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EXHIBIT 10.1




SECURITIES PURCHASE AGREEMENT




     THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), is made and entered into as of February
21, 2006, by and among Medwave, Inc. a Delaware corporation (the “Company”), and the undersigned
prospective investor (the “Investor”).



1. PURCHASE AND SALE OF SHARES; CLOSING.




     1.1. Purchase and Sale of Shares and Warrants.



          (a) Subject to the terms and conditions of this Agreement, the Investor agrees to purchase
from the Company and the Company agrees to issue and sell the number of shares (the “Shares”) of
common stock of the Company, par value $0.01 per share (the “Common Stock”), and warrants to
purchase that number of shares of Common Stock equal to 25% of the Shares, in the form of Exhibit A
hereto (the “Warrants”), with each indicated on the Investor’s signature page to this Agreement
and at the aggregate purchase price for such Investor indicated on the signature page hereto (the
“Aggregate Purchase Price”).



          (b) The Investor shall pay the Aggregate Purchase Price by delivering immediately available
good funds in United States Dollars by wire transfer no later than the Closing Date, as defined in
Section 1.4(a) below, to the Company in accordance with the wire transfer instructions
attached hereto as Exhibit B.



     1.2. Aggregate Number of Shares Offered. The Company is simultaneously entering into
multiple agreements in substantially the same form as this Agreement with certain other investors
(the “Other Investors”). Pursuant to this Agreement and the agreements with the Other Investors,
the Company is selling an aggregate of up to 1,617,614 shares of Common Stock (the “Shares” and
collectively with the Warrants, the “Securities”) at the purchase price per Security of $2.74 (the
“Offering”).



     1.3. Binding Effect of this Agreement. The Investor acknowledges and agrees that this
Agreement shall be binding upon the Investor upon the submission to the Company of the Investor’s
signed counterpart signature page to this Agreement (the “Subscription”). The execution of this
Agreement by the Investor or solicitation of the investment contemplated hereby shall create no
obligation on the part of the Company to accept any Subscription, in part or in full, or complete
the Offering. The Investor hereby acknowledges and agrees that the Subscription hereunder is
irrevocable by the Investor, and that, except as required by law, the Investor is not entitled to
cancel, terminate or revoke this Agreement or any agreements of the Investor hereunder and that if
the Investor is an individual this Agreement shall survive the death or disability of the Investor
and shall be binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.



     1.4. Delivery of Shares at Closing.



          (a) The completion of the purchase and sale of the Securities (the “Closing”) shall occur,
subject to the satisfaction or waiver of the conditions set forth in Section 1.5 and



 









 








Section 1.6 (other than those intended to be satisfied at Closing), at the offices of
Goodwin Procter LLP, 53 State Street, Boston, Massachusetts 02109. The date upon which
the Closing actually occurs is herein referred to as the “Closing Date” (which Closing Date shall
be no later than February 21, 2006, unless such requirement is waived in writing by the Investor).



          (b) Prior to the Closing, the Company shall authorize its transfer agent to issue and the
transfer agent shall issue to the Investor one or more stock certificates registered in the name of
the Investor, or in such name of nominee(s) designated by the Investor in writing, representing the
aggregate a number of Shares to be purchased by the Investor and the Company shall issue to the
Investor Warrants to purchase the applicable number of Warrant Shares (as defined below).



     1.5. Conditions to the Company’s Obligation to Complete Purchase and Sale. Upon
acceptance of the Subscription, the Company’s obligation to issue and sell the Securities to the
Investor at Closing is subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion by providing the Investor with prior
written notice thereof:



          (a) Payment of Aggregate Purchase Price. The Investor shall make payment to the
Company by wire transfer of the Aggregate Purchase Price in accordance with Section 1.1(b); and



          (b) Representations and Warranties; Covenants. The representations and warranties of
the Investor set forth in Article 3 hereof shall be true and correct as of the date hereof
and as of the Closing Date as though made at that time (except for representations and warranties
that speak as of a specific date (which shall be true and correct as of such date)), and the
Investor shall have performed, satisfied and complied with in all material respects the covenants,
agreements and conditions required by this Agreement to be performed, satisfied or complied with by
the Investor on or prior to the Closing Date.



     1.6. Conditions to the Investor’s Obligation to Complete Purchase and Sale. The
obligation of the Investor hereunder to purchase the Securities from the Company at the Closing is
subject to the satisfaction, on or before the Closing Date, of each of the following conditions,
provided that these conditions are for the Investor’s sole benefit and may be waived by the
Investor at any time in its sole discretion by providing the Company with prior written notice
thereof:



          (a) Delivery of Securities. The Company shall have delivered to the Investor the
Shares and the Warrants, each registered in the name of the Investor.



          (b) Opinion of Counsel. Receipt by the Investors of an opinion letter of Goodwin
Procter LLP, counsel to the Company, dated the Closing Date, in substantially the form
attached hereto as Exhibit C;



          (c) Representations and Warranties; Covenants. The representations and warranties of
the Company set forth in Article 2 hereof shall be true and correct in all material
respects as of the date hereof and as of the Closing Date as though made at that time (except for representations



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and warranties that speak as of a specific date (which shall be true and
correct in all material respects as of such date)), and the Company shall have performed, satisfied
and complied with in all material respects the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company on or prior to the
Closing Date;



     (d) Officer’s Certificate. The Company shall have delivered a certificate, dated the
Closing Date, duly executed on behalf of the Company by its Chief Executive Officer to the effect
set forth in clause (c) above;



     (e) Secretary’s Certificate. The Company shall have delivered a certificate, dated
the Closing Date, duly executed by its Secretary or Assistant Secretary or other appropriate
officer, certifying that the attached copies of the Company’s Certificate of Incorporation, by-laws
and the resolutions of the Board of Directors or Executive Committee of the Board of Directors
approving this Agreement and the transactions contemplated hereby, are all true, complete and
correct and remain unamended and in full force and effect;



     (f) No Litigation. On the Closing Date, no legal action, suit or proceeding shall be
pending or overtly threatened which seeks to restrain or prohibit the transactions contemplated by
this Agreement.



     (g) No Legal Prohibition. No statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby, which restricts or prohibits
the consummation of any of the transactions contemplated by this Agreement.



     (h) No Material Adverse Change. There shall have been no material adverse changes and
no material adverse developments in the business, properties, operations, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, since
the date hereof.



