Exhibit 10.1




 




STOCK PURCHASE AGREEMENT




 




Endocardial Solutions, Inc.


1350 Energy Lane, Suite 110


St. Paul, Minnesota 55108




 




 




The undersigned (the “Investor”), hereby confirms its agreement

with you as follows:




 




1.             This Stock Purchase Agreement (the

“Agreement”) is made as of the

date set forth below among Endocardial Solutions, Inc., a Delaware corporation

(the “Company”), and the Investor.




 




2.             The Company has authorized the sale

and issuance of up to 3,097,000 shares (the “Shares”)

of common stock of the Company, $.01 par value per share (the “Common Stock”), to certain investors in a

private placement (the “Offering”).




 




3.             The Company and the Investor agree

that the Investor will purchase from the Company and the Company will issue and

sell to the Investor               

Shares at a purchase price of $2.75 per Share, or an aggregate purchase price

of

$                              ,

pursuant to the Terms and Conditions for Purchase of Shares attached hereto as

Annex I and incorporated herein by this reference as if fully set forth

herein.  Unless otherwise requested by

the Investor in Exhibit A, certificates representing the Shares purchased by

the Investor will be registered in the Investor’s name and address as set forth

below.




 




4.             The Investor represents that,

except as set forth below, (a) it has had no position, office or other material

relationship within the past three years with the Company or its affiliates,

(b) neither it, nor any group of which it is a member or to which it is

related, beneficially owns (including the right to acquire or vote) any

securities of the Company and (c) it has no direct or indirect affiliation or

association with any National Association of Securities Dealers, Inc. (“NASD”)

member.  Exceptions:




 




	

   


  





(If no exceptions, write “none.” 

If left blank, response will be deemed to be “none.”)




 




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Please confirm that the

foregoing correctly sets forth the agreement between us by signing in the space

provided below for that purpose.




 




	

   


  	

  Dated as of:  January 2, 2003


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  “INVESTOR”


  
	

   


  	

   


  
	

   


  	

  By:


  	

   


  
	

   


  	

  Print Name:


  	

   


  
	

   


  	

  Title:


  	

   


  
	

   


  	

  Address:


  	

   


  
	

   


  	

   


  
	

  AGREED AND

  ACCEPTED:


  	

   


  
	

  Endocardial

  Solutions, Inc.


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

  By: /s/ J.

  Robert Paulson


  	

   


  
	

  Title: Chief

  Financial Officer


  	

   


  
						





 




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Annex I




 




TERMS AND CONDITIONS

FOR PURCHASE OF SHARES




 




1.                                      Agreement

to Sell and Purchase the Shares; Subscription Date.




 




1.1          Purchase

and Sale.  At

the Closing (as defined in Section 2), the Company will sell to the Investor,

and the Investor will purchase from the Company, upon the terms and conditions

hereinafter set forth, the number of Shares set forth in paragraph 3 of the

Stock Purchase Agreement to which these Terms and Conditions for Purchase of

Shares are attached as Annex I and at the purchase price set forth in such

paragraph.




 




1.2          Other

Investors.  As

part of the Offering, the Company proposes to enter into this same form of

Stock Purchase Agreement with certain other investors (the “Other Investors”), and the Company expects

to complete sales of Shares to them. 

(The Investor and the Other Investors are hereinafter sometimes

collectively referred to as the “Investors,”

and this Agreement and the Stock Purchase Agreements executed by the Other

Investors are hereinafter sometimes collectively referred to as the “Agreements.”)  The Company may accept executed Agreements from Investors for the

purchase of Shares commencing upon the date on which the Company provides the

Investors with the proposed purchase price per Share and concluding upon the

date (the “Subscription Date”) on

which the Company has notified U.S. Bancorp Piper Jaffray Inc. (in its capacity

as placement agent for the Shares, the “Placement

Agent”) in writing that it is no longer accepting Agreements for the

purchase of Shares in the Offering (which shall not be later than the Closing

Date).  Each Investor must complete the

Stock Purchase Agreement, the Stock Certificate Questionnaire (attached as

Exhibit A hereto) and the Investor Questionnaire (attached as Exhibit B hereto)

in order to purchase Shares in the Offering.




 




1.3          Placement

Agent Fee.  Investor

acknowledges that the Company intends to pay the Placement Agent a fee in

respect of the sale of Shares to the Investor.




 




The Company shall indemnify and

hold harmless the Investor from and against all fees, commissions or other

payments owing by the Company to the Placement Agent or any other person or

firm acting on behalf of the Company hereunder.




 




2.             Delivery

of the Shares at Closing.  The completion of the purchase and sale of the Shares (the “Closing”) shall occur at a place and time,

no later than January 7, 2003 (the “Closing

Date”), to be specified by the Company and the Placement Agent, and

of which the Investors will be notified in advance by the Placement Agent.  At the Closing, the Company shall deliver to

the Investor one or more stock certificates representing the number of Shares

set forth in paragraph 3 of the Stock Purchase Agreement, each such certificate

to be registered in the name of the Investor or, if so indicated on the Stock

Certificate Questionnaire attached hereto as Exhibit A, in the name of a

nominee designated by the Investor provided that, if requested by the Investor,

stock certificates representing such Shares shall be delivered in escrow to

such Investor’s agent prior to the Closing, to be held until the completion of

the Closing.  In addition, on or prior

to the Closing Date, the Company shall cause counsel to the Company to deliver

to the Investors a legal opinion substantially in the form attached hereto as

Exhibit D.




 




The Company’s obligation to

issue and sell the Shares to the Investor shall be subject to the following

conditions, any one or more of which may be waived by the Company: (a) receipt

by the Company of a certified bank check or wire transfer of funds in the full

amount of the purchase price for the Shares being purchased hereunder as set

forth in paragraph 3 of the Stock Purchase Agreement; (b) completion of

purchases and sales under the Agreements with the 




 




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Other Investors; and (c) the

accuracy of the representations and warranties made by the Investors and the

fulfillment of those undertakings of the Investors to be fulfilled prior to the

Closing.




 




The Investor’s obligation to

purchase the Shares shall be subject to the following conditions, any one or

more of which may be waived by the Investor: (a) the Company’s agreement to

issue and sell, and the Investors’ agreement to purchase, on the Closing Date,

not less than three million (3,000,000) shares of Common Stock; (b) evidence

satisfactory to the Investor that the Shares have been issued to the Investor

(which may be in the form of a facsimile transmission of a copy of the

certificate representing the Shares); (c) the delivery to the Investor by

counsel to the Company of a legal opinion in the form attached hereto as

Exhibit D; (d) the representations and warranties of the Company contained in

Section 3 being true and correct on and as of such Closing with the same effect

as though such representations and warranties had been made on and as of the

date of such Closing; (e) the absence of any order, writ, injunction, judgment

or decree that questions the validity of the Agreements or the right of the

Company to enter into such Agreements or to consummate the transactions

contemplated hereby and thereby; and (f) the delivery to the Investor by the

Secretary or Assistant Secretary of the Company of a certificate stating that

the condition specified in part (d) of this paragraph has been fulfilled.




 




3.                                      Representations,

Warranties and Covenants of the Company. 

