Exhibit 10.26
 
SECURITIES PURCHASE AGREEMENT
 
     This Securities Purchase Agreement (this “Agreement”) is dated as of
August 7, 2007, between Oculus Innovative Sciences, Inc., a Delaware corporation
(the “Company”), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and collectively the
“Purchasers”).
 
     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
 
     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
 
ARTICLE I.
DEFINITIONS
 
     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
 
     “Action” shall have the meaning ascribed to such term in Section 3.1(j).
 
     “Affiliate” means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 405 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
     “Board of Directors” means the board of directors of the Company.
 
     “Business Day” means any day except any Saturday, any Sunday, any day which
is a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
     “Closing” means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.
 
     “Closing Date” means the Trading Day when all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.
 
     “Commission” means the Securities and Exchange Commission.
 
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     “Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.
 
     “Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
 
     “Company Counsel” means Pillsbury Winthrop Shaw Pittman LLP, with offices
located at 2475 Hannover, Palo Alto, California 94304.
 
     “Disclosure Schedules” means the Disclosure Schedules of the Company
delivered concurrently herewith.
 
     “Effective Date” means the date that the initial Registration Statement
filed by the Company pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
 
     “Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).
 
     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
 
     “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose at a price at least equal to
the market price at the time of the grant or issuance, (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, exchange or
conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives 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.
 
     “FWS” means Feldman Weinstein & Smith LLP with offices located at 420
Lexington Avenue, Suite 2620, New York, New York 10170-0002.
 
     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
 
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     “Indebtedness” shall have the meaning ascribed to such term in
Section 3.1(aa).
 
     “Intellectual Property Rights” shall have the meaning ascribed to such term
in Section 3.1(o).
 
     “Legend Removal Date” shall have the meaning ascribed to such term in
Section 4.1(c).
 
     “Liens” means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
 
     “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).
 
     “Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).
 
     “Participation Maximum” shall have the meaning ascribed to such term in
Section 4.12.
 
     “Per Share Purchase Price” equals $8.00, subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.
 
     “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
 
     “Placement Agent” means Rodman & Renshaw, LLC.
 
     “Pre-Notice” shall have the meaning ascribed to such term in Section 4.12.
 
     “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
 
     “Purchaser Party” shall have the meaning ascribed to such term in
Section 4.8.
 
     “Registration Rights Agreement” means the Registration Rights Agreement,
dated the date hereof, among the Company and the Purchasers, in the form
of Exhibit A attached hereto.
 
     “Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares and the Warrant Shares.
 
     “Required Approvals” shall have the meaning ascribed to such term in
Section 3.1(e).
 
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     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
     “SEC Reports” shall have the meaning ascribed to such term in
Section 3.1(h).
 
     “Securities” means the Shares, the Warrants and the Warrant Shares.
 
     “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
 
     “Shareholder Approval” means such approval as may be required by the
applicable rules and regulations of the Nasdaq Stock Market (or any successor
entity) from the shareholders of the Company with respect to the transactions
contemplated by the Transaction Documents, including the issuance of all of the
Shares and Warrants Shares in excess of 19.99% of the issued and outstanding
Common Stock on the Closing Date.
 
     “Shares” means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
 
     “Short Sales” means all “short sales” as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
 
     “Subscription Amount” means, as to each Purchaser, the aggregate amount to
be paid for Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.
 
     “Subsequent Financing” shall have the meaning ascribed to such term in
Section 4.12.
 
     “Subsequent Financing Notice” shall have the meaning ascribed to such term
in Section 4.12.
 
     “Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a), and shall, where applicable, include any subsidiary of the Company
formed or acquired after the date hereof.
 
     “Trading Day” means a day on which the New York Stock Exchange is open for
trading.
 
     “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
 
     “Transaction Documents” means this Agreement, the Warrants, the
Registration Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
 
     “Transfer Agent” means Mellon Investor Services, LLC the current transfer
agent of the Company, with a mailing address of 525 Market Street, Suite 3500,
San Francisco, CA 94105 and a facsimile number of 415-951-4181, and any
successor transfer agent of the Company.
 
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     “VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time); (b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Shares then outstanding and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the Company.
 
     “Warrants” means, collectively, the Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable 181 days after the Closing Date and
have a term of exercise equal to 5 years, in the form of Exhibit C attached
hereto.
 
     “Warrant Shares” means the shares of Common Stock issuable upon exercise of
the Warrants.
 