     (i) NASDAQ Listing. The Company shall: (i) if required, prepare and file with the
NASDAQ Stock Market a listing application covering the Shares and Warrant Shares, (ii) use its
commercially reasonable best efforts to take all steps necessary to cause such shares to be
approved for listing on the NASDAQ Stock Market as soon as possible thereafter, (iii) notify the
Investor upon such listing, and (iv) use its commercially reasonable best efforts to maintain the
listing of the Common Stock on the NASDAQ Stock Market.



     (j) Closing Date. The Closing Date must occur on or before February 21, 2006.



2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.




     Except as set forth in the SEC Documents (as defined below), the Company hereby represents and
warrants to the Investor as follows:



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     2.1. Subsidiaries. The Company has no direct or indirect subsidiaries (as defined by
Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”) other than as
specified in the SEC Documents (the “Subsidiaries”).



     2.2. Organization and Qualification. The Company and each of its Subsidiaries is duly
organized and validly existing and is in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), except where the failure to be in good standing
would not have a material adverse effect upon the business, assets, financial condition or results
of operation of the Company and its Subsidiaries taken as a whole (a “Material Adverse Effect”).
The Company and each of its Subsidiaries has full corporate 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, and to the Company’s knowledge, 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.



     2.3. Due Authorization. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. This Agreement and the Warrants
have been duly authorized and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other party hereto, constitutes a valid and legally
binding obligation of the Company enforceable against the Company in accordance with its terms,
except (i) to the extent rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, (ii) enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar
laws affecting creditors’ and contracting parties’ rights generally and (iii) enforceability may be
limited by general principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).



     2.4. Non-Contravention. The execution and delivery of this Agreement, the issuance,
sale and delivery of the Securities to be sold by the Company under this Agreement, the performance
by the Company of its obligations under this Agreement, the Warrants and/or the consummation of the
transactions contemplated hereby will not (A) conflict with, result in the breach or violation of,
or constitute (with or without the giving of notice or the passage of time or both) a violation of,
or default under, (i) any material bond, debenture, note or other evidence of indebtedness, or
under any material lease, license, franchise, permit, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company is a party or by
which it or its properties may be bound or affected, (ii) the Certificate of Incorporation or
by-laws of the Company or any of its Subsidiaries, or (iii) any statute or law, judgment, decree,
rule, regulation, ordinance or order of any court or governmental or regulatory body, governmental
agency, arbitration panel or authority applicable to the Company, any of its Subsidiaries or their
respective properties, except in the case of clauses (i) or (iii) for such conflicts, breaches,
violations or defaults that would not be 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



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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 the Company or
any of its Subsidiaries 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 court, regulatory body, administrative agency,
self-regulatory organization, stock exchange or market, or other governmental body is required for
the execution and delivery of this Agreement, the valid issuance, sale and delivery of the
Securities to be sold pursuant to this Agreement other than such as have been made or obtained, or
for any securities filings required to be made under federal or state securities laws applicable to
the Offering.



     2.5. Reporting Status. The Company has filed all documents that the Company was
required to file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since
January 1, 2003 (the “SEC Documents”). The SEC Documents complied as to form 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 date thereof did 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, except to the extent that information contained in any such
document has been revised or superseded by a later filed SEC Document.



     2.6. Capitalization. Immediately prior to the Closing, the authorized capital stock of
the Company consists of 50,000,000 shares of Common Stock, $0.01 par value per share of which
11,475,416 shares are issued and outstanding at the close of business on January 31, 2006.


All subscriptions, warrants, options, convertible securities, and other rights (contingent or
other) to purchase or otherwise acquire equity securities of the Company issued and outstanding as
of February 21, 2006, or contracts, commitments, understandings, or arrangements by which the
Company or any of its Subsidiaries is or may be obligated to issue shares of Common Stock, or
securities or rights convertible or exchangeable for shares of Common Stock, are as set forth in
the SEC Documents. Except as set forth in the SEC Documents, or as a result of exercises of stock
options pursuant to the Company’s stock option and incentive plan, no Common Stock nor any
subscription, warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire equity securities of the Company is outstanding on the Closing Date.
The issued and outstanding shares of the Company’s capital stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in compliance with all
applicable federal and state securities laws, and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. No holder of Common
Stock is entitled to preemptive or similar rights. The Securities to be sold pursuant to the
Agreements have been duly and validly authorized, and when issued and paid for in accordance with
the Agreements and the Warrants, the Shares and the shares of Common Stock issuable upon exercise
of the Warrants (the “Warrant Shares”) will be duly authorized and validly issued, fully paid and
nonassessable, subject to no pledge, lien, claim, restriction or encumbrance (except for any such
pledge, lien, claim, restriction or encumbrance created, directly or indirectly, by the Investor).
No further approval or authority of the stockholders or the Board of Directors of the Company will
be required for the issuance and sale of the Shares or the Warrant Shares contemplated herein. No
stockholder of the Company has any right to require the Company to register the
sale of any


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shares owned by the stockholder under the
Securities Act in the Registration Statement (as defined in Section 5.1(a)) (other than rights
which have been waived or otherwise will be ineffective with respect to the Shares pursuant to the
Registration Statement).




     2.7. Legal Proceedings. Except as disclosed in the SEC Documents, there is no action,
suit or proceeding before any court, governmental agency or body, domestic or foreign, now pending
or, to the actual knowledge of the Company or any of its Subsidiaries, threatened in writing
against the Company or its Subsidiaries wherein an unfavorable decision, ruling or finding would
reasonably be expected to materially adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under this Agreement.



     2.8. No Violations. Neither the Company nor any of its Subsidiaries is in violation
of its respective Certificate of Incorporation or by-laws, or is in violation of any statute or
law, judgment, decree, rule, regulation, ordinance or order of any court or governmental or
regulatory body, governmental agency, arbitration panel or authority applicable to the Company or
any of its Subsidiaries, which violation, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect, or is in default (and there exists no condition which,
with or without the passage of time or giving of notice or both, would constitute a default) in any
material respect in the performance of any bond, debenture, note or any other evidence of
indebtedness in 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 properties of the Company are bound, which would
be reasonably likely to have a Material Adverse Effect.



     2.9. Governmental Permits, Etc. The Company and its Subsidiaries possess 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 their respective business as currently conducted, except where such failure to possess
could not reasonably be expected to have a Material Adverse Effect. The Company has not received
any written notice of proceedings relating to the revocation or modification of any such permit
which, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected
to have a Material Adverse Effect.