Except as otherwise described in the Company’s Annual Report on Form

10-K for the year ended December 31, 2001 (and any amendments thereto

filed prior to the date hereof), the Company’s Proxy Statement for its 2002

Annual Meeting of Stockholders, or the Company’s Quarterly Reports on Form 10-Q

for the quarters ended March 31, 2002, June 30, 2002 and September 30,

2002 (and any amendments thereto filed prior to the date hereof) or any of the

Company’s Current Reports on Form 8-K filed since January 1, 2002

(collectively, the “SEC Reports”),

the Company hereby represents and warrants to, and covenants with, the Investor

as of the date hereof and the Closing Date, as follows:




 




3.1          Organization.  Each of the Company

and its Subsidiaries (as defined in Rule 405 under the Securities Act, as

amended (the “Securities Act”)) is

duly incorporated and validly existing in good standing under the laws of the

jurisdiction of its incorporation.  Each

of the Company and its Subsidiaries has full power and authority to own,

operate and occupy its properties and to conduct its business as presently

conducted and is registered or qualified to do business and in good standing in

each jurisdiction in which it owns or leases property or transacts business and

where the failure to be so qualified would have a material adverse effect upon

the Company and its Subsidiaries taken as a whole, or the business, financial

condition, properties, operations or assets of the Company and its Subsidiaries

taken as a whole, or the Company’s ability to perform its obligations under the

Agreements (“Material Adverse Effect”),

and no proceeding has been instituted in any such jurisdiction revoking,

limiting or curtailing, or seeking to revoke, limit or curtail, such power and

authority or qualification.




 




3.2          Due

Authorization. 

The Company has all requisite power and authority to execute, deliver

and perform its obligations under the Agreements, and the Agreements have been

duly authorized and validly executed and delivered by the Company and

constitute legal, valid and binding agreements of the Company enforceable

against the Company in accordance with their terms, except as rights to

indemnity and contribution may be limited by state or federal securities laws

or the public policy underlying such laws, except as enforceability may be

limited by applicable bankruptcy, insolvency, reorganization, moratorium or

similar laws affecting creditors’ and contracting parties’ rights generally and

except as enforceability may be subject to general principles of equity

(regardless of whether such enforceability is considered in a proceeding in

equity or at law).




 




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3.3          Non-Contravention.  The execution and

delivery of the Agreements, the issuance and sale of the Shares to be sold by

the Company under the Agreements, the fulfillment of the terms of the

Agreements and the consummation of the transactions contemplated thereby will

not (A) result in conflict with or constitute a violation of, or default

(with the passage of time or otherwise) under, (i) any bond, debenture,

note or other evidence of indebtedness, or any lease, contract, indenture,

mortgage, deed of trust, loan agreement, joint venture or other agreement or

instrument to which the Company or any of its Subsidiaries is a party or by

which the Company or any of its Subsidiaries or their respective properties are

bound, where such conflict, violation or default is reasonably expected to

result in a Material Adverse Effect, (ii) the certificate of

incorporation, by-laws or other organizational documents of the Company or any

of its Subsidiaries, or (iii) any law, administrative regulation,

ordinance or order of any court or governmental agency, arbitration panel or

authority binding upon the Company or any of its Subsidiaries or their

respective properties, where such conflict, violation or default is likely to

result in a Material Adverse Effect or (B) result in the creation or imposition

of any lien, encumbrance, claim, security interest or restriction whatsoever

upon any of the material properties or assets of the Company or any of its

Subsidiaries or an acceleration of indebtedness pursuant to any obligation,

agreement or condition contained in any material bond, debenture, note or any

other evidence of indebtedness or any material indenture, mortgage, deed of

trust or any other agreement or instrument to which the Company or any of its

Subsidiaries is a party or by which any of them is bound or to which any of the

property or assets of the Company or any of its Subsidiaries is subject.  No consent, approval, authorization or other

order of, or registration, qualification or filing with, any regulatory body,

administrative agency, or other governmental body in the United States is

required for the execution and delivery of the Agreements by the Company and

the valid issuance or sale of the Shares by the Company pursuant to the

Agreements, other than such as have been made or obtained, and except for any

filings required to be made under federal or state securities laws.




 




3.4          Capitalization.  The outstanding

capital stock of the Company as of September 30, 2002 is as described in

the Company’s Quarterly Report on Form 10-Q for the quarter ended

September 30, 2002.  The Company

has not issued any capital stock since September 30, 2002 other than

pursuant to (i) the exercise of employee stock options under the stock

option plans disclosed in the SEC Reports and(ii) the exercise of rights

under the Company’s Employee Stock Purchase Plan disclosed in the SEC

Reports.  The Shares to be sold pursuant

to the Agreements have been duly authorized, and when issued and paid for in

accordance with the terms of the Agreements, will be duly and validly issued,

fully paid and nonassessable.  The

outstanding shares of capital stock of the Company have been duly and validly

issued and are fully paid and nonassessable, have been issued in compliance

with the registration requirements of federal and state securities laws, and

were not issued in violation of any preemptive rights or similar rights to

subscribe for or purchase securities. 

Except for options issued under the Company’s stock option plans,

warrants outstanding as described in the SEC Reports and rights under the

Company’s Employee Stock Purchase Plan or Rights Agreement with Wells Fargo

Bank Minnesota (formerly Norwest Bank Minnesota) as Rights Agent, there are no

outstanding rights (including, without limitation, preemptive rights), warrants

or options to acquire, or instruments convertible into or exchangeable for, any

unissued shares of capital stock or other equity interest in the Company, or

any contract, commitment, agreement, understanding or arrangement of any kind,

in either case to which the Company is a party and providing for the issuance

or sale of any capital stock of the Company, any such convertible or

exchangeable securities or any such rights, warrants or options.  Without limiting the foregoing, no

preemptive right, co-sale right, registration right, right of first refusal or

other similar right exists with respect to the issuance and sale of the Shares,

except as provided in the Agreements. 

There are no stockholders agreements, voting agreements or other similar

agreements with respect to the Common Stock to which the Company is a

party.  Other than one share held by the

Chief Executive Officer of the Company for compliance with local law, the

Company owns the entire equity interest in the Subsidiaries, free and clear of

any pledge, lien, security interest, encumbrance, claim or equitable interest.




 




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3.5          Legal

Proceedings.  There

is no material legal or governmental proceeding pending, or to the knowledge of

the Company, threatened, to which the Company or any of its Subsidiaries is a

party or of which the business or property of the Company or any of its

Subsidiaries is subject that is required to be disclosed and that is not so

disclosed in the SEC Reports.  Neither

the Company nor any of its Subsidiaries is a party to the provisions of any

injunction, judgment, decree or order of any court, regulatory body,

administrative agency or other government body which is material to the

business or operation of the Company and its Subsidiaries, taken as a whole.




 




3.6          No

Violations.  Neither

the Company nor any of its Subsidiaries is in violation of its certificate of

incorporation, bylaws or other organizational documents, or in violation of any

law, administrative regulation, ordinance or order of any court or governmental

agency, arbitration panel or authority applicable to the Company or any of its

Subsidiaries, which violation, individually or in the aggregate, is reasonably

likely to have a Material Adverse Effect, nor, except as provided below, is the

Company or any of its Subsidiaries in default (and there exists no condition

which, with the passage of time or otherwise, would constitute a default) in

the performance of any bond, debenture, note or any other evidence of indebtedness

or any indenture, mortgage, deed of trust or any other material agreement or

instrument to which the Company or any of its Subsidiaries is a party or by

which the Company or any of its Subsidiaries is bound or by which the property

of the Company or any of its Subsidiaries is bound, which default is reasonably

likely to have a Material Adverse Effect. 