ARTICLE II.
PURCHASE AND SALE
 
     2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchasers, severally and not jointly, agree to purchase, up to an
aggregate of $20,000,000 of Shares and Warrants. Each Purchaser shall deliver to
the Company, via wire transfer, immediately available funds equal to its
Subscription Amount and the Company shall deliver to each Purchaser its
respective Shares and a Warrant as determined pursuant to Section 2.2(a), and
the Company and each Purchaser shall deliver, or cause to be delivered, the
other items set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of FWS or such other location as the
parties shall mutually agree.
 
     2.2 Deliveries.
 
     (a) On or prior to the Closing Date, the Company shall deliver or cause to
be delivered to each Purchaser the following:
 
     (i) this Agreement duly executed by the Company;
 
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     (ii) a legal opinion of Company Counsel, substantially in the form
of Exhibit B attached hereto;
 
     (iii) a copy of the irrevocable instructions to the Transfer Agent
instructing the Transfer Agent to deliver, on an expedited basis, a certificate
evidencing a number of Shares equal to such Purchaser’s Subscription Amount
divided by the Per Share Purchase Price, registered in the name of such
Purchaser;
 
     (iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 33% of the number of shares of Common
Stock purchased by such Purchaser, with an exercise price equal to $9.50,
subject to adjustment therein; and
 
     (v) the Registration Rights Agreement duly executed by the Company.
 
     (b) On or prior to the Closing Date, each Purchaser shall deliver or cause
to be delivered to the Company the following:
 
     (i) this Agreement duly executed by such Purchaser;
 
     (ii) such Purchaser’s Subscription Amount by wire transfer to the account
as specified in writing by the Company;
 
     (iii) the Registration Rights Agreement duly executed by such Purchaser;
and
 
     (iv) a certificate of the Placement Agent to the Company, substantially in
the form of Exhibit D hereto.
 
     2.3 Closing Conditions.
 
     (a) The obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:
 
     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;
 
     (ii) all obligations, covenants and agreements of each Purchaser required
to be performed at or prior to the Closing Date shall have been performed; and
 
     (iii) the delivery by each Purchaser of the items set forth in
Section 2.2(b) of this Agreement.
 
     (b) The respective obligations of the Purchasers hereunder in connection
with the Closing are subject to the following conditions being met:
 
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     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
 
     (ii) all obligations, covenants and agreements of the Company required to
be performed at or prior to the Closing Date shall have been performed;
 
     (iii) the delivery by the Company of the items set forth in Section 2.2(a)
of this Agreement;
 
     (iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
 
     (v) from the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the Company’s principal
Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in the
reasonable judgment of [each Purchaser, makes it [impracticable or inadvisable]
to purchase the Securities at the Closing.
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
     3.1 Representations and Warranties of the Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:
 
     (a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities. If the Company has no subsidiaries, then all other
references to the Subsidiaries or any of them in the Transaction Documents shall
be disregarded.
 
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     (b) Organization and Qualification. The Company and each of the
Subsidiaries 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 (as applicable), 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
or default of any of the provisions of its respective certificate or certificate
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.
 
     (c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
     (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
hereby and thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or certificate of
incorporation, bylaws or other organizational or charter documents, or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
 
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     (e) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) application(s) to each
applicable Trading Market for the listing of the Securities for trading thereon
in the time and manner required thereby, and (iv) the filing of Form D with the
Commission and such filings as are required to be made under applicable state
securities laws (“Required Approvals”).
 
     (f) Issuance of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants.
 
     (g) Capitalization. The capitalization of the Company is as set forth
on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees pursuant to
the Company’s employee stock purchase plans and pursuant to the conversion or
exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person has any right
of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities, there are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders.
 
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     (h) SEC Reports; Financial Statements. 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 Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, 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 Reports
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.
 
     (i) Material Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC Report filed
prior to the date hereof, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans or securities outstanding as of the date hereof. The Company does
not have pending before the Commission any request for confidential treatment of
information. Except for the issuance of the Securities contemplated by this
Agreement or as set forth on Schedule 3.1(i), no event, liability or development
has occurred or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this representation is
made.
 
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     (j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
 
     (k) Labor Relations. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company or such Subsidiary, and
neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does not subject the
Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
 
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     (l) Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except
in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.
 
     (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
 
     (n) Title to Assets. Except as set forth on Schedule 3.1(n), 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, 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, facilities and tangible property 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.
 
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     (o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property Rights”). Neither the Company
nor any Subsidiary has received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person except as described onSchedule 3.1(o).
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
 
     (p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Subscription Amount.
Neither the Company nor any 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 without a significant increase in cost.
 
     (q) Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, 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 $60,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company, (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company, and (iv) as
set forth in the SEC Reports.
 
     (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as
such term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
 
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     (s) Certain Fees. Except as set forth on Schedule 3.1(s), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by the Transaction Documents.
 