     2.10. Intellectual Property. The Company and its Subsidiaries own or possess
sufficient rights to use all patents, patent rights, trademarks, copyrights, licenses, inventions,
trade secrets, trade names and know-how that are currently necessary for the conduct of their
respective businesses as now conducted (the “Company Intellectual Property”), except where the
failure to own or possess would not have a Material Adverse Effect. Except as set forth in the SEC
Documents, (i) neither the Company nor any of its Subsidiaries has received any written notice of,
or has any actual knowledge of, any infringement or other violation by the Company or its
Subsidiaries of intellectual property rights of any third party that, individually or in the
aggregate, would have a Material Adverse Effect and (ii) neither the Company nor any of its
Subsidiaries has received any written notice of any infringement by a third party of any Company
Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect.
There is no pending or, to the Company’s knowledge, threatened (in writing) action, suit,
proceeding or claim by others challenging the validity of scope of any Company Intellectual Property, other than actions, suits,
proceedings and claims which would not
reasonably be expected to have a Material Adverse Effect.



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     2.11. Financial Statements. The consolidated financial statements of the Company and
its Subsidiaries and the related notes thereto included in the SEC Documents present fairly and
accurately in all material respects, the financial position of the Company as of the dates
indicated and the results of its operations and cash flows for the periods therein specified
subject, in the case of unaudited statements, to normal year-end audit adjustments. Except as set
forth in such financial statements (or the notes thereto), such financial statements (including the
related notes) comply as to form in all material respects with applicable rules and regulations of
the SEC and have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods therein specified. The financial
statements referred to in this Section 2.11 contain all certifications and statements
required by Rule 13a-14 or 15d-14 under the Exchange Act, or 18 U.S.C. Section 1350 (Sections 302
and 906 of the Sarbanes-Oxley Act of 2002) with respect to the report relating thereto.



     2.12. No Material Adverse Change. Except as the Company may have publicly disclosed
(and then solely to the extent so disclosed) in the SEC Documents, press releases or in other
“public disclosures” as such term is defined in Section 101(e) of Regulation FD of the Exchange
Act, in each case, filed or made through and including the date hereof, since September 30, 2005
there has not been (i) any material adverse change in the business, assets, financial condition or
results of operation of the Company and its Subsidiaries, taken as a whole (ii) any obligation,
direct or contingent, that is material to the Company and its Subsidiaries taken as a whole,
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 (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 had a
Material Adverse Effect.



     2.13. Nasdaq Compliance. The Common Stock is registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is quoted on the Nasdaq
Capital Market (the “Nasdaq Stock Market”), and the Company has taken no action intended to
terminate the registration of the Common Stock under the Exchange Act or delisting the Common Stock
from the Nasdaq Stock Market. Assuming the accuracy of the Investor’s representations hereunder,
the issuance of the Securities does not require shareholder approval, including, without
limitation, pursuant to Nasdaq Marketplace Rule 4530(i). The Company is currently in compliance
with all rules of the National Association of Securities Dealers, Inc. and Nasdaq Market rules
necessary for the continued quotation of the Company’s Common Stock on the Nasdaq Stock Market, and
to the Company’s knowledge, Nasdaq currently is not contemplating terminating such quotation.



     2.14. No Manipulation of Stock. The Company has not taken and will not, in violation
of applicable law, take, any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or
resale of the Securities.



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     2.15. Insurance. The Company maintains and will continue to maintain insurance against
loss or damage by fire or other casualty and such other insurance, including, but not limited to,
product liability insurance, in such amounts and covering such risks as is believed to be prudent
and customary, consistent with industry practice for the conduct of its and its Subsidiaries’
respective businesses and the value of their respective properties.



     2.16. Tax Matters. The Company and each of its Subsidiaries has timely filed all
federal, state, local and foreign income and franchise and other tax returns required to be filed
by any jurisdiction to which it is subject and has paid all taxes due in accordance therewith,
except where the failure to so timely file or pay would not be likely to result in a Material
Adverse Effect, and no tax deficiency has been determined adversely to the Company or any of its
Subsidiaries which has had, nor does the Company or any of its Subsidiaries have any knowledge of
any tax deficiency which, if determined adversely to the Company or any of its Subsidiaries, would
reasonably be expected to have, a Material Adverse Effect.



     2.17. Investment Company. The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the
SEC thereunder.



     2.18. No Registration, Integration, etc. Assuming (i) the accuracy of the
representations and warranties made by, and compliance with the covenants of, the Investor in
Article 3 hereof and of all other Investors in their respective Stock Purchase Agreements, and (ii)
that the Placement Agent (as defined in Section 3.9), has conducted all of its activities
in relation to the Offering in a manner permitted by all applicable Federal and state securities or
other applicable laws and in a manner consistent with the Company’s ability to rely upon the
exemption from registration provided by Regulation D and Section 4(2) of the Securities Act, no
registration of the Securities under the Securities Act is required in connection with the offer
and sale of the Securities by the Company to the Investors as contemplated by this Agreement.



     2.19. Off-Balance Sheet Arrangements. There is no transaction, arrangement or other
relationship between the Company and an unconsolidated or other off-balance sheet entity that is
required to be disclosed by the Company in its SEC Documents that is not so disclosed.



     2.20. Transactions With Affiliates and Employees. Except as disclosed in the SEC
Documents, none of the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.



     2.21. Foreign Corrupt Practices. Neither the Company nor its Subsidiaries, to the
knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf
of the Company or its Subsidiaries has, in the course of its actions for, or on behalf of, the
Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to



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political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic government official or
employee.



     2.22. Disclosure. The Company understands and confirms that the Investor will rely on
the foregoing representations and covenants in effecting transactions in the securities of the
Company. All disclosure provided to the Investor regarding the Company, its business and the
transactions contemplated hereby furnished by or on behalf of the Company 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.



     2.23. Placement Agent. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commission (other than for persons
engaged by an Investor or its investment advisor) relating to or arising out of the transactions
contemplated by the Agreements. The Company shall pay, and hold the Investor harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any claims relating to placement agent fees, financial
advisory fees or brokers’ commission. Other than the Placement Agent, the Company has not engaged
any placement agent or other agent in connection with the sale of the Shares.



     2.24. Non-Public Information. The Company has not disclosed to the Investor information that
would constitute material non-public information as of the Closing Date other than the existence of
the transaction contemplated hereby.



3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.