As a result of the Company’s current cash position, the Company is in

technical violation of a net worth covenant and a quick ratio covenant in

its loan agreement with Silicon Valley Bank, which Silicon Valley Bank has

agreed to forbear through the earlier of January 10, 2003 or the Closing Date

in anticipation of the Company’s completion of this Offering.




 




3.7          Governmental

Permits, Etc.  With

the exception of the matters which are dealt with separately in Sections 3.1,

3.11, 3.12 and 3.21, each of the Company and its Subsidiaries has all necessary

franchises, licenses, certificates and other authorizations from any foreign,

federal, state or local government or governmental agency, department or body

that are currently necessary for the operation of the business of the Company

and its Subsidiaries as currently conducted, except where the failure to

currently possess such franchises, licenses, certificates and other

authorizations is not reasonably be expected to have a Material Adverse Effect.




 




3.8          Intellectual

Property.




 




(a)           Except for matters which are not

reasonably likely to have a Material Adverse Effect, (i) each of the Company

and its Subsidiaries has ownership of, or a license or other legal right to

use, all patents, copyrights, trade secrets, trademarks, customer lists,

designs, manufacturing or other processes, computer software, systems, data

compilation, research results or other proprietary rights used in the business

of the Company or its Subsidiaries (collectively, “Intellectual Property”) and (ii) all of the Intellectual

Property owned by the Company or its Subsidiaries consisting of patents,

registered trademarks and registered copyrights have been duly registered in,

filed in or issued by the United States Patent and Trademark Office, the United

States Register of Copyrights or the corresponding offices of other

jurisdictions and have been maintained and renewed in accordance with all

applicable provisions of law and administrative regulations in the United

States and/or such other jurisdictions.




 




(b)           Except

for matters which are not reasonably likely to have a Material Adverse Effect,

all material licenses or other material agreements under which (i) the Company

or any of its Subsidiaries employs rights in Intellectual Property, or (ii) the

Company or any of its Subsidiaries has granted rights to others in Intellectual

Property owned or licensed by the Company or any of its Subsidiaries, are in full

force and effect and there is no default by the Company or any of its

Subsidiaries thereto.




 




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(c)           The Company believes that it has

taken all steps reasonably required in accordance with sound business practice

and business judgment to establish and preserve the Company’s ownership of all

material Intellectual Property owned by the Company or its Subsidiaries.




 




(d)           Except for matters which are not

reasonably likely to have a Material Adverse Effect, to the knowledge of the

Company, (i) the present business, activities and products of the Company and

its Subsidiaries do not infringe any intellectual property of any other person;

(ii) neither the Company nor any of its Subsidiaries is making unauthorized use

of any confidential information or trade secrets of any person; and (iii) the

activities of any of the employees on behalf of the Company or any of its

Subsidiaries do not violate any agreements or arrangements related to

confidential information or trade secrets of persons other than the Company or

its Subsidiaries or restricting any such employee’s engagement in business

activities of any nature.




 




(e)           No proceedings are pending, or to the

knowledge of the Company, threatened, which challenge the rights of the Company

or any of its Subsidiaries in respect of the Company’s or any of its

Subsidiaries’ right to the use of the Intellectual Property, except for matters

which are not reasonably likely to have a Material Adverse Effect.




 




3.9          Financial

Statements. 

The consolidated financial statements of the Company and the related

notes contained in the SEC Reports present fairly and accurately in all

material respects, in accordance with generally accepted accounting principles,

the consolidated financial position of the Company and its Subsidiaries as of

the dates indicated, and the results of their operations, cash flows and the

changes in stockholders’ equity for the periods therein specified, subject, in

the case of unaudited financial statements for interim periods, to normal

year-end audit adjustments.  Such

consolidated financial statements (including the related notes) have been

prepared in accordance with generally accepted accounting principles applied on

a consistent basis throughout the periods therein specified, except that

unaudited financial statements may not contain all footnotes required by

generally accepted accounting principles.




 




3.10        No

Material Adverse Change.  Except

as disclosed in the SEC Reports or in Section 3.6, since September 30, 2002,

there has not been (i) a change that has had or is reasonably likely to

have a Material Adverse Effect, (ii) any obligation, direct or contingent, that

is material to the Company or any of its Subsidiaries considered as one

enterprise, incurred by the Company or any of its Subsidiaries, except

obligations incurred in the ordinary course of business, (iii) any dividend or

distribution of any kind declared, paid or made on the capital stock of the

Company or any of its Subsidiaries, or (iv) any loss or damage (whether or not

insured) to the physical property of the Company or any of its Subsidiaries

which has been sustained which has a Material Adverse Effect.




 




3.11        Nasdaq

Compliance.  The

Company’s Common Stock is registered pursuant to Section 12(g) of the

Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is listed on the Nasdaq National Market

(the “Nasdaq Stock Market”), and

the Company has taken no action designed to, or which to its knowledge is

likely to have the effect of, terminating the registration of the Common Stock

under the Exchange Act or delisting the Common Stock from the Nasdaq Stock

Market.  The issuance of the Shares does

not require shareholder approval, including, without limitation, pursuant to

the Nasdaq Marketplace Rules.




 




3.12        Reporting

Status.  The

Company has timely made all filings required under the Exchange Act during the

12 months preceding the date of this Agreement, and all of those documents

complied in all material respects with the Securities and Exchange Commission’s

(the “SEC”) requirements as of

their respective filing dates, and the information contained therein as of the

respective dates thereof did not contain an untrue statement of a material fact

or omit to state a material fact required 




 




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to be stated therein or

necessary to make the statements therein in light of the circumstances under

which they were made not misleading. 

The Company is currently eligible to register the resale of Common Stock

in a secondary offering on a registration statement on Form S-3 under the

Securities Act.




 




3.13        No

Manipulation of Stock.  The

Company has not taken and will not, in violation of applicable law, take any

action outside the ordinary course of business designed to or that might

reasonably be expected to cause or result in unlawful manipulation of the price

of the Common Stock to facilitate the sale or resale of the Shares.




 




3.14        Accountants.  Ernst & Young

LLP, who expressed their opinion with respect to the consolidated financial

statements to be incorporated by reference from the Company’s Annual Report on

Form 10-K for the year ended December 31, 2001 into the Registration

Statement (as defined below) and the prospectus which forms a part thereof (the

“Prospectus”), have advised the Company that they are, and to the knowledge of

the Company they are, independent accountants as required by the Securities Act

and the rules and regulations promulgated thereunder (the “Rules and Regulations”).




 




3.15        Contracts.  Except for matters

which are not reasonably likely to have a Material Adverse Effect, the

contracts listed as exhibits to the SEC Reports that are material to the

Company, other than the Distribution/Supply Agreement between the Company and

Medtronic, Inc. and all amendments thereto and those contracts that are

substantially or fully performed or expired by their terms, are in full force

and effect on the date hereof, and none of the Company, its Subsidiaries nor,

to the Company’s knowledge, any other party to such contracts is in breach of

or default under any of such contracts.




