**Exhibit 10.27**

 

**SECURITIES PURCHASE AGREEMENT**

 

**between**

 

**REFOCUS GROUP, INC.,**

 

**and**

 

**MEDCARE INVESTMENT FUND III, LTD.**

 

**Dated as of March 1, 2005**

 

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**TABLE OF CONTENTS**

 
| **ARTICLE I. THE SECURITIES**                                    | ** **                                                                                 |
|------------------------------------------------------------------|--------------------------------------------------------------------------------------------|
| **SECTION 1.01**                                                 | **Issuance, Sale and  Delivery of the Series A-1 Shares and Warrant at the First Closing** | ** ** |
| **SECTION 1.02**                                                 | **Issuance, Sale and  Delivery of the Series A-2 Shares at Second Closing**                | ** ** |
| **SECTION 1.03**                                                 | **First Closing**                                                                          | ** ** |
| **SECTION 1.04**                                                 | **Second Closing**                                                                         | ** ** |
| ** **                                                       | ** **                                                                                 | ** ** |
| **ARTICLE II.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3** | ** **                                                                                 |
| **SECTION 2.01**                                                 | **Organization,  Qualifications and Corporate Power**                                      | ** ** |
| **SECTION 2.02**                                                 | **Authorization; No  Conflict; No Violation**                                              | ** ** |
| **SECTION 2.03**                                                 | **Consents and Approvals**                                                                 | ** ** |
| **SECTION 2.04**                                                 | **Validity**                                                                               | ** ** |
| **SECTION 2.05**                                                 | **Authorized Capital Stock**                                                               | ** ** |
| **SECTION 2.06**                                                 | **Reports and Financial  Statements**                                                      | ** ** |
| **SECTION 2.07**                                                 | **Disclosure Controls and  Procedures**                                                    | ** ** |
| **SECTION 2.08**                                                 | **No Undisclosed Liabilities**                                                             | ** ** |
| **SECTION 2.09**                                                 | **Events Subsequent to the  Balance Sheet Date**                                           | ** ** |
| **SECTION 2.10**                                                 | **Litigation; Compliance  with Law**                                                       | ** ** |
| **SECTION 2.11**                                                 | **Proprietary Information**                                                                | ** ** |
| **SECTION 2.12**                                                 | **Intellectual Property**                                                                  | ** ** |
| **SECTION 2.13**                                                 | **Real Property**                                                                          | ** ** |
| **SECTION 2.14**                                                 | **Assets**                                                                                 | ** ** |
| **SECTION 2.15**                                                 | **Insurance**                                                                              | ** ** |
| **SECTION 2.16**                                                 | **Taxes**                                                                                  | ** ** |
| **SECTION 2.17**                                                 | **Agreements**                                                                             | ** ** |
| **SECTION 2.18**                                                 | **Loans and Advances**                                                                     | ** ** |
| **SECTION 2.19**                                                 | **Assumptions, Guaranties,  Etc. of Indebtedness of Other Persons**                        | ** ** |
| **SECTION 2.20**                                                 | **Significant Customers and  Suppliers**                                                   | ** ** |
| **SECTION 2.21**                                                 | **Offerings**                                                                              | ** ** |
| **SECTION 2.22**                                                 | **Brokers; Financial  Advisors**                                                           | ** ** |
| **SECTION 2.23**                                                 | **Transactions With  Affiliates**                                                          | ** ** |
| **SECTION 2.24**                                                 | **Employees**                                                                              | ** ** |
| **SECTION 2.25**                                                 | **Environmental and Safety  Laws**                                                         | ** ** |
| **SECTION 2.26**                                                 | **Employee Benefits**                                                                      | ** ** |
| **SECTION 2.27**                                                 | **Foreign Corrupt Practices  Act**                                                         | ** ** |
| **SECTION 2.28**                                                 | **Illegal or Unauthorized  Payments; Political Contributions**                             | ** ** |
| **SECTION 2.29**                                                 | **Pending Changes**                                                                        | ** ** |
| **SECTION 2.30**                                                 | **Investment Company Act**                                                                 | ** ** |
| **SECTION 2.31**                                                 | **Product Liability**                                                                      | ** ** |
| **SECTION 2.32**                                                 | **Passive Foreign Investment  Company**                                                    | ** ** |
| **SECTION 2.33**                                                 | **Registration Rights**                                                                    | ** ** |
| **SECTION 2.34**                                                 | **Books and Records**                                                                      | ** ** |
| **SECTION 2.35**                                                 | **Disclosure**                                                                             | ** ** |

 