     (t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, and the accuracy of the
statements set forth in the certificate of the Placement Agent referenced in
Section 2.2(b), no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.
 
     (u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act of 1940,
as amended.
 
     (v) Registration Rights. Except as set forth on Schedule3.1(v), other than
each of the Purchasers, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.
 
     (w) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the
12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
 
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     (x) Application of Takeover Protections. The Company and the Board of
Directors have taken 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 Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s
issuance of the Securities and the Purchasers’ ownership of the Securities.
 
     (y) 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 any of
the Purchasers or their agents or counsel with any information that it believes
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the Company. All
disclosure furnished by or on behalf of the Company to the Purchasers 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 no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.
 
     (z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, and the accuracy of the
statements set forth in the certificate of the Placement Agent referenced
in Section 2.2(b), neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of (i) the
Securities Act which would require the registration of any such securities under
the Securities Act, or (ii) any applicable shareholder approval provisions of
any Trading Market on which any of the securities of the Company are listed or
designated.
 
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     (aa) Solvency. Based on the consolidated financial condition of the Company
as of the Closing Date, after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the fair saleable value
of the Company’s assets exceeds the amount that will be required to be paid on
or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof, and
(iii) the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its liabilities when such amounts are required to be paid.
The Company does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. Schedule 3.1(aa) sets forth as of the
date thereof all outstanding secured and unsecured Indebtedness of the Company
or any Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, “Indebtedness” means (a) any liabilities for
borrowed money or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance with
GAAP. Neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.
 
     (bb) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
 
     (cc) No General Solicitation. Assuming the accuracy of the statements set
forth in the certificate of the Placement Agent referenced in Section 2.2(b),
neither the Company nor any person acting on behalf of the Company has offered
or sold any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers and certain other “accredited investors” within the meaning of
Rule 501 under the Securities Act.
 
     (dd) 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.
 
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     (ee) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(ee) of the Disclosure Schedule. To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report on Form 10-K
for the year ending March 31, 2008.
 
     (ff) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents, the
Company is current with respect to any fees owed to its accountants and lawyers.
 
     (gg) Acknowledgment Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is 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 thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities. The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
 
     (hh) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the
Company (i) that none of the Purchasers have been asked by the Company to agree,
nor has any Purchaser agreed, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term;
(ii) that past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and
(iv) that each Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction. The
Company further understands and acknowledges that (a) one or more Purchasers may
engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Warrant Shares deliverable with respect to Securities are
being determined and (b) such hedging activities (if any) could reduce the value
of the existing stockholders’ equity interests in the Company at and after the
time that the hedging activities are being conducted. The Company acknowledges
that such aforementioned hedging activities do not constitute a breach of any of
the Transaction Documents.
 
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     (ii) Regulation M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.
 
     (jj) FDA. As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act,
as amended, and the regulations thereunder (“FDCA”) that is manufactured,
packaged, labeled, tested, distributed, sold, and/or marketed by the Company or
any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such
Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect. Except as set forth
on Schedule 3.1(jj), there is no pending, completed or, to the Company’s
knowledge, threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or investigation)
against the Company or any of its Subsidiaries, and none of the Company or any
of its Subsidiaries has received any notice, warning letter or other
communication from the FDA or any other governmental entity, which (i) contests
the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the sale
of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws
its approval of, requests the recall, suspension, or seizure of, or withdraws or
orders the withdrawal of advertising or sales promotional materials relating to,
any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse Effect.
The properties, business and operations of the Company have been and are being
conducted in all material respects in accordance with all applicable laws, rules
and regulations of the FDA. The Company has not been informed by the FDA that
the FDA will prohibit the marketing, sale, license or use in the United States
of any product proposed to be developed, produced or marketed by the Company nor
has the FDA expressed any concern as to approving or clearing for marketing any
product being developed or proposed to be developed by the Company.
 
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     3.2 Representations and Warranties of the Purchasers. Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:
 
     (a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
 
     (b) Own Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the 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
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.
 
     (c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants, it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
 
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     (d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
 
     (e) General Solicitation. Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
 
     (f) Short Sales and Confidentiality Prior To The Date Hereof. Other than
consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received notice of the
identity of the Company as the issuer in the transaction from the Company or any
other Person representing the Company contemplated hereunder until the date
hereof (“Discussion Time”). Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).
 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
     4.1 Transfer Restrictions.
 