The Investor represents, warrants and covenants to the Company as follows:




     3.1. Securities Law Representations and Warranties.



          (a) The Investor (i) is an “accredited investor” as defined in Regulation D under the
Securities Act, (ii) has the knowledge, sophistication and experience necessary to make, and is
qualified to make decisions with respect to, investments in securities presenting an investment
decision like that involved in the purchase of investments in securities issued by the Company and
investments in comparable companies, (iii) can bear the economic risk of a total loss of its
investment in the Securities and (iv) has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision to purchase the Securities;



          (b) The Investor is acquiring the Securities for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or distribution thereof;



          (c) The Investor was not organized for the specific purpose of acquiring the Securities;



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          (d) 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 Securities except in compliance with the Securities Act, applicable state securities laws and
the respective rules and regulations promulgated thereunder;



          (e) The Investor understands that the Securities are being offered and sold to it in reliance
on specific exemptions from the registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of, and the Investor’s
compliance with, representations, warranties, agreements, acknowledgements and understandings of
the Investor set forth herein in order to determine the availability of such exemptions and the
eligibility of the Investor to acquire the Securities;



          (f) The Investor understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of an investment in the Securities nor have such
authorities passed upon or endorsed the merits of the Offering;



          (g) The Investor acknowledges that the Company has represented that no action has been or will
be taken in any jurisdiction outside the United States by the Company that would permit an offering
of the Securities, or possession or distribution of offering materials in connection with the issue
of the Securities, in any jurisdiction outside the United States where action for that purpose is
required. If the Investor is located or domiciled outside the United States it agrees to comply
with all applicable laws and regulations in each foreign jurisdiction in which it purchases,
offers, sells or delivers Securities or has in its possession or distributes any offering material,
in all cases at its own expense;



          (h) The Investor has been furnished with all materials relating to the business, financial
condition, results of operations, properties, management, operations and prospects of the Company
and its Subsidiaries, including matters referred to in the materials relating to the terms and
conditions of the offer and sale of the Securities which have been requested by the Investor. The
Investor has been afforded the opportunity to ask questions of the Company and has received answers
from an authorized representative of the Company which are satisfactory to the Investor.
Notwithstanding the foregoing, in entering into this Agreement, the Investor represents that it is
relying solely on the SEC Documents, representations, warranties, covenants and agreements set
forth in this Agreement, which document supersedes and replaces any other written or oral
information communicated to the Investor; and



          (i) The Investor has independently evaluated the merits of its decision to purchase Securities
pursuant to this Agreement.



     3.2. Legends.



          (a) The Investor understands that, until the end of the applicable holding period under Rule
144(k) of the Securities Act (or any successor provision) with respect to the Securities, any
certificate representing the Shares, the Warrant or the Warrant Shares shall bear a legend in
substantially the following form:



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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.


The legend set forth above shall be removed (i) if the Shares, the Warrants or the Warrant Shares
have been resold or transferred pursuant to the Registration Statement contemplated by Section
5 and the Registration Statement was effective at the time of such transfer, (ii) if, in
connection with a sale transaction, such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company to the effect that a public sale, assignment or transfer of
the Shares, the Warrants, or the Warrant Shares, as applicable may be made without registration
under the Securities Act, or (iii) upon expiration of the applicable two-year holding period under
Rule 144(k) of the Securities Act (or any successor rule); provided that the Investor is not and
has not been within three months prior to such date, an “affiliate” of the Company (as such term is
defined in Rule 144 of the Securities Act). The Company may make a notation on its records and/or
provide instruction to its transfer agent regarding the Company’s stock transfer records,
consistent with the provisions of this Section 3.2.




          (b) The Investor understands that, in the event Rule 144(k) as promulgated under the
Securities Act (or any successor rule) is amended to change the two-year period under Rule 144(k)
(or the corresponding period under any successor rule), (i) each reference in this Section
3.2 of this Agreement to “two years” or the “two-year period” shall be deemed for all purposes
of this Agreement to be references to such changed period, and (ii) all corresponding references in
the Securities shall be deemed for all purposes to be references to the changed period, provided
that such changes shall not become effective if they are otherwise prohibited by, or would
otherwise cause a violation of, the then-applicable federal securities laws.



     3.3. Authorization; Enforcement; Validity. The Investor has full right, power,
authority and capacity (corporate, statutory or otherwise) 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. This Agreement constitutes a valid and
binding obligation of the Investor enforceable against the Investor in accordance with its terms,
except (i) to the extent rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, (ii) enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar
laws affecting creditors’ and contracting parties’ rights generally and (iii) enforceability may be
limited by general principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).



     3.4. Certain Trading Limitations. The Investor (i) represents that on and from the
date the Investor first became aware of the Offering until the date hereof he, she or it has not
and (ii) covenants that for the period commencing on the date hereof and ending on the public



11









 







announcement of the Offering he, she or it will not, nor will any affiliates, engage in any
hedging or other transaction which is designed to or could reasonably be expected to lead to or
result in, or be characterized as, a sale, an offer to sell, a solicitation of offers to buy,
disposition of, loan, pledge or grant of any right with respect to (collectively, a “Disposition”)
the Common Stock of the Company by the Investor or any other person or entity in violation of the
Securities Act. Such prohibited hedging or other transactions would include without limitation
effecting any short sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered into) or any purchase,
sale or grant of any right (including without limitation any put or call option) with respect to
the Common Stock of the Company or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of its value from the
Common Stock of the Company.



     3.5. No Sale of Securities. The Investor hereby covenants with the Company not to make
any sale of the Securities without (i) complying with the provisions of this Agreement, including
Section 5.3 hereof or (ii) satisfying the requirements of the Securities Act and the rules
and regulations promulgated thereunder, including, without limitation, causing the prospectus
delivery requirement under the Securities Act to be satisfied, if applicable. The Investor
acknowledges that there may occasionally be times when the Company, based on the advice of its
counsel, determines that, subject to the limitations of Section 5.3, 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.



     3.6. Registration Questionnaire. The Investor has completed or caused to be completed
the Registration Questionnaire attached hereto as Exhibit D (or has otherwise provided in a written
form the information requested in such Registration Questionnaire) and the signature page hereto,
each for use in preparation of the Registration Statement, and the information contained in such
completed Registration Questionnaire (or such other form provided by the Investor) and on such
signature page are true and correct in all material respects as of the date of this Agreement and
will be true and correct as of the effective date of the Registration Statement; provided that the
Investor shall be entitled to update such information by providing written notice thereof to the
Company prior to the effective date of the Registration Statement.



     3.7. No Advice. The Investor understands that nothing in this Agreement or any other
materials presented to the Investor in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.



     3.8. NASD Compliance. The Investor acknowledges that if it is a Registered
Representative (as defined by the NASD) of a National Association of Securities Dealers (“NASD”)
member firm, the Investor must give such firm the notice required by the NASD’s Rules of Fair
Practice, receipt of which must be acknowledged by such firm on the signature page hereof.