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| **SECTION 2.36**                                                                | **FDA Trials**                                                                             | ** ** |
|---------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|------------|
| ** **                                                                      | ** **                                                                                 | ** ** |
| **ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF  THE PURCHASER**    | ** **                                                                                 |
| **SECTION 3.01**                                                                | **Representations and  Warranties of the Purchaser**                                       | ** ** |
| **SECTION 3.02**                                                                | **Certain Covenants of the  Purchaser**                                                    | ** ** |
| **SECTION 3.03**                                                                | **Legend**                                                                                 | ** ** |
| ** **                                                                      | ** **                                                                                 | ** ** |
| **ARTICLE IV. CONDITIONS TO  THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY** | ** **                                                                                 |
| **SECTION 4.01**                                                                | **Conditions to the  Purchaser’s Obligations at the Closings**                        | ** ** |
| **SECTION 4.02**                                                                | **Conditions to the  Company’s Obligations at each Closing**                          | ** ** |
| ** **                                                                      | ** **                                                                                 | ** ** |
| **ARTICLE V. COVENANTS OF  THE COMPANY**                                        | ** **                                                                                 |
| **SECTION 5.01**                                                                | **Reserve for Warrant Shares  and Preferred Stock Conversion Shares**                      | ** ** |
| **SECTION 5.02**                                                                | **Corporate Existence**                                                                    | ** ** |
| **SECTION 5.03**                                                                | **Preservation of Property  and Assets**                                                   | ** ** |
| **SECTION 5.04**                                                                | **Properties, Business,  Insurance**                                                       | ** ** |
| **SECTION 5.05**                                                                | **Directors and Officers  Insurance**                                                      | ** ** |
| **SECTION 5.06**                                                                | **Inspection, Consultation  and Advice**                                                   | ** ** |
| **SECTION 5.07**                                                                | **Restrictive Agreements  Prohibited**                                                     | ** ** |
| **SECTION 5.08**                                                                | **Transactions with  Affiliates**                                                          | ** ** |
| **SECTION 5.09**                                                                | **Compensation and Expenses**                                                              | ** ** |
| **SECTION 5.10**                                                                | **Use of Proceeds**                                                                        | ** ** |
| **SECTION 5.11**                                                                | **Financial Reporting**                                                                    | ** ** |
| **SECTION 5.12**                                                                | **Non-Disclosure,  Non-Solicitation and Proprietary Information and Inventions Agreement** | ** ** |
| **SECTION 5.13**                                                                | **Key Person Insurance**                                                                   | ** ** |
| **SECTION 5.14**                                                                | **Payment of Taxes; Trade  Debt**                                                          | ** ** |
| **SECTION 5.15**                                                                | **Internal Accounting  Controls**                                                          | ** ** |
| **SECTION 5.16**                                                                | **Indemnity**                                                                              | ** ** |
| **SECTION 5.17**                                                                | **Compliance with Laws**                                                                   | ** ** |
| **SECTION 5.18**                                                                | **Keeping of Records and  Books of Account**                                               | ** ** |
| **SECTION 5.19**                                                                | **PFIC Covenant**                                                                          | ** ** |
| **SECTION 5.20**                                                                | **Publicity**                                                                              | ** ** |
| ** **                                                                      | ** **                                                                                 | ** ** |
| **ARTICLE VI. ADDITIONAL  COVENANTS OF THE COMPANY**                            | ** **                                                                                 |
| **SECTION 6.01**                                                                | **Protective Provisions  Requiring Stockholder Approval**                                  | ** ** |
| **SECTION 6.02**                                                                | **Protective Provisions  Requiring Board Approval**                                        | ** ** |
| ** **                                                                      | ** **                                                                                 | ** ** |
| **ARTICLE VII. MISCELLANEOUS**                                                  | ** **                                                                                 |
| **SECTION 7.01**                                                                | **Expenses**                                                                               | ** ** |
| **SECTION 7.02**                                                                | **Survival of Agreements**                                                                 | ** ** |
| **SECTION 7.03**                                                                | **Entire Agreement**                                                                       | ** ** |
| **SECTION 7.04**                                                                | **Assignment; Binding Effect**                                                             | ** ** |
| **SECTION 7.05**                                                                | **Notices**                                                                                | ** ** |
| **SECTION 7.06**                                                                | **Specific Performance;  Remedies**                                                        | ** ** |

 

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| **SECTION 7.07**       | **Submission to  Jurisdiction; Waiver of Jury Trial** | ** ** |
|------------------------|-------------------------------------------------------|------------|
| **SECTION 7.08**       | **Headings**                                          | ** ** |
| **SECTION 7.09**       | **Governing Law**                                     | ** ** |
| **SECTION 7.10**       | **Amendments**                                        | ** ** |
| **SECTION 7.11**       | **Extensions; Waivers**                               | ** ** |
| **SECTION 7.12**       | **Severability**                                      | ** ** |
| **SECTION 7.13**       | **Counterparts;  Effectiveness**                      | ** ** |
| **SECTION 7.14**       | **Construction**                                      | ** ** |
| **SECTION 7.15**       | **Attorneys’ Fees**                              | ** ** |
| **SECTION 7.16**       | **Brokerage**                                         | ** ** |
| **SECTION 7.17**       | **Adjustments for Stock  Splits, Etc**                | ** ** |
| **SECTION 7.18**       | **Aggregation of Stock**                              | ** ** |
| **SECTION 7.19**       | **Certain Defined Terms**                             | ** ** |
| **SECTION 7.20**       | **Incorporation of Exhibits,  Annexes and Schedules** | ** ** |
| ** **             | ** **                                            | ** ** |
| **INDEX TO SCHEDULES** | ** **                                            |
| Disclosure Schedules   |                                                  |       |
| SCHEDULE 2.01(B)       | Subsidiaries                                          |       |
| SCHEDULE 2.02          | Authorization of Preferred Stock                      |       |
| SCHEDULE 2.05(A)       | Outstanding Capital Stock                             |       |
| SCHEDULE 2.05(B)       | Authorization of Capital Stock                        |       |
| SCHEDULE 2.05(C)       | Percentage Ownership                                  |       |
| SCHEDULE 2.08          | Liabilities                                           |       |
| SCHEDULE 2.09          | Events Subsequent to the Audited Balance Sheet  Date  |       |
| SCHEDULE 2.10          | Litigation                                            |       |
| SCHEDULE 2.12(A)       | Authorization to Intellectual Property                |       |
| SCHEDULE 2.12(C)       | List of Intellectual Property                         |       |
| SCHEDULE 2.12(D)       | Agreements Concerning Intellectual Property           |       |
| SCHEDULE 2.12(G)       | Subsidiary Intellectual Property                      |       |
| SCHEDULE 2.13(B)       | Real Property                                         |       |
| SCHEDULE 2.15          | Insurance                                             |       |
|                   |                                                  |       |
| **INDEX TO EXHIBITS**  | ** **                                            |
| EXHIBIT A              | Certificate of Designation                            |       |
| EXHIBIT B              | Warrant                                               |       |
| EXHIBIT C              | Form of Investors’ Rights Agreement              |       |

