Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of
February 17, 2006, among BioSphere Medical, Inc., a Delaware corporation (the
“Company”), and the investors identified on the signature pages hereto (each, an
“Investor” and collectively, the “Investors”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined below) and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Investor,
and each Investor, severally and not jointly, desires to purchase from the
Company certain securities of the Company, as more fully described in this
Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:

 

ARTICLE 1.
DEFINITIONS

 

1.1.                              Definitions. In addition to the terms defined
elsewhere in this Agreement, for all purposes of this Agreement, the following
terms shall have the meanings indicated in this Section 1.1:

 

“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.

 

“Business Day” means any day except Saturday, Sunday and any day which is a
federal legal holiday or a day on which banking institutions in the State of New
York or Commonwealth of Massachusetts are authorized or required by law or other
governmental action to close.

 

“Buy-In” has the meaning set forth in Section 4.1(c).

 

“Certificate” has the meaning set forth in Section 2.2(a).

 

“Closing” means the closing of the purchase and sale of the Shares pursuant to
Article 2.

 

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“Closing Date” means the Business Day on which all of the conditions set forth
in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties
may agree.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.01 per share,
and any securities into which such common stock may hereafter be reclassified.

 

“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which entitle the holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common
Stock.

 

“Company Counsel” means Wilmer Cutler Pickering Hale and Dorr LLP.

 

“Company Deliverables” has the meaning set forth in Section 2.2(a).

 

“Disclosure Materials” has the meaning set forth in Section 3.1(h).

 

“Effective Date” means the date that the Registration Statement required by
Section 2(a) of the Registration Rights Agreement is first declared effective by
the Commission.

 

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

 

“GAAP” means U.S. generally accepted accounting principles.

 

“Intellectual Property Rights” has the meaning set forth in Section 3.1(o).

 

“Investment Amount” means, with respect to each Investor, the Investment Amount
indicated on such Investor’s signature page to this Agreement.

 

“Investor Deliverables” has the meaning set forth in Section 2.2(b).

 

“Investor Party” has the meaning set forth in Section 4.7.

 

“Lien” means any lien, charge, encumbrance, security interest, right of first
refusal or other restrictions of any kind.

 

“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s
ability to perform on a timely basis its obligations under any Transaction
Document.

 

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“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.

 

“Per Share Purchase Price” equals $7.00.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of this Agreement, among the Company and the Investors, in the
form of Exhibit A hereto.

 

“Registration Statement” means the registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Investors of the Shares.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“SEC Reports” has the meaning set forth in Section 3.1(h).

 

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

 

“Share Delivery Date” has the meaning set forth in Section 4.1(c).

 

“Shares” means the shares of Common Stock issued or issuable to the Investors
pursuant to this Agreement.

 

“Short Sales” include, without limitation, all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act and all types
of direct and indirect stock pledges, forward sale contracts, options, puts,
calls, swaps and similar arrangements (including on a total return basis), and
sales and other transactions through non-US broker dealers or foreign regulated
brokers.

 

“Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of
the Regulation S-X promulgated by the Commission under the Exchange Act.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading
Market, a day on which the Common Stock is

 

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quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

 

“Transaction Documents” means this Agreement, the Registration Rights Agreement,
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

 

ARTICLE 2.
PURCHASE AND SALE

 

2.1.                              Closing. Subject to the terms and conditions
set forth in this Agreement, at the Closing the Company shall issue and sell to
each Investor, and each Investor shall, severally and not jointly, purchase from
the Company, the Shares representing such Investor’s Investment Amount. The
Closing shall take place at the offices of Bryan Cave LLP, 1290 Avenue of the
Americas, New York, NY 10104 on the Closing Date or at such other location or
time as the parties may agree.

 

2.2.                              Closing Deliveries. (a)  At the Closing, the
Company shall deliver or cause to be delivered to each Investor the following
(the “Company Deliverables”):

 

(I)                                     A CERTIFICATE EVIDENCING A NUMBER OF
SHARES EQUAL TO SUCH INVESTOR’S INVESTMENT AMOUNT DIVIDED BY THE PER SHARE
PURCHASE PRICE, REGISTERED IN THE NAME OF SUCH INVESTOR (THE “CERTIFICATE”);

 

(II)                                  THE LEGAL OPINION OF COMPANY COUNSEL, IN
AGREED FORM, ADDRESSED TO THE INVESTORS; AND

 

(III)                               THE REGISTRATION RIGHTS AGREEMENT, DULY
EXECUTED BY THE COMPANY.

 

(B)                                 AT THE CLOSING, EACH INVESTOR SHALL DELIVER
OR CAUSE TO BE DELIVERED TO THE COMPANY THE FOLLOWING (THE “INVESTOR
DELIVERABLES”):

 

(I)                                     PROMPTLY AFTER RECEIPT OF THE
CERTIFICATE, ITS INVESTMENT AMOUNT, IN UNITED STATES DOLLARS AND IN IMMEDIATELY
AVAILABLE FUNDS, BY WIRE TRANSFER TO AN ACCOUNT DESIGNATED IN WRITING BY THE
COMPANY FOR SUCH PURPOSE; AND

 

(II)                                  THE REGISTRATION RIGHTS AGREEMENT, DULY
EXECUTED BY SUCH INVESTOR.

 

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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES

 

3.1.                              Representations and Warranties of the Company.
The Company hereby makes the following representations and warranties to each
Investor:

 

(A)                                  SUBSIDIARIES. THE COMPANY HAS NO DIRECT OR
INDIRECT SUBSIDIARIES OTHER THAN AS SPECIFIED IN THE SEC REPORTS. THE COMPANY
OWNS, DIRECTLY OR INDIRECTLY, ALL OF THE CAPITAL STOCK OF EACH SUBSIDIARY FREE
AND CLEAR OF ANY AND ALL LIENS, AND ALL THE ISSUED AND OUTSTANDING SHARES OF
CAPITAL STOCK OF EACH SUBSIDIARY ARE VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE (WHERE SUCH CONCEPTS ARE LEGALLY APPLICABLE) AND FREE OF
PREEMPTIVE AND SIMILAR RIGHTS.

 

(B)                                 ORGANIZATION AND QUALIFICATION. THE COMPANY
AND EACH SUBSIDIARY ARE DULY INCORPORATED OR OTHERWISE ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS
INCORPORATION OR ORGANIZATION (AS APPLICABLE), WITH THE REQUISITE POWER AND
AUTHORITY TO OWN AND USE ITS PROPERTIES AND ASSETS AND TO CARRY ON ITS BUSINESS
AS CURRENTLY CONDUCTED. NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN VIOLATION
OF ANY OF THE PROVISIONS OF ITS RESPECTIVE CERTIFICATE OR ARTICLES OF
INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL OR CHARTER DOCUMENTS. EACH OF THE
COMPANY AND ITS SUBSIDIARIES IS DULY QUALIFIED TO CONDUCT ITS RESPECTIVE
BUSINESSES AND IS IN GOOD STANDING AS A FOREIGN CORPORATION OR OTHER ENTITY (IN
EACH INSTANCE WHERE SUCH CONCEPTS ARE LEGALLY APPLICABLE) IN EACH JURISDICTION
IN WHICH THE NATURE OF THE BUSINESS CONDUCTED OR PROPERTY OWNED BY IT MAKES SUCH
QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO BE SO QUALIFIED OR IN GOOD
STANDING, AS THE CASE MAY BE, WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE
OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(C)                                  AUTHORIZATION; ENFORCEMENT. THE COMPANY HAS
THE REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY EACH OF THE TRANSACTION DOCUMENTS AND OTHERWISE TO
CARRY OUT ITS OBLIGATIONS THEREUNDER. THE EXECUTION AND DELIVERY OF EACH OF THE
TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY IT OF THE
TRANSACTIONS CONTEMPLATED THEREBY HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY
ACTION ON THE PART OF THE COMPANY AND NO FURTHER ACTION IS REQUIRED BY THE
COMPANY IN CONNECTION THEREWITH. EACH TRANSACTION DOCUMENT HAS BEEN (OR UPON
DELIVERY WILL HAVE BEEN) DULY EXECUTED BY THE COMPANY AND, WHEN DELIVERED IN
ACCORDANCE WITH THE TERMS HEREOF, WILL CONSTITUTE THE VALID AND BINDING
OBLIGATION OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH ITS
TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO,
OR AFFECTING GENERALLY THE ENFORCEMENT OF, CREDITORS’ RIGHTS AND REMEDIES OR BY
OTHER EQUITABLE PRINCIPLES OF GENERAL APPLICATION.