 




3.16        Taxes.  Except for matters

which are not reasonably expected to have a Material Adverse Effect, the

Company has filed all necessary federal, state and foreign income and franchise

tax returns and has paid or accrued all taxes shown as due thereon, and the

Company has no knowledge of a tax deficiency which has been asserted or

threatened against the Company.




 




3.17        Transfer

Taxes.  On the

Closing Date, all stock transfer or other taxes (other than income taxes) which

are required to be paid in connection with the sale and transfer of the Shares

hereunder will be, or will have been, fully paid or provided for by the Company

and the Company will have complied with all laws imposing such taxes.




 




3.18        Investment

Company.  The

Company is not an “investment company” or an “affiliated person” of, or

“promoter” or “principal underwriter” for an investment company, within the

meaning of the Investment Company Act of 1940, as amended.




 




3.19        Insurance.  The Company and its

Subsidiaries maintain insurance of the types and in the amounts that the

Company reasonably believes is adequate for their businesses, including, but

not limited to, insurance covering real and personal property owned or leased

by the Company and its Subsidiaries against theft, damage, destruction, acts of

vandalism and all other risks customarily insured against by similarly situated

companies, all of which insurance is in full force and effect.




 




3.20        Offering

Materials.  The

Company has not in the past nor will it hereafter take any action to sell,

offer for sale or solicit offers to buy any securities of the Company which

would bring the offer or sale of the Shares as contemplated by this Agreement

within the provisions of Section 5 of the Securities Act.




 




3.21        Listing.  The Company shall

comply with all requirements of the NASD with respect to the issuance of the

Shares and the listing thereof on the Nasdaq Stock Market.




 




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3.22        Related

Party Transactions. 

Except as disclosed in the SEC Reports, no transaction has occurred

between or among the Company, or any of its Subsidiaries and their affiliates,

officers or directors or any affiliate or affiliates of any such officer or

director that with the passage of time will be required to be disclosed

pursuant to Section 13, 14 or 15(d) of the Exchange Act, other than (i) the

execution of a Change of Control Agreement with J. Robert Paulson, Jr. upon

employment as Chief Financial Officer, and (ii) the execution of

Noncompetition, Nondisclosure and Assignment of Inventions Agreements with

certain officers in October, 2002.




 




3.23        Books

and Records.  The

books, records and accounts of the Company and its Subsidiaries accurately and

fairly reflect, in reasonable detail, the transactions in, and dispositions of,

the assets of, and the operations of, the Company and its Subsidiaries.  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

authorizations, (ii) transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted

accounting principles 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.




 




3.24        Disclosure.  The Company

confirms that neither it nor any other Person acting on its behalf has provided

Investor, or will provide Investor without Investor’s consent, with any information

that constitutes or might constitute material, nonpublic information, except

the material terms and conditions of this transaction, including the provisions

of the Agreement, which shall be fully disclosed pursuant to Section 6.6

hereof, and Suspension Notices pursuant to Section 6.2(c). The Company

understands and confirms that Investor will rely on the foregoing

representations in effecting transactions in securities of the Company.




 




4.                                      Representations,

Warranties and Covenants of the Investor.




 




4.1          Investor

Knowledge and Status.  The

Investor represents and warrants to, and covenants with, the Company that: (i)

the Investor is an “accredited investor” as defined in Regulation D under the

Securities Act, is knowledgeable, sophisticated and experienced in making, and

is qualified to make decisions with respect to, investments in securities

presenting an investment decision like that involved in the purchase of the

Shares, and has requested, received, reviewed and considered all information it

deemed relevant in making an informed decision to purchase the Shares; (ii) the

Investor understands that the Shares are “restricted securities” and have not

been registered under the Securities Act and is acquiring the number of Shares

set forth in paragraph 3 of the Stock Purchase Agreement in the ordinary course

of its business and for its own account for investment only, has no present

intention of distributing any of such Shares and has no arrangement or

understanding with any other persons regarding the distribution of such Shares

(this representation and warranty not limiting the Investor’s right to sell

Shares at any time pursuant to the Registration Statement or otherwise, or

other than with respect to any claim arising out of a breach of this

representation and warranty, the Investor’s right to indemnification under

Section 6.3); (iii) the Investor will not, directly or indirectly, offer, sell,

pledge, transfer or otherwise dispose of (or solicit any offers to buy,

purchase or otherwise acquire or take a pledge of) any of the Shares except in

compliance with the Securities Act, applicable state securities laws and the

respective rules and regulations promulgated thereunder; (iv) the Investor has

answered all questions in paragraph 3 of the Stock Purchase Agreement and the

Investor Questionnaire attached hereto as Exhibit B for use in preparation of

the Registration Statement and the answers thereto are true and correct as of

the date hereof and will be true and correct as of the Closing Date; (v) the

Investor will notify the Company promptly of any change in any of such

information until such time as the Investor has sold all of its Shares or until

the Company is no longer required to keep the Registration Statement 




 




13





























 




effective; and (vi) the

Investor has, in connection with its decision to purchase the number of Shares

set forth in paragraph 3 of the Stock Purchase Agreement, relied only upon the

representations and warranties of the Company contained herein.  Investor understands that the issuance of the

Shares to the Investor has not been registered under the Securities Act, or

registered or qualified under any state securities law in reliance on specific

exemptions therefrom, which exemptions may depend upon, among other things, the

bona fide nature of the Investor’s investment intent as expressed herein and

the information provided in the Investor Questionnaire.  The Placement Agent is not authorized to

make any representation or use any information in connection with the

placement, purchase and sale of the Shares, and no person is authorized to

provide any representation which is inconsistent or in addition to those in the

SEC Reports.  The Investor acknowledges

that it has not received or relied on any such representations.




 




4.2          International

Actions.  The

Investor acknowledges, represents and agrees that no action has been or will be

taken in any jurisdiction outside the United States by the Company or the

Placement Agent that would permit an offering of the Shares, or possession or

distribution of offering materials in connection with the issue of the Shares,

in any jurisdiction outside the United States. 

If the Investor is located outside the United States, it has or will

take all actions necessary for the sale of the Shares to comply with all

applicable laws and regulations in each foreign jurisdiction in which it

purchases, offers, sells or delivers Shares or has in its possession or

distributes any offering material, in all cases at its own expense.




 




4.3          Registration

Required.  The

Investor hereby covenants with the Company not to make any sale of the Shares

without complying with the provisions of this Agreement, including Section 6.2

hereof, and without effectively causing the prospectus delivery requirement

under the Securities Act to be satisfied (unless the Investor is selling such

Shares in a transaction not subject to the prospectus delivery requirement),

and the Investor acknowledges that the certificates evidencing the Shares will

be imprinted with a legend that prohibits their transfer except in accordance

therewith.  The Investor acknowledges

that as set forth in, and subject to the provisions of, Section 6.2, there may

occasionally be times when the Company, based on the advice of its counsel, determines

that it must suspend the use of the Prospectus forming a part of the

Registration Statement until such time as an amendment to the Registration

Statement has been filed by the Company and declared effective by the SEC or

until the Company has amended or supplemented such Prospectus.