12









 





     3.9. Placement Agent Fees. The Investor acknowledges that (i) the Company has engaged
and authorized Canaccord Adams, Inc. referred to herein as the “Placement Agent”) in connection
with the Offering and the transactions contemplated by this Agreement, (ii) the Company shall pay
the Placement Agent a commission and reimburse the Placement Agent’s expenses and 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 and (iii) registered representatives of the Placement Agent and/or its designees
(including, without limitation, registered representatives of the Placement Agent and/or their
designees who may participate in the Offering and sale of the securities sold in the Offering) may
be paid a portion of the commissions paid to the Placement Agent.



     3.10. Treatment of Non-Public Information. The Investor agrees (a) to hold the
existence, terms and conditions of the Offering in confidence and not to use or disclose the same
to any other person until such time as the Company files with the SEC a Current Report on Form 8-K
disclosing the Offering or publicly announces the Offering, and (b) to hold certain other matters
disclosed to it by the Company in confidence and not to disclose the same to any other person until
such time as the Company files with the SEC a report publicly disclosing such information, in
accordance with the terms of the Confidentiality and Nondisclosure Agreement previously entered
into between the Company and the Investor.



     3.11. SEC Reports. The Investor has reviewed copies of the Company’s Annual Report on
Form 10-K for the year ended September 30, 2005 (and any amendments thereto), the Company’s Proxy
Statement for its 2006 Annual Meeting of Shareholders, (and any amendments thereto) and each of the
Company’s Current Reports on Form 8-K, if any, filed since September 30, 2005 (and any amendments
thereto).



4. COVENANTS.




     4.1. Trading Market. The Company shall use commercially reasonable best efforts to
comply with all requirements of the Nasdaq Stock Market with respect to the issuance, listing and
quotation of the Securities and the continued listing and quotation of its Common Stock (including
the Shares and the Warrant Shares). The Company agrees that if the Company applies to have its
Common Stock traded on any other trading market, it will use commercially reasonable efforts to
cause the Shares and the Warrant Shares to be listed or quoted on such other trading market.



     4.2. Certain Future Financings and Related Actions. Without the prior consent of the
Investor, the Company shall not cause the Offering to be integrated with prior offerings by the
Company in a manner that would require the registration under the Securities Act of the sale of the
Securities to the Investor or in a manner that would require stockholder approval of the sale of
the Securities to the Investor.



     4.3. Public Disclosure. The Company will not issue any public statement, press release
or any other public disclosure listing the Investor as one of the purchasers hereunder without the
Investor’s prior written consent, except as may be required by applicable law, rule or regulation,
or rules of the Nasdaq Stock Market or any exchange on which the Company’s securities are listed. The Investor hereby consents
to the issuance by the Company of a press release
announcing the transaction in the form of Exhibit E hereto.



13









 









     4.4. Use of Proceeds. The Company will use the net proceeds from the sale of the
Securities pursuant to this Agreement for general corporate purposes and/or acquisitions.



     4.5. Prospectus Delivery Requirements. Investor covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as applicable to it in
connection with the sales of Registrable Securities, as defined in Section 5.1.




			
	5.	 	REGISTRATION OF SHARES AND WARRANT SHARES AND COMPLIANCE WITH THE SECURITIES ACT.





     5.1. Registration Procedures and Expenses. The Company shall:



          (a) subject to receipt of necessary information from the Investors, including the information
requested in the Registration Statement Questionnaire, prepare and file with the SEC on or prior to
the 30th calendar day following the Closing Date hereof a registration statement (the
“Registration Statement”) on Form S-1 (or such other form as may be required) to enable the resale
by the Investor on a delayed or continuous basis under Rule 415 of the Securities Act of the Shares
and the Warrant Shares and any shares of Common Stock issued or issuable in respect of the Shares
and the Warrant Shares by virtue of any stock split, stock dividend, recapitalization or similar
event (the “Registerable Securities”);



          (b) use commercially reasonable best efforts, subject to receipt of necessary information from
the Investor, including the information requested in the Registration Statement Questionnaire, to
cause the Registration Statement to become effective within 90 calendar days after the Closing
Date, and in any event shall cause the Registration Statement to become effective within one
hundred and twenty (120) calendar days after the Closing Date (the “Required Effectiveness Date”);



          (c) as expeditiously as practicable, prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus (as defined in Section 5.4
below) used in connection therewith and take all such other actions as may be necessary to keep the
Registration Statement current and effective for a period (the “Registration Period”) not
exceeding, with respect to the Registrable Securities, the earlier of (i) the date on which all
Registrable Securities then held by the Investor may be sold or transferred in compliance with Rule
144 under the Securities Act (or any other similar provisions then in force) without any volume or
manner of sale restrictions thereunder, or (ii) such time as all Registrable Securities held by the
Investor have been sold (A) pursuant to a registration statement, (B) to or through a broker or
dealer or underwriter in a public distribution or a public securities transaction, or (C) in a
transaction exempt from the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale;



          (d) promptly furnish to the Investor with respect to the Registrable Securities registered
under the Registration Statement such reasonable number of copies of the Prospectus as the Investor may request, including any
supplements to or amendments to the Prospectus, in
order to facilitate the public sale or other disposition of all or any of the Registrable
Securities by the Investor;



14









 







          (e) promptly take such action as may be necessary to qualify, or obtain, an exemption for the
Registrable Securities under such of the state securities laws of United States jurisdictions as
shall be necessary to qualify, or obtain an exemption for, the sale of the Registrable Securities
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, subject itself to general
taxation in any such jurisdiction or provide any undertakings that cause the Company undue expense
or burden;



          (f) bear all expenses in connection with the procedures in paragraphs (a) through (e) and
(g) of this Section 5.1 and the registration of the Registrable Securities pursuant to
the Registration Statement, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses (including filings
made with Nasdaq Stock Market); (ii) fees and expenses of compliance with federal securities and
state “blue sky” or securities laws; (iii) expenses of printing (including printing certificates
for the Registrable Securities and Prospectuses); (iv) all application and filing fees, if any, in
connection with listing of the Registrable Securities with the Nasdaq Stock Market; and (v) all
fees and disbursements of counsel of the Company and independent certified public accountants of
the Company; provided, however, that the Investor shall be responsible for
paying the underwriting commissions or brokerage fees, and taxes of any kind (including, without
limitation, transfer taxes) applicable to any disposition, sale or transfer of the Investor’s
Registrable Securities. The Company shall, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees performing legal or
accounting duties);