 

(D)                                 NO CONFLICTS. EXCEPT AS SET FORTH ON
SCHEDULE 3.1(D), THE EXECUTION, DELIVERY AND PERFORMANCE OF THE TRANSACTION
DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS
CONTEMPLATED THEREBY DO NOT AND WILL NOT (I) CONFLICT WITH OR VIOLATE ANY
PROVISION OF THE COMPANY’S OR ANY SUBSIDIARY’S CERTIFICATE OR ARTICLES OF
INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL OR CHARTER DOCUMENTS, OR
(II) CONFLICT WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT THAT WITH NOTICE OR
LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER, OR GIVE TO OTHERS ANY
RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION (WITH

 

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OR WITHOUT NOTICE, LAPSE OF TIME OR BOTH) OF, ANY AGREEMENT, CREDIT FACILITY,
DEBT OR OTHER INSTRUMENT TO WHICH THE COMPANY OR ANY SUBSIDIARY IS A PARTY OR BY
WHICH ANY PROPERTY OR ASSET OF THE COMPANY OR ANY SUBSIDIARY IS BOUND, OR
(III) RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT,
INJUNCTION, DECREE OR OTHER RESTRICTION OF ANY COURT OR GOVERNMENTAL AUTHORITY
TO WHICH THE COMPANY OR A SUBSIDIARY IS SUBJECT (INCLUDING FEDERAL AND STATE
SECURITIES LAWS AND REGULATIONS), OR BY WHICH ANY PROPERTY OR ASSET OF THE
COMPANY OR A SUBSIDIARY IS BOUND; EXCEPT IN THE CASE OF EACH OF CLAUSES (II) AND
(III), SUCH AS WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE OR REASONABLY
BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(E)                                  FILINGS, CONSENTS AND APPROVALS. THE
COMPANY IS NOT REQUIRED TO OBTAIN ANY CONSENT, WAIVER, AUTHORIZATION OR ORDER
OF, GIVE ANY NOTICE TO, OR MAKE ANY FILING OR REGISTRATION WITH, ANY COURT OR
OTHER FEDERAL, STATE, LOCAL OR OTHER GOVERNMENTAL AUTHORITY OR OTHER PERSON IN
CONNECTION WITH THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY OF THE
TRANSACTION DOCUMENTS, OTHER THAN (I) THE FILING WITH THE COMMISSION OF THE
REGISTRATION STATEMENT IN ACCORDANCE WITH THE REQUIREMENTS OF THE REGISTRATION
RIGHTS AGREEMENT, (II) FILINGS REQUIRED BY STATE SECURITIES LAWS, (III) THE
FILING OF A NOTICE OF SALE OF SECURITIES ON FORM D WITH THE COMMISSION UNDER
REGULATION D OF THE SECURITIES ACT, (IV) THE FILINGS REQUIRED IN ACCORDANCE WITH
SECTION 4.5 AND (V) THOSE THAT HAVE BEEN MADE OR OBTAINED PRIOR TO THE DATE OF
THIS AGREEMENT.

 

(F)                                    ISSUANCE OF THE SHARES. THE SHARES HAVE
BEEN DULY AUTHORIZED AND, WHEN ISSUED AND PAID FOR IN ACCORDANCE WITH THE
TRANSACTION DOCUMENTS, WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE, FREE AND CLEAR OF ALL LIENS. THE COMPANY HAS RESERVED FROM ITS
DULY AUTHORIZED CAPITAL STOCK THE SHARES OF COMMON STOCK ISSUABLE PURSUANT TO
THIS AGREEMENT IN ORDER TO ISSUE THE SHARES.

 

(G)                                 CAPITALIZATION. SCHEDULE 3.1(G) SETS FORTH
THE NUMBER OF SHARES AND TYPE OF ALL AUTHORIZED, ISSUED AND OUTSTANDING CAPITAL
STOCK OF THE COMPANY, AND ALL SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER
THE COMPANY’S VARIOUS OPTION AND INCENTIVE PLANS. EXCEPT AS SET FORTH ON
SCHEDULE 3.1(G) OR SPECIFIED IN THE SEC REPORTS, NO SECURITIES OF THE COMPANY
ARE ENTITLED TO PREEMPTIVE OR SIMILAR RIGHTS, AND NO PERSON HAS ANY RIGHT OF
FIRST REFUSAL, PREEMPTIVE RIGHT, RIGHT OF PARTICIPATION, OR ANY SIMILAR RIGHT TO
PARTICIPATE IN THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS.
EXCEPT AS SET FORTH ON SCHEDULE 3.1(G) OR SPECIFIED IN THE SEC REPORTS, THERE
ARE NO OUTSTANDING OPTIONS, WARRANTS, SCRIP RIGHTS TO SUBSCRIBE TO, CALLS OR
COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES, RIGHTS OR
OBLIGATIONS CONVERTIBLE INTO OR EXCHANGEABLE FOR, OR GIVING ANY PERSON ANY RIGHT
TO SUBSCRIBE FOR OR ACQUIRE, ANY SHARES OF COMMON STOCK, OR CONTRACTS,
COMMITMENTS, UNDERSTANDINGS OR ARRANGEMENTS, IN EACH INSTANCE, BY WHICH THE
COMPANY OR ANY SUBSIDIARY IS OR MAY BECOME BOUND TO ISSUE ADDITIONAL SHARES OF
COMMON STOCK, OR SECURITIES OR RIGHTS CONVERTIBLE OR EXCHANGEABLE INTO SHARES OF
COMMON STOCK. THE ISSUE AND SALE OF THE SHARES WILL NOT, IMMEDIATELY OR WITH THE
PASSAGE OF TIME, OBLIGATE THE COMPANY TO ISSUE SHARES OF COMMON STOCK OR OTHER
SECURITIES TO ANY PERSON (OTHER THAN THE INVESTORS) AND WILL NOT RESULT IN A
RIGHT OF ANY HOLDER OF COMPANY SECURITIES TO ADJUST THE EXERCISE, CONVERSION,
EXCHANGE OR RESET PRICE UNDER SUCH SECURITIES.

 

(H)                                 SEC REPORTS; FINANCIAL STATEMENTS. THE
COMPANY HAS FILED ALL REPORTS REQUIRED TO BE FILED BY IT UNDER THE SECURITIES
ACT AND THE EXCHANGE ACT, INCLUDING PURSUANT TO

 

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SECTION 13(A) OR 15(D) THEREOF, FOR THE TWELVE MONTHS PRECEDING THE DATE HEREOF
(OR SUCH SHORTER PERIOD AS THE COMPANY WAS REQUIRED BY LAW TO FILE SUCH REPORTS)
(THE FOREGOING MATERIALS BEING COLLECTIVELY REFERRED TO HEREIN AS THE “SEC
REPORTS” AND, TOGETHER WITH THE SCHEDULES TO THIS AGREEMENT (IF ANY), THE
“DISCLOSURE MATERIALS”) ON A TIMELY BASIS OR HAS TIMELY FILED A VALID EXTENSION
OF SUCH TIME OF FILING AND HAS FILED ANY SUCH SEC REPORTS PRIOR TO THE
EXPIRATION OF ANY SUCH EXTENSION. EXCEPT AS SET FORTH ON SCHEDULE 3.1(H), AS OF
THEIR RESPECTIVE DATES, THE SEC REPORTS COMPLIED IN ALL MATERIAL RESPECTS WITH
THE REQUIREMENTS OF THE SECURITIES ACT AND THE EXCHANGE ACT AND THE RULES AND
REGULATIONS OF THE COMMISSION PROMULGATED THEREUNDER, AND NONE OF THE SEC
REPORTS, WHEN FILED, CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT OR
OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY IN
ORDER TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING. THE FINANCIAL STATEMENTS OF THE COMPANY INCLUDED
IN THE SEC REPORTS COMPLY IN ALL MATERIAL RESPECTS WITH APPLICABLE ACCOUNTING
REQUIREMENTS AND THE RULES AND REGULATIONS OF THE COMMISSION WITH RESPECT
THERETO AS IN EFFECT AT THE TIME OF FILING. SUCH FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH GAAP APPLIED ON A CONSISTENT BASIS DURING THE
PERIODS INVOLVED, EXCEPT AS MAY BE OTHERWISE SPECIFIED IN SUCH FINANCIAL
STATEMENTS OR THE NOTES THERETO, AND FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE
FINANCIAL POSITION OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES AS OF AND
FOR THE DATES THEREOF AND THE RESULTS OF OPERATIONS AND CASH FLOWS FOR THE
PERIODS THEN ENDED, SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL,
IMMATERIAL, YEAR-END AUDIT ADJUSTMENTS.

