the Purchase
Agreement.  When issued and paid for in accordance with the Purchase Agreement,
the Purchase Shares shall be validly issued, fully paid and non-assessable, to
our knowledge, free of all taxes, liens, charges, restrictions, rights of first
refusal and preemptive rights. When issued and paid for in accordance with the
Warrant, the Warrant Shares shall be validly issued, fully paid and
non-assessable, to our knowledge, free of all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights.  164,675 shares of
Common Stock have been properly reserved for issuance as Additional Commitment
Shares under the Purchase Agreement.  When issued in accordance with the
Purchase Agreement, the Additional Commitment Shares shall be validly issued,
fully paid and non-assessable, to our knowledge, free of all taxes, liens,
charges, restrictions, rights of first refusal and preemptive rights. To our
knowledge, the execution and delivery of the Registration Rights Agreement do
not, and the performance by the Company of its obligations thereunder shall not,
give rise to any rights of any other person for the registration under
the  Securities Act of any shares of Common Stock or other securities of the
Company which have not been waived.
 
6.      As of the date hereof, the authorized capital stock of the Company
consists of 95,000,000 shares of common stock, $.000001 value, of which to our
knowledge __________ shares are issued and outstanding, and 5,000,000 shares of
preferred stock, none of which are issued and outstanding.  Except as set forth
on Schedule 4(c) of the Purchase Agreement, to our knowledge, there are no
outstanding shares of capital stock or other securities convertible into or
exchangeable or exercisable for shares of the capital stock of the Company.
 
7.      Assuming the accuracy of the representations and your compliance with
the covenants made by you in the Transaction Documents, the offering, sale and
issuance of the Initial Commitment Shares to you pursuant to the Transaction
Documents is exempt from registration under the Securities Act.
 
8.      Other than that which has been obtained and completed prior to the date
hereof, no authorization, approval, consent, filing or other order of any
federal or state governmental body, regulatory agency, or stock exchange or
market, or any court, or, to our knowledge, any third party is required to be
obtained by the Company to enter into and perform its obligations under the
Transaction Documents or for the Company to issue and sell the Purchase Shares
as contemplated by the Transaction Documents.
 
9.  The Common Stock is registered pursuant to Section 12(b) of the
Exchange  Act.  To our knowledge, since one year preceding the date of the
Purchase Agreement, the Company has been in compliance with the reporting
requirements of the Exchange Act applicable to it.  To our knowledge, and except
as stated in Schedule 4(f), since one year preceding the date of the Purchase
Agreement, the Company has not received any written notice from the Principal
Market stating that the Company has not been in compliance with any of the rules
and regulations (including the requirements for continued listing) of the
Principal Market.
 
We further advise you that to our knowledge, except as disclosed on Schedule
4(h) in the Purchase Agreement, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body, any governmental
agency, any stock exchange or market, or self-regulatory organization, which has
been threatened in writing or which is currently pending against the Company,
any of its subsidiaries, any officers or directors of the Company or any of its
subsidiaries or any of the properties of the Company or any of its subsidiaries
which could have a material adverse effect on the Company.
 
 
 

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In addition, we have participated in the preparation of the Registration
Statement (SEC File #________) covering the sale of the Purchase Shares and the
Commitment Shares including the prospectus dated ____________, contained therein
and in conferences with officers and other representatives of the Company during
which the contents of the Registration Statement and related matters were
discussed and reviewed and, although we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement, on the basis of the information that
was developed in the course of the performance of the services referred to
above, considered in the light of our understanding of the applicable law,
nothing came to our attention that caused us to believe that the Registration
Statement (other than the financial statements and schedules and the other
financial and statistical data included therein, as to which we express no
belief), as of their dates, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
 
 
 

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EXHIBIT B

FORM OF OFFICER’S CERTIFICATE
 
This Officer’s Certificate (“Certificate”) is being delivered pursuant to
Section 8(e) of that certain Purchase Agreement dated as of _________,
(“Purchase Agreement”), by and between BACTERIN INTERNATIONAL HOLDINGS, INC., a
Delaware corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”).  Terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement.

The undersigned, ___________, ______________ of the Company, hereby certifies as
follows:

1.           I am the _____________ of the Company and make the statements
contained in this Certificate;

2.           The representations and warranties of the Company are true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
4 of the Purchase Agreement, in which case, such representations and warranties
are true and correct without further qualification) as of the date when made and
as of the Commencement Date as though made at that time (except for
representations and warranties that speak as of a specific date);

3.           The Company has performed, satisfied and complied in all material
respects with covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Commencement Date.