 




4.4          Power

and Authority.  The

Investor further represents and warrants to, and covenants with, the Company

that (i) the Investor has full right, power, authority and capacity to enter

into this Agreement and to consummate the transactions contemplated hereby and

has taken all necessary action to authorize the execution, delivery and

performance of this Agreement, and (ii) this Agreement constitutes a valid and

binding obligation of the Investor enforceable against the Investor in

accordance with its terms, except as enforceability may be limited by

applicable bankruptcy, insolvency, reorganization, moratorium or similar laws

affecting creditors’ and contracting parties’ rights generally and except as

enforceability may be subject to general principles of equity (regardless of

whether such enforceability is considered in a proceeding in equity or at law)

and except as the indemnification agreements of the Investors herein may be

legally unenforceable.




 




4.5          Short

Positions.  The

Investor will not use any of the Shares acquired pursuant to this Agreement to

cover any short position in the Common Stock if doing so would be in violation

of applicable securities laws.




 




4.6          No

Investment, Tax or Legal Advice.  The

Investor understands that nothing in the SEC Reports, this Agreement, or any

other materials presented to the Investor in connection with the purchase and

sale of the Shares constitutes legal, tax or investment advice.  The Investor has consulted 




 




14





























 




such legal, tax and investment

advisors as it, in its sole discretion, has deemed necessary or appropriate in

connection with its purchase of Shares.




 




4.7          Confidential

Information.  The

Investor covenants that from the date hereof it will maintain in confidence all

material non-public information regarding the Company received by the Investor

from the Company after the date hereof, including the receipt of any Suspension

Notice (as defined in Section 6.2(c)) until such information (a) becomes

generally publicly available other than through a violation of this provision

by the Investor or its agents or (b) is required to be disclosed in legal

proceedings (such as by deposition, interrogatory, request for documents, subpoena,

civil investigation demand, filing with any governmental authority or similar

process); provided, however, that the foregoing obligation is subject to

Investor’s consent to receive such information as provided in Section 3.24;

provided, further, that before making any disclosure in reliance on this

Section 4.7, the Investor will give the Company at least 15 days prior written

notice (or such shorter period as required by law) specifying the circumstances

giving rise thereto and will furnish only that portion of the non-public

information which is legally required and will exercise its best efforts to

obtain reliable assurance that confidential treatment will be accorded any

non-public information so furnished.




 




4.8          Acknowledgments

Regarding Placement Agent.  The

Investor acknowledges that the Placement Agent has acted solely as placement

agent for the Company in connection with the Offering of the Shares by the

Company, that certain of the information and data provided to the Investor in

connection with the transactions contemplated hereby have not been subjected to

independent verification by the Placement Agent, and that the Placement Agent

makes no representation or warranty with respect to the accuracy or

completeness of such information, data or other related disclosure

material.  The Investor further

acknowledges that in making its decision to enter into this Agreement and

purchase the Shares it has relied on its own examination of the Company and the

terms of, and consequences, of holding the Shares.  The Investor further acknowledges that the provisions of this

Section 4.8 are also for the benefit of, and may also be enforced by, the

Placement Agent.




 




5.                                      Survival

of Representations, Warranties and Agreements. 

Notwithstanding any investigation made by any party to this

Agreement or by the Placement Agent, all covenants, agreements, representations

and warranties made by the Company and the Investor herein shall survive the

execution of this Agreement, the delivery to the Investor of the Shares being

purchased and the payment therefor.




 




6.                                      Registration

of the Shares; Compliance with the Securities Act.




 




6.1          Registration

Procedures and Expenses.  The

Company shall:




 




(a)           subject to receipt of necessary

information from the Investors reasonably requested by the Company, prepare and

file with the SEC, within ten (10) business days after the Closing Date, a

registration statement on Form S-3 (the “Registration

Statement”) to enable the resale of the Shares by the Investors from

time to time through the automated quotation system of the Nasdaq Stock Market

or in privately-negotiated transactions, and provide the Investor at least two

(2) business days to review and provide comments to the Registration Statement

before filing with the SEC;




 




(b)           use its best efforts, subject to

receipt of necessary information from the Investor reasonably requested by the

Company, to cause the Registration Statement to become effective as soon as

practicable, but in no event later than sixty (60) days after the Registration

Statement is filed by the Company. If the Registration Statement has not been

declared effective by the SEC on or before the date that is 90 days after the

Closing Date (the “Required Effective Date”),

the Company shall, on the 91st day and each 30th day

thereafter, make a payment to the Investor as partial compensation for such

delay (the “Late Registration Payments”)

equal to 1% of the purchase price paid for the Shares 




 




15





























 




purchased by the Investor and

not previously sold by the Investor 

(but in no event to exceed 8% in the aggregate) until the Registration

Statement is declared effective by the SEC. The Late Registration Payments will

be prorated on a daily basis during each 30 day period and will be paid to the

Investor by wire transfer or check within five business days after the earlier

of (i) the end of each 30 day period following the Required Effective Date

or (ii) the effective date of the Registration Statement;




 




(c)           use its best efforts to prepare and

file with the SEC such amendments and supplements to the Registration Statement

and the Prospectus used in connection therewith as may be necessary to keep the

Registration Statement current and effective for a period not exceeding, with

respect to each Investor’s Shares purchased hereunder, the earlier of (i) the

second anniversary of the Closing Date, (ii) the date on which the Investor may

sell all Shares then held by the Investor without restriction by the volume

limitations of Rule 144(e) of the Securities Act or (iii) such time as all

Shares purchased by such Investor in this Offering have been sold pursuant to a

registration statement, and to notify each Investor promptly upon the

Registration Statement and each post-effective amendment thereto, being declared

effective by the SEC;




 




(d)           furnish to the Investor with respect

to the Shares registered under the Registration Statement such number of copies

of the Registration Statement, Prospectuses (including supplemental

prospectuses) and preliminary versions of the Prospectus filed with the SEC (“Preliminary Prospectuses”) in conformity

with the requirements of the Securities Act and such other documents as the

Investor may reasonably request, in order to facilitate the public sale or

other disposition of all or any of the Shares by the Investor, provided,

however, that unless waived by the Company in writing, the obligation of the

Company to deliver copies of Prospectuses or Preliminary Prospectuses to the

Investor shall be subject to the receipt by the Company of reasonable

assurances from the Investor that the Investor will comply with the applicable

provisions of the Securities Act and of such other securities or blue sky laws

as may be applicable in connection with any use of such Prospectuses or Preliminary

Prospectuses;




 




(e)           file documents required of the

Company for normal blue sky clearance in states specified in writing by the

Investor; provided, however, that the Company shall not be required to qualify

to do business or consent to service of process in any jurisdiction in which it

is not now so qualified or has not so consented;




 




(f)            bear all expenses (other than

underwriting discounts and commissions, if any) in connection with the

procedures in paragraph (a) through (e) of this Section 6.1 and the registration

of the Shares pursuant to the Registration Statement; and




 




(g)           advise the Investors, promptly after

it receives notice or obtains knowledge of the issuance of any stop order by

the SEC delaying or suspending the effectiveness of the Registration Statement

or of the initiation of any proceeding for that purpose; and it will promptly

use its commercially reasonable efforts to prevent the issuance of any stop

order or to obtain its withdrawal at the earliest possible moment if such stop

order should be issued.