 

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**SECURITIES PURCHASE AGREEMENT**

 

This**SECURITIES PURCHASE AGREEMENT**(this “***Agreement***”), dated as of March 1, 2005, isentered into by and between Refocus Group, Inc., a Delaware corporation (the “***Company***”), andMedcare Investment Fund III, Ltd. (the “***Purchaser***”). Certain capitalized terms used herein are defined in Section 7.19of this Agreement.

 

A.            The Company has filed a Certificateof Designation, Rights and Preferences (the ***“Certificate of Designation”***) in theform attached hereto as Exhibit A and incorporated herein by reference,establishing three series of convertible preferred stock, namely, the SeriesA-1 Convertible Preferred Stock, par value $0.0001 per share (the “***Series A-1 Preferred Stock***”),and the Series A-2 Convertible Preferred Stock, par value $0.0001 per share(the “***Series A-2 PreferredStock***”), and the Series A-3 Convertible Preferred Stock, parvalue $0.0001 per share (the “***Series A-3 Preferred Stock***”).

 

B.            The Company desires to issue andsell to the Purchaser, and the Purchaser desires to purchase from the Company,280,000 shares of the Series A-1 Preferred Stock (the ***“Series A-1 Shares***”),and 280,000 shares of the Series A-2 Preferred Stock (the ***“Series A-2 Shares***”and together with the Series A-1 Shares, the ***“Shares”***) on the terms and subject tothe conditions set forth in this Agreement.

 

C.            The Company desires to grant thePurchaser a warrant to purchase 133,334 shares of Series A-3 Preferred Stock ata price of $30.00 per share (“***Warrant Shares***”), such Warrant Shares to be issued inaccordance with the warrant agreement in substantially the form attached heretoas Exhibit B (the “***Warrant***”),and the Purchaser desires to purchase the Warrant, on the terms and subject tothe conditions set forth in this Agreement.

 

D.            Each Share and each Warrant Sharewill be convertible into 100 shares of the Company’s common stock, par value$0.0001 (the “Common Stock”), subject to adjustment as provided in theCertificate of Designation (defined herein).

 

**AGREEMENT**

 

**NOW, THEREFORE**, in consideration of the premises,representations, warranties and the mutual covenants contained in thisAgreement, the parties agree as follows:

 

# **ARTICLE I.**

# ** **

# **THESECURITIES**

# ** **

**SECTION1.01****               Issuance, Sale and Delivery ofthe Series A-1 Shares and Warrant at the First Closing.**  At the First Closing (as defined in Section1.03 hereof), on the terms and subject to the conditions of this Agreement,the Company shall issue and sell to the Purchaser, and the Purchaser shallpurchase from the Company, the Series A-1 Shares, at a price of $25.00 pershare (the “***SharePurchase Price***”) for an aggregate purchase price of $7 million,and the Company shall issue and sell to the Purchaser, and the Purchaser shallpurchase from the Company, the Warrant, the purchase price of which shall be$1,000 (“***WarrantPurchase***

 

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***Price***”), whichthe Company and the Purchaser agree to be the fair market value of the Warrantas of the date hereof.

 

**SECTION1.02****               Issuance, Sale and Delivery ofthe Series A-2 Shares at Second Closing.**  At the Second Closing (as defined in Section1.04 hereof), on the terms and subject to the conditions of this Agreement, theCompany shall issue and sell to the Purchaser, and the Purchaser shall purchasefrom the Company, the Series A-2 Shares at the Share Purchase Price for anaggregate purchase price of $7 million.

 

**SECTION1.03****               First Closing.**   The First Closing shall take place at 10:00a.m. at the offices of Akin Gump Strauss Hauer & Feld LLP, 300 ConventStreet, Suite 1500, San Antonio, Texas 78205, on March 1, 2005, or at suchother location, date and time as may be agreed upon between the Company and thePurchaser (such closing being called the “***First**Closing***”and such date and time being called the “***First Closing Date***”).  At the First Closing, the Company shall issueand deliver to the Purchaser a certificate representing the 280,000 Series A-1Shares and the Warrant.  As payment infull for the Series A-1 Shares and the Warrant, on the First Closing Date thePurchaser shall pay in immediately available funds to the Company $7,001,000 bywire transfer or by such other method as may be reasonably acceptable to theCompany.  Such amounts shall be paid tothe account of the Company as shall have been designated in writing areasonable time in advance to the Purchaser by the Company.

