Exhibit 10.64
 

4,771,174 Shares
Warrants to Purchase 6,679,644 Shares

CYTORI THERAPEUTICS, INC.

Common Stock

PLACEMENT AGENCY AGREEMENT

March 9, 2009

Piper Jaffray & Co.
U.S. Bancorp Center
800 Nicollet Mall
Minneapolis, Minnesota  55402

Ladies and Gentlemen:

Cytori Therapeutics, Inc., a Delaware corporation (the “Company”), proposes,
subject to the terms and conditions stated herein, to issue and sell to certain
investors located by you (each an “Investor” and, collectively, the
“Investors”), (i) up to 4,771,174 shares (the “Shares”) of the Company’s common
stock, $0.001 par value per share (the “Common Stock”), and (ii) warrants to
purchase up to 6,679,644 shares of Common Stock (the “Warrants” and together
with the Shares, the “Securities”).  The shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to as the “Warrant
Shares”.  The Company desires to engage Piper Jaffray & Co. as its exclusive
placement agent (the “Placement Agent”) in connection with such issuance and
sale.  The Securities are more fully described in the Registration Statement (as
hereinafter defined).

The Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and the published
rules and regulations thereunder (the “Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”) a Registration Statement
on Form S-3 (No. 333-157023), relating to the Securities and the offering
thereof from time to time in accordance with Rule 415 of the Rules and
Regulations, and such amendments thereof as may have been required. The
Registration Statement includes a base prospectus (the “Base Prospectus”). The
Company has filed with, or transmitted for filing to, or shall promptly
hereafter file with or transmit for filing to the Commission, a prospectus
supplement, including the Base Prospectus, relating to the Securities in
accordance with Rule 424(b) under the Act (the “Final Prospectus Supplement”).
The term “Registration Statement” as used in this Agreement means the initial
registration statement (including all exhibits, financial schedules and all
documents and information deemed to be a part of the Registration Statement
(through incorporation by reference or otherwise)), as amended, at the time and
on the date it became effective (the “Effective Date”), including the
information (if any) contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations and deemed to be
part thereof at the time of effectiveness pursuant to Rule 430A of the Rules and
Regulations. The term “Prospectus” as used in this Agreement means the Base
Prospectus together with the Final Prospectus Supplement. Any preliminary
prospectus or prospectus subject to completion included in the Registration
Statement or filed with the Commission pursuant to Rule 424 under the Securities
Act is hereafter called a “Preliminary Prospectus.” As used herein, the terms
“Base
 

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Prospectus,” “Prospectus,” “Registration Statement,” “Preliminary Prospectus”
and “Final Prospectus Supplement” shall include any documents incorporated by
reference therein; and any reference to any amendment or supplement to the
Registration Statement or the Prospectus shall be deemed to refer to and include
any document filed under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), after the date of the Base Prospectus by the Company with the
Commission and on or before the last to occur of the Effective Date, the date of
the Preliminary Prospectus, or the date of the Prospectus; and any reference
herein to the terms “amend,” “amendment,” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the filing of any document under the Exchange Act
before or after the Effective Date, the date of such Preliminary Prospectus or
the date of the Prospectus, as the case may be, which is incorporated by
reference into such amendment or supplement, but excluding any documents or
information furnished to the Commission under Item 2.02 or Item 7.01 of any
Current Report on Form 8-K.  If the Company has filed an abbreviated
registration statement to register additional Shares and Warrants pursuant to
Rule 462(b) under the Rules and Regulations (the “Rule 462(b) Registration
Statement”), then any reference herein to the term “Registration Statement”
shall also be deemed to include such Rule 462(b) Registration Statement.  The
Company hereby confirms that the Placement Agent, in connection with its duties
in such capacity, is authorized to distribute or cause to be distributed the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to such Placement Agent).

All references in this Agreement to financial statements and schedules and other
information which is “contained,” “included” or “stated” in the Registration
Statement or the Prospectus (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other
information which is incorporated by reference in the Registration Statement or
the Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement or the Prospectus shall
be deemed to mean and include the filing of any document under the Exchange Act
on or before the Closing Date (as defined herein), which is incorporated by
reference in the Registration Statement or the Prospectus, as the case may be.
 
For purposes of this Agreement, all references to the Registration Statement,
the Rule 462(b) Registration Statement, the Base Prospectus, any Preliminary
Prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).    
 
1. Agreement to Act as Placement Agent; Delivery and Payment.  On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to the terms and conditions set forth in this Agreement:
 
(a) The Company hereby engages the Placement Agent to act as its exclusive
placement agent in connection with the issuance and sale, by the Company, of
Securities to the Investors and the Placement Agent hereby agrees, as an agent
of the Company, to use its best efforts to solicit offers to purchase all or
part of the Securities from the Company upon the terms and conditions set forth
in the Prospectus. The Company expressly acknowledges and agrees that this
Agreement shall not give rise to a commitment by the Placement Agent or any of
its affiliates to underwrite or purchase any of the Securities or otherwise
provide any financing, and the Placement Agent shall have no authority to bind
(and agrees not to purport to bind) the Company in respect of the sale of any
Securities.
 
(b) Concurrently with the execution and delivery of this Agreement, the Company,
the Placement Agent and JP Morgan Chase, as escrow agent (the “Escrow Agent”),
shall enter into an escrow agreement, dated as of the date hereof (the “Escrow
Agreement”) pursuant to which an escrow account will be established, at the
Company's expense, for the benefit of the Company and the Investors
 
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who desire to settle their purchase through the facilities of The Depository
Trust Company’s DWAC system (the “Escrow Account”). Prior to the Closing Date,
(i) each such Investor will deposit in the Escrow Account an amount equal to
$2.10 per unit (with each unit consisting of one (1) Share and one and
four-tenths (1.4) Warrants) multiplied by the number of units to be purchased by
such Investor (the “Purchase Amount”), and (ii) the Escrow Agent will notify the
Company and the Placement Agent in writing of the amount of funds deposited in
the Escrow Account.
 
(c)            Upon the occurrence of the Closing (as hereinafter defined), the
Company shall pay to the Placement Agent, by wire transfer of immediately
available funds payable to the order of the Placement Agent, to an account
designated by the Placement Agent, an aggregate of six percent (6.0%) of the
gross proceeds received by the Company from its sale of the Securities at such
Closing (the “Agency Fee”).
 
(d) Payment of the purchase price for, and delivery of, the Securities shall be
made at a closing (the “Closing”) at the offices of DLA Piper US LLP, counsel
for the Company, located at 4365 Executive Drive, Suite 1100, San Diego,
California at 10:00 a.m., local time, on March 13, 2009 or at such other time
and date as the Placement Agent and the Company determine pursuant to Rule
15c6-1(a) under the Exchange Act (such date of payment and delivery being herein
referred to as the “Closing Date”), and upon satisfaction of the conditions set
forth in this Agreement and the Subscription Agreements (as defined below), the
Company shall deliver the Securities, which shall be registered in the name or
names and shall be in such denominations as the Placement Agent may request at
least one business day before the Closing Date, to the Investors, which
delivery, with respect to the Shares, may be made through the facilities of the
Depository Trust Company, and the Escrow Agent will disburse the aggregate funds
in the Escrow Account to the Company reduced by an amount equal to the sum of
the aggregate Agency Fee payable to the Placement Agent and the Placement
Agent’s bona fide estimate of the amount, if any, of expenses for which the
Placement Agent is entitled to reimbursement pursuant hereto, with such amounts
being delivered to the Placement Agent, by wire in federal (same day) funds, as
provided in the Escrow Agreement. All such actions taken at the Closing shall be
deemed to have occurred simultaneously.  Each of the Company and the Placement
Agent hereby agree to deliver to the Escrow Agent a Closing Notice in the form
attached as Exhibit C to the Escrow Agreement at least one day prior to the
Closing Date.  At least one day prior to the Closing Date, the Placement Agent
shall submit to the Company its bona fide estimate of the amount, if any, of
expenses for which such Placement Agent is entitled to reimbursement pursuant
hereto. If the Company shall default in its obligations to deliver Securities to
an Investor whose offer it has accepted, the Company shall indemnify and hold
the Placement Agent harmless against any loss, claim or damage arising from or
as a result of such default by the Company.
 
(e) The sale of the Securities shall be made pursuant to subscription agreements
in the form included as Exhibit A hereto (the “Subscription Agreements”). The
Company shall have the sole right to accept offers to purchase the Securities
and may reject any such offer in whole or in part, and, except as set forth in
Section 4 hereof, in no event shall fees be payable on any proposed purchase
which is rejected for any reason or which otherwise does not close for any
reason.
 
(f)            Prior to the earlier of (i) the date on which this Agreement is
terminated and (ii) the Closing Date, the Company shall not, without the prior
written consent of the Placement Agent, solicit or accept offers to purchase
Securities of the Company (other than pursuant to the exercise of options or
warrants to purchase shares of Common Stock that are outstanding at the date
hereof) otherwise than through the Placement Agent in accordance herewith.
 
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2. Representations and Warranties of the Company.  The Company represents and
warrants to the Placement Agent as of the date hereof and as of the Closing
Date, and agrees with the Placement Agent, as follows:

(a) Registration Statement and Prospectus.  The Company and the transactions
contemplated by this Agreement meet the requirements and comply with the
conditions for the use of Form S-3 under the Securities Act.  The offering of
the Securities by the Company complies with the applicable requirements of
Rule 415 under the Securities Act.  The Company has complied to the Commission’s
satisfaction with all requests of the Commission for additional or supplemental
information. The Registration Statement has become effective under the
Securities Act.  No stop order preventing or suspending use of the Registration
Statement or the Prospectus or the effectiveness of the Registration Statement,
has been issued by the Commission, and no proceedings for such purpose have been
instituted or are pending or, to the Company’s knowledge, are contemplated or
threatened by the Commission.

(b) Compliance with Registration Requirements.  Each part of the Registration
Statement and any post-effective amendment thereto, at the time such part became
effective (including each deemed effective date with respect to the Placement
Agent pursuant to Rule 430B under the Securities Act) and as of the Closing
Date, complied and will comply, in all material respects, with the requirements
of the Securities Act, the Rules and Regulations and the Exchange Act and did
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus (or any amendment or
supplement to the Prospectus), at the time of filing or the time of first use
within the meaning of the Rules and Regulations and as of the Closing Date,
complied and will comply, in all material respects, with the requirements of the
Securities Act, the Rules and Regulations and the Exchange Act and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, that the
Company makes no representations or warranty in this paragraph with respect to
any Placement Agent Information (as defined in Section 7).
 