 

(I)                                     MATERIAL CHANGES. SINCE SEPTEMBER 30,
2005, (I) THERE HAS BEEN NO EVENT, OCCURRENCE OR DEVELOPMENT THAT HAS HAD OR
THAT WOULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT,
(II) THE COMPANY HAS NOT INCURRED ANY MATERIAL LIABILITIES (CONTINGENT OR
OTHERWISE) OTHER THAN (A) TRADE PAYABLES, ACCRUED EXPENSES AND OTHER LIABILITIES
INCURRED IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE AND
(B) LIABILITIES NOT REQUIRED TO BE REFLECTED IN THE COMPANY’S FINANCIAL
STATEMENTS PURSUANT TO GAAP OR REQUIRED TO BE DISCLOSED IN FILINGS MADE WITH THE
COMMISSION, (III) THE COMPANY HAS NOT ALTERED ITS METHOD OF ACCOUNTING OR THE
IDENTITY OF ITS AUDITORS, (IV) EXCEPT AS SET FORTH ON SCHEDULE 3.1(I), THE
COMPANY HAS NOT DECLARED OR MADE ANY DIVIDEND OR DISTRIBUTION OF CASH OR OTHER
PROPERTY TO ITS STOCKHOLDERS OR PURCHASED, REDEEMED OR MADE ANY AGREEMENTS TO
PURCHASE OR REDEEM ANY SHARES OF ITS CAPITAL STOCK, AND (V) THE COMPANY HAS NOT
ISSUED ANY EQUITY SECURITIES TO ANY OFFICER, DIRECTOR OR AFFILIATE, EXCEPT
PURSUANT TO EXISTING COMPANY STOCK OPTION PLANS. THE COMPANY DOES NOT HAVE
PENDING BEFORE THE COMMISSION ANY REQUEST FOR CONFIDENTIAL TREATMENT OF
INFORMATION.

 

(J)                                     LITIGATION. THERE IS NO ACTION WHICH
(I) ADVERSELY AFFECTS OR CHALLENGES THE LEGALITY, VALIDITY OR ENFORCEABILITY OF
ANY OF THE TRANSACTION DOCUMENTS OR THE SHARES OR (II) EXCEPT AS DISCLOSED IN
THE SEC REPORTS, WOULD, IF THERE WERE AN UNFAVORABLE DECISION, INDIVIDUALLY OR
IN THE AGGREGATE, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT. NEITHER THE COMPANY NOR ANY SUBSIDIARY, NOR, TO THE KNOWLEDGE OF THE
COMPANY, ANY DIRECTOR OR OFFICER THEREOF (IN HIS OR HER CAPACITY AS SUCH), IS OR
HAS BEEN THE SUBJECT OF ANY ACTION INVOLVING A CLAIM OF VIOLATION OF OR
LIABILITY UNDER FEDERAL OR STATE SECURITIES LAWS OR A CLAIM OF BREACH OF
FIDUCIARY DUTY, EXCEPT AS SPECIFICALLY DISCLOSED IN THE SEC REPORTS. THERE HAS
NOT BEEN, AND TO THE KNOWLEDGE OF THE COMPANY, THERE IS NOT PENDING ANY
INVESTIGATION BY THE COMMISSION INVOLVING THE COMPANY OR ANY CURRENT OR FORMER
DIRECTOR OR OFFICER OF THE COMPANY (IN HIS OR HER CAPACITY AS SUCH). THE
COMMISSION HAS NOT ISSUED ANY STOP ORDER OR OTHER ORDER

 

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SUSPENDING THE EFFECTIVENESS OF ANY REGISTRATION STATEMENT FILED BY THE COMPANY
OR ANY SUBSIDIARY UNDER THE EXCHANGE ACT OR THE SECURITIES ACT.

 

(K)                                  LABOR RELATIONS. NO MATERIAL LABOR DISPUTE
EXISTS OR, TO THE KNOWLEDGE OF THE COMPANY, IS IMMINENT WITH RESPECT TO ANY OF
THE EMPLOYEES OF THE COMPANY.

 

(L)                                     COMPLIANCE. NEITHER THE COMPANY NOR ANY
SUBSIDIARY (I) IS IN DEFAULT UNDER OR IN VIOLATION OF (AND NO EVENT HAS OCCURRED
THAT HAS NOT BEEN WAIVED THAT, WITH NOTICE OR LAPSE OF TIME OR BOTH, WOULD
RESULT IN A DEFAULT BY THE COMPANY OR ANY SUBSIDIARY UNDER), NOR HAS THE COMPANY
OR ANY SUBSIDIARY RECEIVED WRITTEN NOTICE OF A CLAIM THAT IT IS IN DEFAULT UNDER
OR THAT IT IS IN VIOLATION OF, ANY INDENTURE, LOAN OR CREDIT AGREEMENT OR ANY
OTHER AGREEMENT OR INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH IT OR ANY OF
ITS PROPERTIES IS BOUND (WHETHER OR NOT SUCH DEFAULT OR VIOLATION HAS BEEN
WAIVED), (II) IS IN VIOLATION OF ANY ORDER OF ANY COURT, ARBITRATOR OR
GOVERNMENTAL BODY, OR (III) IS OR HAS BEEN IN VIOLATION OF ANY STATUTE, RULE OR
REGULATION OF ANY GOVERNMENTAL AUTHORITY, INCLUDING WITHOUT LIMITATION ALL
FOREIGN, FEDERAL, STATE AND LOCAL LAWS RELATING TO TAXES, ENVIRONMENTAL
PROTECTION, OCCUPATIONAL HEALTH AND SAFETY, PRODUCT QUALITY AND SAFETY AND
EMPLOYMENT AND LABOR MATTERS, EXCEPT IN EACH CASE AS WOULD NOT, INDIVIDUALLY OR
IN THE AGGREGATE, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT. THE COMPANY IS IN COMPLIANCE WITH ALL EFFECTIVE REQUIREMENTS OF THE
SARBANES-OXLEY ACT OF 2002, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER, THAT ARE APPLICABLE TO IT, EXCEPT WHERE SUCH NONCOMPLIANCE WOULD NOT
HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(M)                               REGULATORY PERMITS. THE COMPANY AND THE
SUBSIDIARIES POSSESS ALL CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE
APPROPRIATE FEDERAL, STATE, LOCAL OR FOREIGN REGULATORY AUTHORITIES NECESSARY TO
CONDUCT THEIR RESPECTIVE BUSINESSES AS DESCRIBED IN THE SEC REPORTS, EXCEPT
WHERE THE FAILURE TO POSSESS SUCH PERMITS WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT, AND NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS RECEIVED ANY WRITTEN
NOTICE OF PROCEEDINGS RELATING TO THE REVOCATION OR MODIFICATION OF ANY SUCH
PERMITS.

 

(N)                                 TITLE TO ASSETS. EXCEPT AS SET FORTH ON
SCHEDULE 3.1(N), THE COMPANY AND THE SUBSIDIARIES HAVE GOOD AND VALID TITLE IN
FEE SIMPLE TO ALL REAL PROPERTY OWNED BY THEM THAT IS MATERIAL TO THEIR
RESPECTIVE BUSINESSES AND GOOD AND VALID TITLE IN ALL PERSONAL PROPERTY OWNED BY
THEM THAT IS MATERIAL TO THEIR RESPECTIVE BUSINESSES, IN EACH CASE FREE AND
CLEAR OF ALL LIENS, EXCEPT FOR LIENS AS DO NOT MATERIALLY AFFECT THE VALUE OF
SUCH PROPERTY AND DO NOT MATERIALLY INTERFERE WITH THE USE MADE AND PROPOSED TO
BE MADE OF SUCH PROPERTY BY THE COMPANY AND THE SUBSIDIARIES. ANY REAL PROPERTY
AND FACILITIES HELD UNDER LEASE BY THE COMPANY AND THE SUBSIDIARIES ARE HELD BY
THEM UNDER VALID, SUBSISTING AND ENFORCEABLE LEASES OF WHICH THE COMPANY AND THE
SUBSIDIARIES ARE IN COMPLIANCE, EXCEPT AS WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT.