 

**SECTION1.04****               Second Closing.**  If the Second Closing Milestones (as definedin Section 4.01(q)) are met, the Second Closing shall take place withinthirty (30) days after the Company provides the Purchaser with written notice,accompanied by satisfactory documentation, that the Second Closing Milestoneshave been met; provided, however, the Second Closing shall not occur prior toMarch 1, 2006.  Notwithstanding theforegoing, upon 30-days prior written notice to the Company, the Purchasershall have the right, but not the obligation, to cause the Second Closing tooccur at any time after the First Closing. The Second Closing shall take place at 10:00 a.m. at the offices of AkinGump Strauss Hauer & Feld LLP, 300 Convent Street, Suite 1500, San Antonio,Texas 78205, or at such other location, on a date and time as may be agreedupon between the Company and the Purchaser in accordance with the terms as setforth in this Section 1.04 (such closing being called the “***Second Closing***” andsuch date and time being called the “***Second Closing Date***”).  At the Second Closing, the Company shallissue and deliver to the Purchaser a certificate representing the 280,000Series A-2 Shares.  As payment in fullfor the Series A-2 Shares, on the Second Closing Date the Purchaser shall payin immediately available funds to the Company $7,000,000 by wire transfer or bysuch other method as may be reasonably acceptable to the Company.  Such amounts shall be paid to the account ofthe Company as shall have been designated in writing a reasonable time inadvance to the Purchaser by the Company. The First Closing and Second Closing, if any, shall hereinafter bereferred to individually as a “***Closing***” and collectively as the “***Closings***.”  For purposes of this Agreement, the FirstClosing Date and Second Closing Date, if any, shall be deemed a “***Closing Date***” as suchterm is used in this Agreement.

 

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# **ARTICLE II.**

# ** **

# **REPRESENTATIONSAND WARRANTIES OF THE COMPANY**

# ** **

TheCompany represents and warrants to the Purchaser, as of each Closing Date, thatexcept as set forth in the Schedules attached hereto which shall be amendedupon the Second Closing, if any:

 

**SECTION2.01****               Organization, Qualificationsand Corporate Power.**

 

(a)                                     TheCompany is a corporation duly organized, validly existing and in good standingunder the laws of the State of Delaware. The Company is duly licensed or qualified to transact business as aforeign corporation and is in good standing in each jurisdiction in which the natureof the business transacted by it or the character of the properties owned orleased by it requires such licensing or qualification, except where the failureto be so licensed, qualified or in good standing would not result in a MaterialAdverse Change.  The Company has fullcorporate power and authority to own and hold its properties and to carry onits business as now conducted and as proposed to be conducted, to execute,deliver and perform this Agreement and each of the other Transaction Documents,to issue, sell and deliver the Shares and the Warrant, to issue and deliver theWarrant Shares upon exercise of the Warrant, and to issue and deliver theshares of Common Stock issuable upon conversion of the Shares and the WarrantShares (collectively, the “***PreferredStock Conversion Shares***”).

###  

### (b)           Except as set forth on Schedule2.01(b), the Company has no Subsidiaries and the Company does not (i) ownof record or beneficially, directly or indirectly, (A) any shares of capitalstock or securities exercisable or exchangeable for, or convertible into,capital stock of any other entity or (B) any participating interest in anypartnership, joint venture or other non-corporate business enterprise or (ii)control, directly or indirectly, any other entity. The Company has nocommitments or plans to establish any additional Subsidiaries.

###  

**SECTION2.02****               Authorization; NoConflict; No Violation.**  The Company’s: (a) execution anddelivery of this Agreement and each of the other Transaction Documents andperformance of its obligations hereunder and thereunder, (b) issuance, sale anddelivery of the Shares, (c) issuance and delivery of the Warrant and theWarrant Shares and (d) issuance and delivery of the Preferred Stock ConversionShares have been duly authorized by all requisite corporate action and will not(v) result in a violation of the Company’s Certificate of Incorporation, asamended or modified (the “***Charter***”)or the Company’s Bylaws, as amended or modified (the “***Bylaws***”), (w) resultin a violation of any applicable law, rule or regulation, or any applicableorder, injunction, judgment or decree of any court or other agency ofgovernment, except such violations that would not result in a Material AdverseChange, (x) conflict with, result in a breach of, or constitute (or, with duenotice or lapse of time or both, would constitute) a default under, or giverise to any right of termination, acceleration or cancellation under, anyindenture, agreement, contract, license, arrangement, understanding, evidenceof indebtedness, note, lease or other instrument to which the Company or any ofits properties or assets is bound, except as set forth on Schedule 2.02,(y) result in the creation or imposition of any Lien, charge, restriction,claim or encumbrance of any nature whatsoever upon the Company or any of the 

 

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Company’s properties or assetsor (z) require any consent, approval, notification, waiver or other similaraction from any third party.

 

**SECTION2.03****               Consents and Approvals.**  Subject to the accuracy of the Purchaser’srepresentations and warranties set forth in Article III hereof, noregistration or filing with, or consent or approval of or other action by, anyfederal, state or other governmental agency or instrumentality or any thirdparty is or will be necessary for (a) the Company’s valid execution, deliveryand performance of this Agreement and the other Transaction Documents, (b) theCompany’s issuance, sale and delivery of the Shares, (c) the Company’s issuanceand delivery of the Warrant and Warrant Shares upon exercise of the Warrant,(d) the Company’s issuance and delivery of the Preferred Stock ConversionShares upon conversion of the Shares and Warrant Shares, other than (x) theCertificate of Designation that will be filed with the Secretary of State ofthe State of Delaware on or before the First Closing Date, (y) those which havepreviously been obtained or made or (z) those which are required to be madeunder federal or state securities laws, which will be obtained or made, andwill be effective within the time periods required by law.

 

**SECTION2.04****               Validity.** This Agreement and each of the otherTransaction Documents have been duly executed and delivered by the Company andconstitute the legal, valid and binding obligations of the Company, enforceableagainst the Company in accordance with their terms.