 




With a view to making available

to the Investor the benefits of Rule 144 (or its successor rule) and any other

rule or regulation of the SEC that may at any time permit the Investor to sell

Shares to the public without registration, the Company covenants and agrees

to:  (i) make and keep public

information available, as those terms are understood and defined in Rule 144,

until the earlier of (A) such date as all of the Investor’s Shares may be

resold pursuant to Rule 144(k) or any other rule of similar effect or (B) such

date as all of the Investor’s Shares shall have been resold; (ii) file with the

SEC in a timely manner all reports and other documents required of the 




 




16





























 




Company under the Securities

Act and under the Exchange Act; and (iii) furnish to the Investor upon request,

as long as the Investor owns any Shares, (A) a written statement by the Company

that it has complied with the reporting requirements of the Securities Act and

the Exchange Act, (B) a copy of the Company’s most recent Annual Report on Form

10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be

reasonably requested in order to avail the Investor of any rule or regulation

of the SEC that permits the selling of any such Shares without registration.




 




It shall be a condition

precedent to the obligations of the Company to take any action pursuant to this

Section 6.1 that the Investor shall furnish to the Company such information

regarding itself, the Shares to be sold by Investor, and the intended method of

disposition of such securities as shall be reasonably required to effect the

registration of the Shares.




 




The Company understands that

the Investor disclaims being an underwriter, but the Investor being deemed an

underwriter by the SEC shall not relieve the Company of any obligations it has

hereunder.




 




6.2          Transfer

of Shares After Registration; Suspension.




 




(a)           The Investor agrees that it will not

effect any disposition of the Shares or its right to purchase the Shares that

would constitute a sale within the meaning of the Securities Act other than

transactions exempt from the registration requirements of the Securities Act,

except as contemplated in the Registration Statement referred to in Section 6.1

and as described below, and that it will promptly notify the Company of any

changes in the information set forth in the Registration Statement regarding

the Investor or its plan of distribution.




 




(b)           Except in the event that paragraph

(c) below applies, the Company shall: (i) if deemed necessary by the Company,

prepare and file from time to time with the SEC a post-effective amendment to

the Registration Statement or a supplement to the related Prospectus or a

supplement or amendment to any document incorporated therein by reference or

file any other required document so that such Registration Statement will not

contain an 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, and so that, as thereafter delivered to purchasers of the Shares

being sold thereunder, such Prospectus will not contain an 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, in light of the circumstances

under which they were made, not misleading; (ii) provide the Investor copies of

any documents filed pursuant to Section 6.2(b)(i); and (iii) upon request,

inform each Investor who so requests that the Company has complied with its

obligations in Section 6.2(b)(i) (or that, if the Company has filed a

post-effective amendment to the Registration Statement which has not yet been

declared effective, the Company will notify the Investor to that effect, will

use its reasonable efforts to secure the effectiveness of such post-effective

amendment as promptly as possible and will promptly notify the Investor

pursuant to Section 6.2(b)(i) hereof when the amendment has become effective).




 




(c)           Subject to paragraph (d) below, in

the event: (i) of any request by the SEC or any other federal or state

governmental authority during the period of effectiveness of the Registration

Statement for amendments or supplements to the Registration Statement or

related Prospectus or for additional information; (ii) of the issuance by the

SEC or any other federal or state governmental authority of any stop order

suspending the effectiveness of the Registration Statement or the initiation of

any proceedings for that purpose; (iii) of the receipt by the Company of any

notification 




 




17





























 




with respect to the suspension

of the qualification or exemption from qualification of any of the Shares for

sale in any jurisdiction or the initiation of any proceeding for such purpose;

or (iv) of any event or circumstance which necessitates the making of any

changes in the Registration Statement or Prospectus, or any document

incorporated or deemed to be incorporated therein by reference, so that, in the

case of the Registration Statement, it will not contain any untrue statement of

a material fact or any omission to state a material fact required to be stated

therein or necessary to make the statements therein not misleading, and that in

the case of the Prospectus, it will not contain any untrue statement of a

material fact or any omission to state a material fact required to be stated

therein or necessary to make the statements therein, in the light of the

circumstances under which they were made, not misleading; then the Company

shall promptly deliver a certificate in writing to the Investor (the “Suspension Notice”) to the effect of the

foregoing (but not including any information which constitutes material

non-public information other than notice that one of the foregoing events has

occurred) and, upon receipt of such Suspension Notice, the Investor will

refrain from selling any Shares pursuant to the Registration Statement (a “Suspension”) until the Investor’s receipt

of copies of a supplemented or amended Prospectus prepared and filed by the

Company, or until it is advised in writing by the Company that the current

Prospectus may be used, and has received copies of any additional or

supplemental filings that are incorporated or deemed incorporated by reference

in any such Prospectus.  In the event of

any Suspension, the Company will use its reasonable best efforts to cause the

use of the Prospectus so suspended to be resumed as soon as reasonably practicable

after delivery of a Suspension Notice to the Investors.  In addition to and without limiting any

other remedies (including, without limitation, at law or at equity) available

to the Investor, the Investor shall be entitled to specific performance in the

event that the Company fails to comply with the provisions of this Section

6.2(c).




 




(d)           Notwithstanding the foregoing

paragraphs of this Section 6.2, the Company shall use its best efforts to

ensure that the Investor shall not be prohibited from selling Shares under the

Registration Statement as a result of Suspensions on more than two occasions of

not more than 30 days in any twelve month period.  If a Suspension is in effect for more than 60 days (consecutive

or non-consecutive) in any twelve-month period, the Company shall, on the 61st

day of the Suspension and each 30th day thereafter, make payments to

the Investor as partial compensation for such delay until the Suspension is

lifted.  The amount of the payments made

to the Investor will be equal to 1% of the purchase price paid for the Shares

purchased by the Investor and not previously sold by the Investor for each 30

days that sales cannot be made under the effective Registration Statement (but

in no event to exceed 8% in the aggregate) beyond the period allowed by the

previous sentence.  The number of Shares

not previously sold as specified in the previous sentence shall be determined

as of the end of the respective 30 day period. 

These payments will be prorated on a daily basis during the 30 day period

and will be paid to the Investor by check within five business days following

the end of each month as to which payment is due hereunder, assuming that the

Investor delivered to the Company at least two business days prior thereto

information with respect to the number of Shares not previously sold by the

Investor (together with reasonable supporting documentation).




 




(e)           Provided that a Suspension is not

then in effect the Investor may sell Shares under the Registration Statement,

provided that it arranges for delivery of a current Prospectus to the

transferee of such Shares.  Upon receipt

of a request therefor, the Company will provide an adequate number of current

Prospectuses to the Investor and to any other parties requiring such

Prospectuses.




 




(f)            In the event of a sale of Shares by

the Investor pursuant to the Registration Statement, unless such requirement is

waived by the Company in writing, the Investor must also deliver to the

Company’s transfer agent, with a copy to the Company, a Certificate of

Subsequent Sale substantially in the form attached hereto as Exhibit C, so that

the shares may be properly transferred.