 

(O)                                 PATENTS AND TRADEMARKS. THE COMPANY AND THE
SUBSIDIARIES HAVE, OR HAVE RIGHTS TO USE, ALL PATENTS, PATENT APPLICATIONS,
TRADEMARKS, TRADEMARK APPLICATIONS, SERVICE MARKS, TRADE NAMES, COPYRIGHTS,
LICENSES AND OTHER SIMILAR RIGHTS THAT ARE NECESSARY OR MATERIAL FOR USE IN
CONNECTION WITH THEIR RESPECTIVE BUSINESSES AS DESCRIBED IN THE SEC REPORTS AND
WHICH THE FAILURE TO SO HAVE WOULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE OR
REASONABLY BE EXPECTED TO

 

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RESULT IN A MATERIAL ADVERSE EFFECT ON THE COMPANY’S OR THE SUBSIDIARIES’
CURRENT BUSINESS AS DESCRIBED IN THE SEC REPORTS (COLLECTIVELY, THE
“INTELLECTUAL PROPERTY RIGHTS”). NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS
RECEIVED A WRITTEN NOTICE THAT THE INTELLECTUAL PROPERTY RIGHTS USED BY THE
COMPANY OR ANY SUBSIDIARY VIOLATES OR INFRINGES UPON THE RIGHTS OF ANY PERSON.
EXCEPT AS SET FORTH IN THE SEC REPORTS, TO THE KNOWLEDGE OF THE COMPANY, ALL
SUCH INTELLECTUAL PROPERTY RIGHTS ARE ENFORCEABLE AND THERE IS NO EXISTING
INFRINGEMENT BY ANOTHER PERSON OF ANY OF THE INTELLECTUAL PROPERTY RIGHTS.

 

(P)                                 INSURANCE. THE COMPANY AND THE SUBSIDIARIES
ARE INSURED BY INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH
LOSSES AND RISKS AND IN SUCH AMOUNTS AS ARE PRUDENT AND CUSTOMARY IN THE
BUSINESSES IN WHICH THE COMPANY AND THE SUBSIDIARIES ARE ENGAGED. THE COMPANY
HAS NO REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW ITS AND THE
SUBSIDIARIES’ 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 ON TERMS CONSISTENT WITH MARKET FOR THE COMPANY’S AND SUCH
SUBSIDIARIES’ RESPECTIVE LINES OF BUSINESS.

 

(Q)                                 TRANSACTIONS WITH AFFILIATES. EXCEPT AS SET
FORTH IN THE SEC REPORTS, NONE OF THE OFFICERS OR DIRECTORS OF THE COMPANY IS
PRESENTLY A PARTY TO ANY TRANSACTION WITH THE COMPANY OR ANY SUBSIDIARY (OTHER
THAN FOR SERVICES AS OFFICERS AND DIRECTORS), THAT WOULD BE REQUIRED TO BE
DISCLOSED PURSUANT TO ITEM 404 OF REGULATION S-K PROMULGATED UNDER THE
SECURITIES ACT.

 

(R)                                    DISCLOSURE AND ACCOUNTING CONTROLS. THE
COMPANY AND THE SUBSIDIARIES MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS
SUFFICIENT TO PROVIDE REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE EXECUTED IN
ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS,
(II) TRANSACTIONS ARE RECORDED AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL
STATEMENTS IN CONFORMITY WITH GAAP AND TO MAINTAIN ASSET ACCOUNTABILITY,
(III) ACCESS TO ASSETS IS PERMITTED ONLY IN ACCORDANCE WITH MANAGEMENT’S GENERAL
OR SPECIFIC AUTHORIZATION, AND (IV) THE RECORDED ACCOUNTABILITY FOR ASSETS IS
COMPARED WITH THE EXISTING ASSETS AT REASONABLE INTERVALS AND APPROPRIATE ACTION
IS TAKEN WITH RESPECT TO ANY DIFFERENCES. THE COMPANY HAS ESTABLISHED DISCLOSURE
CONTROLS AND PROCEDURES (AS DEFINED IN EXCHANGE ACT RULES 13A-15(E) AND
15D-15(E)) FOR THE COMPANY AND DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES
TO ENSURE THAT MATERIAL INFORMATION RELATING TO THE COMPANY, INCLUDING ITS
SUBSIDIARIES, IS MADE KNOWN TO THE CERTIFYING OFFICERS BY OTHERS WITHIN THOSE
ENTITIES, PARTICULARLY DURING THE PERIOD IN WHICH THE COMPANY’S FORM 10-K OR
10-Q, AS THE CASE MAY BE, IS BEING PREPARED. THE COMPANY’S CERTIFYING OFFICERS
HAVE EVALUATED THE EFFECTIVENESS OF THE COMPANY’S CONTROLS AND PROCEDURES IN
ACCORDANCE WITH ITEM 307 OF REGULATION S-K UNDER THE EXCHANGE ACT FOR THE
COMPANY’S MOST RECENTLY ENDED FISCAL QUARTER OR FISCAL YEAR-END (SUCH DATE, THE
“EVALUATION DATE”). THE COMPANY PRESENTED IN ITS MOST RECENTLY FILED FORM 10-K
OR FORM 10-Q THE CONCLUSIONS OF THE CERTIFYING OFFICERS ABOUT THE EFFECTIVENESS
OF THE DISCLOSURE CONTROLS AND PROCEDURES BASED ON THEIR EVALUATIONS AS OF THE
EVALUATION DATE. SINCE THE EVALUATION DATE, THERE HAS BEEN NO CHANGE IN THE
COMPANY’S INTERNAL CONTROL OVER FINANCIAL REPORTING (AS DEFINED IN
RULES 13A-15(F) AND 15D-15(F) OF THE EXCHANGE ACT) THAT HAS MATERIALLY AFFECTED
OR IS REASONABLY LIKELY TO MATERIALLY AFFECT THE COMPANY’S INTERNAL CONTROL OVER
FINANCIAL REPORTING.

 

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(S)                                  SOLVENCY. BASED ON THE FINANCIAL CONDITION
OF THE COMPANY AS OF THE CLOSING DATE (AND ASSUMING THAT THE CLOSING SHALL HAVE
OCCURRED), (I) THE COMPANY’S FAIR SALEABLE VALUE OF ITS ASSETS EXCEEDS THE
AMOUNT THAT WILL BE REQUIRED TO BE PAID ON OR IN RESPECT OF THE COMPANY’S
EXISTING DEBTS AND OTHER LIABILITIES (INCLUDING KNOWN CONTINGENT LIABILITIES) AS
THEY MATURE, AND (II) THE CURRENT CASH FLOW OF THE COMPANY, TOGETHER WITH THE
PROCEEDS THE COMPANY WOULD RECEIVE, WERE IT TO LIQUIDATE ALL OF ITS ASSETS,
AFTER TAKING INTO ACCOUNT ALL ANTICIPATED USES OF THE CASH, WOULD BE SUFFICIENT
TO PAY ALL AMOUNTS ON OR IN RESPECT OF ITS DEBT WHEN SUCH AMOUNTS ARE REQUIRED
TO BE PAID. THE COMPANY DOES NOT INTEND TO INCUR DEBTS BEYOND ITS ABILITY TO PAY
SUCH DEBTS AS THEY MATURE (TAKING INTO ACCOUNT THE TIMING AND AMOUNTS OF CASH TO
BE PAYABLE ON OR IN RESPECT OF ITS DEBT).