 

**SECTION2.05****               Authorized CapitalStock.**

## ** **

### (a)           The Company’s authorized capitalstock consists of 10 million shares of preferred stock, par value $.0001 pershare (the “***PreferredStock***”), of which 280,000 shares have been designated Series A-1Preferred Stock, 280,000 shares have been designated Series A-2 PreferredStock, 133,334 shares have been designated Series A-3 Preferred Stock and 120million shares of Common Stock. Immediately after the Closing, the number of shares of Preferred Stockand the number shares of Common Stock set forth on Schedule 2.05(a) willbe validly issued and outstanding, fully paid and nonassessable.  In addition, immediately prior to the FirstClosing, 81,544,004 shares of Common Stock will be reserved for issuance uponconversion of the Preferred Stock Conversion Shares and exercise of outstandingoptions, warrants or other securities exchangeable for or convertible intoCommon Stock.  No shares are held in theCompany’s treasury.  The stockholders ofrecord and holders of subscriptions, warrants, options, convertible securities,and other rights (contingent or other) to purchase or otherwise acquire equitysecurities of the Company, and the number of shares of Common Stock and thenumber of such subscriptions, warrants, options, convertible securities, andother such rights held by each are as set forth in Schedule 2.05(a)hereto as of the date indicated therein. The designations, powers, preferences, rights, qualifications,limitations and restrictions in respect of each class and series of theCompany’s authorized capital stock, are as set forth in the Charter, and allsuch designations, powers, preferences, rights, qualifications, limitations andrestrictions are valid, binding and enforceable and in accordance with allapplicable laws.  Except as set forth in Schedule2.05(a) hereto: (i) no Person owns of record any share of the Company’scapital stock, (ii) no subscription, warrant, option, convertible security, orother right (contingent or other) to purchase or otherwise acquire equitysecurities or equity related securities of the Company is authorized oroutstanding and (iii) there is no commitment by the 

 

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### Company to issue shares, subscriptions, warrants,options, convertible or exchangeable securities, or other such rights or todistribute to holders of any of its equity securities any evidence ofindebtedness or asset. Except as set forth in Schedule 2.05(a) hereto,the Company has no obligation (contingent or other) to purchase, repurchase,redeem, retire or otherwise acquire any of its equity securities or equityrelated securities or any interest therein or to pay any dividend or make anyother distribution in respect thereof. Except as set forth in Schedule 2.05(a), no stock plan, stockpurchase plan, stock option or other agreement or understanding between theCompany and any holder of any equity securities of the Company or rights topurchase equity securities of the Company provides for acceleration or otherchanges in the vesting provisions or other terms of such securities, as theresult of any merger, sale of stock or assets, change in control or othersimilar transaction by the Company. Other than as set forth in this Agreement, to the Company’s knowledge,there are no voting trusts or agreements, stockholders’ agreements, pledgeagreements, buy-sell agreements, rights of first refusal, preemptive rights orother similar rights or proxies relating to any of the Company’s securities, oragreements relating to the issuance, sale, redemption, transfer or otherdisposition of the Company’s securities. All of the outstanding securities of the Company were issued incompliance with all applicable federal and state securities laws.

###  

### (b)           The Shares and Warrant Shares havebeen duly authorized by the Company. When the Shares and Warrant Shares are issued and delivered againstpayment therefor, and in accordance with the terms and conditions of this Agreementand the Warrant, respectively, the Shares and Warrant Shares will be duly andvalidly issued, fully paid and nonassessable and will be free of restrictionson transfer other than restrictions on transfer imposed by this Agreement, theSecurities Act and applicable state securities laws.  The Preferred Stock Conversion Shares havebeen duly reserved for issuance upon conversion of the Series A-1 PreferredStock, the Series A-2 Preferred Stock and the Series A-3 Preferred Stock and,when so issued in accordance therewith, will be duly authorized, validlyissued, fully paid and nonassessable shares of Common Stock and will be freeand clear of all Liens, charges, restrictions, claims and encumbrances, otherthan Liens, charges, restrictions, claims and encumbrances that were created bythe Purchaser and restrictions on transfer imposed by this Agreement, theSecurities Act and applicable state securities laws.  Neither the issuance, sale or delivery of theShares or Warrant Shares, nor the issuance or delivery of the Preferred StockConversion Shares is subject to any preemptive right of the Company’sstockholders or to any right of first refusal or other right in favor of anyPerson.  The consummation of thetransactions contemplated hereunder will not result in any anti-dilutionadjustment or other similar adjustment to any of the Company’s outstandingsecurities.  Any Person with any right(other than the Purchaser) to purchase securities of the Company, which wouldbe triggered as a result of the transactions contemplated under this Agreement,has waived such rights.

###  

(c)           Immediately after the Closing, theSeries A-1 Shares will represent 53.2% of the outstanding Common Stock(assuming conversion of the Series A-1 Shares into Common Stock).  In addition, Schedule 2.5(c) setsforth the percentage ownership that the Shares and the Warrant Shares representimmediately after the Closing under the various circumstances described in suchSchedule.