4.           The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any Bankruptcy Law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy or insolvency
proceedings. The Company is financially solvent and is generally able to pay its
debts as they become due.

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
___________.

 
 
   
Name:
   
Title:
 

The undersigned as Secretary of BACTERIN INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, hereby certifies that ___________ is the duly elected,
appointed, qualified and acting ________ of _________ and that the signature
appearing above is his genuine signature.

 
 
   
Secretary
 

 
 

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EXHIBIT C

FORM OF COMPANY RESOLUTIONS
FOR SIGNING PURCHASE AGREEMENT

WHEREAS, there has been presented to the Board of Directors of the Corporation a
draft of the Purchase Agreement (the “Purchase Agreement”) by and between the
Corporation and Lincoln Park Capital Fund, LLC (“Lincoln Park”), providing for
the purchase by Lincoln Park of up to Thirty One Million Dollars ($31,000,000)
of the Corporation’s common stock, $.000001 par value per share (the “Common
Stock”); and

WHEREAS, after consideration and review of the Purchase Agreement, the documents
attached thereto and other factors deemed relevant by the Board of Directors,
the Board of Directors has determined that it is advisable and in the best
interests of the Corporation to engage in the transactions contemplated by the
Purchase Agreement, including, but not limited to, the sale initially of
$1,000,000 of Common Stock and the issuance of 128,506 shares of Common Stock to
Lincoln Park as an initial commitment fee (the “Initial Commitment Shares”) and
the sale of up to an additional $30,000,000 worth of shares of Common Stock to
Lincoln Park (the "Purchase Shares").

Transaction Documents
 
NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and each of __________ (the “Authorized Officers”)
are severally authorized to execute and deliver the Purchase Agreement on behalf
of the Company, and any other agreements or documents contemplated thereby
including, without limitation, a registration rights agreement (the
“Registration Rights Agreement”) providing for the registration of the shares of
the Company’s Common Stock issuable in respect of the Purchase Agreement on
behalf of the Corporation, with such amendments, changes, additions and
deletions as the Authorized Officers may deem to be appropriate and approve on
behalf of, the Corporation, such approval to be conclusively evidenced by the
signature of an Authorized Officer thereon; and
 
FURTHER RESOLVED, that the terms and provisions of the Registration Rights
Agreement by and among the Corporation and Lincoln Park, a draft of which has
been provided to the Board, are hereby approved and the Authorized Officers are
authorized to execute and deliver the Registration Rights Agreement on behalf of
the Company, with such amendments, changes, additions and deletions as the
Authorized Officer may deem appropriate and approve on behalf of, the
Corporation, such approval to be conclusively evidenced by the signature of an
Authorized Officer thereon; and
 
FURTHER RESOLVED, that the terms and provisions of the Form of Irrevocable
Transfer Agent Instructions (the “Instructions”), a draft of which has been
provided to the Board, are hereby approved and the Authorized Officers are
authorized to execute and deliver the Instructions on behalf of the Company,
with such amendments, changes, additions and deletions as the Authorized
Officers may deem appropriate and approve on behalf of, the Corporation, such
approval to be conclusively evidenced by the signature of an Authorized Officer
thereon; and
 

 
 

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Issuance of Common Stock
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue to Lincoln
Park 128,506 shares of Common Stock as Initial Commitment Shares pursuant to the
Purchase Agreement, and the Initial Commitment Shares shall be duly authorized,
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof; and
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue to Lincoln
Park up to ____ shares of Common Stock as the Purchase Shares, including the
issuance and sale of the Initial Purchase Shares on or after the Commencement
Date in accordance with the terms of the Purchase Agreement and that, upon
issuance of the Purchase Shares pursuant to the Purchase Agreement, the Purchase
Shares will be duly authorized, validly issued, fully paid and nonassessable
with no personal liability attaching to the ownership thereof; and
 
FURTHER RESOLVED, that the Corporation shall initially reserve ______ shares of
Common Stock for issuance as Purchase Shares under the Purchase Agreement; and
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue to Lincoln
Park the Warrants on or after the Commencement Date in accordance with the terms
of the Purchase Agreement and that, upon issuance of the Warrants Shares
pursuant to the Warrants, the Warrants Shares will be duly authorized, validly
issued, fully paid and nonassessable with no personal liability attaching to the
ownership thereof; and
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue 164,675
shares of Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
in connection with the purchase of Purchase Shares (the “Additional Commitment
Shares”) in accordance with the terms of the Purchase Agreement and that, upon
issuance of the Additional Commitment Shares pursuant to the Purchase Agreement,
the Additional Commitment Shares will be duly authorized, validly issued, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof; and
 