 

(T)                                    CERTAIN FEES. EXCEPT AS DESCRIBED IN
SCHEDULE 3.1(T), NO BROKERAGE OR FINDER’S FEES OR COMMISSIONS ARE OR WILL BE
PAYABLE BY THE COMPANY TO ANY BROKER, FINANCIAL ADVISOR OR CONSULTANT, FINDER,
PLACEMENT AGENT, INVESTMENT BANKER, BANK OR OTHER PERSON WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE INVESTORS SHALL HAVE NO
OBLIGATION WITH RESPECT TO ANY FEES OR WITH RESPECT TO ANY CLAIMS (OTHER THAN
SUCH FEES OR COMMISSIONS OWED BY AN INVESTOR PURSUANT TO WRITTEN AGREEMENTS
EXECUTED BY SUCH INVESTOR WHICH FEES OR COMMISSIONS SHALL BE THE SOLE
RESPONSIBILITY OF SUCH INVESTOR) MADE BY OR ON BEHALF OF OTHER PERSONS FOR FEES
OF A TYPE CONTEMPLATED IN THIS SECTION THAT MAY BE DUE IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

(U)                                 CERTAIN REGISTRATION MATTERS. ASSUMING THE
ACCURACY OF THE INVESTORS’ REPRESENTATIONS AND WARRANTIES SET FORTH IN
SECTION 3.2, NO REGISTRATION UNDER THE SECURITIES ACT IS REQUIRED FOR THE OFFER
AND SALE OF THE SHARES BY THE COMPANY TO THE INVESTORS UNDER THE TRANSACTION
DOCUMENTS. THE COMPANY IS ELIGIBLE TO REGISTER ITS COMMON STOCK FOR RESALE BY
THE INVESTORS UNDER FORM S-3 PROMULGATED UNDER THE SECURITIES ACT. EXCEPT AS SET
FORTH ON SCHEDULE 3.1(U), THE COMPANY HAS NOT GRANTED OR AGREED TO GRANT TO ANY
PERSON ANY RIGHTS (INCLUDING “PIGGY-BACK” REGISTRATION RIGHTS) TO HAVE ANY
SECURITIES OF THE COMPANY REGISTERED WITH THE COMMISSION OR ANY OTHER
GOVERNMENTAL AUTHORITY THAT HAVE NOT BEEN SATISFIED.

 

(V)                                 LISTING AND MAINTENANCE REQUIREMENTS. THE
COMPANY HAS NOT, IN THE TWO YEARS PRECEDING THE DATE HEREOF, RECEIVED WRITTEN
NOTICE FROM ANY TRADING MARKET TO THE EFFECT THAT THE COMPANY IS NOT IN
COMPLIANCE WITH THE LISTING OR MAINTENANCE REQUIREMENTS THEREOF. THE COMPANY IS,
AND HAS NO REASON TO BELIEVE THAT IT WILL NOT IN THE FORESEEABLE FUTURE CONTINUE
TO BE, IN COMPLIANCE WITH THE LISTING AND MAINTENANCE REQUIREMENTS FOR CONTINUED
LISTING OF THE COMMON STOCK ON THE TRADING MARKET ON WHICH THE COMMON STOCK IS
CURRENTLY LISTED OR QUOTED. THE ISSUANCE AND SALE OF THE SHARES UNDER THE
TRANSACTION DOCUMENTS DOES NOT CONTRAVENE THE RULES AND REGULATIONS OF THE
TRADING MARKET ON WHICH THE COMMON STOCK IS CURRENTLY LISTED OR QUOTED, AND NO
APPROVAL OF THE SHAREHOLDERS OF THE COMPANY THEREUNDER IS REQUIRED FOR THE
COMPANY TO ISSUE AND DELIVER TO THE INVESTORS THE SHARES CONTEMPLATED BY
TRANSACTION DOCUMENTS.

 

(W)                               INVESTMENT COMPANY. THE COMPANY IS NOT, AND IS
NOT AN AFFILIATE OF, AND IMMEDIATELY FOLLOWING THE CLOSING WILL NOT HAVE BECOME,
AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED.

 

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(X)                                   APPLICATION OF TAKEOVER PROTECTIONS. THE
COMPANY HAS TAKEN ALL NECESSARY ACTION, IF ANY, IN ORDER TO RENDER INAPPLICABLE
ANY CONTROL SHARE ACQUISITION, BUSINESS COMBINATION, POISON PILL (INCLUDING ANY
DISTRIBUTION UNDER A RIGHTS AGREEMENT) OR OTHER SIMILAR ANTI-TAKEOVER PROVISION
UNDER THE COMPANY’S CERTIFICATE OF INCORPORATION (OR SIMILAR CHARTER DOCUMENTS)
OR THE LAWS OF ITS STATE OF INCORPORATION THAT IS OR COULD BECOME APPLICABLE TO
THE INVESTORS AS A RESULT OF THE INVESTORS AND THE COMPANY FULFILLING THEIR
OBLIGATIONS OR EXERCISING THEIR RIGHTS UNDER THE TRANSACTION DOCUMENTS,
INCLUDING WITHOUT LIMITATION THE COMPANY’S ISSUANCE OF THE SHARES AND THE
INVESTORS’ OWNERSHIP OF THE SHARES.

 

(Y)                                 NO ADDITIONAL AGREEMENTS. THE COMPANY DOES
NOT HAVE ANY AGREEMENT OR UNDERSTANDING WITH ANY INVESTOR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS OTHER THAN AS SPECIFIED
IN THE TRANSACTION DOCUMENTS.

 

(Z)                                   DISCLOSURE. THE COMPANY CONFIRMS THAT
NEITHER IT NOR ANY PERSON ACTING ON ITS BEHALF HAS PROVIDED ANY INVESTOR OR ITS
RESPECTIVE AGENTS OR COUNSEL WITH ANY INFORMATION THAT THE COMPANY BELIEVES
CONSTITUTES MATERIAL, NON-PUBLIC INFORMATION, EXCEPT INSOFAR AS THE EXISTENCE
AND TERMS OF THE PROPOSED TRANSACTIONS CONTEMPLATED HEREUNDER MAY CONSTITUTE
SUCH INFORMATION. THE COMPANY UNDERSTANDS AND CONFIRMS THAT THE INVESTORS WILL
RELY ON THE FOREGOING SENTENCE IN EFFECTING TRANSACTIONS IN SECURITIES OF THE
COMPANY. ALL DISCLOSURE PROVIDED TO THE INVESTORS REGARDING THE COMPANY, ITS
BUSINESS AND THE TRANSACTIONS CONTEMPLATED HEREBY, FURNISHED BY OR ON BEHALF OF
THE COMPANY (INCLUDING THE COMPANY’S REPRESENTATIONS AND WARRANTIES SET FORTH IN
THIS AGREEMENT) ARE TRUE AND CORRECT AND DO NOT CONTAIN ANY UNTRUE STATEMENT OF
A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE
THE STATEMENTS MADE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING.

 

3.2.                              Representations and Warranties of the
Investors. Each Investor hereby, for itself and for no other Investor,
represents and warrants to the Company as follows:

 

(A)                                  ORGANIZATION; AUTHORITY. SUCH INVESTOR IS
AN ENTITY DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS
OF THE JURISDICTION OF ITS ORGANIZATION WITH THE REQUISITE CORPORATE,
PARTNERSHIP OR LIMITED LIABILITY COMPANY POWER AND AUTHORITY TO ENTER INTO AND
TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE APPLICABLE TRANSACTION
DOCUMENTS AND OTHERWISE TO CARRY OUT ITS OBLIGATIONS THEREUNDER. THE EXECUTION,
DELIVERY AND PERFORMANCE BY SUCH INVESTOR OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT HAS BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE OR, IF SUCH
INVESTOR IS NOT A CORPORATION, SUCH PARTNERSHIP, LIMITED LIABILITY COMPANY OR
OTHER APPLICABLE LIKE ACTION, ON THE PART OF SUCH INVESTOR. EACH OF THIS
AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT HAS BEEN DULY EXECUTED BY SUCH
INVESTOR, AND WHEN DELIVERED BY SUCH INVESTOR IN ACCORDANCE WITH THE TERMS
HEREOF, WILL CONSTITUTE THE VALID AND LEGALLY BINDING OBLIGATION OF SUCH
INVESTOR, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS, EXCEPT AS SUCH
ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO, OR
AFFECTING GENERALLY THE ENFORCEMENT OF, CREDITORS’ RIGHTS AND REMEDIES OR BY
OTHER EQUITABLE PRINCIPLES OF GENERAL APPLICATION.

 

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(B)                                 INVESTMENT INTENT. SUCH INVESTOR IS
ACQUIRING THE SHARES BEING PURCHASED BY IT HEREUNDER AS PRINCIPAL FOR ITS OWN
ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR DISTRIBUTING
OR RESELLING SUCH SHARES OR ANY PART THEREOF, WITHOUT PREJUDICE, HOWEVER, TO
SUCH INVESTOR’S RIGHT AT ALL TIMES TO SELL OR OTHERWISE DISPOSE OF ALL OR ANY
PART OF SUCH SHARES IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES
LAWS. SUBJECT TO THE IMMEDIATELY PRECEDING SENTENCE, NOTHING CONTAINED HEREIN
SHALL BE DEEMED A REPRESENTATION OR WARRANTY BY SUCH INVESTOR TO HOLD SUCH
SHARES FOR ANY PERIOD OF TIME. SUCH INVESTOR IS ACQUIRING SUCH SHARES HEREUNDER
IN THE ORDINARY COURSE OF ITS BUSINESS. SUCH INVESTOR DOES NOT HAVE ANY
AGREEMENT OR UNDERSTANDING, DIRECTLY OR INDIRECTLY, WITH ANY PERSON TO
DISTRIBUTE ANY OF SUCH SHARES.