 

**SECTION2.06****               Reports andFinancial Statements.**  The Company has furnished or made availableto the Purchaser true and complete copies of all reports or registration 

 

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statements it has filed withthe Securities and Exchange Commission (the “***SEC***”) under the Securities Act and theSecurities Exchange Act of 1934, as amended (the “***Exchange Act***”), for all periodssubsequent to December 31, 2001, all in the form so filed (collectively the “***Company SEC Documents***”).  As of their respective filing dates, theCompany SEC Documents complied in all material respects with the requirementsof the Securities Act or the Exchange Act, as applicable, and, as of itsrespective filing date, no Company SEC Document filed under the Exchange Actcontained any untrue statement of a material fact or omitted to state amaterial fact required to be stated therein or necessary to make the statementsmade therein, in the light of the circumstances in which they were made, notmisleading, except to the extent corrected by a subsequently filed document withthe SEC.  No Company SEC Document filedunder the Securities Act contained an untrue statement of material fact oromitted to state a material fact required to be stated therein or necessary tomake the statements therein not misleading at the time such Company SECDocuments became effective under the Securities Act.  The Company’s financial statements, includingthe notes thereto, included in the Company SEC Documents (the “***Financial Statements***”)comply as to form in all material respects with applicable accountingrequirements and with the published rules and regulations of the SEC withrespect thereto, have been prepared in accordance with generally acceptedaccounting principles consistently applied (“***GAAP***”) and present fairly the Company’sconsolidated financial position at the dates thereof and of its operations andcash flows for the periods specified (subject, in the case of unauditedstatements, to normal audit adjustments). Since the date of the most recentCompany SEC Document, the Company has not effected any change in any method ofaccounting or accounting practice, except for any such change required becauseof a concurrent change in GAAP.  No eventsince November 15, 2004 has occurred that requires the filing of a CurrentReport on Form 8-K (an “***8-K***”)with the SEC for which an 8-K has not been so filed.  Since September 30, 2002 the Company hastimely filed all material reports, registration statements and other filingsrequired by the SEC.

 

## **SECTION2.07****     DisclosureControls and Procedures.**

## ** **

### (a)           The Company has established andmaintains disclosure controls and procedures (as such term is defined in Rules13a-15 and 15d-15 under the Exchange Act) that (i) are designed to ensure thatmaterial information relating to the Company, including its consolidatedsubsidiaries, is made known to the Company’s Chief Executive Officer and itsChief Financial Officer by others within those entities, particularly duringthe periods in which the filings made by the Company with the SEC underSections 13(a), 13(c), 14 or 15(d) of the Exchange Act are being prepared, (ii)have been evaluated for effectiveness as of a date within 90 days prior to thefiling of the Company’s most recent Annual Report on Form 10-KSB or QuarterlyReport on Form 10-QSB, as the case may be, filed with the SEC, and (iii) areeffective to perform the functions for which they were established; and

###  

### (b)           The independent registered publicaccountants and the Audit Committee of the Board of Directors (the “***Board***”) of theCompany have been advised of (i) any significant deficiencies in the design oroperation of internal controls which could adversely affect the Company’sability to record, process, summarize and report financial data and (ii) anyfraud, whether or not material, that involves management or other employees whohave a role in the Company’s internal controls; any material weaknesses ininternal controls have been identified for the accountants; and since the dateof the most recent evaluation of such disclosure controls 

 

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### and procedures, there have been no significant changesin internal controls or in other factors that could significantly affectinternal controls, including any corrective actions with regard to significantdeficiencies and material weaknesses.

###  

### (c)           The principal executive officer andprincipal financial officer of the Company have made all certificationsrequired by the Sarbanes-Oxley Act of 2002 (the “***Sarbanes-Oxley Act***”) and any relatedrules and regulations promulgated by the SEC, each in effect on the datethereof, and the statements contained in any such certification were completeand correct as of their respective dates. The Company is otherwise in material compliance with all applicableprovisions of the Sarbanes-Oxley Act that are effective.

###  

**SECTION2.08****               No Undisclosed Liabilities.**  The Company has noliabilities (whether accrued, absolute, contingent or otherwise, known orunknown, and whether due or to become due or asserted or unasserted), except(a) liabilities provided for in the Financial Statements (other thanliabilities which, in accordance with GAAP, need not be disclosed), (b)liabilities (including accounts payable) incurred since December 31, 2004 (the *“**Balance Sheet Date***”)in the ordinary course of business consistent with past practice that are nogreater than $50,000 in the aggregate, (c) such other liabilities which are nomore than $50,000 individually or $100,000 in the aggregate or (d) as set forthon Schedule 2.08.  Except as setforth on Schedule 2.08, the Company knows of no basis for the assertionagainst the Company of any liabilities not adequately reflected or reservedagainst in the Financial Statements.

 

**SECTION2.09****               Events Subsequent to theBalance Sheet Date.**  Except as set forth on Schedule 2.09,since the Balance Sheet Date:

 

### (a)           there has been no Material AdverseChange nor has any event occurred which could reasonably be expected to resultin any Material Adverse Change;

###  

### (b)           there has not been any payment of,setting of a record date for, or declaration, setting aside or authorizing thepayment of, any dividend or other distribution in respect of any shares ofcapital stock of the Company or any purchase, repurchase, retirement,redemption or other acquisition by the Company, of any of the outstandingshares of capital stock or other securities of, or other ownership interest in,the Company;

###  

### (c)           there has not been any transfer,issue, sale or other disposition by the Company of any shares of capital stockor other securities of the Company or any grant of options, warrants, calls orother rights to purchase or otherwise acquire shares of such capital stock orsuch other securities;

###  

### (d)           the Company has not increased thecompensation payable or to become payable, or awarded or paid any bonuses toemployees, officers, directors, consultants, advisors, agents, stockholders orrepresentatives of the Company nor has the Company either entered into anyemployment, deferred compensation, severance or similar agreements (nor amendedany such agreement) or agreed to increase the compensation payable or to becomepayable by it to any of the Company’s employees, officers, directors,consultants, independent contractors, advisors, agents, stockholders orrepresentatives or agreed to increase the coverage or benefits available underany severance pay, deferred compensation, bonus or other incentivecompensation, 