(c) Disclosure Package.  As of the Time of Sale (as hereinafter defined) and as
of the Closing Date, neither (A) any Issuer General Use Free Writing
Prospectus(es)(as defined below), if any, issued at or prior to the Time of
Sale, the Statutory Prospectus (as hereinafter defined), and the information
included on Schedule II hereto, all considered together (collectively, the
“Disclosure Package”), nor (B) any individual Issuer Limited-Use Free Writing
Prospectus (as hereinafter defined), when considered together with the
Disclosure Package, included or will include any untrue statement of a material
fact or omitted or will omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representations
or warranty in this paragraph with respect to statements in or omissions from
the Disclosure Package in reliance upon, and in conformity with any Placement
Agent Information.  No statement of material fact included in the Prospectus has
been omitted from the Disclosure Package and no statement of material fact
included in the Disclosure Package that is required to be included in the
Prospectus has been omitted therefrom. As used in this paragraph and elsewhere
in this Agreement:
 

 
(1)
“Time of Sale” with respect to any Investor, means 6:00 p.m. New York City time
on the date of this Agreement.

 
(2)
“Statutory Prospectus” means the Preliminary Prospectus, if any, and  the Base
Prospectus, each as amended and supplemented as of immediately prior to the Time
of Sale, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof.  For purposes of this
definition, information

 
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contained in a form of prospectus that is deemed retroactively to be a part of
the Registration Statement pursuant to Rule 430B under the Securities Act shall
be considered to be included in the Statutory Prospectus as of the actual time
that form of prospectus is filed with the Commission pursuant to Rule 424(b)
under the Securities Act.

 
 
(3)
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433 under the Securities Act (“Rule 433”), relating to the
Securities in the form filed or required to be filed with the Commission or, if
not required to be filed, in the form retained in the Company’s records pursuant
to Rule 433(g) under the Securities Act.

 
(4)
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is intended for general distribution to prospective investors as
identified on Schedule I hereto, and does not include a “bona fide electronic
road show” as defined in Rule 433.

 
(5)
“Issuer Limited-Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is not an Issuer General Free Writing Prospectus, including any
“bona fide electronic road show” as defined in Rule 433, that is made available
without restriction pursuant to Rule 433(d)(8)(ii), even though not required to
be filed with the Commission.

(d) Conflict with Registration Statement.   Each Issuer Free Writing Prospectus,
as of its issue date and at all subsequent times through the completion of the
offering and sale of the Securities or until any earlier date that the Company
notified or notifies the Placement Agent, did not, does not and will not include
any information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement, any Statutory Prospectus or the
Prospectus including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof that has not been superseded
or modified or included or would include an untrue statement of a material fact
or omitted or would omit to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading; provided,
that the Company makes no representations or warranty in this paragraph with
respect to any Placement Agent Information.

(e) Distributed Materials.  he Company has not, directly or indirectly,
distributed and will not distribute any prospectus or other offering material in
connection with the offering and sale of the Securities other than the
Disclosure Package or the Prospectus, and other materials, if any, permitted
under the Securities Act to be distributed and consistent with Section 3 below.
The Company will file with the Commission all Issuer Free Writing Prospectuses
required to be filed in the time required under Rule 433(d) under the Securities
Act. The Company has satisfied or will satisfy the conditions in Rule 433 under
the Securities Act to avoid a requirement to file with the Commission any
electronic road show. The parties hereto agree and understand that the content
of any and all “road shows” related to the offering of the Securities
contemplated hereby is solely the property of the Company.

(f) Not an Ineligible Issuer.  (1) At the earliest time after the filing of the
Registration Statement that the Company or another offering participant made a
bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act)
of the Securities and (2) at the date hereof, the Company was not and is not an
“ineligible issuer,” as defined in Rule 405 under the Securities Act, without
taking account of any determination by the Commission pursuant to Rule 405 that
it is not necessary that the Company be considered an ineligible issuer,
including, without limitation, for purposes
 
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of Rules 164 and 433 under the Securities Act with respect to the offering of
the Securities as contemplated by the Registration Statement.

(g) Incorporated Documents.  The documents incorporated by reference in the
Disclosure Package and in the Prospectus, when they became effective or were
filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and were filed on a timely basis with the Commission and none of
such documents contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

(h) Due Incorporation.  The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, with the corporate power and authority to own its properties and
to conduct its business as currently being carried on and as described in the
Registration Statement, the Disclosure Package and the Prospectus and is duly
qualified to transact business as a foreign corporation in good standing under
the laws of each other jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified and in good standing (i) would not,
individually or in the aggregate, result in any material adverse effect upon, or
change in, the general affairs, business, operations, prospects, properties,
financial condition, or results of operations of the Company taken as a whole or
(ii) would not impair in any material respect the ability of the Company to
perform its obligations under this Agreement or to consummate any transactions
contemplated by this Agreement, the Disclosure Package or the Prospectus (any
such effect as described in clauses (i) or (ii), a “Material Adverse Effect”).
 
(i) Capitalization.  All of the issued and outstanding shares of capital stock
of the Company, including the outstanding shares of Common Stock, have been duly
authorized and validly issued and are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase or acquire any securities of the Company that have not been
waived in writing.

(j) The Securities.  The Shares have been duly and validly authorized by the
Company and, when issued, delivered and paid for in accordance with the terms of
this Agreement and the Subscription Agreements, will have been duly and validly
issued and will be fully paid and nonassessable and will not be subject to any
statutory or contractual preemptive rights or other rights to subscribe for or
purchase or acquire any shares of Common Stock of the Company, which have not
been waived or complied with and will conform in all material respects to the
description thereof contained in the Disclosure Package and the Prospectus and
such description conforms in all material respects to the rights set forth in
the instruments defining the same.  The Warrants conform, or when issued will
conform, to the description thereof contained in the Disclosure Package and the
Prospectus and have been duly and validly authorized by the Company and upon
delivery to the Investors at the Closing Date will be valid and binding
obligations of the Company, enforceable in accordance with their terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors
generally or subject to general principles of equity. The Warrant Shares
initially issuable upon exercise of the Warrants conform, or when issued will
conform, to the description thereof contained in the Disclosure Package and the
Prospectus and have been duly authorized and reserved for issuance and when
issued in accordance with the terms thereof will be validly issued, fully paid
and nonassessable.

(k) Description of Capital Stock.  The capital stock of the Company, including
the Common Stock, conforms as to legal matters to the description thereof, if
any, contained in the
 
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Registration Statement, the Statutory Prospectus and the Prospectus, and as of
the date thereof, the Company had authorized capital stock as set forth
therein.  The Securities are in due and proper form and the holders of the
Securities will not be subject to personal liability by reason of being such
holders.

(l) No Registration Rights.  Except as otherwise described in the Disclosure
Package, there are no preemptive rights or other rights to subscribe for or to
purchase, or any restriction upon the voting of transfer of, any shares of
Common Stock pursuant to the Company’s charter, by-laws or any agreement or
other instrument to which the Company is a party or by which the Company is
bound.  There are no contracts, agreements or understandings between the Company
and any person granting such person the right (other than rights which have been
waived in writing in connection with the transactions contemplated by this
Agreement or otherwise satisfied) to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.

(m) Subsidiaries. The Company has no significant subsidiaries (as such term is
defined in Rule 1-02(w) of Regulation S-X promulgated by the Commission).
 
(n) Due Authorization and Enforceability.    The Company has the full right,
power and authority to enter into this Agreement, each of the Subscription
Agreements and the Escrow Agreement, and to perform and discharge its
obligations hereunder and thereunder; and each of this Agreement, the Escrow
Agreement and each Subscription Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
 
(o) No Conflict.  The execution, delivery and performance by the Company of this
Agreement each Subscription Agreement and the Escrow Agreement and the
consummation of the transactions herein contemplated, including the issuance and
sale by the Company of the Securities and the issuance of the Warrant Shares
upon due exercise of the Warrants in accordance with their terms, will not
conflict with or result in a breach or violation of, or constitute a default
under (nor constitute any event which with notice, lapse of time or both would
result in any breach or violation of or constitute a default under) (i) the
provisions of the charter or by-laws of the Company, (ii) any material
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company is a party or by which it or any of its
properties may be bound or affected, or (iii) any federal, state, local or
foreign law, regulation or rule or any decree, judgment or order applicable to
the Company.

(p) No Consents Required.  No approval, authorization, consent or order of or
filing with any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or of or with any self-regulatory
organization or other non-governmental regulatory authority (including, without
limitation, the National Association of Securities Dealers Automated Quotation
(“Nasdaq”) Global Market, or approval of the stockholders of the Company
(including such as may be required pursuant to Rule 4350 of the Nasdaq
Marketplace Rules), is required in connection with the execution, delivery and
performance of this Agreement, the Subscription Agreements and the Escrow
Agreement by the Company, the issuance and sale of the Securities and the
issuance of the Warrant Shares upon due exercise of the Warrants in accordance
with their terms, or the consummation by the Company of the transactions
contemplated hereby other than (i) as may be required under the Securities
 
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Act, (ii) any necessary qualification of the Securities under the securities or
blue sky laws of the various jurisdictions in which the Securities are being
offered by the Placement Agent and (iii) under the rules and regulations of the
Financial Industry Regulatory Authority (“FINRA”).

(q) No Violation.  The Company is not in breach or violation of or in default
(nor has any event occurred which with notice, lapse of time or both would
result in any breach or violation of, or constitute a default) (i) under the
provisions of its charter or bylaws or (ii) in the performance or observance of
any term, covenant, obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company is a party or by which it or any of its
properties may be bound or affected, or (iii) in the performance or observance
of any statute, law, rule, regulation, ordinance, judgment, order or decree of
any court, regulatory body, administrative agency, governmental body, arbitrator
or other authority having jurisdiction over the Company or any of its
properties, as applicable (including, without limitation, those administered by
the Food and Drug Administration of the U.S. Department of Health and Human
Services (the “FDA”) or by any foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the
FDA), except, with respect to clauses (ii) and (iii) above, to the extent any
such contravention has been waived or would not result in a Material Adverse
Effect.

(r) Absence of Material Changes. Subsequent to the respective dates as of which
information is given in the Disclosure Package (and taking into account any
updates included within the Disclosure Package), (a) the Company has not
sustained any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, (b) the Company has
not incurred any material liability or obligation, direct or contingent, or
entered into any material transaction not in the ordinary course of business;
(c) the Company has not purchased any of the Company's outstanding capital
stock, or declared, paid or otherwise made any dividend or distribution of any
kind on the Company's capital stock; and (d) there has not been any change in
the capital stock (other than a change in the number of outstanding shares of
Common Stock due to the issuance of shares upon the exercise of outstanding
options or warrants or the conversion of convertible indebtedness), or material
change in the short−term debt or long−term debt of the Company (other than upon
conversion of convertible indebtedness) or any issue of options, warrants,
convertible securities or other rights to purchase the capital stock (other than
grants of stock options under the Company’s stock option plans existing on the
date hereof) of the Company, or any Material Adverse Effect.