 

(C)                                  INVESTOR STATUS. AT THE TIME SUCH INVESTOR
WAS OFFERED THE SHARES, IT WAS, AND AT THE DATE HEREOF IT IS, AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT. SUCH INVESTOR IS
NOT A REGISTERED BROKER-DEALER UNDER SECTION 15 OF THE EXCHANGE ACT.

 

(D)                                 GENERAL SOLICITATION. SUCH INVESTOR IS NOT
PURCHASING THE SHARES BEING PURCHASED BY IT HEREUNDER AS A RESULT OF ANY
ADVERTISEMENT, ARTICLE, NOTICE OR OTHER COMMUNICATION REGARDING SUCH SHARES
PUBLISHED IN ANY NEWSPAPER, MAGAZINE OR SIMILAR MEDIA OR BROADCAST OVER
TELEVISION OR RADIO OR PRESENTED AT ANY SEMINAR OR ANY OTHER GENERAL
SOLICITATION OR GENERAL ADVERTISEMENT.

 

(E)                                  ACCESS TO INFORMATION. SUCH INVESTOR
ACKNOWLEDGES THAT IT HAS REVIEWED THE DISCLOSURE MATERIALS AND HAS BEEN AFFORDED
(I) THE OPPORTUNITY TO ASK SUCH QUESTIONS AS IT HAS DEEMED NECESSARY OF, AND TO
RECEIVE ANSWERS FROM, REPRESENTATIVES OF THE COMPANY CONCERNING THE TERMS AND
CONDITIONS OF THE OFFERING OF THE SHARES AND THE MERITS AND RISKS OF INVESTING
IN THE SHARES; (II) ACCESS TO INFORMATION ABOUT THE COMPANY AND THE SUBSIDIARIES
AND THEIR RESPECTIVE FINANCIAL CONDITION, RESULTS OF OPERATIONS, BUSINESS,
PROPERTIES, MANAGEMENT AND PROSPECTS SUFFICIENT TO ENABLE IT TO EVALUATE ITS
INVESTMENT; AND (III) THE OPPORTUNITY TO OBTAIN SUCH ADDITIONAL INFORMATION THAT
THE COMPANY POSSESSES OR CAN ACQUIRE WITHOUT UNREASONABLE EFFORT OR EXPENSE THAT
IS NECESSARY TO MAKE AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE
INVESTMENT. NEITHER SUCH INQUIRIES NOR ANY OTHER INVESTIGATION CONDUCTED BY OR
ON BEHALF OF SUCH INVESTOR OR ITS REPRESENTATIVES OR COUNSEL SHALL MODIFY, AMEND
OR AFFECT SUCH INVESTOR’S RIGHT TO RELY ON THE TRUTH AND ACCURACY OF THE
DISCLOSURE MATERIALS AND THE COMPANY’S REPRESENTATIONS AND WARRANTIES CONTAINED
IN THE TRANSACTION DOCUMENTS.

 

(F)                                    CERTAIN TRADING ACTIVITIES. SUCH INVESTOR
HAS NOT DIRECTLY OR INDIRECTLY, NOR HAS ANY PERSON ACTING ON BEHALF OF OR
PURSUANT TO ANY UNDERSTANDING WITH SUCH INVESTOR, ENGAGED IN ANY TRANSACTIONS IN
THE SECURITIES OF THE COMPANY (INCLUDING, WITHOUT LIMITATIONS, ANY SHORT SALES
INVOLVING THE COMPANY’S SECURITIES) SINCE THE TIME THAT SUCH INVESTOR WAS FIRST
CONTACTED BY THE COMPANY OR ROTH CAPITAL PARTNERS, LLC REGARDING AN INVESTMENT
IN THE COMPANY. SUCH INVESTOR COVENANTS THAT NEITHER IT NOR ANY PERSON ACTING ON
ITS BEHALF OR PURSUANT TO ANY UNDERSTANDING WITH IT WILL ENGAGE IN ANY
TRANSACTIONS IN THE SECURITIES OF THE COMPANY (INCLUDING SHORT SALES) PRIOR TO
THE TIME THAT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ARE PUBLICLY
DISCLOSED.

 

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(G)                                 INDEPENDENT INVESTMENT DECISION. SUCH
INVESTOR HAS INDEPENDENTLY EVALUATED THE MERITS OF ITS DECISION TO PURCHASE THE
SHARES PURSUANT TO THE TRANSACTION DOCUMENTS, AND SUCH INVESTOR CONFIRMS THAT IT
HAS NOT RELIED ON THE ADVICE OF ANY OTHER INVESTOR’S BUSINESS AND/OR LEGAL
COUNSEL IN MAKING SUCH DECISION. SUCH INVESTOR HAS NOT RELIED ON THE BUSINESS OR
LEGAL ADVICE OF ROTH CAPITAL PARTNERS, LLC OR ANY OF ITS AGENTS, COUNSEL OR
AFFILIATES IN MAKING ITS INVESTMENT DECISION HEREUNDER, AND CONFIRMS THAT NONE
OF SUCH PERSONS HAS MADE ANY REPRESENTATIONS OR WARRANTIES TO SUCH INVESTOR IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS.

 

(h)                                 Limited
Ownership.                                         The purchase by such Investor
of the Shares issuable to it at the Closing will not result in such Investor
(individually or together with any other Person with whom such Investor has
identified, or will have identified, itself as part of a “group” in a public
filing made with the Commission involving the Company’s securities) acquiring,
or obtaining the right to acquire, in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred. Such Investor does not
presently intend to, alone or together with others, make a public filing with
the Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
Closing (when added to any other securities of the Company that it or they then
own or have the right to acquire), in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred.

 

(i)                                     Investment Experience. Such Investor
acknowledges that it can bear the economic risk and complete loss of its
investment in the Shares and it has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby. Such Investor has significant experience in
making private investments, similar to the purchase of the Shares hereunder.
Such Investor understands that its investment in the Shares involves a high
degree of risk.

 

(J)                                     RELIANCE ON EXEMPTIONS. SUCH INVESTOR
UNDERSTANDS THAT (I) THE SHARES ARE BEING OFFERED AND SOLD IN RELIANCE UPON
SPECIFIC EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE U.S. FEDERAL AND
STATE SECURITIES LAWS AND (II) THE COMPANY IS RELYING UPON THE TRUTH AND
ACCURACY OF, AND SUCH INVESTOR’S COMPLIANCE WITH, THE REPRESENTATIONS,
WARRANTIES, AGREEMENTS, ACKNOWLEDGEMENTS AND UNDERSTANDINGS OF SUCH INVESTOR SET
FORTH HEREIN IN ORDER TO DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE
ELIGIBILITY OF SUCH INVESTOR TO ACQUIRE SHARES. SUCH INVESTOR UNDERSTANDS THAT
NO U.S. FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL AGENCY
HAS PASSED UPON THE VALIDITY OF OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE
SHARES.

 

(k)                                  Restricted Securities. Such Investor
understands that the Shares are characterized as “restricted securities” under
the U.S. federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.

 

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The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

 

ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES

 

4.1.                              (a)                                  Shares
may only be disposed of in compliance with state and federal securities laws. In
connection with any transfer of the Shares other than pursuant to an effective
registration statement, to the Company, to an Affiliate of an Investor or in
connection with a bona fide pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Shares under the
Securities Act.

 

(B)                                 CERTIFICATES EVIDENCING THE SHARES WILL
CONTAIN THE FOLLOWING LEGEND, UNTIL SUCH TIME AS THEY ARE NOT REQUIRED UNDER
SECTION 4.1(C):

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Shares pursuant
to a bona fide margin agreement in connection with a bona fide margin account
and, if required under the terms of such agreement or account, such Investor
may transfer pledged or secured Shares to the pledgees or secured parties. Such
a pledge or transfer would not be subject to approval or consent of the Company
and no legal opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal opinion may be
required in connection with a subsequent transfer following default by the
Investor transferor of the pledge. No notice shall be required of such pledge.
At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party

 

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of Shares may reasonably request in connection with a pledge or transfer of the
Shares including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Each Investor acknowledges and agrees that, except as
otherwise provided in Section 4.1(c), any Shares subject to a pledge or security
interest as contemplated by this Section 4.1(b) shall continue to bear the
legend set forth in this Section 4.1(b) and be subject to the restrictions on
transfer set forth in Section 4.1(a).