 

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### pension or other employee benefit plan, payment orarrangement made to, for or with such employees, officers, directors,consultants, independent contractors, advisors, agents, stockholders orrepresentatives;

###  

### (e)           the Company has not made any loans,advances, guarantees or capital contributions to, or investments in, anyPerson, or acquired any assets or securities of any Person involving more than$50,000 individually or $100,000 in the aggregate, other than ordinary advancesfor expenses incurred in the ordinary course of business;

###  

### (f)            there has not been satisfaction ordischarge of any Lien, claim or encumbrance or payment of any obligation by theCompany, except in the ordinary course of business and that has not resulted ina Material Adverse Change;

###  

### (g)           there has not been any terminationof, or change to, a material contract or arrangement by which the Company orany of its assets is bound or subject;

###  

### (h)           there has not been any resignation ortermination of employment of any employees, officers, directors, consultants,advisors, agents or representatives of the Company;

###  

### (i)            other than to the Purchaser, theCompany has not transferred or granted any rights under any contracts, leases,licenses, agreements or Intellectual Property (as defined in Section 2.11hereof) used by the Company in its business;

###  

### (j)            there has not been any damage,destruction or loss, whether or not covered by insurance, with respect to theproperty or assets of the Company having a replacement cost of more than$50,000 for any single loss or $100,000 for all such losses in the aggregate;

###  

### (k)           the Company has not mortgaged,pledged or subjected to any Lien or encumbrance any of its assets, other thanwith respect to the Purchaser, acquired any assets, or sold, assigned,transferred, conveyed, leased or otherwise disposed of any assets, except forassets acquired or sold, assigned, transferred, conveyed, leased or otherwisedisposed of in the ordinary course of business consistent with the Company’spast practice or Liens for taxes not yet due or payable;

###  

### (l)            the Company has not canceled orcompromised any debt or claim, or amended, canceled, terminated, relinquished,waived or released any contract or right or settled any claim;

###  

### (m)          the Company has not made, or enteredinto any binding commitment to make, any capital expenditures or capitaladditions or betterments in excess of $100,000 in the aggregate;

###  

### (n)           the Company has not incurred anydebts, obligations or liabilities, whether due or to become due, except currentliabilities incurred in the usual and ordinary course of business, none ofwhich current liabilities (individually or in the aggregate) has resulted in,or could reasonably be expected to result in, a Material Adverse Change;

###  

### (o)           the Company has not entered into anymaterial transaction except for this Agreement and the other Transaction Documents;

 

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### (p)           the Company has not encountered, orto its knowledge, been threatened with, any labor disputes, strikes, slowdowns,work stoppages or labor union organizing activities;

###  

### (q)           the Company has not made any changein the Company’s accounting principles, methods or practices or depreciation oramortization policies or rates theretofore adopted;

###  

### (r)            the Company has not disclosed to anyPerson any trade secrets or confidential information, except for disclosuresmade to Persons subject to valid and enforceable confidentiality agreements oras required by applicable law;

###  

### (s)           the Company has not suffered orexperienced any change in the relationship or course of dealings between theCompany and any of its suppliers or customers which supply goods or services tothe Company or purchase goods or services from the Company;

###  

### (t)            the Company has not made any paymentto, or received any payment from, or made or received any investment in, orentered into any transaction or series of related transactions (including,without limitation, the purchase, sale, exchange or lease of assets, propertyor services, or the making of a loan or guarantee) with any Affiliate or anymembers of their immediate families or any legal entity controlled by eitherone of them; and

###  

### (u)           the Company has not entered into anyagreement or commitment (contingent or otherwise) to do any of the foregoing.

###  

**SECTION2.10****               Litigation;Compliance with Law.**

## ** **

### (a)           Except as set forth on Schedule2.10, there is no (i) action, suit, claim, proceeding or investigationpending or, to the best of the Company’s knowledge, threatened, against oraffecting the Company or its properties or assets, at law or in equity, orbefore or by any federal, state, municipal or other governmental body,department, commission, board, bureau, agency or instrumentality, domestic orforeign, (ii) arbitration proceeding pending or, to the best of the Company’sknowledge, threatened, against or affecting the Company or its properties orassets or (iii) governmental inquiry pending or, to the best of the Company’sknowledge, threatened, against or affecting the Company or its properties orassets (including, without limitation, any inquiry as to the Company’squalification to hold or receive any license or permit), and to the best of theCompany’s knowledge, there is no basis for any of the foregoing.  The Company is not in default with respect toany order, writ, judgment, injunction or decree known to or served upon theCompany of any court or of any federal, state, municipal or other governmentalbody, department, commission, board, bureau, agency or instrumentality,domestic or foreign.  Except as set forthon Schedule 2.10, there is no action, suit, proceeding or investigationby the Company pending, threatened or contemplated against others.

###  

### (b)           The Company has not received anyopinion or memorandum or legal advice from legal counsel to the effect that itis exposed, from a legal standpoint, to any liability or disadvantage which maybe material to its business, prospects, financial condition, operations,property or affairs.  The Company hascomplied, in all material respects, with all laws, rules, regulations andorders applicable to its business, operations, properties, assets, products andservices, the Company has all material permits, licenses and otherauthorizations required to conduct its business as presently conducted and theCompany has been operating its business 

 

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### pursuant to and in compliance with the terms of allsuch permits, licenses and other authorizations.  There is no existing law, rule, regulation ororder, and the Company is not aware of any proposed law, rule, regulation ororder, whether federal, state, county or local, which would prohibit orrestrict the Company from, or otherwise adversely affect the Company in,conducting its business in any jurisdiction in which it is now conductingbusiness.