(s) Permits.  The Company possesses, and is operating in compliance in all
material respects with, all necessary franchises, licenses, grants, permits,
easements, authorizations, consents, certificates and orders of any governmental
or self-regulatory body required for the conduct of its business and all such
franchises, licenses, grants, permits, easements, authorizations, consents,
certificates and orders are valid and in full force and effect.  The Company has
made all necessary filings required under any federal, state, local or foreign
law, regulation or rule (including, without limitation, those from the FDA, and
any other foreign, federal, state or local government or regulatory authorities
performing functions similar to those performed by the FDA), in order to conduct
its business.  The Company has not received notice of any proceedings relating
to revocation or modification of, any such franchise, license, grant, permit,
easement, authorization, consent, certificate and order except where such
violation, default or proceeding would not, individually or in the aggregate,
have a Material Adverse Effect.

(t) Legal Proceedings. There are no legal or governmental proceedings pending
or, to the Company’s knowledge, threatened or contemplated to which the Company
is or would be a party or of which any of its properties is or would be subject
at law or in equity, before or by any federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency, or
before or by
 
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any self-regulatory organization or other non-governmental regulatory authority
(including, without limitation, Nasdaq), except (i) as described in the
Registration Statement, the Prospectus, and the Disclosure Package, (ii) any
such proceeding, which if resolved adversely to the Company, would not result in
a judgment, decree or order having, individually or in the aggregate, a Material
Adverse Effect or (iii) any such proceeding that would not prevent or materially
and adversely affect the ability of the Company to consummate the transactions
contemplated hereby. The Disclosure Package contains in all material respects
the same description of the foregoing matters contained in the Prospectus.
 
(u) Statutes; Contracts.  There are no statutes or regulations applicable to the
Company or contracts or other documents of the Company which are required to be
described in the Registration Statement, the Disclosure Package or the
Prospectus or filed as exhibits to the Registration Statement by the Securities
Act or by the Rules and Regulations which have not been so described or filed.
 
(v) Good Title to Property.  The Company has good and valid title to all
property (whether real or personal) described in the Registration Statement, the
Disclosure Package and the Prospectus as being owned by it, in each case free
and clear of all liens, claims, security interests, other encumbrances or
defects except such as are described in the Registration Statement, the
Disclosure Package and the Prospectus and those that would not, individually or
in the aggregate 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.  All of the property described in the Registration Statement,
the Disclosure Package and the Prospectus as being held under lease by the
Company is held thereby under valid, subsisting and enforceable leases, without
any liens, restrictions, encumbrances or claims, except those that, individually
or in the aggregate, are not material and do not materially interfere with the
use made and proposed to be made of such property by the Company.

(w) Intellectual Property Rights.  The Company owns, or has obtained valid and
enforceable licenses for, or other rights to use, the inventions, patent
applications, patents, trademarks (both registered and unregistered),
tradenames, copyrights, trade secrets and other proprietary information
described in the Registration Statement, the Disclosure Package and the
Prospectus as being owned or licensed by it or which are necessary for the
conduct of its business, except where the failure to own, license or have such
rights would not, individually or in the aggregate, result in a Material Adverse
Effect (collectively, “Intellectual Property”); except as described in the
Registration Statement, the Disclosure Package and the Prospectus (i) there are
no third parties who have or, to the Company’s knowledge, will be able to
establish rights to any Intellectual Property, except for the ownership rights
of the owners of the Intellectual Property which is licensed to the Company;
(ii) to the Company’s knowledge, there is no infringement by third parties of
any Intellectual Property; (iii) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others challenging
the Company’s rights in or to, or the validity, enforceability, or scope of, any
Intellectual Property owned by or licensed to the Company, and the Company is
unaware of any facts which could form a reasonable basis for any such claim;
(iv) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any facts which could form a
reasonable basis for any such claim; (v) to the Company’s knowledge, there is no
patent or patent application that contains claims that interfere with the issued
or pending claims of any of the Intellectual Property; and (vi) to the Company's
knowledge, each issued patent was validly issued under the laws of the country
that issued it.

(x) Financial Statements.  The financial statements of the Company, together
with the related schedules and notes thereto, set forth or incorporated by
reference in the Registration Statement, the Disclosure Package and the
Prospectus comply in all material respects with the applicable requirements of
the
 
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Securities Act and the Exchange Act, as applicable, and present fairly in all
material respects (i) the financial condition of the Company, taken as a whole,
as of the dates indicated and (ii) the consolidated results of operations,
stockholders’ equity and changes in cash flows of the Company, taken as a whole,
for the periods therein specified; and such financial statements and related
schedules and notes thereto have been prepared in conformity with United States
generally accepted accounting principles, consistently applied throughout the
periods involved (except as otherwise stated therein and subject, in the case of
unaudited financial statements, to the absence of footnotes and normal year-end
adjustments).  There are no other financial statements (historical or pro forma)
that are required to be included in the Registration Statement, the Disclosure
Package and the Prospectus; and the Company does not have any material
liabilities or obligations, direct or contingent (including any off-balance
sheet obligations), not disclosed in the Registration Statement, the Disclosure
Package and the Prospectus; and all disclosures contained in the Registration
Statement, the Disclosure Package and the Prospectus regarding “non-GAAP
financial measures” (as such term is defined by the rules and regulations of the
Commission) comply with Regulation G of the Exchange Act and Item 10(e) of
Regulation S-K of the Commission, to the extent applicable, and present fairly
the information shown therein and the Company’s basis for using such measures.

(y) Independent Accountants.  To the Company’s knowledge, KPMG LLP, who have
certified certain of the financial statements of the Company, is (i) an
independent public accounting firm within the meaning of the Securities Act and
the Rules and Regulations, (ii) a registered public accounting firm (as defined
in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”)), and (iii) not in violation of the auditor independence requirements of
the Sarbanes-Oxley Act.
 
(z) Taxes.  The Company has timely filed all federal, state, local and foreign
income and franchise tax returns (or timely filed applicable extensions
therefore) that have been required to be filed and are not in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than any which the Company is contesting
in good faith and for which adequate reserves have been provided and reflected
in the Company’s financial statements included in the Registration Statement,
the Disclosure Package and the Prospectus.  The Company does not have any tax
deficiency that has been or, to the knowledge of the Company, might be asserted
or threatened against it that would result in a Material Adverse Effect.

(aa) Nasdaq; Exchange Act Registration.  The Common Stock  is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and is accepted for
quotation on the Nasdaq Global Market, and the Company has taken no action
designed to, or likely to have the effect of, termination the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from the
Nasdaq Global Market, nor has the Company received any notification that the
Commission or FINRA is contemplating terminating such registration or listing.
The Company has complied in all material respects with the applicable
requirements of the Nasdaq Global Market for maintenance of inclusion of the
Common Stock thereon.  The Company has filed an application to include the
Shares and Warrant Shares on the Nasdaq Global Market.

(bb) Accounting Controls.  The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (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 existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  Except as described in the Registration Statement, in the
Disclosure Package and in the Prospectus, since the most recent audit of the
effectiveness of the Company’s internal control over financial
 
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reporting, there has been (i) no material weakness in the Company’s internal
control over financial reporting (whether or not remediated) and (ii) no change
in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
 
(cc) Disclosure Controls.  The Company has established, maintains and evaluates
“disclosure controls and procedures” (as such term is defined in Rule 13a-15(e)
and 15d-15(e) under the Exchange Act), which (i) are designed to ensure that
material information relating to the Company is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared, (ii) have been evaluated for
effectiveness as of the end of the last fiscal period covered by the
Registration Statement; and (iii) such disclosure controls and procedures are
effective to perform the functions for which they were established. There are no
significant deficiencies and material weaknesses in the design or operation of
internal controls which could adversely affect the Company’s ability to record,
process, summarize, and report financial data to management and the Board of
Directors. The Company is not aware of any fraud, whether or not material, that
involves management or other employees who have a role in the Company’s internal
controls; and since the date of the most recent evaluation of such disclosure
controls and procedures, there have been no significant changes in internal
controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
 
(dd) Sarbanes-Oxley Act.  The Company, and to its knowledge after due inquiry,
all of the Company’s directors or officers, in their capacities as such, is in
compliance in all material respects with all applicable effective provisions of
the Sarbanes-Oxley Act and any related rules and regulations promulgated by the
Commission.
 
(ee) Minute Books.  The minute books of the Company and each Subsidiary have
been made available to the Placement Agent and counsel for the Placement Agent,
and such books (i) contain a complete summary of all meetings and actions of the
board of directors (including each board committee) and shareholders of the
Company (or analogous governing bodies and interest holders, as applicable), and
each Subsidiary since the time of its respective incorporation or organization
through the date of the latest meeting and action, and (ii) accurately in all
material respects reflect all transactions referred to in such minutes.
 
 
(ff) Not an Investment Company.  The Company is not, nor after giving effect to
the offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will be, (i) required to register as an
“investment company” as defined in the Investment Company Act of 1940, as
amended (the “ Investment Company Act ”), and the rules and regulations of the
Commission thereunder or (ii) a “business development company” (as defined in
Section 2(a)(48) of the Investment Company Act).
 
(gg) Insurance.  The Company maintains insurance in such amounts and covering
such risks as is reasonably considered to be adequate for the conduct of its
business and the value of its properties and as is customary for companies
engaged in similar businesses in similar industries.  All such insurance is
fully in force on the date hereof and will be fully in force as of the Closing
Date.  The Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

(hh) Brokers Fees.  The Company is not a party to any contract, agreement or
understanding with any person (other than this Agreement) that would give rise
to a valid claim against the Company or the Placement Agent for a brokerage
commission, finder’s fee or other like payment in connection with the offering
and sale of the Securities.
 
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(ii) Integration.  The Company has not sold or issued any securities that would
be integrated with the offering of the Securities contemplated by this Agreement
pursuant to the Securities Act, the Rules and Regulations or the interpretations
thereof by the Commission.
 
(jj) Corrupt Practices.  Neither the Company nor, to the Company’s knowledge,
any other person associated with or acting on behalf of the Company, including
without limitation any director, officer, agent or employee of the Company has,
directly or indirectly, while acting on behalf of the Company (i) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds, (iii) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended or (iv) made
any other unlawful payment.

(kk)            Critical Accounting Policies.  The section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Policies” in the Company’s most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Q accurately and fully
describes (A) the accounting policies that the Company believes are the most
important in the portrayal of the Company’s financial condition and results of
operations and that require management’s most difficult, subjective or complex
judgments (“Critical Accounting Policies”); and (B) the judgments and
uncertainties affecting the application of Critical Accounting Policies.