 

(C)                                  CERTIFICATES EVIDENCING SHARES SHALL NOT
CONTAIN ANY LEGEND (INCLUDING THE LEGEND SET FORTH IN SECTION 4.1(B)):
(I) FOLLOWING A SALE OR TRANSFER OF SUCH SHARES PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT (INCLUDING THE REGISTRATION STATEMENT), OR (II) FOLLOWING
A SALE OR TRANSFER OF SUCH SHARES PURSUANT TO RULE 144 (ASSUMING THE TRANSFEROR
IS NOT AN AFFILIATE OF THE COMPANY), OR (III) WHILE SUCH SHARES ARE ELIGIBLE FOR
SALE UNDER RULE 144(K). IF AN INVESTOR SHALL MAKE A SALE OR TRANSFER OF SHARES
EITHER (X) PURSUANT TO RULE 144 OR (Y) PURSUANT TO A REGISTRATION STATEMENT (AND
SHALL HAVE COMPLIED WITH ITS PROSPECTUS DELIVERY REQUIREMENTS FOR SUCH SALE OR
TRANSFER UNDER FEDERAL SECURITIES LAWS) AND IN EACH CASE SHALL HAVE DELIVERED TO
THE COMPANY OR THE COMPANY’S TRANSFER AGENT THE CERTIFICATE REPRESENTING SHARES
CONTAINING A RESTRICTIVE LEGEND WHICH ARE THE SUBJECT OF SUCH SALE OR TRANSFER
AND A REPRESENTATION LETTER IN CUSTOMARY FORM (THE DATE OF SUCH SALE OR TRANSFER
AND SHARE DELIVERY BEING THE “SHARE DELIVERY DATE”) AND (1) THE COMPANY SHALL
FAIL TO DELIVER OR CAUSE TO BE DELIVERED TO SUCH INVESTOR A CERTIFICATE
REPRESENTING SUCH SHARES THAT IS FREE FROM ALL RESTRICTIVE OR OTHER LEGENDS BY
THE THIRD TRADING DAY FOLLOWING THE SHARE DELIVERY DATE AND (2) FOLLOWING SUCH
THIRD TRADING DAY AFTER THE SHARE DELIVERY DATE AND PRIOR TO THE TIME SUCH
SHARES ARE RECEIVED FREE FROM RESTRICTIVE LEGENDS, THE INVESTOR, OR ANY THIRD
PARTY ON BEHALF OF SUCH INVESTOR, PURCHASES (IN AN OPEN MARKET TRANSACTION OR
OTHERWISE) SHARES OF COMMON STOCK TO DELIVER IN SATISFACTION OF A SALE BY THE
INVESTOR OF SUCH SHARES (A “BUY-IN”), THEN THE COMPANY SHALL PAY IN CASH TO THE
INVESTOR (FOR COSTS INCURRED EITHER DIRECTLY BY SUCH INVESTOR OR ON BEHALF OF A
THIRD PARTY) THE AMOUNT BY WHICH THE TOTAL PURCHASE PRICE PAID FOR COMMON STOCK
AS A RESULT OF THE BUY-IN (INCLUDING BROKERAGE COMMISSIONS, IF ANY) EXCEED THE
PROCEEDS RECEIVED BY SUCH INVESTOR AS A RESULT OF THE SALE TO WHICH SUCH BUY-IN
RELATES. THE INVESTOR SHALL PROVIDE THE COMPANY WRITTEN NOTICE INDICATING THE
AMOUNTS PAYABLE TO THE INVESTOR IN RESPECT OF THE BUY-IN.

 

4.2.                              Furnishing of Information. As long as the
Company is subject to the reporting requirements of the Exchange Act, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Investor owns Shares that are not eligible for resale under Rule 144(k), and the
Company is not required to file reports pursuant to the Exchange Act, the
Company will prepare and furnish to the Investors and make publicly available in
accordance with Rule 144(c) such information as is required for the Investors to
sell the Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Shares may reasonably request, all to the
extent required from time to time to enable such Person to sell the Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

 

4.3.                              Integration. The Company shall not, and shall
use its best efforts to ensure that no Affiliate of the Company shall, sell,
offer for sale or solicit offers to buy or otherwise negotiate

 

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in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares to
the Investors, or that would be integrated with the offer or sale of the Shares
for purposes of the rules and regulations of any Trading Market in a manner that
would require stockholder approval of the sale of the Shares to the Investors.

 

4.4.                              Subsequent Registrations. Other than pursuant
to the Registration Statement, prior to the Effective Date, the Company may not
file any registration statement (other than on Form S-8)  with the Commission
with respect to any securities of the Company.

 

4.5.                              Securities Laws Disclosure; Publicity. By
9:00 a.m. (New York time) on the Trading Day following the execution of this
Agreement, and by 9:00 a.m. (New York time) on the Trading Day following the
Closing Date, the Company shall issue press releases disclosing the transactions
contemplated hereby and the Closing. On the Trading Day following the execution
of this Agreement the Company will file a Current Report on Form 8-K disclosing
the material terms of the Transaction Documents (and attach as exhibits thereto
the Transaction Documents), and on the Trading Day following the Closing Date
the Company will file an additional Current Report on Form 8-K to disclose the
Closing. In addition, the Company will make such other filings and notices in
the manner and time required by the Commission and the Trading Market on which
the Common Stock is listed. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Investor, or include the name of any Investor
in any filing with the Commission (other than the Registration Statement, any
prospectus relating to the Registration Statement and any exhibits to filings
made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Trading Market,
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or Trading Market regulations.

 

4.6.                              Limitation on Issuance of Future Priced
Securities. During the six months following the Closing Date, the Company shall
not issue any “Future Priced Securities” as such term is described by NASD
IM-4350-1.

 

4.7.                              Indemnification of Investors. In addition to
the indemnity provided in the Registration Rights Agreement, the Company will
indemnify and hold the Investors and their directors, officers, shareholders,
partners, employees and agents (each, an “Investor Party”) harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”)
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 4.7
shall be the same as those set forth in Section 5 of the Registration Rights
Agreement.

 

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4.8.                              Non-Public Information. The Company covenants
and agrees that neither it nor any other Person acting on its behalf will
provide any Investor or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto such Investor shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.

 

4.9.                              Listing of Securities. The Company agrees,
(a) if the Company applies to have the Common Stock traded on any other Trading
Market, it will include in such application the Shares, and will take such other
action as is necessary or desirable to cause the Shares to be listed on such
other Trading Market as promptly as possible, and (b) it will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.

 

4.10.                        Use of Proceeds. The Company will use the net
proceeds from the sale of the Shares hereunder for working capital purposes and
not for the satisfaction of any portion of the Company’s debt (other than
payment of trade payables and accrued expenses in the ordinary course of the
Company’s business and consistent with prior practices), or to redeem any Common
Stock or Common Stock Equivalents.