     (a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
 
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     (b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:
 
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 
     The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are subject
to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
 
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     (c) Certificates evidencing the Shares and Warrant Shares shall not contain
any legend (including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Shares or Warrant Shares pursuant to Rule 144, or (iii) if such
Shares or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue a legal opinion to
the Transfer Agent promptly after the Effective Date if required by the Transfer
Agent to effect the removal of the legend hereunder. If all or any portion of a
Warrant is exercised at a time when there is an effective registration statement
to cover the resale of the Warrant Shares, such Warrant Shares shall be issued
free of all legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three (3) Trading Days following the delivery by a Purchaser
to the Company or the Transfer Agent of a certificate representing Shares or
Warrant Shares, as the case may be, issued with a restrictive legend (such third
Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to
such Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section. Certificates for Securities subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.
 
     (d) In addition to such Purchaser’s other available remedies, the Company
shall pay to a Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Shares or Warrant Shares (based on the VWAP of the
Common Stock on the date such Securities are submitted to the Transfer Agent)
delivered for removal of the restrictive legend and subject to Section 4.1(c),
$10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days
after such damages have begun to accrue) for each Trading Day commencing on the
third Trading Day after the Legend Removal Date until such certificate is
delivered without a legend. In addition to any other rights available to the
Purchaser, if the Company fails to cause its transfer agent to transmit to the
Purchaser an unlegended certificate or certificates representing the Shares or
Warrant Shares, as applicable, on or before the Legend Removal Date, and if
after such date the Purchaser is required by its broker to purchase (in an open
market transaction or otherwise) or the Purchaser’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the
Purchaser of the Shares or Warrant Shares which the Purchaser anticipated
receiving (a “Buy-In”), then the Company shall pay in cash to the Purchaser the
amount by which (x) the Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Shares or Warrant Shares that
the Company was required to deliver to the Purchaser times (B) the price at
which the sell order giving rise to such purchase obligation was executed. For
example, if the Purchaser purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted sale of shares of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, the Company shall be required to pay the Purchaser
$1,000. The Purchaser shall provide the Company written notice indicating the
amounts payable to the Purchaser in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. Nothing herein shall limit
such Purchaser’s right to pursue actual damages for the Company’s failure to
deliver certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
 
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     (e) Each Purchaser, severally and not jointly with the other Purchasers,
agrees that such Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.
 
     4.2 Furnishing of Information. Until the earliest of the time that (i) no
Purchaser owns Securities or (ii) the Warrants have expired, the Company
covenants to use reasonable efforts to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the Purchasers
to sell the Securities under Rule 144. The Company further covenants that it
will take such further action as any holder of Securities may reasonably
request, to the extent required from time to time to enable such Person to sell
such Securities without registration under the Securities Act within the
requirements of the exemption provided by Rule 144.
 
     4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities to the Purchasers for
purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.
 
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     4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
(New York City time) on the Trading Day immediately following the date hereof,
issue a Current Report on Form 8-K, disclosing the material terms of the
transactions contemplated hereby, and filing the Transaction Documents as
exhibits thereto. The Company and each Purchaser shall consult with each other
in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or delayed,
except if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except (i) as
required by federal securities law in connection with (A) any registration
statement contemplated by the Registration Rights Agreement and (B) the filing
of final Transaction Documents (including signature pages thereto) with the
Commission and (ii) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure permitted under this clause (ii).
 
     4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
 
     4.6 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that it will not provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company.
 
     4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for (a) the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.
 
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     4.8 Indemnification of Purchasers. Subject to the provisions of this
Section 4.8, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents.
 
     4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.
 
     4.10 Listing of Common Stock.(a) The Company hereby agrees to maintain the
listing of the Common Stock on a Trading Market, and as soon as reasonably
practicable following the Closing (but not later than the earlier of the
Effective Date and the first anniversary of the Closing Date) to list all of the
Shares and Warrant Shares on such Trading Market. The Company further agrees, if
the Company applies to have the Common Stock traded on any other Trading Market,
it will include in such application all of the Shares and Warrant Shares, and
will take such other action as is necessary to cause all of the Shares and
Warrant Shares to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
 
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     4.11 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended for the Company to treat the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise. The
provisions of this section 4.11 notwithstanding, nothing in this agreement shall
prohibit the Company from negotiating and entering into separate settlements
with any Purchaser in the event of litigation arising out of the transactions
contemplated by the Transaction Documents without triggering the obligation to
make a similar payment to any other Purchaser.
 
     4.12 Participation in Future Financing.
 
     (a) From the date hereof until the date that is the 24 month anniversary of
the Effective Date, upon any issuance by the Company or any of its Subsidiaries
of Common Stock or Common Stock Equivalents for cash consideration (a
“Subsequent Financing”), each Purchaser shall have the right to participate in
the Subsequent Financing up to an amount equal to 25% of the Subsequent
Financing (the “Participation Maximum”) on the same terms, conditions and price
provided for in the Subsequent Financing.
 