(ll) No Price Stabilization.  Neither the Company nor, to the Company’s
knowledge, any of its officers, directors, affiliates or controlling persons has
taken or will take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.

(mm) No Undisclosed Relationships.  No relationship, direct or indirect, exists
between or among the Company on the one hand and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand which is
required to be described in the Registration Statement, the Disclosure Package
and the Prospectus which has not been so described.

(nn) Exchange Act Requirements. The Company has filed in a timely manner all
reports required to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d) of
the Exchange Act during the preceding 12 months (except to the extent that
Section 15(d) requires reports to be filed pursuant to Sections 13(d) and 13(g)
of the Exchange Act, which shall be governed by the next clause of this
sentence); and the Company has filed in a timely manner all reports required to
be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act since January
1, 2003, except where the failure to timely file could not reasonably be
expected individually or in the aggregate to have a Material Adverse Effect.

(oo) FINRA Affiliations.  To the Company’s knowledge, there are no affiliations
or associations between (i) any member of the FINRA and (ii) the Company or any
of the Company’s officers, directors or 5% or greater securityholders (other
than Neil Gagnon and Gagnon Securities LLC) or any beneficial owner of the
Company’s unregistered equity securities that were acquired from the Company at
any time on or after the one hundred eightieth (180th) day immediately preceding
the date the Registration Statement was initially filed with the Commission,
except as set forth in the Registration Statement, the Disclosure Package and
the Prospectus.

(pp) Compliance with Environmental Laws.  The Company (a) is in compliance with
any and all applicable foreign, federal, state and local laws, orders, rules,
regulations, directives, decrees and judgments relating to the protection of
human health and safety, the environment or hazardous or
 
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toxic substances or wastes, pollutants or contaminants (“Environmental Laws”),
(b) has received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct its business and (c) is in compliance
with all terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, individually or in
the aggregate, result in a Material Adverse Effect.  There are no costs or
liabilities associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, individually or in the aggregate,
result in a Material Adverse Effect.

(qq) No Labor Disputes.  The Company is not engaged in any unfair labor
practice; except for matters that would not, individually or in the aggregate,
result in a Material Adverse Effect  (i) there is (A) no unfair labor practice
complaint pending or, to the Company’s knowledge after due inquiry, threatened
against the Company before the National Labor Relations Board, and no grievance
or arbitration proceeding arising out of or under collective bargaining
agreements is pending or threatened, (B) no strike, labor dispute, slowdown or
stoppage pending or, to the Company’s knowledge after due inquiry, threatened
against the Company and (C) no union representation dispute currently existing
concerning the employees of the Company, and (ii) to the Company’s knowledge
(A) no union organizing activities are currently taking place concerning the
employees of the Company and (B) there has been no violation of any federal,
state, local or foreign law relating to discrimination in the hiring, promotion
or pay of employees or any applicable wage or hour laws concerning the employees
of the Company.

(rr) ERISA.  The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder (“ERISA”); no “reportable event” (as defined in ERISA) has occurred
with respect to any “pension plan” (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each “pension plan” for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.

(ss) Statistical or Market-Related Data.  Any statistical, industry-related and
market-related data included or incorporated by reference in the Registration
Statement, the Disclosure Package and the Prospectus, are based on or derived
from sources that the Company reasonably and in good faith believes to be
reliable and accurate, and such data agree with the sources from which they are
derived.

(tt) Clinical Studies.  The clinical, pre-clinical and other studies and tests
conducted by or on behalf of or sponsored by the Company or in which the Company
or products or product candidates have participated that are described in the
Registration Statement, the Disclosure Package and the Prospectus were and, if
still pending, are being conducted in accordance in all material respects with
all statutes, laws, rules and regulations, as applicable (including, without
limitation, those administered by the FDA or by any foreign, federal, state or
local governmental or regulatory authority performing functions similar to those
performed by the FDA) and with standard medical and scientific research
procedures.  The descriptions in the Registration Statement, the Disclosure
Package and the Prospectus of the results of such studies and tests are accurate
and complete in all material respects and fairly present the published data
derived from such studies and tests.  The Company has not received any notices
or
 
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other correspondence from the FDA or any other foreign, federal, state or local
governmental or regulatory authority performing functions similar to those
performed by the FDA with respect to any ongoing clinical or pre-clinical
studies or tests requiring the termination, suspension or material modification
of such studies or tests, which such termination, suspension or material
modification would reasonably be expected to result in a Material Adverse
Effect.  The Company is in compliance with all applicable federal, state, local
and foreign laws, regulations, orders and decrees governing its business as
prescribed by the FDA, or any other federal, state or foreign agencies or
bodies, including those bodies and agencies engaged in the regulation of
pharmaceuticals or biohazardous substances or materials, except where
noncompliance would not, singly or in the aggregate, result in a Material
Adverse Effect.

Any certificate signed by any officer of the Company and delivered to the
Placement Agent or to counsel for the Placement Agent in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company to the Placement Agent and the Investors as to the matters covered
thereby.

3. Covenants.  The Company covenants and agrees with the Placement Agent as
follows:

(a) Reporting Obligations; Exchange Act Compliance.  The Company will (i)
prepare the Prospectus in a form approved by the Placement Agent containing
information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rules 430A, 430B and 430C and to file such Prospectus
with the Commission within the time periods specified by Rule 424(b) and Rules
430A and 430B, as applicable under the Securities Act, (ii) not file any
amendment to the Registration Statement or distribute an amendment or supplement
to the Disclosure Package or the Prospectus or document incorporated by
reference therein of which the Placement Agent shall not previously have been
advised and furnished with a copy or to which the Placement Agent shall have
reasonably objected in writing or which is not in compliance with the Rules and
Regulations and (iii) promptly file all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of the Prospectus and during such period as the Prospectus would be
required by law to be delivered  (whether physically or through compliance with
Rule 172 under the Securities Act or any similar rule) (the “Prospectus Delivery
Period”).

(b) Abbreviated Registration Statement.  If the Company elects to rely upon Rule
462(b) under the Securities Act, the Company shall file a registration statement
under Rule 462(b) with the Commission in compliance with Rule 462(b) by
8:00 a.m., Washington, D.C. time, on the business day next succeeding the date
of this Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for such Rule 462(b) registration statement or give
irrevocable instructions for the payment of such fee pursuant to the Rules and
Regulations.

(c) Issuer Free Writing Prospectuses.  The Company will (i) not make any offer
relating to the Securities that would constitute an Issuer Free Writing
Prospectus or that would otherwise constitute a “free writing prospectus” (as
defined in Rule 405 under the Securities Act) required to be filed by the
Company with the Commission under Rule 433 under the Securities Act unless the
Placement Agent approves its use in writing prior to first use (each, a
“Permitted Free Writing Prospectus”); provided that the prior written consent of
the Placement Agent hereto shall be deemed to have been given in respect of the
Issuer Free Writing Prospectus(es) included in Schedule I hereto, (ii) treat
each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus,
(iii) comply with the requirements of Rules 164 and 433 under the Securities Act
applicable to any Issuer Free Writing Prospectus, including the requirements
relating to timely filing with the Commission, legending and record keeping and
(iv) not take any action that would result in a Placement Agent or the Company
being required to file with the
 
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Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of such Placement Agent that such Placement
Agent otherwise would not have been required to file thereunder. The Company
will satisfy the conditions in Rule 433 under the Securities Act to avoid a
requirement to file with the Commission any electronic road show.

(d) [Reserved.]

(e) Notice to Placement Agent.  The Company will notify the Placement Agent
promptly, and will, if requested, confirm such notification in writing: (i) of
the receipt of any comments of, or requests for additional or supplemental
information from, the Commission; (ii) of the time and date of any filing of any
post-effective amendment to the Registration Statement or any amendment or
supplement to any Preliminary Prospectus, the Disclosure Package or the
Prospectus, (iii) the time and date when any post-effective amendment to the
Registration Statement becomes effective, but only during the Prospectus
Delivery Period; (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, or any
post-effective amendment thereto or any order preventing or suspending the use
of any Preliminary Prospectus, the Disclosure Package, the Prospectus or any
Issuer Free Writing Prospectus, or the initiation of any proceedings for that
purpose or pursuant to Section 8A of the Securities Act or the threat thereof,
but only during the Prospectus Delivery Period; (v) of receipt by the Company of
any notification with respect to any suspension or the approval of the Shares
and Warrant Shares from any securities exchange upon which it is listed for
trading or included or designated for quotation, or the initiation or
threatening of any proceeding for such purpose.   The Company will use its
reasonable best efforts to prevent the issuance or invocation of any such stop
order or suspension by the Commission and, if any such stop order or suspension
is so issued or invoked, to obtain as soon as possible the withdrawal or removal
thereof.

(f) Filing of Amendments or Supplements. If, during the Prospectus Delivery
Period, any event shall occur or condition exist as a result of which, in the
judgment of the Company or in the reasonable opinion of the Placement Agent, it
becomes necessary to amend or supplement the Prospectus (or, if the Prospectus
is not yet available to prospective purchasers, the Disclosure Package) in order
to make the statements therein, in the light of the circumstances when the
Prospectus (or, if the Prospectus is not yet available to prospective
purchasers, the Disclosure Package) is delivered to an Investor, not misleading,
or if it is necessary to amend or supplement the Prospectus (or, if the
Prospectus is not yet available to prospective purchasers, the Disclosure
Package) to comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Placement Agent, either
amendments or supplements to the Prospectus (or, if the Prospectus is not yet
available to prospective purchasers, the Disclosure Package) so that the
statements in the Prospectus (or, if the Prospectus is not yet available to
prospective purchasers, the Disclosure Package) as so amended or supplemented
will not, in the light of the circumstances when the Prospectus (or, if the
Prospectus is not yet available to prospective purchasers, the Disclosure
Package) is delivered to an Investor, be misleading or so that the Prospectus
(or, if the Prospectus is not yet available to prospective purchasers, the
Disclosure Package), as amended or supplemented, will comply with law.

(g) Conflicting Issuer Free Writing Prospectus.  If at any time following
issuance of an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing Prospectus
conflicted or would conflict with the information contained in the Registration
Statement relating to the Securities or included or would include an untrue
statement of a material fact or omitted or would omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances prevailing at that subsequent time, not misleading, the Company
promptly will notify the Placement Agent and will promptly amend or supplement,
at its own expense, such Issuer Free Writing Prospectus to eliminate or correct
such conflict, untrue statement or omission.
 