          (g) advise the Investor promptly, but in any event within two business days by e-mail, fax or
other type of communication, and, if requested by such person, confirm such advice in writing: (i)
after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC
delaying or suspending the effectiveness of the Registration Statement or of the initiation or
threat of any proceeding for that purpose, or any other order issued by any state securities
commission or other regulatory authority suspending the qualification or exemption from
qualification of such Registrable Securities under state securities or “blue sky” laws; and it will
promptly use its commercially reasonable efforts to prevent the issuance of any stop order or other
order or to obtain its withdrawal at the earliest possible moment if such stop order or other order
should be issued; (ii) when the Prospectus or any supplements to or amendments of the Prospectus
have been filed, and, with respect to the Registration Statement or any post-effective amendment
thereto, when the same has become effective; and (iii) when the SEC notifies the Company whether
there will be a “review” of such Registration Statement and whenever the SEC comments in writing on
such Registration Statement (the Company shall provide true and complete copies thereof and all
written responses thereto to the Investor that pertain to the Investor as a Selling Stockholder or
to the Plan of Distribution, but not information which the Company believes would constitute
material and non-public information);



15









 





          (h) except if otherwise required pursuant to written comments received from the SEC upon a
review of such Registration Statement, include in the Registration Statement the “Plan of
Distribution” attached hereto as Exhibit F;



          (i) unless otherwise agreed to by holders of a majority of the Registrable Securities held by
the Investor and all Other Investors, neither the Company nor any of its securities holders may
include securities of the Company (other than the Registerable Securities) in any Registration
Statement filed pursuant to this Agreement and the Company shall not after the date hereof enter
into any agreement in contravention of the foregoing;



          (j) if at any time during the Registration Period, there is not one or more effective
Registration Statements covering the resale of all Registrable Securities and the Company shall
determine to prepare and file with the SEC a registration statement relating to an offering for its
own account or the account of others under the Securities Act of any of its equity securities,
other than of Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with stock option or other
employee benefit plans, then the Company shall send to the Investor written notice of such
determination and if, within 20 days after receipt of such notice the Investor shall so request in
writing, the Company shall include in such registration statement those Registrable Securities
requested by the Investor to be so included and which are not otherwise covered by one or more
effective Registration Statements;



          (k) not less than three business days prior to the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Company shall furnish to the
Investor copies of the “Selling Stockholders” section of such document, the “Plan of Distribution,”
any risk factor contained in such document that addresses specifically this transaction or the
Selling Stockholders, as proposed to be filed, which documents will be subject to the review and
comment of the Investor and its counsel; provided that, the failure of any Investor or his,
her or its counsel to respond to such proposed documents within five business days after receipt
thereof shall be deemed approval of same; and provided, further, that no
such review and comment shall inhibit the Company from filing the Registration Statement or
otherwise from complying with its obligations hereunder;



          (l) respond as promptly as practicable, but in any event within ten business days, to any
comments received from the SEC with respect to each Registration Statement or any amendment thereto
and, as promptly as practicable provide the Investor true and complete copies of all correspondence
from and to the SEC relating to such Registration Statement that would not result in the disclosure
to the Investor of material and non-public information concerning the Company;



          (m) comply in all material respects with the provisions of the Securities Act, the Exchange
Act and all rules of the SEC promulgated thereunder with respect to the Registration Statements and
the disposition of all Registrable Securities covered by each Registration Statement;



16









 





          (n) File with the SEC a request for acceleration in accordance with Rule 461 promulgated under
the Securities Act within five (5) trading days after the date that the Company is notified (orally
or in writing (whichever is earlier)) by the SEC that the Registration Statement will not be
reviewed or be subject to further review;



          (o) Take all other steps necessary to effect the registration of the Registrable Securities;



          (p) cooperate with the Investor to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to the
Registration Statements, which certificates shall be free of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such names as the
Investor may request; provided, that, the delivery of such certificates shall be subject to the
payment by the Investor of any transfer taxes, if applicable; and



          (q) file a Form D with respect to the Shares and the Warrants as required under Regulation D.



     5.2. Delay in Effectiveness of Registration Statement. In the event the Registration
Statement is not declared effective by the Required Effectiveness Date in accordance with
Section 5.1(b), the Company shall pay in cash to the Investor liquidated damages in the
amount of 2.0% of the Aggregate Purchase Price per month thereafter (pro rata for any portion
thereof) until the earlier of (i) the date on which the Registration Statement is first declared
effective by the SEC or (ii) the second anniversary of the Closing Date, any such payments to be
made monthly in arrears.



     5.3. Transfer of Registerable Securities; Suspension.



          (a) The Investor agrees that it will not effect any Disposition of the Registrable Securities
or its right to purchase the Registrable Securities that would constitute a sale within the meaning
of the Securities Act, except as contemplated in the Registration Statement referred to in
Section 5.1 or in accordance with the Securities Act, and that it will promptly notify the
Company of any changes in the information set forth in the Registration Statement or the
Registration Statement Questionnaire regarding the Investor. The Company shall not be required to
include any Registerable Securities held by the Investor in the Registration Statement if the
Investor fails to complete, or update as needed, the Registration Statement Questionnaire or
provide the information requested in such Registration Statement Questionnaire in accordance with
this Section 5.3.



          (b) Except in the event that paragraph (c) below applies, the Company shall use its
best efforts to, at all times during the Registration Period, promptly (i) 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 necessary to make the
statements therein not misleading, and so that, as thereafter delivered to purchasers of the
Registrable Securities being sold thereunder, such



17









 







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 5.3(b)(i); and (iii)inform the Investor that the Company has complied with its
obligations in Section 5.3(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 best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the Investor pursuant to
Section 5.3(b)(iii) hereof when the amendment has become effective).



          (c) In the event of (i) 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 a Registration Statement or related Prospectus or for additional information; (ii)
the issuance by the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of any proceedings for
that purpose; (iii) the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv)
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 omit 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 omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading (a “Subsection IV Event”), then the Company shall deliver a notice in writing to the
Investor (the “Suspension Notice”) to the effect of the foregoing and, upon receipt of such
Suspension Notice, the Investor will refrain from selling any Registrable Securities 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. In the event of any Suspension, the
Company will use its commercially reasonable efforts, consistent with the best interests of the
Company and its stockholders, to cause the use of the Prospectus so suspended to be resumed as soon
as reasonably practicable after the delivery of a Suspension Notice to the Investor. In the event
of any Suspension (an “Event”), the Company shall pay in cash to the Investor liquidated damages in
the amount of 2.0% of the Aggregate Purchase Price per month thereafter (pro rata for any portion
thereof) until the earlier of (i) the first date after such Event on which the Investor either
receives copies of a supplemented or amended Prospectus prepared and filed by the Company or is
advised in writing by the Company that the current Prospectus may be used, or (ii) the second
anniversary of the Closing Date, any such payments to be made monthly in arrears; provided,
however, that the foregoing payment shall not apply to any Suspension due to a potential merger,
consolidation or other acquisition transaction or entry by the Company into an agreement that
causes a Subsection IV Event, provided that the preceding exclusion from the foregoing provision
providing for the payment of liquidated damages upon the occurrence of an Event shall negate the
payment of liquidated damages that otherwise would have been payable with respect to only (A) not
more than two Suspensions in any consecutive 12-month period and (B) of any such one or two
Suspensions



18









 







noted in (A), to Suspensions totaling not more than an aggregate of 45 days in any consecutive
12-month period. For the avoidance of doubt, it is agreed that in the event the aggregate
Suspension days exceeds such 45 day limit, the penalty shall only be payable for the days in excess
of the 45 day limit.