     (b) At least 5 Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written notice of its
intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice
shall ask such Purchaser if it wants to review the details of such financing
(such additional notice, a “Subsequent Financing Notice”). Upon the request of a
Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing
Notice, the Company shall promptly, but no later than 1 Trading Day after such
request, deliver a Subsequent Financing Notice to such Purchaser. The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder
and the Person or Persons through or with whom such Subsequent Financing is
proposed to be effected and shall include a term sheet or similar document
relating thereto as an attachment.
 
     (c) Any Purchaser desiring to participate in such Subsequent Financing must
provide written notice to the Company by not later than 5:30 p.m. (New York City
time) on the 5th Trading Day after all of the Purchasers have received the
Pre-Notice that the Purchaser is willing to participate in the Subsequent
Financing, the amount of the Purchaser’s participation, and that the Purchaser
has such funds ready, willing, and available for investment on the terms set
forth in the Subsequent Financing Notice. If the Company receives no notice from
a Purchaser as of such 5th Trading Day, such Purchaser shall be deemed to have
notified the Company that it does not elect to participate.
 
     (d) If by 5:30 p.m. (New York City time) on the 5th Trading Day after all
of the Purchasers have received the Pre-Notice, notifications by the Purchasers
of their willingness to participate in the Subsequent Financing is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and with the Persons set forth in the Subsequent Financing Notice.
 
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     (e) If by 5:30 p.m. (New York City time) on the 5th Trading Day after all
of the Purchasers have received the Pre-Notice, the Company receives responses
to a Subsequent Financing Notice from Purchasers seeking to purchase more than
the aggregate amount of the Participation Maximum, each such Purchaser shall
have the right to purchase its Pro Rata Portion (as defined below) of the
Participation Maximum. “Pro Rata Portion” means the ratio of (x) the
Subscription Amount of Securities purchased on the Closing Date by a Purchaser
participating under this Section 4.12 and (y) the sum of the aggregate
Subscription Amounts of Securities purchased on the Closing Date by all
Purchasers participating under this Section 4.12.
 
     (f) The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.12, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days after
the date of the initial Subsequent Financing Notice.
 
     (g) Notwithstanding the foregoing, this Section 4.12 shall not apply in
respect of (i) an Exempt Issuance or (ii) an underwritten public offering of
Common Stock.
 
     4.13 Subsequent Equity Sales.
 
     (a) From the date hereof until 90 days after the Effective Date, neither
the Company nor any Subsidiary shall issue shares of Common Stock or Common
Stock Equivalents other than Exempt Issuances; provided, however, the 90 day
period set forth in this Section 4.13 shall be extended for the number of
Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Shares and Warrant Shares.
 
     (b) From the date hereof until such time as no Purchaser holds any of the
Securities, the Company shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Financing involving a Variable Rate
Transaction. “Variable Rate Transaction” means a transaction in which the
Company issues or sells (i) 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, exercise 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 or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined price. Any
Purchaser shall be entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to any right to
collect damages.
 
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     (c) Unless Shareholder Approval has been obtained and deemed effective,
neither the Company nor any Subsidiary shall make any issuance whatsoever of
Common Stock or Common Stock Equivalents which would cause any adjustment of the
Exercise Price to the extent the holders of Warrants would not be permitted,
pursuant to Section 2(d) of the Warrants, to exercise their respective Warrants
in full, ignoring for such purposes the exercise limitations therein. Any
Purchaser shall be entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to any right to
collect damages
 
     (d) Notwithstanding the foregoing, this Section 4.13 shall not apply in
respect of an Exempt Issuance, except that no Variable Rate Transaction shall be
an Exempt Issuance.
 
     4.14 Short Sales and Confidentiality After The Date Hereof. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending at the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.4. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Disclosure Schedules. Each Purchaser severally and
not jointly with any other Purchaser, understands and acknowledges, and agrees,
to act in a manner that will not violate the positions of the Commission as set
forth in Item 65, Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in
Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.
 
     4.15 Delivery of Securities After Closing. The Company shall deliver, or
cause to be delivered, the respective Securities purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.
 
     4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.
 
     4.17 Capital Changes. [Until the one year anniversary of the Effective
Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in interest of the Shares.
 
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ARTICLE V.
MISCELLANEOUS
 
     5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser’s obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
August 8, 2007; provided, however, that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).
 
     5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.
 
     5.3 Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
 
     5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
 
     5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers of at least 67% of the Shares still held by the
Purchasers or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
 
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     5.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
 
     5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Purchasers.”
 