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(h) Delivery of Copies.  The Company will deliver promptly to the Placement
Agent and its counsel such number of the following documents as the Placement
Agent shall reasonably request:  (i) conformed copies of the Registration
Statement as originally filed with the Commission and each amendment thereto (in
each case excluding exhibits), (ii) copies of each Preliminary Prospectus, if
any; (iii) any Issuer Free Writing Prospectus, (iv) during the Prospectus
Delivery Period, copies of the Prospectus (or any amendments or supplements
thereto); (v) any document incorporated by reference in the Prospectus (other
than any such document that is filed with the Commission electronically via
EDGAR or any successor system) and (vi) all correspondence to and from, and all
documents issued to and by, the Commission in connection with the registration
of the Securities under the Securities Act.

(i) Blue Sky Laws.  The Company will promptly take or cause to be taken, from
time to time, such actions as the Placement Agent may reasonably request to
qualify the Securities for offering and sale under the state securities, or blue
sky, laws of such states or other jurisdictions as the Placement Agent may
reasonably request and to maintain such qualifications in effect so long as the
Placement Agent may request for the distribution of the Securities, provided,
that in no event shall the Company be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file a
general consent to service of process in any jurisdiction or subject itself to
taxation as doing business in any jurisdiction.  The Company will advise the
Placement Agent promptly of the suspension of the qualification or registration
of (or any exemption relating to) the Securities for offering, sale or trading
in any jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.

(j) Earnings Statement.  As soon as practicable, but in any event not later than
18 months after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Securities Act), the Company will make generally available
to holders of its securities and deliver to the Placement Agent, an earnings
statement of the Company (which need not be audited) that will satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 of the Rules and
Regulations.

(k) Use of Proceeds.  The Company will apply the net proceeds from the sale of
the Securities in the manner set forth in the Disclosure Package and the
Prospectus under the heading “Use of Proceeds”.
 
(l) Lock-Up Period.  Beginning on the date hereof and continuing for a period of
90 days after the date of the Prospectus (the “Lock-Up Period”), the Company
will not (1) offer to sell, hypothecate, pledge, announce the intention to sell,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act, with respect to,
any shares of Common Stock, any securities convertible into or exercisable or
exchangeable for Common Stock; (2) file or cause to become effective a
registration statement under the Securities Act relating to the offer and sale
of any shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock except for a registration statement on Form S-8
relating to employee benefit plans or (3) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i), (ii) or (iii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise, without the prior written consent of the
Placement Agent (which consent may be withheld in its sole discretion), other
than (i) the Securities to be sold hereunder, (ii) the issuance of employee
stock options pursuant to stock option plans described in the Registration
Statement (excluding the exhibits thereto), the Disclosure Package and the
Prospectus, (iii) issuances of Common
 
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Stock upon the exercise of options or warrants (either upon current terms
thereof or upon subsequently amended terms but excluding a general repricing)
disclosed as outstanding in the Registration Statement (excluding the exhibits
thereto), the Disclosure Package and the Prospectus or upon the conversion or
exchange of convertible or exchangeable securities outstanding as of the date of
this Agreement; (iv) the issuance by the Company of any shares of Common Stock
as consideration for mergers, acquisitions, other business combinations, or
strategic alliances, occurring after the date of this Agreement; provided that
each recipient of shares pursuant to this clause (iv) agrees that all such
shares remain subject to restrictions substantially similar to those contained
in this Section 3(l); or (v) the purchase or sale of the Company’s securities
pursuant to a plan, contract or instruction that satisfies all of the
requirements of Rule 10b5-1(c)(1)(i)(B) that was in effect prior to the date
hereof.  Notwithstanding the foregoing, for the purpose of allowing the
Placement Agent to comply with FINRA Rule 2711(f)(4), if (1) during the last 17
days of the Lock-Up Period, the Company releases earnings results or publicly
announces other material news or a material event relating to the Company occurs
or (2) prior to the expiration of the Lock-Up Period, the Company announces that
it will release earnings results during the 16 day period beginning on the last
day of the Lock-Up Period, then in each case the Lock-Up Period will be extended
until the expiration of the 18 day period beginning on the date of release of
the earnings results or the public announcement regarding the material news or
the occurrence of the material event, as applicable, unless the Placement Agent
waives, in writing, such extension.  The Company agrees not to accelerate the
vesting of any option or warrant or the lapse of any repurchase right prior to
the expiration of the Lock-Up Period.
 
(m) Lock-Up Agreements.  The Company will cause each of its executive officers
and directors whose names are set forth on Exhibit C hereto to furnish to the
Placement Agent, on the date hereof, a letter, substantially in the form of
Exhibit B hereto (the “Lock-Up Agreement”).  The Company will enforce the terms
of each Lock-Up Agreement and issue stop transfer instructions to the transfer
agent for the Common Stock with respect to any transaction or contemplated
transaction that would constitute a breach or default under the applicable
Lock-Up Agreement.

(n) Public Communications.  Prior to the Closing Date, the Company will not
issue any press release or other communication directly or indirectly or hold
any press conference with respect to the Company, its condition, financial or
otherwise, or its earnings, business, operations or prospects, or the offering
of the Securities, without the prior written consent of the Placement Agent,
unless in the reasonable judgment of the Company and its counsel, and after
notification to the Placement Agent, such press release or communication is
required by law or by Nasdaq rules, in which case the Company shall use its
reasonable best efforts to allow the Placement Agent reasonable time to comment
on such release or other communication in advance of such issuance.

(o) Stabilization.  The Company will not take, directly or indirectly, any
action designed, or that might reasonably be expected to cause or result in, or
that will constitute, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of any of the Securities.

(p) Transfer Agent.  The Company shall engage and maintain, at its expense, a
transfer agent and, if necessary under the jurisdiction of incorporation of the
Company, a registrar for the Shares and Warrant Shares.

(q) Listing.  The Company shall use its commercially reasonable efforts to cause
the Shares and Warrant Shares to be listed for quotation on the Nasdaq Global
Market at the Closing Date and to maintain such listing.  In addition, the
Company shall use its commercially reasonable efforts to cause the Warrants to
be listed for quotation on the Nasdaq Global Market as soon as practicable and
to
 
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maintain such listing until the earlier to occur of (i) the expiration date of
the Warrants and (ii) such time as all of the Warrants have been exercised in
full.
 
(r) Investment Company Act.  The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Securities in such a
manner as would require the Company to register as an investment company under
the Investment Company Act.

(s) Broker’s Fee. The Company will not incur any liability for any finder’s or
broker’s fee or agent’s commission in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby
(other than as set forth in this Agreement).
 
(t) Interim Financial Statements. Prior to the Closing Date, the Company will
furnish to the Placement Agent, as soon as practicable after they have been
prepared, copies of any unaudited interim consolidated financial statements of
the Company for any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the Prospectus.
 
(u) Reservation of Warrant Shares.  The Company shall reserve and keep available
at all times a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue the Warrant Shares.
 
(v) Performance. The Company shall use its best efforts to do and perform all
things required to be done or performed under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.
 
4. Costs and Expenses.  The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will pay
or reimburse if paid by the Placement Agent all reasonable costs and expenses
incident to the performance of the obligations of the Company under this
Agreement and in connection with the transactions contemplated hereby, including
but not limited to costs and expenses of or relating to (i) the preparation,
printing, filing, delivery and shipping of the Registration Statement, any
Issuer Free Writing Prospectus, each Preliminary Prospectus, the Disclosure
Package and the Prospectus, and any amendment or supplement to any of the
foregoing and the printing and furnishing of copies of each thereof to the
Placement Agent and dealers (including costs of mailing and shipment), (ii) the
registration, issue, sale and delivery of the Securities including any stock or
transfer taxes and stamp or similar duties payable upon the sale, issuance or
delivery of the Securities and the printing, delivery, and shipping of the
certificates representing the Securities, (iii) the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions designated pursuant to Section 3(i), (including
the reasonable legal fees and filing fees, and other disbursements of counsel to
the Placement Agent in connection therewith), and, if reasonably requested by
the Placement Agent, the preparation and printing and furnishing of copies of
any blue sky surveys to the Placement Agent and to dealers,  (iv) the fees and
expenses of any transfer agent or registrar for the Shares and Warrant Shares,
(v) any filings required to be made by the Placement Agent or the Company with
FINRA, and the reasonable fees, disbursements and other charges of counsel for
the Placement Agent in connection with the FINRA’s review and approval of the
Placement Agent’s participation in the offering (including all COBRADesk fees),
(vi) fees, disbursements and other charges of counsel to the Company, (vii)
listing fees, if any, for the listing or quotation of the Shares, Warrants and
Warrant Shares on the Nasdaq Global Market, (viii) fees and disbursements of the
Company’s auditor incurred in delivering the letter(s) described in Sections
5(j) and (k) of this Agreement, (ix) fees of the Escrow Agent, (x) fees,
disbursements and other charges of counsel to the Placement Agent (in addition
to (iii) and (v) above), and (xi) the costs and expenses of the Company and the
Placement Agent in connection with the marketing of the offering and the sale of
the Securities to prospective investors
 
 
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including, but not limited to, those related to any presentations or meetings
undertaken in connection therewith including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged with the written consent of the Company in
connection with the road show presentations, travel, lodging and other expenses
incurred by the officers of the Company and any such consultants, and the cost
of any aircraft or other transportation chartered in connection with the road
show.  If this Agreement shall be terminated by the Placement Agent pursuant to
Section 8 hereof, the Company will, in addition to paying the amounts described
in Section 4 hereof, reimburse the Placement Agent for all of its reasonable
out-of-pocket disbursements (including, but not limited to, the fees and
disbursements of its counsel) incurred by the Placement Agent in connection with
its investigation, preparing to market and marketing of the Securities or in
contemplation of performing its obligations hereunder.

5. Conditions of Placement Agent’s Obligations.  The obligations of the
Placement Agent hereunder and the Investors under the Subscription Agreements
are subject to the following conditions:

(a) Filings with the Commission.  The Preliminary Prospectus (if any),
Prospectus and any Issuer Free Writing Prospectus required to be filed under the
Securities Act or the Rules and Regulations shall have been filed with the
Commission pursuant to Rule 424(b) or Rule 164, as the case may be, in the
manner and within the time period so required.

(b) Abbreviated Registration Statement.  If the Company has elected to rely upon
Rule 462(b), the registration statement filed under Rule 462(b) shall have
become effective under the Securities Act by 8:00 a.m., Washington, D.C. time,
on the business day next succeeding the date of this Agreement.

(c) No Stop Orders.  Prior to the Closing: (i) no stop order suspending the
effectiveness of the Registration Statement or any part thereof, preventing or
suspending the use of any Base Prospectus, any Preliminary Prospectus, the
Prospectus or Permitted Free Writing Prospectus or any part thereof shall have
been issued under the Securities Act and no proceedings for that purpose or
pursuant to Section 8A under the Securities Act shall have been initiated or
threatened by the Commission, (ii) no order suspending the qualification or
registration of the Securities under the securities or blue sky laws of any
jurisdiction shall be in effect and (iii) all requests for additional
information on the part of the Commission (to be included or incorporated by
reference in the Registration Statement, the Disclosure Package, the Prospectus
or any Issuer Free Writing Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of the Placement Agent.