     5.4. Indemnification. For the purpose of this Section 5.4, the term
“Registration Statement” shall include any preliminary or final prospectus, exhibit, supplement or
amendment included in or relating to the Registration Statement referred to in Section 5.1
and the term “Rules and Regulations” means the rules and regulations promulgated under the
Securities Act.



          (a) Indemnification by the Company. The Company agrees to indemnify, defend and hold
harmless the Investor, its officers, directors, agents, investment advisors, partners, members,
managers, stockholders, trustees and employees, and each person, if any, who controls the Investor
(or any of such other persons) within the meaning of the Securities Act, against any losses,
claims, damages, liabilities, costs or expenses to which the Investor or other person may become
subject (including, without limitation, reasonable legal and other costs and expenses of preparing,
investigating, defending, settling, compromising or paying such losses, claims, damages,
liabilities, costs or expenses) (collectively, “Losses”), as incurred, under the Securities Act,
the Exchange Act, or any other federal or state statutory law or regulation insofar as such losses
arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, including the Prospectus, financial statements and
schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness
of the Registration Statement, including any information deemed to be a part thereof as of the time
of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434 of the Rules and
Regulations, or the Prospectus, in the form first filed with the SEC pursuant to Rule 424(b) of the
Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule
424(b) filing is required (the “Prospectus”), or any amendment or supplement thereto, (ii) the
omission or alleged omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them, in light of the circumstances under which they
were made, not misleading, (iii) any inaccuracy in the representations and warranties of the
Company contained in this Agreement, or any failure of the Company to perform its obligations under
this Agreement, or (iv) any violation or alleged violation by the Company of the Securities Act,
the Securities Exchange Act of 1934, as amended, state (“blue sky”) securities laws or any rule or
regulation promulgated thereunder; provided, however, that the Company will
not be liable in any such case to the extent that any such Loss arises out of or is based upon (i)
an untrue statement or alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus or any amendment or supplement of the Registration Statement
or Prospectus in reliance upon and in conformity with written information furnished to the Company
by or on behalf of the Investor expressly for use in the Registration Statement or the Prospectus,
or to the extent that such information relates to such Investor or such Investor’s proposed method
of distribution, or (ii) the failure of the Investor to comply with the covenants and agreements
contained in Sections 3.5 or 5.3 of this Agreement respecting resale of Registrable
Securities, or (iii) the inaccuracy of any representations made by the Investor in this Agreement
or (iv) any untrue statement or omission of a material fact in any Prospectus that is corrected in
any subsequent Prospectus that was delivered to the Investor before the pertinent sale or sales by
the Investor.



19









 





          (b) Indemnification by the Investor. The Investor will indemnify, defend and hold
harmless the Company, each of its directors, each of its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning of the Securities
Act, against any Losses to which the Company, each of its directors, each of its officers who sign
the Registration Statement or such controlling person may become subject, as incurred, under the
Securities Act, the Exchange Act, or any other federal or state statutory law or regulation insofar
as such Losses arise out of or are based upon (i) any failure on the part of the Investor to comply
with the covenants and agreements contained in Sections 3.5 or 5.3 of this Agreement
respecting the sale of the Registrable Securities or (ii) the inaccuracy of any representation or
warranty made by the Investor in this Agreement or (iii) any untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or supplement to the
Registration Statement or Prospectus, or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of the Investor
expressly for use therein; provided, however, that the Investor shall not
be liable for any such untrue statement or omission of which the Investor has delivered to the
Company in writing a correction at least two business days before the occurrence of the transaction
from which such loss was incurred. Notwithstanding the provisions of this Section 5.4, the
Investor shall not be liable for any indemnification obligation under this Agreement in excess of
the amount of net proceeds received by the Investor from the sale of the Registrable Securities.



     5.5. Indemnification Procedure.



          (a) Promptly after receipt by an indemnified party under this Section 5.5 of notice of
the threat or commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5.5, promptly notify
the indemnifying party in writing of the claim; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any indemnified party for
contribution or otherwise under the obligations to indemnify contained in Section 5.4 to
the extent it is not materially prejudiced as a result of such failure.



          (b) In case any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof; provided,
however, if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded that there is a
conflict between the positions of the indemnifying party and the indemnified party in conducting
the defense of any such action the indemnified party or parties shall have the right to select
separate counsel to assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election to assume the defense of such action, the
indemnifying party will not be liable to such indemnified party under this Section 5.5 for
any



20









 







legal or other expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless:




	 	(i)	 	the indemnified party shall have employed such
counsel in connection with the assumption of legal defenses in
accordance with the proviso to the preceding sentence in Section
5.5(b) above (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate
counsel in each jurisdiction where counsel is reasonably necessary,
approved by such indemnifying party (such approval not to be
unreasonably withheld) representing all of the indemnified parties who
are parties to such action), or
	 
	 	(ii)	 	the indemnifying party shall not have counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement
of action, in each of which cases the reasonable fees and expenses of
counsel shall be at the expense of the indemnifying party.





          (c) Settlement. The indemnifying party shall not be liable for any settlement of any
action, claim, suit, investigation, inquiry or proceeding (including, without limitation, any
shareholder or derivative action or arbitration proceeding, whether commenced or threatened
(collectively, a “Proceeding”) effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending Proceeding in respect of which any
indemnified party is a party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of such Proceeding.



          (d) Contribution. If a claim for indemnification under this Section 5.5 is
unavailable to an indemnified party (by reason of public policy or otherwise), then each
indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to in this Agreement, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection with the actions,
statements or omissions that resulted in such losses, claims, damages, liabilities or expenses as
well as any other relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things, whether any action
in question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any losses, claims, damages, liabilities or
expenses shall be deemed to include, subject to the limitations set forth in this Section
5.5, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any proceeding to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in this Section was available to such party in
accordance with its terms.