 

ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING

 

5.1.                              Conditions Precedent to the Obligations of the
Investors to Purchase Shares. The obligation of each Investor to acquire Shares
at the Closing is subject to the satisfaction or waiver by such Investor, at or
before the Closing, of each of the following conditions:

 

(A)                                  REPRESENTATIONS AND WARRANTIES. THE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED HEREIN SHALL BE TRUE AND
CORRECT IN ALL MATERIAL RESPECTS AS OF THE DATE WHEN MADE AND AS OF THE CLOSING
AS THOUGH MADE ON AND AS OF SUCH DATE;

 

(B)                                 PERFORMANCE. THE COMPANY SHALL HAVE
PERFORMED, SATISFIED AND COMPLIED IN ALL MATERIAL RESPECTS WITH ALL COVENANTS,
AGREEMENTS AND CONDITIONS REQUIRED BY THE TRANSACTION DOCUMENTS TO BE PERFORMED,
SATISFIED OR COMPLIED WITH BY IT AT OR PRIOR TO THE CLOSING;

 

(C)                                  NO INJUNCTION. NO STATUTE, RULE,
REGULATION, EXECUTIVE ORDER, DECREE, RULING OR INJUNCTION SHALL HAVE BEEN
ENACTED, ENTERED, PROMULGATED OR ENDORSED BY ANY COURT OR GOVERNMENTAL AUTHORITY
OF COMPETENT JURISDICTION THAT PROHIBITS THE CONSUMMATION OF ANY OF THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS;

 

(D)                                 ADVERSE CHANGES. SINCE THE DATE OF EXECUTION
OF THIS AGREEMENT, NO EVENT OR SERIES OF EVENTS SHALL HAVE OCCURRED THAT
REASONABLY WOULD HAVE OR RESULT IN A MATERIAL ADVERSE EFFECT;

 

(E)                                  NO SUSPENSIONS OF TRADING IN COMMON STOCK;
LISTING. TRADING IN THE COMMON STOCK SHALL NOT HAVE BEEN SUSPENDED BY THE
COMMISSION OR ANY TRADING MARKET

 

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(EXCEPT FOR ANY SUSPENSIONS OF TRADING OF NOT MORE THAN ONE TRADING DAY SOLELY
TO PERMIT DISSEMINATION OF MATERIAL INFORMATION REGARDING THE COMPANY) AT ANY
TIME SINCE THE DATE OF EXECUTION OF THIS AGREEMENT, AND THE COMMON STOCK SHALL
HAVE BEEN AT ALL TIMES SINCE SUCH DATE LISTED FOR TRADING ON A TRADING MARKET;

 

(F)                                    COMPANY DELIVERABLES. THE COMPANY SHALL
HAVE DELIVERED THE COMPANY DELIVERABLES IN ACCORDANCE WITH SECTION 2.2(A);

 

(g)                                 Nasdaq Listing. If applicable, the Nasdaq
Stock Market shall have waived application of the 15 day prior notice contained
in NASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expired
without objection; and

 

(h)                                 Termination. This Agreement shall not have
been terminated as to such Investor in accordance with Section 6.5.

 

5.2.                              Conditions Precedent to the Obligations of the
Company to sell Shares. The obligation of the Company to sell Shares at the
Closing is subject to the satisfaction or waiver by the Company, at or before
the Closing, of each of the following conditions:

 

(A)                                  REPRESENTATIONS AND WARRANTIES. THE
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR CONTAINED HEREIN SHALL BE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE DATE WHEN MADE AND AS OF THE
CLOSING DATE AS THOUGH MADE ON AND AS OF SUCH DATE;

 

(B)                                 PERFORMANCE. EACH INVESTOR SHALL HAVE
PERFORMED, SATISFIED AND COMPLIED IN ALL MATERIAL RESPECTS WITH ALL COVENANTS,
AGREEMENTS AND CONDITIONS REQUIRED BY THE TRANSACTION DOCUMENTS TO BE PERFORMED,
SATISFIED OR COMPLIED WITH BY SUCH INVESTOR AT OR PRIOR TO THE CLOSING;

 

(C)                                  NO INJUNCTION. NO STATUTE, RULE,
REGULATION, EXECUTIVE ORDER, DECREE, RULING OR INJUNCTION SHALL HAVE BEEN
ENACTED, ENTERED, PROMULGATED OR ENDORSED BY ANY COURT OR GOVERNMENTAL AUTHORITY
OF COMPETENT JURISDICTION THAT PROHIBITS THE CONSUMMATION OF ANY OF THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS;

 

(D)                                 INVESTORS DELIVERABLES. EACH INVESTOR SHALL
HAVE DELIVERED ITS INVESTORS DELIVERABLES IN ACCORDANCE WITH SECTION 2.2(B);

 

(e)                                  Nasdaq Listing. If applicable, the Nasdaq
Stock Market shall have waived application of the 15 day prior notice contained
in NASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expired
without objection; and

 

(f)                                    Termination. This Agreement shall not
have been terminated as to such Investor in accordance with Section 6.5.

 

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ARTICLE 6.
MISCELLANEOUS

 

6.1.                              Fees and Expenses. Each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of the Transaction Documents.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Shares.

 

6.2.                              Entire Agreement. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.

 

6.3.                              Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of
successful transmission) at the facsimile number specified in this Section prior
to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is not
a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(c) the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as follows:

 

 

If to the Company:

BioSphere Medical, Inc.

 

 

1050 Hingham St.

 

 

Rockland, Massachusetts 02370

 

 

Attn: Chief Executive Officer

 

 

Facsimile: (781) 681-5093

 

 

 

 

With a copy to:

Wilmer Cutler Pickering Hale and Dorr LLP

 

 

60 State Street

 

 

Boston, Massachusetts 02109

 

 

Attn: Susan W. Murley, Esq.

 

 

Facsimile: (617) 526-5000

 

 

 

 

If to an Investor:

To the address set forth under such Investor’s name on the signature
pages hereof;

 

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

 

6.4.                              Amendments; Waivers; No Additional
Consideration. No provision of this Agreement may be waived or amended except in
a written instrument signed by the Company

 

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and the Investors holding a majority of the Shares. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Investor to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration is
also offered to all Investors who then hold Shares.

 

6.5.                              Termination. This Agreement may be terminated
prior to Closing by written agreement of the Investors and the Company.

 

6.6.                              Construction. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party. This Agreement shall be construed as if drafted jointly by
the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or any of the Transaction Documents.

 

6.7.                              Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investors. Any
Investor may assign any or all of its rights under this Agreement to any Person
to whom such Investor assigns or transfers any Shares, provided such transferee
agrees in writing to be bound, with respect to the transferred Shares, by the
provisions hereof that apply to the “Investors.”  The preceding sentence shall
not apply to (a) any Shares that have been registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with such registration statement, or (b) any Shares that have been
publicly sold pursuant to Rule 144.

 

6.8.                              No Third-Party Beneficiaries. This Agreement
is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set forth
in Section 4.7 (as to each Investor Party).

 

6.9.                              Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party hereto hereby irrevocably submits to the jurisdiction of the
New York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction of
any such New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service

 

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of process and consents to process being served in any such Proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

 

6.10.                        Survival. The representations, warranties,
agreements and covenants contained herein shall survive the Closing and the
delivery of the Shares.

 

6.11.                        Execution. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile or other electronic transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
or other electronic signature page were an original thereof.

 

6.12.                        Severability. If any provision of this Agreement is
held to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this
Agreement.

 

6.13.                        Rescission and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Investor exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Investor may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.

 

6.14.                        Replacement of Securities. If any certificate or
instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Shares. If

 

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a replacement certificate or instrument evidencing any Shares is requested due
to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

 

6.15.                        Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
each of the Investors and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary damages may not
be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

 

6.16.                        Payment Set Aside. To the extent that the Company
makes a payment or payments to any Investor pursuant to any Transaction Document
or an Investor enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 

6.17.                        Independent Nature of Investors’ Obligations and
Rights. The obligations of each Investor under any Transaction Document are
several and not joint with the obligations of any other Investor, and no
Investor shall be responsible in any way for the performance of the obligations
of any other Investor under any Transaction Document. The decision of each
Investor to purchase Shares pursuant to the Transaction Documents has been made
by such Investor independently of any other Investor. Nothing contained herein
or in any Transaction Document, and no action taken by any Investor pursuant
thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Shares or enforcing its rights
under the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor.

 

6.18.                        Limitation of Liability. Notwithstanding anything
herein to the contrary, the Company acknowledges and agrees that the liability
of an Investor arising directly or indirectly,

 

22

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under any Transaction Document of any and every nature whatsoever shall be
satisfied solely out of the assets of such Investor, and that no trustee,
officer, other investment vehicle or any other Affiliate of such Investor or any
investor, shareholder or holder of shares of beneficial interest of such a
Investor shall be personally liable for any liabilities of such Investor.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

BIOSPHERE MEDICAL, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

NAME OF INVESTOR

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

Investment Amount: $

 

 

 

 

 

Tax ID No.:

 

 

 

 

 

 

 

ADDRESS FOR NOTICE

 

 

 

c/o:

 

 

 

 

 

Street:

 

 

 

 

 

City/State/Zip:

 

 

 

 

 

Attention:

 

 

 

 

 

Tel:

 

 

 

 

 

Fax:

 

 

 

 

 

 

 

DELIVERY INSTRUCTIONS

 

(if different from above)

 

 

 

c/o:

 

 

 

 

 

Street:

 

 

 

 

 

City/State/Zip:

 

 

 

 

 

Attention:

 

 

 

 

 

Tel:

 

 

 

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