 




18





























 




(g)           The

Company agrees that it shall, immediately prior to the Registration Statement

being declared effective, deliver to its transfer agent an opinion letter of

counsel, opining that at any time the Registration Statement is effective, the

transfer agent shall issue, in connection with the sale of the Shares,

certificates representing such Shares without restrictive legend, provided the

Shares are to be sold pursuant to the prospectus contained in the Registration

Statement and the transfer agent receives a Certificate of Subsequent Sale in

the form attached hereto as Exhibit C. 

Upon receipt of such opinion, the Company shall cause the transfer agent

to confirm, for the benefit of the Investor, that no further opinion of counsel

is required at the time of transfer in order to issue such Shares without

restrictive legend.




 




In the event of any sale of the Shares in accordance with this

Agreement, the restrictive legend shall be removed and the Company shall issue

a certificate without such legend to the purchaser of any such Shares, if (a)

the sale of such Shares is registered under the Registration Statement

(including registration pursuant to Rule 416 under the Securities Act); (b) the

holder has provided the Company with an opinion of counsel, in form, substance

and scope customary for opinions of counsel in comparable transactions, to the

effect that a public sale or transfer of such Shares may be made without

registration under the Securities Act; or (c) such Shares are sold in

compliance with Rule 144 under the Securities Act.




 




6.3          Indemnification.  For the purpose of

this Section 6.3:




 




(a)           the term “Selling Stockholder” shall include the Investor and each

person, if any, who controls the Investor within the meaning of Section 15 of

the Securities Act or Section 20 of the Exchange Act;




 




(b)           the term “Registration Statement” shall include any final Prospectus,

exhibit, supplement or amendment included in or relating to, and any document

incorporated by reference in, the Registration Statement (or deemed to be a

part thereof) referred to in Section 6.1; and




 




(c)           the term “untrue statement” shall include any untrue statement or

alleged untrue statement, or any omission or alleged omission to state in the

Registration Statement a material fact required to be stated therein or

necessary to make the statements therein, in the light of the circumstances

under which they were made, not misleading.




 




(d)           (i)            The Company

agrees to indemnify and hold harmless each Selling Stockholder (including its

investment advisor, auditors and legal counsel) from and against any losses,

claims, damages or liabilities to which such Selling Stockholder may become

subject (under the Securities Act or otherwise) insofar as such losses, claims,

damages or liabilities (or actions or proceedings in respect thereof) arise out

of, or are based upon (i) any untrue statement of a material fact contained in

the Registration Statement, (ii) any inaccuracy in the representations and

warranties of the Company contained in the Agreement or the failure of the

Company to perform its obligations hereunder or (iii) any failure by the

Company to fulfill any undertaking included in the Registration Statement, and

the Company will reimburse such Selling Stockholder for any reasonable legal

expense or other actual accountable out of pocket expenses reasonably incurred

in investigating, defending or preparing to defend any such action, proceeding

or claim, provided, however, that the Company shall not be liable in any such

case to the extent that such loss, claim, damage or liability arises out of, or

is based upon, an untrue statement made in such Registration Statement in reliance

upon and in conformity with written information furnished to the Company by or

on behalf of such Selling Stockholder specifically for use in preparation of

the Registration Statement or the failure of such Selling Stockholder to comply

with its covenants and agreements contained in Sections 4.1, 4.2, 4.3 or 6.2

hereof or any statement or omission in 




 




19





























 




any Prospectus that is

corrected in any subsequent Prospectus that was delivered to the Selling Stockholder

prior to the pertinent sale or sales by the Selling Stockholder.




 




(ii)           The

Investor agrees to indemnify and hold harmless the Company (and each person, if

any, who controls the Company within the meaning of Section 15 of the

Securities Act, each officer of the Company who signs the Registration

Statement and each director of the Company) from and against any losses,

claims, damages or liabilities to which the Company (or any such officer,

director or controlling person) may become subject (under the Securities Act or

otherwise), insofar as such losses, claims, damages or liabilities (or actions

or proceedings in respect thereof) arise out of, or are based upon, (i) any

failure to comply with the covenants and agreements contained in Section 4.1,

4.2, 4.3 or 6.2 hereof, or (ii) any untrue statement of a material fact

contained in the Registration Statement if such untrue statement was made in

reliance upon and in conformity with written information furnished by or on

behalf of the Investor specifically for use in preparation of the Registration

Statement, and the Investor will reimburse the Company (or such officer,

director or controlling person), as the case may be, for any reasonable legal

expense or other actual accountable out-of-pocket expenses reasonably incurred

in investigating, defending or preparing to defend any such action, proceeding

or claim.  The Investor’s obligation to

indemnify the Company pursuant to this Section 6.3(d)(ii) shall be limited to the

extent the net amount of the proceeds received by the Investor from the sale of

the Shares pursuant to the Registration Statement exceeds the amount paid for

such Shares pursuant to this Agreement.




 




(iii)         Promptly after receipt by any

indemnified person of a notice of a claim or the beginning of any action in

respect of which indemnity is to be sought against an indemnifying person

pursuant to this Section 6.3, such indemnified person shall notify the

indemnifying person in writing of such claim or of the commencement of such

action, but the omission to so notify the indemnifying party will not relieve

it from any liability which it may have to any indemnified party under this

Section 6.3 (except to the extent that such omission materially and adversely

affects the indemnifying party’s ability to defend such action) or from any

liability otherwise than under this Section 6.3.  Subject to the provisions hereinafter stated, in case any such

action shall be brought against an indemnified person, the indemnifying person

shall be entitled to participate therein, and, to the extent that it shall

elect by written notice delivered to the indemnified party promptly after

receiving the aforesaid notice from such indemnified party, shall be entitled

to assume the defense thereof, with counsel reasonably satisfactory to such

indemnified person.  After notice from

the indemnifying person to such indemnified person of its election to assume

the defense thereof (unless it has failed to assume the defense thereof and

appoint counsel reasonably satisfactory to the indemnified party), such

indemnifying person shall not be liable to such indemnified person for any

legal expenses subsequently incurred by such indemnified person in connection

with the defense thereof, provided, however, that if there exists or shall exist

a conflict of interest that would make it inappropriate, in the reasonable

opinion of counsel to the indemnified person, for the same counsel to represent

both the indemnified person and such indemnifying person or any affiliate or

associate thereof, the indemnified person shall be entitled to retain its own

counsel at the expense of such indemnifying person; provided, however, that no

indemnifying person shall be responsible for the fees and expenses of more than

one separate counsel (together with appropriate local counsel) for all

indemnified parties.  In no event shall

any indemnifying person be liable in respect of any amounts paid in settlement

of any action unless the indemnifying person shall have approved the terms of

such settlement; provided that such consent shall not be unreasonably

withheld.  No indemnifying person shall,

without the prior written consent of the indemnified person, effect any

settlement of any pending or threatened proceeding in respect of which any

indemnified person is or could reasonably have been a party and indemnification

could have been sought hereunder by such indemnified person, unless such

settlement includes an unconditional release of such indemnified person from

all liability on claims that are the subject matter of such proceeding.