     5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
 
     5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
 
     5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.
 
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     5.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together 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, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.
 
     5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
 
     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and
rights; provided, however, in the case of a rescission of an exercise of a
Warrant, the Purchaser shall be required to return any shares of Common Stock
delivered in connection with any such rescinded exercise notice.
 
     5.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.
 
     5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
 
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     5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
     5.17 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FWS. FWS
does not represent the Purchasers but only the Placement Agent. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
 
     5.18 Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
 
     5.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
 
     5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
 
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     5.21 Waiver of Jury Trial. In any action, suit or proceeding in any
jurisdiction brought by any party against any other party, the parties each
knowingly and intentionally, to the greatest extent permitted by applicable law,
hereby absolutely, unconditionally, irrevocably and expressly waives forever
trial by jury.
 
(Signature Pages Follow)
 
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          IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
 

             
OCULUS INNOVATIVE SCIENCES, INC.
     
Address for Notice:
             
By:
 
/s/ Jim Schutz
                         
Name: Jim Schutz
Title: General Counsel
     
Fax:
             
With a copy to (which shall not constitute notice):
   

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Aristeia International Limited

Signature of Authorized Signatory of Purchaser: /s/Chong Park

Name of Authorized Signatory: Chong Park

Title of Authorized Signatory: Portfolio Manager

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Aristeia International Limited

136 Madison Avenue
3rd Floor
New York, NY 10016

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $676,600

Shares: 84,575

Warrant Shares: 27,909

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Aristeia Partners, L.P.

Signature of Authorized Signatory of Purchaser: /s/Chong Park

Name of Authorized Signatory: Chong Park

Title of Authorized Signatory: Portfolio Manager

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Aristeia Partners, L.P.

136 Madison Avenue
3rd Floor
New York, NY 10016

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $84,096

Shares: 10,512

Warrant Shares: 3,468

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Aristeia Special Investments Master, L.P.

Signature of Authorized Signatory of Purchaser: /s/Chong Park

Name of Authorized Signatory: Chong Park

Title of Authorized Signatory: Portfolio Manager

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Aristeia Special Investments Master, L.P.

136 Madison Avenue
3rd Floor
New York, NY 10016

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $239,304

Shares: 29,913

Warrant Shares: 9,871

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Avendis Absolute Alternative 1 Trading Ltd

Signature of Authorized Signatory of Purchaser: /s/Yannis Bilquez

Name of Authorized Signatory: Yannis Bilquez

Title of Authorized Signatory: Director

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Lehman Brothers International Europe

25 Bank Street
London E14 5LE

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $280,000

Shares: 35,000

Warrant Shares: 11,550

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Cranshire Capital, L.P.

Signature of Authorized Signatory of Purchaser: /s/Lawrence A. Prosser

Name of Authorized Signatory: Lawrence A. Prosser

Title of Authorized Signatory: CFO - Downsview Capital, Inc. The General Partner

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Cranshire Capital, L.P.

3100 Dundee Road, Suite 703
Northbrook, IL 60062

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $500,000

Shares: 62,500

Warrant Shares: 20,625

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Crescent International, Ltd.

Signature of Authorized Signatory of Purchaser: /s/Maxi Brezzi

Name of Authorized Signatory: Maxi Brezzi

Title of Authorized Signatory: 

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Crescent International, Ltd.

c/o Cantara (Switzerland) SA
84, Avenue Louis-Casai
CH-1216 Cointrin/Geneva, Switzerland

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $308,000

Shares: 38,500

Warrant Shares: 12,705

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Diamond Opportunity Fund, LLC

Signature of Authorized Signatory of Purchaser: /s/Richard Marks

Name of Authorized Signatory: Richard Marks

Title of Authorized Signatory: Managing Director

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Diamond Opportunity Fund, LLC

500 Skokie Boulevard, Suite 300
Northbrook, IL 60062

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $350,000

Shares: 43,750

Warrant Shares: 14,437

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Double U Master Fund LP

Signature of Authorized Signatory of Purchaser: /s/Sheldon Traube

Name of Authorized Signatory: Sheldon Traube

Title of Authorized Signatory: 

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Double U Master Fund LP

2nd Floor, Harbour House, Waterfront Drive
Road Town, Tortola
British Virgin Islands

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $100,000

Shares: 12,500

Warrant Shares: 4,125

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Egatniv, LLC

Signature of Authorized Signatory of Purchaser: /s/Seth Farbman

Name of Authorized Signatory: Seth Farbman

Title of Authorized Signatory: Member

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Egatniv, LLC

150 West 46th St., 6th floor
New York, NY 10036
Attn: Josh Greenberg

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $100,000

Shares: 12,500

Warrant Shares: 4,125

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Graham Anderson

Signature of Authorized Signatory of Purchaser: /a/Graham Anderson

Name of Authorized Signatory: Graham Anderson

Title of Authorized Signatory: 