(d)            Action Preventing Issuance.  No action shall have been taken and
no statute, rule, regulation or order shall have been enacted, adopted or issued
by any governmental agency or body which would, as of the Closing Date, prevent
the issuance or sale of the Securities or materially and adversely affect or
reasonably be believed to potentially materially and adversely affect the
business or operations of the Company; and no injunction, restraining order or
order of any other nature by any federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance or sale of the Securities or materially and adversely affect or
reasonably be believed to potentially materially and adversely affect the
business or operations of the Company.

(e) Objection of Placement Agent.  No Prospectus or amendment or supplement to
the Registration Statement shall have been filed to which the Placement Agent
shall have objected in writing, which objection shall not be unreasonable.  The
Placement Agent shall not have in good faith advised the Company on or prior to
the Closing Date that the Registration Statement or any amendment thereof or
supplement thereto contains an untrue statement of fact which, in its opinion,
is material, or omits to state a fact which, in its opinion, is material and is
required to be stated therein or necessary to make
 
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the statements therein not misleading, or that the Disclosure Package or any
Issuer Free Writing Prospectus or the Prospectus or any amendment thereof or
supplement thereto contains an untrue statement of fact which, in its opinion,
is material, or omits to state a fact which, in its opinion, is material and is
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

(f) No Material Adverse Change.  Prior to the Closing, there shall not have
occurred any change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business, operations or
prospects of the Company, taken as a whole, from that set forth in the
Disclosure Package and the Prospectus that, in the Placement Agent’s judgment,
is material and adverse and that makes it, in the Placement Agent’s judgment,
impracticable to market the Securities on the terms and in the manner
contemplated in the Disclosure Package.

(g) Representations and Warranties.  Each of the representations and warranties
of the Company contained herein shall be true and correct in all material
respects (except for those representations and warranties which are qualified by
materiality, in which case such representations and warranties shall be true and
correct in all respects) when made and on and as of the Closing Date, as if made
on such date (except that those representations and warranties that address
matters only as of a particular date shall remain true and correct in all
material respects (except for those representations and warranties which are
qualified by materiality, in which case such representations and warranties
shall be true and correct in all respects) as of such date), and all covenants
and agreements herein contained to be performed on the part of the Company and
all conditions herein contained to be fulfilled or complied with by the Company
at or prior to the Closing Date shall have been duly performed, fulfilled or
complied with in all material respects.

(h) Opinion of Counsel to the Company.  The Placement Agent shall have received
from DLA Piper US LLP, counsel to the Company, such counsel’s written opinion,
addressed to the Placement Agent and the Investors and dated the Closing Date,
in form and substance as is set forth on Exhibit D attached hereto.  Such
counsel shall also have furnished to the Placement Agent a written statement
(“Negative Assurance”), addressed to the Placement Agent and dated the Closing
Date, in form and substance as set forth in Exhibit E attached hereto.

(i) Opinion of Counsel to the Placement Agent.  The Placement Agent shall have
received from Goodwin Procter LLP, counsel to the Placement Agent, such opinion
or opinions (including Negative Assurance), dated the Closing Date and addressed
to the Placement Agent, covering such matters as are customarily covered in
transactions of this type.

(j) Accountant’s Comfort Letter.  The Placement Agent shall have received on the
date of the Time of Sale, a letter dated the date hereof, (the “Original
Letter”), addressed to the Placement Agent and in form and substance reasonably
satisfactory to the Placement Agent and its counsel, from KPMG LLP, which letter
shall cover, without limitation, the various financial disclosures, if any,
contained in the Disclosure Package and shall contain statements and information
of the type customarily included in accountants’ “comfort letters” to
underwriters, delivered according to Statement of Auditing Standards No. 72 and
Statement of Auditing Standard No. 100 (or successor bulletins), with respect to
the audited and unaudited financial statements and certain financial information
contained in or incorporated by reference into the Registration Statement, the
Disclosure Package and the Prospectus. 

(k)            Bring-Down Letter.  At the Closing Date, the Placement Agent
shall have received from KPMG LLP a letter (the “Bring-Down Letter”), dated the
Closing Date, addressed to the Placement Agent, which shall confirm, as of the
date of the Bring-Down Letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
 
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information is given in the Disclosure Package and the Prospectus, as the case
may be, as of a date nor more than three (3) business days prior to the date of
the Bring-Down Letter) that on the basis of a review in accordance with the
procedures set forth in the Original Letter, that nothing has come to their
attention during the period from the date of the Original Letter referred to in
the prior sentence to a date (specified in the letter) not more than three days
prior to the Closing Date which would require any change in the Original Letter
if it were required to be dated and delivered at the Closing Date.

(l) Officer’s Certificate.  The Placement Agent shall have received on the
Closing Date a certificate, addressed to the Placement Agent and dated the
Closing Date, of the chief executive or chief operating officer and the chief
financial officer or chief accounting officer of the Company to the effect that:

(i) each of the representations, warranties and agreements of the Company in
this Agreement were true and correct in all material respects (except for those
representations and warranties which are qualified by materiality, in which case
such representations and warranties shall be true and correct in all respects)
when originally made and are true and correct in all material respects (except
for those representations and warranties which are qualified by materiality, in
which case such representations and warranties shall be true and correct in all
respects) as of the Time of Sale and the Closing Date; and the Company has
complied in all material respects with all agreements and satisfied all the
conditions on its part required under this Agreement to be performed or
satisfied at or prior to the Closing Date;

(ii) subsequent to the respective dates as of which information is given in the
Disclosure Package (taking into account any updates included within the
Disclosure Package), there has not been (A) a material adverse change or any
development involving a prospective material adverse change in the general
affairs, business, prospects, properties, management, financial condition or
results of operations of the Company, taken as a whole, (B) any transaction that
is material to the Company, taken as a whole, except transactions entered into
in the ordinary course of business, (C) any obligation, direct or contingent,
that is material to the Company, taken as a whole, incurred by the Company,
except obligations incurred in the ordinary course of business, (D) any change
in the capital stock (other than a change in the number of outstanding shares of
Common Stock due to the issuance of shares upon the exercise of outstanding
options or warrants) or any material change in the short term or long term
indebtedness of the Company, taken as a whole, (E) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company or (F)
any loss or damage (whether or not insured) to the property of the Company which
has been sustained or will have been sustained which has had or is reasonably
likely to result in a Material Adverse Effect.

(iii) no stop order suspending the effectiveness of the Registration Statement
or any part thereof or any amendment thereof or the qualification of the
Securities for offering or sale, nor suspending or preventing the use of the
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall
have been issued, and no proceedings for that purpose or pursuant to Section 8A
under the Securities Act shall be pending or to their knowledge, threatened by
the Commission or any state or regulatory body; and

(iv) the signers of said certificate have reviewed the Registration Statement,
the Disclosure Package, any Permitted Free Writing Prospectus and the
Prospectus, and any amendments thereof or supplements thereto (and any documents
filed under the Exchange Act and deemed to be incorporated by reference into the
Disclosure Package and the Prospectus), and (A) (i) each part of the
Registration Statement and any amendment thereof do not and did not contain when
the Registration Statement (or such amendment) became effective, any untrue
statement of a material fact or omit to state, and did not omit to state when
the Registration Statement (or such amendment) became effective, any material
fact required to be stated therein
 
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or necessary to make the statements therein not misleading, (ii) as of the Time
of Sale, neither the Disclosure Package nor any individual Issuer Free Writing
Prospectus, when considered together with the Disclosure Package, contained any
untrue statement of material fact or omits to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading and (iii) the Prospectus, as amended or supplemented,
does not contain, as of the Closing Date, and did not contain, as of its issue
date, any untrue statement of material fact or omit to state and did not omit to
state as of such date, a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(B) since the Time of Sale, there has occurred no event required to be set forth
in an amendment or supplement to the Registration Statement, the Disclosure
Package or the Prospectus which has not been so set forth and there has been no
document required to be filed under the Exchange Act that upon such filing would
be deemed to be incorporated by reference in to the Disclosure Package and into
the Prospectus that has not been so filed.

(m) Secretary’s Certificate.  On the Closing Date, the Company shall have
furnished to the Placement Agent a Secretary’s Certificate of the Company.

(n) The Nasdaq Global Market.  The Shares and Warrant Shares shall have been
listed and authorized for trading on the Nasdaq Global Market.

(o) Other Filings with the Commission.  The Company shall have prepared and
filed with the Commission a Current Report on Form 8-K with respect to the
transactions contemplated hereby, and filed with the Commission including as an
exhibit thereto this Agreement and any other material documents relating
thereto.

(p) No FINRA Objection.  FINRA shall not have raised any unresolved objection
with respect to the fairness and reasonableness of the placement agency terms
and arrangements relating to the issuance and sale of the Securities.

(q) Lock-Up Agreements.  The Placement Agent shall have received copies of the
executed Lock-Up Agreements executed by each person listed on Exhibit C hereto,
and such Lock-Up Agreements shall be in full force and effect on the Closing
Date.
 
(r) Subscription Agreements.  The Placement Agent shall have entered into the
Subscription Agreements with each of the Investors, and such agreements shall be
in full force and effect on the Closing Date.
 
(s) Escrow Agreement.  The Placement Agent shall have entered into the Escrow
Agreement, and such agreement shall be in full force and effect on the Closing
Date.
 
(t) Additional Documents.  Prior to the Closing Date, the Company shall have
furnished to the Placement Agent such further information, certificates or
documents as the Placement Agent shall have reasonably requested.