 




20





























 




(iv)          If the indemnification provided for in

this Section 6.3 is unavailable to or insufficient to hold harmless an

indemnified party under subsection (d)(i) or (d)(ii) above in respect of any

losses, claims, damages or liabilities (or actions or proceedings in respect

thereof) referred to therein, then each indemnifying party shall contribute to

the amount paid or payable by such indemnified party as a result of such

losses, claims, damages or liabilities (or actions in respect thereof) in such

proportion as is appropriate to reflect the relative fault of the Company on

the one hand and the Investor on the other in connection with the statements or

omissions or other matters which resulted in such losses, claims, damages or

liabilities (or actions in respect thereof), as well as any other relevant

equitable considerations.  The relative

fault shall be determined by reference to, among other things, in the case of

an untrue statement, whether the untrue statement relates to information

supplied by the Company on the one hand or the Investor on the other and the

parties’ relative intent, knowledge, access to information and opportunity to

correct or prevent such untrue statement. 

The Company and the Investor agree that it would not be just and

equitable if contribution pursuant to this subsection (d) were determined by

pro rata allocation (even if the Investors were treated as one entity for such

purpose) or by any other method of allocation which does not take into account

the equitable considerations referred to above in this subsection (d).  The amount paid or payable by an indemnified

party as a result of the losses, claims, damages or liabilities (or actions in

respect thereof) referred to above in this subsection (d) shall be deemed to

include any legal or other expenses reasonably incurred by such indemnified

party in connection with investigating or defending any such action or

claim.  Notwithstanding the provisions

of this subsection (d), the Investor shall not be required to contribute any

amount in excess of the amount by which the net amount received by the Investor

from the sale of the Shares to which such loss relates exceeds the amount of

any damages which the Investor has otherwise been required to pay by reason of

such untrue statement.  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. 

The Investors’ obligations in this subsection to contribute are several

in proportion to their sales of Shares to which such loss relates and not

joint.




 




(v)            The parties to this Agreement hereby

acknowledge that they are sophisticated business persons who were represented

by counsel during the negotiations regarding the provisions hereof including,

without limitation, the provisions of this Section 6.3, and are fully informed

regarding said provisions.  They further

acknowledge that the provisions of this Section 6.3 fairly allocate the risks

in light of the ability of the parties to investigate the Company and its

business in order to assure that adequate disclosure is made in the

Registration Statement as required by the Securities Act and the Exchange Act.




 




6.4          Termination

of Conditions and Obligations.  The

conditions precedent imposed by Section 4 or this Section 6 upon the

transferability of the Shares shall cease and terminate as to any particular

number of the Shares when such Shares shall have been effectively registered

under the Securities Act and sold or otherwise disposed of in accordance with

the intended method of disposition set forth in the Registration Statement

covering such Shares or at such time as an opinion of counsel satisfactory to

the Company shall have been rendered to the effect that such conditions are not

necessary in order to comply with the Securities Act.




 




6.5          Information

Available.  So

long as the Registration Statement is effective covering the resale of Shares

owned by the Investor, the Company will furnish (or to the extent such

information is available electronically through the Company’s filings with the

SEC, the Company will make available) to the Investor:




 




(a)           as soon as practicable after it is available,

one copy of (i) its Annual Report to Stockholders (which Annual Report shall

contain financial statements audited in accordance with generally accepted

accounting principles by a national firm of certified public accountants) and

(ii) if 




 




21





























 




not included in substance in

the Annual Report to Stockholders, its Annual Report on Form 10-K (the

foregoing, in each case, excluding exhibits);




 




(b)           upon the reasonable request of the

Investor, all exhibits excluded by the parenthetical to subparagraph (a)(ii) of

this Section 6.5 as filed with the SEC and all other information that is made

available to stockholders; and




 




(c)           upon the reasonable request of the

Investor, an adequate number of copies of the Prospectuses to supply to any

other party requiring such Prospectuses; and the Company, upon the reasonable

request of the Investor, will meet with the Investor or a representative

thereof at the Company’s headquarters to discuss all information relevant for disclosure

in the Registration Statement covering the Shares and will otherwise reasonably

cooperate with the Investor conducting an investigation for the purpose of

reducing or eliminating the Investor’s exposure to liability under the

Securities Act, including the reasonable production of information at the

Company’s headquarters; provided, that the Company shall not be required to

disclose any confidential information to or meet at its headquarters with the

Investor until and unless the Investor shall have entered into a

confidentiality agreement in form and substance reasonably satisfactory to the

Company with the Company with respect thereto.




 




6.6          Public

Statements.  The

Company agrees to disclose the existence of the Offering and the material terms

thereof on or before the Closing Date. 

The Company will not issue any public statement, press release or any

other public disclosure listing Investor as one of the purchasers of the Shares

without Investor’s prior written consent, except as may be required by

applicable law or rules of any exchange on which the Company’s securities are

listed.




 




7.                                      Notices.  All notices, requests, consents and

other communications hereunder shall be in writing, shall be mailed (A) if

within domestic United States by first-class registered or certified airmail,

or nationally recognized overnight express courier, postage prepaid, or by

facsimile, or (B) if delivered from outside the United States, by International

Federal Express (or comparable service) or facsimile, and shall be deemed given

(i) if delivered by first-class registered or certified mail domestic, three

business days after so mailed, (ii) if delivered by nationally recognized

overnight carrier, one (1) business day after so mailed, (iii) if delivered by

International Federal Express (or comparable service), two (2) business days

after so mailed, (iv) if delivered by facsimile, upon electric confirmation of

receipt and shall be delivered as addressed as follows:




 




(a)           if to the Company, to:




 




Endocardial

Solutions, Inc.




1350 Energy

Lane, Suite 110




St. Paul, MN

55108




Attention:      J. Robert Paulson,

Jr.




Telephone:    (651) 523-6900




Telecopy:      (651) 644-7897




 




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with a copy

mailed to: 




 




Dorsey &

Whitney LLP




Suite 1500




50 South Sixth

Street




Minneapolis,

MN 55402




Attention:      Ken Cutler




Telephone:    (612) 340-2740




Telecopy:      (612) 340-7800




 




(b)           if to the Investor, at its address on

the signature page to the Stock Purchase Agreement, or at such other address or

addresses as may have been furnished to the Company in writing.




 




8.                                      Changes.  This Agreement may not be modified or

amended except pursuant to an instrument in writing signed by the Company and

the Investor.




 




9.                                      Headings.  The headings of the various sections of this

Agreement have been inserted for convenience of reference only and shall not be

deemed to be part of this Agreement.




 




10.                               Severability.  In case any provision contained in this

Agreement should be invalid, illegal or unenforceable in any respect, the

validity, legality and enforceability of the remaining provisions contained

herein shall not in any way be affected or impaired thereby.




 




11.                               Governing

Law.  This Agreement shall be

governed by, and construed in accordance with, the internal laws of the State

of Minnesota, without giving effect to the principles of conflicts of law.




 




12.                               Counterparts.  This Agreement may be executed in two or

more counterparts, each of which shall constitute an original, but all of

which, when taken together, shall constitute but one instrument, and shall

become effective when one or more counterparts have been signed by each party

hereto and delivered to the other parties.




 




13.                               Independent

Nature of Investors.  The

obligations of each Investor under any Agreement 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

Agreement. The decision of each Investor to purchase Shares as part of the

Offering has been made by such Investor independently of any other

Investor.  Nothing contained herein, and

no action taken by any Investor pursuant hereto, 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 Offering. Each Investor shall be entitled to

independently protect and enforce its rights, including without limitation the

rights arising out of this Agreement.




 




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