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
71 Hickory Lane

Bedford, NY 10506

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $100,000

Shares: 12,500

Warrant Shares: 4,125

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Franklin Biotechnology Discovery Fund

Signature of Authorized Signatory of Purchaser: /s/Evan McCulloch

Name of Authorized Signatory: Evan McCulloch

Title of Authorized Signatory: Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
One Franklin Parkway

San Mateo, CA 94403

Address
Attn: Arnold Mussela

Bank of New York
One Wall Street, 3rd Floor
New York, NY 10268

Subscription Amount: $2,000,000

Shares: 250,000

Warrant Shares: 82,500

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Highbridge International, LLC

Signature of Authorized Signatory of Purchaser: /s/Scott Wallace

Name of Authorized Signatory: Scott Wallace

Title of Authorized Signatory: Senior Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Highbridge Capital Management, LLC

9 West 57th Street, 27th Floor
New York, NY 10019
Attn: Ari J Storch / Adam J Chill

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Bear Stearns

1 Metrotech Center, 20th Floor
Brooklyn, NY 11201
Attn: Elanna Bradley

Subscription Amount: $500,000

Shares: 62,500

Warrant Shares: 20,625

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Iroquois Master Fund, Ltd.

Signature of Authorized Signatory of Purchaser: /s/Joshua Silverman

Name of Authorized Signatory: Joshua Silverman

Title of Authorized Signatory: 

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
641 Lexington Ave., 26th Fl.

New York, NY 10022

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $300,000

Shares: 37,500

Warrant Shares: 12,375

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Lincoln Biotech Ventures II, L.P.

Signature of Authorized Signatory of Purchaser: /s/Robert Carver

Name of Authorized Signatory: Robert Carver

Title of Authorized Signatory: Secretary, Lincoln Funds International

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Lincoln Biotech Ventures, L.P.

695 Town Center Dr.
8th Floor
Costa Mesa, CA 92626

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $100,000

Shares: 12,500

Warrant Shares: 4,125

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Otago Partners, LLC

Signature of Authorized Signatory of Purchaser: /s/Lindsay A. Rosenwald, MD

Name of Authorized Signatory: Lindsay A. Rosenwald, MD

Title of Authorized Signatory: Managing Member

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Otago Partners, LLC

787 7th Ave, 48th Fl.
New York, NY 10019

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $100,000

Shares: 12,500

Warrant Shares: 4,125

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Perceptive Life Sciences Master Fund LTD

Signature of Authorized Signatory of Purchaser: /s/Joe Edelman

Name of Authorized Signatory: Joe Edelman

Title of Authorized Signatory: Managing Member

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Perceptive Advisors

499 Park Avenue
25th Floor
New York, NY 10022

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $1,400,000

Shares: 175,000

Warrant Shares: 57,750

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Catalytix LDC Life Science Hedge AC

Signature of Authorized Signatory of Purchaser: /s/Ted Kalem

Name of Authorized Signatory: Ted Kalem

Title of Authorized Signatory: Partner

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Catalytix LOC Life Science Hedge AC

CIBe Bank and Trust Company (Cayman) Limited
GIBC Financial Centre, 11 Dr. Roy’s Drive
P.O. Box 694 GT
Grand Cayman
Cayman Islands
B.W.I.
Attn: Martin Laidlaw

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Theodore E Kalem

Array Capital Management, LLC
425 Fifth Avenue, Suite 28D
New York, NY 10016

Subscription Amount: $100,000

Shares: 12,500

Warrant Shares: 4,125

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Rockmore Investment Master Fund, Ltd

Signature of Authorized Signatory of Purchaser: /s/Brian Daly

Name of Authorized Signatory: Brian Daly

Title of Authorized Signatory: Director

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
c/o Rockmore Capital LLC

150 E. 58th St., 28th Fl.
New York, NY 10155

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Rockmore Investment Master Fund, LLC

Meridian Fund Services Limited
P.O. Box HM528
73 Front Street
Hamilton HM CX
Bermuda

Subscription Amount: $350,000

Shares: 43,750

Warrant Shares: 14,437

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: RRC Biofund, LP

Signature of Authorized Signatory of Purchaser: /s/Jim Silverman

Name of Authorized Signatory: Jim Silverman

Title of Authorized Signatory: Managing Director

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
124 Mr. Auburn St., Suite 200N