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

6. Indemnification and Contribution.

(a) Indemnification of the Placement Agent.  The Company agrees to indemnify,
defend and hold harmless the Placement Agent, its directors and officers, and
each person, if any, who
 
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controls the Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, and the successors and assigns
of all of the foregoing persons, from and against any loss, damage, claim or
liability, which, jointly or severally, the Placement Agent or any such person
may become subject under the Securities Act, the Exchange Act, or other federal
or state statutory law or regulation, the common law or otherwise, (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, damage, claim or liability (or
actions in respect thereof as contemplated below) arises out of or is based
upon: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto (including the
information deemed to be a part of the Registration Statement at the time of
effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the
Rules and Regulations, if applicable) or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Base Prospectus, any Preliminary
Prospectus, any Issuer Free Writing Prospectus, any “issuer information” filed
or required to be filed pursuant to Rule 433(d) of the Rules and Regulations or
the Prospectus (or any amendment or supplement thereto including any documents
filed under the Exchange Act and deemed to be incorporated by reference into the
Prospectus), or in any materials or information provided to investors by, or
with the approval of, the Company in connection with the marketing of the
offering of the Common Stock (“Marketing Materials”), including any roadshow or
investor presentations made to investors by the Company (whether in person or
electronically) or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; and, in the case of (i) and (ii) above, to reimburse the Placement
Agent and each such controlling person for any and all reasonable expenses
(including reasonable fees and disbursements of counsel) as such expenses are
incurred by the Placement Agent or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action, (iii) any untrue statement or alleged
untrue statement made by the Company in Section 3 hereof or the failure by the
Company to perform when and as required any agreement or covenant contained
herein or (iv) any untrue statement or alleged untrue statement of any material
fact contained in any audio or visual materials provided to Investors by or with
the approval of the Company or based upon written information furnished by or on
behalf of the Company including, without limitation, slides, videos, films or
tape recordings used in any road show or investor presentations made to
investors by the Company (whether in person or electronically) or in connection
with the marketing of the Securities; provided, however, that the foregoing
indemnity shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, it arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in or omitted
from the Registration Statement, the Base Prospectus, any Preliminary
Prospectus, the Prospectus, or any such amendment or supplement, any Issuer Free
Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) of the Rules and Regulations or in any Marketing
Materials, in reliance upon and in conformity with information concerning the
Placement Agent furnished in writing by or on behalf of the Placement Agent to
the Company expressly for use therein, which information the parties hereto
agree is limited to the Placement Agent Information.

(b) Indemnification of the Company.  The Placement Agent agrees to indemnify,
defend and hold harmless the Company, its directors and officers, and any
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, and the successors and
assigns of all of the foregoing persons, from and against any loss, claim,
damage, liability or expense, as incurred to which, jointly or severally, the
Company or any such person may become subject under the Securities Act, the
Exchange Act, or other federal or state statutory law or regulation, the common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Placement Agent), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon (i) any untrue
 
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statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, or the omission or alleged
omission therefrom to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Disclosure Package, the Prospectus, or any amendment
or supplement thereto or any Issuer Free Writing Prospectus, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading, in the case of each of (i) and (ii)
above, to the extent but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Disclosure Package, the Prospectus (or any amendment
or supplement thereto) or any Issuer Free Writing Prospectus in reliance upon
and in conformity with information concerning the Placement Agent furnished in
writing by or on behalf of the Placement Agent to the Company expressly for use
therein, which information the parties hereto agree is limited to the Placement
Agent Information and shall reimburse the Company, or any such director, officer
or controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action.  Notwithstanding the provisions of this
Section 6(b), in no event shall any indemnity by the Placement Agent under this
Section 6(b) exceed the total compensation received by such Placement Agent in
accordance with Section 1(c).

(c) Notice and Procedures.  If any action, suit or proceeding (each, a
“Proceeding”) is brought against a person (an “indemnified party”) in respect of
which indemnity may be sought against the Company or the Placement Agent (as
applicable, the “indemnifying party”) pursuant to subsection (a) or (b),
respectively, of this Section 6, such indemnified party shall promptly notify
such indemnifying party in writing of the institution of such Proceeding and
such indemnifying party shall assume the defense of such Proceeding, including
the employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses; provided, however, that the omission to so
notify such indemnifying party shall not relieve such indemnifying party from
any liability which such indemnifying party may have to any indemnified party or
otherwise, except to the extent the indemnifying party does not otherwise learn
of the Proceeding and such failure results in the forfeiture by the indemnifying
party of substantial rights or defenses. The indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by the indemnifying party in connection with the defense of such
Proceeding, (ii) the indemnifying party shall not have, within a reasonable
period of time in light of the circumstances, employed counsel to defend such
Proceeding or (iii) such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
which are different from, additional to or in conflict with those available to
such indemnifying party (in which case such indemnifying party shall not have
the right to direct the defense of such Proceeding on behalf of the indemnified
party or parties ), in any of which events such reasonable fees and expenses
shall be borne by such indemnifying party and paid as incurred (it being
understood, however, that such indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to any local counsel) in
any one Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such Proceeding). An
indemnifying party shall not be liable for any settlement of any Proceeding
effected without its written consent but, if settled with its written consent or
if there be a final judgment for the plaintiff, such indemnifying party agrees
to indemnify and hold harmless the indemnified party or parties from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second sentence of this Section 6(c), then the
indemnifying party agrees that it shall be liable for any settlement of any
Proceeding effected without its written consent if (i) such settlement is
 
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entered into more than 60 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall not have fully reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days’ prior notice of its intention to settle. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement, compromise or consent to the entry of judgment in any pending or
threatened Proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such Proceeding and does not include an admission of fault or culpability or a
failure to act by or on behalf of such indemnified party.

(d) Contribution.  If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under subsections (a) or (b) of this
Section 6 or insufficient to hold an indemnified party harmless in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party shall, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to in subsection (a) or (b) above, (i) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations.  The relative benefits received by the Company on the one hand
and the Placement Agent on the other hand shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities (before deducting expenses) received by the Company and the total
placement agent commissions received by the Placement Agent, in each case as set
forth on the cover of the Prospectus, bear to the aggregate public offering
price of the Securities.  The relative fault of the Company on the one hand and
the Placement Agent on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Placement Agent,
on the other hand, and the parties’ relevant intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement,
omission, act or failure to act; provided that the parties hereto agree that the
written information furnished to the Company by the Placement Agent for use in
any Preliminary Prospectus, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto, consists solely of the Placement Agent
Information.  The Company and the Placement Agent agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the first
sentence of this Section 6(d).  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this Section 6(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject of
this Section 6(d).  Notwithstanding the provisions of this Section 6(d), the
Placement Agent shall not be required to contribute any amount in excess of the
total commissions received by such Placement Agent in accordance with Section
1(c).  No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

(e) Representations and Agreements to Survive Delivery.  The obligations of the
Company under this Section 6 shall be in addition to any liability which the
Company may otherwise have.  The indemnity and contribution agreements contained
in this Section 6 and the covenants,
 
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agreements, warranties and representations of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agent, any person who controls the Placement Agent within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act or any affiliate of the Placement Agent, or by or on behalf of the Company,
its directors or officers or any person who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, and (iii) the issuance and delivery of the Securities. The Company and the
Placement Agent agree promptly to notify each other of the commencement of any
Proceeding against it and, in the case of the Company, against any of the
Company’s officers or directors in connection with the issuance and sale of the
Securities, or in connection with the Registration Statement, the Disclosure
Package or the Prospectus.

7. Information Furnished by Placement Agent.  The Company acknowledges that the
statements set forth in (a) the third sentence of the sixth paragraph and (b)
the tenth paragraph under the heading “Plan of Distribution” in the Prospectus
(the “Placement Agent Information”) constitute the only information relating to
the Placement Agent furnished in writing to the Company by the Placement Agent
as such information is referred to in Sections 2 and 6 hereof.

8. Termination.  (a)  The Placement Agent shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior to
the Closing Date, without liability on the part of the Placement Agent to the
Company, if (i) prior to delivery and payment for the Securities (A) trading in
securities generally shall have been suspended on or by the New York Stock
Exchange, the NYSE Alternext (formerly known as the American Stock Exchange),
the Nasdaq Global Market or in the over-the-counter market, (each, a “Trading
Market”), (B) trading in the Common Stock of the Company shall have been
suspended on any such exchange, in the over-the-counter market or by the
Commission, (C) a general moratorium on commercial banking activities shall have
been declared by federal or New York state authorities or a material disruption
shall have occurred in commercial banking or securities settlement or clearance
services in the United States, (D) there shall have occurred any outbreak or
material escalation of hostilities or acts of terrorism involving the United
States or there shall have been a declaration by the United States of a national
emergency or war, (E) there shall have occurred any other calamity or crisis or
any material change in general economic, political or financial conditions in
the United States or elsewhere, if the effect of any such event specified in
clause (D) or (E), in the judgment of the Placement Agent, is material and
adverse and makes it impractical or inadvisable to proceed with the completion
of the sale of and payment for the Securities on the Closing Date on the terms
and in the manner contemplated by this Agreement, the Disclosure Package and the
Prospectus, (ii) since the time of execution of this Agreement or the earlier
respective dates as of which information is given in the Disclosure Package or
incorporated by reference therein, there has been any Material Adverse Effect or
the Company shall have sustained a loss or interference with its business by
strike, fire, flood, earthquake, accident or other calamity, whether or not
covered by insurance, of such character that in the judgment of the Placement
Agent would, individually or in the aggregate, result in a Material Adverse
Effect and which would, in the judgment of the Placement Agent, make it
impracticable or inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in the Disclosure
Package, (iii) the Company shall have failed, refused or been unable to comply
with the terms or perform any agreement or obligation of this Agreement or any
Subscription Agreement, other than by reason of a default by the Placement
Agent, or (iv) any condition of the Placement Agent’s obligations hereunder is
not fulfilled.  Any such termination shall be without liability of any party to
any other party except that the provisions of Section 4, Section 6, and Section
11 hereof shall at all times be effective notwithstanding such termination.

9. Notices.  All statements, requests, notices and agreements hereunder shall be
in writing or by facsimile, and:
 
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(a)           if to the Placement Agent, shall be delivered or sent by mail or
facsimile transmission to :
 
Piper Jaffray & Co.
U.S. Bancorp Center
800 Nicollet Mall
Minneapolis, Minnesota 55402
Attention: James Martin, Esq.
Facsimile No.: 612-303-1410

with a copy (which shall not constitute notice) to:
 
Goodwin Procter LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
Attention: Michael D. Maline, Esq.
Facsimile No.: 212-355-3333
 
(b)           if to the Company shall be delivered or sent by mail or facsimile
transmission to: Cytori Therapeutics, Inc., 3020 Callan Road, San Diego,
California 92121, Attention: Chief Executive Officer, (Facsimile No.:
858-458-0995), with a copy (which shall not constitute notice) to: DLA Piper US
LLP, 4365 Executive Drive, Suite 1100, San Diego, California 92121-2133,
Attention:  Jeff Baglio, Esq., (Facsimile No.: 858-677-1401). Any such
statements, requests, notices or agreements shall be effective only upon
receipt.  Any party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.
 
10. Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the
benefit of and shall be binding upon the Placement Agent, the Company and their
respective successors and assigns.  Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence, any legal or equitable right,
remedy or claim under or in respect of this Agreement, or any provisions herein
contained, except that (i) the representations, warranties, covenants,
agreements and indemnities of the Company contained in this Agreement shall also
be for the benefit of the controlling persons, officers and directors referred
to in Section 6(a) and the indemnities of the Placement Agent shall also be for
the benefit of the controlling persons, officers and directors referred to in
Section 6(b)  and (ii) the Investors are relying on the representations made by
the Company under, and are intended third party beneficiaries of, this
Agreement..  The term “successors and assigns” as herein used shall not include
any purchaser of the Securities by reason merely of such purchase.

11. Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflicts of laws provisions thereof.

12. No Fiduciary Relationship. The Company hereby acknowledges and agrees that
the Placement Agent is acting solely as a placement agent in connection with the
offering of the Company’s securities. The Company further acknowledges that the
Placement Agent is acting pursuant to a contractual relationship created solely
by this Agreement entered into on an arm’s length basis and in no event do the
parties intend that the Placement Agent act or be responsible as a fiduciary to
the Company, its management, stockholders, creditors or any other person in
connection with any activity that the Placement Agent may undertake or has
undertaken in furtherance of the offering of the Company’s
 
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securities, either before or after the date hereof. The Placement Agent hereby
expressly disclaims any fiduciary or similar obligations to the Company, either
in connection with the transactions contemplated by this Agreement or any
matters leading up to such transactions, and the Company hereby confirms its
understanding and agreement to that effect. The price of the Securities set
forth in this Agreement was established by the Company following discussions and
arms-length negotiations with the Investors and the Placement Agent, and the
Company is capable of evaluating and understanding, and understands and accepts,
the terms, risks and conditions of the transactions contemplated by this
Agreement.  The Company has been advised that the Placement Agent and its
affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the Placement Agent has
no obligation to disclose such interests and transactions to the Company by
virtue of any fiduciary, advisory or agency relationship.  The Company and the
Placement Agent agree that they are each responsible for making their own
independent judgments with respect to any such transactions. The Company hereby
waives and releases, to the fullest extent permitted by law, any claims that the
Company may have against the Placement Agent with respect to any breach or
alleged breach of any fiduciary or similar duty to the Company in connection
with the transactions contemplated by this Agreement or any matters leading up
to such transactions and agrees that the Placement Agent shall have no liability
(whether direct or indirect) to the Company in respect of such a fiduciary duty
claim to any person asserting a fiduciary duty claim on behalf of the Company.

13. Headings.  The Section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.

14. Amendments and Waivers.    No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. The failure of a party to exercise any right or remedy shall not be
deemed or constitute a waiver of such right or remedy in the future. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly
provided.

15. Submission to Jurisdiction. Except as set forth below, no Proceeding may be
commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company and the
Placement Agent each hereby consents to the jurisdiction of such courts and
personal service with respect thereto.  The Company hereby waives all right to
trial by jury in any Proceeding (whether based upon contract, tort or otherwise)
in any way arising out of or relating to this Agreement. The Company agrees that
a final and no-longer-appealable judgment in any such Proceeding brought in any
such court shall be conclusive and binding upon the Company and may be enforced
in any other courts in the jurisdiction of which the Company is or may be
subject, by suit upon such judgment.

16. Counterparts.  This Agreement may be executed in one or more counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original and all such counterparts shall together
constitute one and the same instrument.  Delivery of an executed counterpart by
facsimile shall be effective as delivery of a manually executed counterpart
thereof.

17. Research Analyst Independence. The Company acknowledges that the Placement
Agent’s research analysts and research department are required to be independent
from its investment banking division and is subject to certain regulations and
internal policies, and that such Placement Agent’s research analysts may hold
views and make statements or investment recommendations and/or publish research
reports with respect to the Company and/or the offering that differ from the
views of its investment banking division. The Company hereby waives and
releases, to the fullest extent permitted by
 
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law, any claims that the Company may have against the Placement Agent with
respect to any conflict of interest that may arise from the fact that the views
expressed by its independent research analysts and research department may be
different from or inconsistent with the views or advice communicated to the
Company by such Placement Agent’s investment banking division. The Company
acknowledges that the Placement Agent is a full service securities firm and as
such from time to time, subject to applicable securities laws, rules and
regulations, may effect transactions for its own account or the account of its
customers and hold long or short positions in debt or equity securities of the
Company; provided, however, that nothing in this Section 17 shall relieve the
Placement Agent of any responsibility or liability that it may otherwise bear in
connection with activities in violation of applicable securities laws, rules and
regulations.

18. Entire Agreement. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.

19. Partial Unenforceability. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph, clause or provision hereof.

[Signature Page Follows]

 
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If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.
 
Very truly yours,
 

CYTORI THERAPEUTICS, INC.

By:  /s/ Christopher J. Calhoun    
Name:  Christopher J. Calhoun
Title:  Chief Executive Officer

Accepted as of
the date first above written:
 
PIPER JAFFRAY & CO.

By:  /s/ David W. Stadinski                
    Name:  David W. Stadinski
    Title:  Managing Director
 
 
 

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Schedules and Exhibits

Schedule I:
Permitted Free Writing Prospectuses

Schedule II:
Pricing Information

Exhibit A:
Form of Subscription Agreement

Exhibit B:
Form of Lock-Up Agreement

Exhibit C:
List of Directors and Executive Officers Executing Lock-Up Agreements

Exhibit D:
Matters To Be Covered In The Opinion Of Counsel To The Company

Exhibit E:
Form of Written Statement of Corporate Counsel to the Company

 
 

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Schedule I

Permitted Free Writing Prospectuses

None.

 
 

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Schedule II

Pricing Information

Number of Shares to be Issued:   4,771,174

Number of Warrants to be Issued:  6,679,644

Offering Price:   $2.10 per unit

Warrant Exercise Price:  $2.59 per share
 

 

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Exhibit A

Form of Subscription Agreement

 

 
 

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Exhibit B

Form of Lock-Up Agreement

 
___________, 2009
 
Piper Jaffray & Co.
U.S. Bancorp Center
800 Nicollet Mall
Minneapolis, Minnesota  55402

Ladies and Gentlemen:
 
The undersigned understands that you, as Placement Agent, propose to enter into
the Placement Agency Agreement (the “Placement Agreement”) with Cytori
Therapeutics, Inc., a Delaware corporation (the “Company”), providing for the
offering (the “Offering”) of shares (the “Shares”) of common stock, par value
$0.001 per share (the “Common Stock”), and warrants to purchase shares of Common
Stock (the “Warrants”), of the Company. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Placement Agreement.
 
In consideration of the foregoing, and in order to induce you to participate in
the Offering, and for other good and valuable consideration receipt of which is
hereby acknowledged, the undersigned hereby agrees that, without your prior
written consent (which consent may be withheld in your sole discretion), the
undersigned will not, during the period (the “Lock-Up Period”) beginning on the
date hereof and ending on the date 90 days after the date of the final
prospectus (including the final prospectus supplement) to be used in confirming
the sale of the Shares and Warrants, (1) offer, pledge, announce the intention
to sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, or file
(or participate in the filing of) a registration statement with the Securities
and Exchange Commission in respect of, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(including without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission and securities which may
be issued upon exercise of a stock option or warrant), (2) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise, (3) make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock, or (4) publicly announce an intention to effect any transaction specific
in clause (1), (2) or (3) above.

Notwithstanding the foregoing, the restrictions set forth in clause (1) and
(2) above shall not apply to (a) transfers (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein, (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value, (iii) with your prior written consent or (iv) effected
pursuant to any exchange of “underwater” options with the Company, (b) the
acquisition or exercise of any stock option
 

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issued pursuant to the Company’s existing stock option plan, including any
exercise effected by the delivery of Shares and Warrants of the Company held by
the undersigned, or (c) the purchase or sale of the Company’s securities
pursuant to a plan, contract or instruction that satisfies all of the
requirements of Rule 10b5-1(c)(1)(i)(B) that was in effect prior to the date
hereof.  For purposes of this Lock-Up Agreement, “immediate family” shall mean
any relationship by blood, marriage or adoption, not more remote than first
cousin.  None of the restrictions set forth in this Lock-Up Agreement shall
apply to Common Stock acquired in open market transactions.
 
For the purpose of allowing you to comply with FINRA Rule 2711(f)(4), if (1)
during the last 17 days of the Lock-Up Period, the Company releases earnings
results or publicly announces other material news or a material event relating
to the Company occurs or (2) prior to the expiration of the Lock-Up Period, the
Company announces that it will release earnings results during the 16 day period
beginning on the last day of the Lock-Up Period, then in each case the Lock-Up
Period will be extended until the expiration of the 18 day period beginning on
the date of release of the earnings results or the public announcement regarding
the material news or the occurrence of the material event, as applicable, unless
you waive, in writing, such extension.  The undersigned hereby acknowledges that
the Company has agreed not to accelerate the vesting of any option or warrant or
the lapse of any repurchase right prior to the expiration of the Lock-Up
Period.  In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Lock-Up Agreement.

The foregoing restrictions are expressly agreed to preclude the undersigned from
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a sale or disposition of the Common Stock even
if such Common Stock would be disposed of by someone other than the
undersigned.  Such prohibited hedging or other transactions would include
without limitation any short sale or any purchase, sale or grant of any right
(including without limitation any put option or put equivalent position or call
option or call equivalent position) with respect to any of the Common Stock or
with respect to any security that includes, relates to, or derives any
significant part of its value from such Common Stock.
 
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this Lock-Up Agreement.  All authority herein
conferred or agreed to be conferred and any obligations of the undersigned shall
be binding upon the successors, assigns, heirs or personal representatives of
the undersigned.

The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar against the
transfer of the undersigned’s shares of Common Stock except in compliance with
the foregoing restrictions.
 
The undersigned understands that, if the Placement Agreement does not become
effective, or if the Placement Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares and Warrants to be sold thereunder, the undersigned
shall be released from all obligations under this Lock-Up Agreement.
 

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This Lock-Up Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflict of laws principles
thereof.
 

 
Very truly yours,
 
Print Name:  __________________________
Print Title:  ___________________________
 
Signature:  ____________________________
           

 
 

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Exhibit C

List of Directors and Executive Officers
Executing Lock-Up Agreements

Richard J. Hawkins
Christopher J. Calhoun
Marc H. Hedrick, MD
Mark E. Saad
Bruce A. Reuter
Seijiro Shirahama
Douglas Arm, Ph.D.
Alexander M. Milstein, MD
Paul W. Hawran
Ronald D. Henriksen
E. Carmack Holmes, MD
David M. Rickey

 
 

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Exhibit D

Matters To Be Covered In The
Opinion Of Counsel To The Company

In form and substance reasonably satisfactory to the Placement Agent and
delivered by DLA Piper US LLP at Closing

 
 

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Exhibit E

Form of Written Statement of
Corporate Counsel to the Company

In form and substance reasonably satisfactory to the Placement Agent and
delivered by DLA Piper US LLP at Closing

 
 

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