21









 





          (e) The parties hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5.5 were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 5.5, no
Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds from the sale of Registrable Securities by the Investor exceeds the amount
of any damages that the Investor has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No party to this Agreement guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any other party to this Agreement who was not guilty of such
fraudulent misrepresentation.



     5.6. Termination of Conditions and Obligations. The restrictions imposed by
Article 3 or Article 5 upon the transferability of the Registrable Securities shall
cease and terminate as to any particular number of the Registrable Securities upon the termination
of the Registration Period with respect to such Registrable Securities.



     5.7. Rule 144. At all times during which there are Registrable Securities outstanding
which have not been previously (a) sold to or through a broker or dealer or underwriter in a public
distribution, or (b) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(l) thereof, in the case of either clause (a)
or clause (b) in such a manner that, upon the consummation of such sale, all transfer
restrictions and restrictive legends with respect to such shares are removed upon the consummation
of such sale, the Company shall use commercially reasonable best efforts to:



          (a) comply with the requirements of Rule 144(c) under the Securities Act with respect to
current public information about the Company;



          (b) file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time it is subject to such reporting
requirements); and



          (c) furnish to any holder of Registrable Securities promptly after receipt of a written
request therefor (i) a written statement by the Company as to its compliance with the requirements
of said Rule 144(c), and the reporting requirements of the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other
reports and documents of the Company as such holder may reasonably request to avail itself of any
similar rule or regulation of the SEC allowing it to sell any such securities without registration.



     5.8. Registration of Other Securities. Notwithstanding anything contained herein to
the contrary and for the avoidance of doubt, the parties hereto acknowledge that (a) the Company
has granted registration rights to Other Investors with respect to Registrable Securities, and (b)
any Registration Statement prepared, filed and made effective under this Article 5 may also
cover the resale of such other securities.






22









 







6.
MISCELLANEOUS.



     6.1. Notices. Except as specifically permitted by Section 5.1(g), all notices,
requests, consents and other communications hereunder shall be in writing, shall be mailed (b) if
within the 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 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 business day after so
mailed, (iii) if delivered by International Federal Express, two business days after so mailed, and
(iv) if delivered by facsimile, upon electric confirmation of receipt if sent during the normal
business hours of the recipient and, if not, on the next business day, and shall be delivered as
addressed as follows:


if to the Company, to:



Medwave, Inc.

435 Newbury Street, Suite 206

Danvers, MA 01923



with a copy to:



Goodwin | Procter LLP

53 State Street

Boston, MA 02109

Attn: Stephen T. Adams

Tel: (617) 570-1121

Fax: (617) 523-1231



if to the Investor, at its address on the signature page hereto, or at such other address or
addresses as may have been furnished to the Company in writing.




     6.2. Changes. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Investor.



     6.3. 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.



     6.4. 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.



     6.5. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, 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 Securities being purchased and the payment therefor
unless otherwise stated herein.



23









 





     6.6. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the Commonwealth of Massachusetts, without giving effect to the
principles of conflicts of law.



     6.7. Entire Agreement. This Agreement and the documents referenced herein constitute
the entire agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior agreements and understandings
among the parties.



     6.8. Finders Fees. Neither the Company nor the Investor nor any affiliate thereof has
incurred any obligation which will result in the obligation of the other party to pay any finder’s
fee or commission in connection with this transaction, except for fees payable by the Company to
the Placement Agent.



     6.9. 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 party. Facsimile signatures shall be deemed originals for
all purposes hereunder.



     6.10. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors, heirs, executors and administrators and permitted assigns of the
parties hereto. With respect to transfers that are not made pursuant to the Registration Statement
(or Rule 144 but are otherwise made in accordance with all applicable laws and the terms of this
Agreement), the rights and obligations of the Investor under this Agreement shall be automatically
assigned by the Investor to any transferee of all or any portion of the Investor’s Securities who
is a Permitted Transferee (as defined below); provided, however, that
within two business days prior to the transfer, (i) the Company is provided written notice of the
transfer including the name and address of the transferee and the number of Securities as
applicable to be transferred; and (ii) that such transferee agrees in writing to be bound by the
terms of this Agreement as if such transferee were the Investor. (For purposes of this Agreement, a
“Permitted Transferee” shall mean any Person who (a) is an “accredited investor,” as that term is
defined in Rule 501(a) of Regulation D under the Securities Act, (b) receives the Securities in a
transaction which is in compliance with the Federal and applicable state securities law. Upon any
transfer permitted by this Section 6.10, the Company shall be obligated to such transferee
to perform all of its covenants under this Agreement as if such transferee was the Investor.



     6.11. Expenses. The Company and the Investor shall bear its or his own expenses in
connection with the preparation and negotiation of the Agreement.



     6.12. Third Party Rights. Except as explicitly set forth in this Agreement, nothing
in this Agreement shall create or be deemed to create any rights in any person or entity not a
party to this Agreement. Notwithstanding the foregoing, the Placement Agent shall be deemed to be
third-party beneficiary of the representations, warranties and covenants made by the Company and
the Investor herein.



24









 





     6.13. No Waiver. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.



     6.14. Further Assurances. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.



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



[SIGNATURE PAGES FOLLOW]




COMPANY SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT




25









 





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



	 	 	 	 	 	 	 
	 	 	MEDWAVE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 

	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	Amount of Subscription	 	 
	 	 	Accepted     $                                                                                                    	 	 






 









 







INVESTOR SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT




	 	 	 	 	 
	 	 	[INVESTOR NAME]
	 
	 	 	 	 
	 	 	 
	 	 	(print full legal name of Investor)
	 
	 	 	 	 
	 

	 	 By:	 	 
	 

	 	 	 
	 	 	(signature of authorized representative)
	 
	 	 	 	 
	 

	 	 Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 Its:	 	 
	 

	 	 	 







	 	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Telephone:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Email:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Tax I.D. or SSN:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Address where Shares
should be sent (if different from above):
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	NUMBER OF SHARES AND WARRANTS SUBSCRIBED FOR:
	 
	 	 	 	 
	 

	 	SHARES:	 	 
	 	 	 
	 
	 	 	 	 
	 

	 	WARRANTS:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	AGGREGATE PURCHASE PRICE:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 





27









 





INVESTOR SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT (CONT.)



If Investor is a Registered Representative with an NASD member firm, have the following
acknowledgment signed by the appropriate party:



The undersigned NASD member firm acknowledges receipt of the notice required by Rule 3040 of the
NASD Conduct Rules.




	 	 	 	 	 
	 	 	 
	Name of NASD Member	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 

	 	 
	Title:
	 	 	 	 







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