Cambridge, MA 02138

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $840,000

Shares: 105,000

Warrant Shares: 34,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Whalehaven Capital Fund Limited

Signature of Authorized Signatory of Purchaser: /s/Brian Mazzella

Name of Authorized Signatory: Brian Mazzella

Title of Authorized Signatory: CFO

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Whalehaven Capital Fund Limited

160 Summit Avenue
Montvale, NJ 07645

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Subscription Amount: $500,000

Shares: 62,500

Warrant Shares: 20,625

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Daniel B. and Linda O. Ahlberg Trustees FBO Ahlberg Joint
Revocable Trust u/a dtd 8/27/06

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Daniel B. Ahlberg

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $36,000

Shares: 4,500

Warrant Shares: 1,485

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Alice Ann Corporation

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Alice Ann Corporation

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $56,000

Shares: 7,000

Warrant Shares: 2,310

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Robert G. Allison

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Robert G. Allison

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $80,000

Shares: 10,000

Warrant Shares: 3,300

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: William H. Baxter Trustee FBO William H. Baxter Revokable
Trust u/a dtd 7/3/96

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
William H. Baxter

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $32,000

Shares: 4,000

Warrant Shares: 1,320

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO William H. Baxter IRA

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
William H. Baxter

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $28,000

Shares: 3,500

Warrant Shares: 1,155

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: David & Carole Brown Trustees FBO David & Carole Brown
Revocable Trust u/a dtd 10/23/97

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
David & Carole Brown

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO Robert H. Clayburgh IRA

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Robert H. Clayburgh

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $52,000

Shares: 6,500

Warrant Shares: 2,145

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Gary & Leslie Clipper JTWROS

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Gary & Leslie Clipper

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $24,000

Shares: 3,000

Warrant Shares: 990

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO Mark Donahoe IRA

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Mark Donahoe

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $64,000

Shares: 8,000

Warrant Shares: 2,640

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Dennis D. Gonyea

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Dennis D. Gonyea

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Richard A. Hoel

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Richard A. Hoel

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $24,000

Shares: 3,000

Warrant Shares: 990

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Elizabeth J. Kuehne

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Elizabeth J. Kuehne

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO Elizabeth J. Kuehne IRA

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Elizabeth J. Kuehne

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $28,000

Shares: 3,500

Warrant Shares: 1,155

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO Michael E. McElligott SPN/PRO

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Michael E. McElligott

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $28,000

Shares: 3,500

Warrant Shares: 1,155

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO Charles W. Pappas IRA

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Charles W. Pappas

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $36,000

Shares: 4,500

Warrant Shares: 1,485

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: John T. Potter

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
John T. Potter

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $48,000

Shares: 6,000

Warrant Shares: 1,980

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Carolyn Salon

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Carolyn Salon

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $32,000

Shares: 4,000

Warrant Shares: 1,320

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Joel A. Salon

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Joel A. Salon

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $28,000

Shares: 3,500

Warrant Shares: 1,155

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Paul C. Seel & Nancy S. Seel JTWROS

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Paul C. Seel & Nancy S. Seel

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: E. Terry Skone, TTE FBO E. Terry Skone Revocable Trust U/A
dtd 11/30/05

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
E. Terry Skone

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $48,000

Shares: 6,000

Warrant Shares: 1,980

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Donald O. & Janet M. Voight TTEE’s FBO Janet M. Voight Trust
U/A dtd 9/29/96

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Janet M. Voight

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO James B. Wallace SPN/PRO

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
James B. Wallace

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $48,000

Shares: 6,000

Warrant Shares: 1,980

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: David M. Wertrum TTEE, FBO David M. Westrum Revocable Living
Trust u/a dtd 6/1/97

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
David M. Westrum

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Piper Jaffray as Custodian FBO Michael R. Wilcox IRA

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Michael R. Wilcox

c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $40,000

Shares: 5,000

Warrant Shares: 1,650

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]
 
78

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[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]
 
     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser: Pyramid Partners, L.P.

Signature of Authorized Signatory of Purchaser: /s/Richard C. Perkins

Name of Authorized Signatory: Richard C. Perkins

Title of Authorized Signatory: Executive Vice President

Email Address of Purchaser: 

Fax Number of Purchaser: 

Address for Notice of Purchaser:
Richard W. Perkins

Pyramid Partners, L.P.
c/o Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391

Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Piper Jaffray

Corp & Venture Services
Ms. Kristi Kling
800 Nicollet Mall, J12S06
Minneapolis, MN 55402

Subscription Amount: $200,000

Shares: 25,000

Warrant Shares: 8,250

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
 
 
79

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