FURTHER RESOLVED, that the Corporation shall initially reserve 164,675 shares of
Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
for issuance as Additional Commitment Shares under the Purchase Agreement; and
 
Approval of Actions
 
FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation and to take all such steps as deemed necessary or appropriate,
with the advice and assistance of counsel, to cause the Corporation to
consummate the agreements referred to herein and to perform its obligations
under such agreements; and
 
FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.

 
 

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EXHIBIT D

FORM OF SECRETARY’S CERTIFICATE

This Secretary’s Certificate (“Certificate”) is being delivered pursuant to
Section 7(k) of that certain Purchase Agreement dated as of __________,
(“Purchase Agreement”), by and between BACTERIN INTERNATIONAL HOLDINGS, INC., a
Delaware corporation (the “Company”) and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”), pursuant to which the Company may sell to the Investor up to Thirty
One Million Dollars ($31,000,000) of the Company's Common Stock, $.000001 par
value per share (the "Common Stock").  Terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement.

The undersigned, ____________, Secretary of the Company, hereby certifies as
follows:

1.      I am the Secretary of the Company and make the statements contained in
this Secretary’s Certificate.

2.      Attached hereto as Exhibit A and Exhibit B are true, correct and
complete copies of the Company’s bylaws (“Bylaws”) and Certificate of
Incorporation (“Articles”), in each case, as amended through the date hereof,
and no action has been taken by the Company, its directors, officers or
shareholders, in contemplation of the filing of any further amendment relating
to or affecting the Bylaws or Articles.

3.      Attached hereto as Exhibit C are true, correct and complete copies of
the resolutions duly adopted by the Board of Directors of the Company on
_____________, at which a quorum was present and acting throughout.  Such
resolutions have not been amended, modified or rescinded and remain in full
force and effect and such resolutions are the only resolutions adopted by the
Company’s Board of Directors, or any committee thereof, or the shareholders of
the Company relating to or affecting (i) the entering into and performance of
the Purchase Agreement, or the issuance, offering and sale of the Purchase
Shares and the Commitment Shares and (ii) and the performance of the Company of
its obligation under the Transaction Documents as contemplated therein.

4.           As of the date hereof, the authorized, issued and reserved capital
stock of the Company is as set forth on Exhibit D hereto.

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
____________.

 
   
   
Secretary
 

The undersigned as ___________ of BACTERIN INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, hereby certifies that ____________ is the duly elected,
appointed, qualified and acting Secretary of _________, and that the signature
appearing above is his genuine signature.

 
   
 

 
 

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EXHIBIT E

FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE INITIAL PURCHASE
AND INITIAL COMMITMENT SHARES AT SIGNING OF THE PURCHASE AGREEMENT

[COMPANY LETTERHEAD]

[DATE]
     
[TRANSFER AGENT]
 
__________________
 
__________________
 
__________________
 

Re: Issuance of Common Shares to Lincoln Park Capital Fund, LLC

Dear ________,

On behalf of BACTERIN INTERNATIONAL HOLDINGS, INC., (the “Company”), you are
hereby instructed to issue as soon as possible (i) ___,___ shares of our common
stock as Initial Purchase Shares and (ii) 128,506 shares of our common stock as
Initial Commitment Shares, for an aggregate issuance of ________ shares, in the
name of Lincoln Park Capital Fund, LLC.  The share certificate should be dated
[DATE OF THE PURCHASE AGREEMENT].  I have included a true and correct copy of
the resolutions adopted by the Board of Directors of the Company adopting
resolutions approving the issuance of these shares.  The shares should be issued
subject to the following restrictive legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.

 
 

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The share certificate should be sent as soon as possible via overnight mail to
the following address:

Lincoln Park Capital Fund, LLC
440 North Wells, Suite 620
Chicago, IL 60654
Attention: Josh Scheinfeld/Jonathan Cope

The shareholder’s tax identification  number is __________________.

Thank you very much for your help.  Please call me at ______________ if you have
any questions or need anything further.

BACTERIN INTERNATIONAL HOLDINGS, INC.

BY:
 
   
[name]
   
[title]
 

 
 
 

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EXHIBIT F

FORM OF WARRANT
 
 
 

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