###  

**SECTION2.11****               ProprietaryInformation.**

## ** **

### (a)           No third party has claimed or, to thebest of the Company’s knowledge, has reason to claim, that any Person employedor retained by or affiliated with the Company has (i) violated or may beviolating any of the terms or conditions of an employment, non-competition or non-disclosureagreement with such third party, (ii) disclosed or may be disclosing orutilized or may be utilizing any trade secret or proprietary information ordocumentation of such third party or (iii) interfered or may be interfering inthe employment relationship between such third party and any of its present orformer employees.  No third party hasrequested information from the Company which suggests that such a claim mightbe contemplated.  To the Company’sknowledge, no Person employed by the Company or an Affiliate of the Company hasemployed or proposes to employ any trade secret or any information ordocumentation proprietary to any former employer, and, to the Company’sknowledge, no Person employed by the Company or an Affiliate of the Company hasviolated any confidential relationship which such Person may have had with anythird party in connection with the development, manufacture or sale of anyproduct or proposed product of the Company or the development or sale of anyservice or proposed service of the Company, and the Company has no reason tobelieve there will be any such employment or violation.  Neither the execution or delivery of thisAgreement or any of the other Transaction Documents, nor the conduct orproposed conduct of the Company’s business, nor the participation of any of theCompany’s officers, directors or employees in the conduct of the Company’sbusiness, will conflict with or result in a breach of the terms, conditions orprovisions of or constitute a default under any contract, covenant orinstrument under which any such Person is obligated to a third party.

###  

### (b)           Each employee, officer, consultant,advisor, agent and representative of the Company has entered into and executeda Employee Non-Disclosure, Non-Solicitation and Proprietary Information andInventions Agreement or Non-Employee Non-Disclosure, Non-Solicitation andProprietary Information and Inventions Agreement, as the case may be,substantially in the forms which have been delivered to the Purchaser(collectively, the “***Non-Disclosureand Proprietary Information and Inventions Agreement***”), or anemployment or consulting agreement containing substantially similar terms, andsuch agreements are in full force and effect. The Company is not aware that any of its employees, officers,consultants, advisors, agents and representatives is in violation of suchagreements, and the Company will use its best efforts to prevent any suchviolation.  In addition, to the best ofthe Company’s knowledge, no current or former employee, officer, director,consultant, advisor, agent, or representative has excluded works or inventionsmade prior to his or her employment or consulting relationship with the Companyfrom his or her assignment of inventions pursuant to their Non-Disclosure andProprietary Information and Inventions Agreement.

 

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**SECTION2.12****               IntellectualProperty.**

## ** **

### (a)           Except as previously granted orassigned to the Purchaser and set forth in Schedule 2.12, the Companyhas all right, title and interest in and to all patents and patent rights,trademarks and trademark rights, trade names and trade name rights, servicemarks and service mark rights, service names and service name rights, brandnames, inventions, processes, formulae, copyrights and copyright rights, tradedress, business and product names, logos, slogans, trade secrets, industrialmodels, processes, designs, methodologies, computer programs (including allsource codes) and related documentation, technical information, manufacturing,engineering and technical drawings, know-how, concepts and all pendingapplications for and registrations of patents, trademarks, service marks andcopyrights (together, “***IntellectualProperty***”) necessary for its business as now conducted and asproposed to be conducted, without any conflict with or infringement upon therights of others.  Except as set forth inSchedule 2.12, all registrations on behalf of the Company with andapplications to governmental or regulatory authorities in respect of allIntellectual Property of the Company are valid and in full force and effect andare not subject to (i) any suits or other judicial or administrativeproceedings challenging their validity or enforceability, or (ii) any otheractions by the Company to maintain their validity or effectiveness, except forthe routine payment of governmental fees and the submission of oaths or otherevidence required by statute.  Except asset forth in Schedule 2.12(a) and Schedule 2.12(c) hereto, thereare no outstanding options, licenses, security interests, or other interests oragreements of any kind relating to the Intellectual Property of theCompany.  Except as set forth in Schedule2.12 hereto, no other person or entity (other than licensors of softwarethat is generally commercially available, licensors of Intellectual Propertyunder the agreements disclosed pursuant to paragraph (d) below andnon-exclusive licensees of the Company’s Intellectual Property in the ordinarycourse of the Company’s business) has any rights to any of the IntellectualProperty owned or used by the Company, and, to the Company’s knowledge, noother person or entity is infringing upon, violating or misappropriating any ofthe Company’s Intellectual Property.

###  

### (b)           The Company has not, nor has itreceived any communications alleging that the Company has violated, or, byconducting its business as now conducted or as proposed to be conducted, wouldviolate any of the Intellectual Property of any other Person.  The Company is not aware that any employee ofthe Company is obligated under any contract (including licenses, covenants orcommitments of any nature) or other agreement, or subject to any judgment,decree or order of any court or administrative agency, that would interferewith the use of his or her best efforts to promote the interests of the Companyor that would conflict with the business of the Company as now conducted or asproposed to be conducted.  To theCompany’s knowledge, neither the execution and delivery of this Agreement orany of the other Transaction Documents, nor the carrying on of the business ofthe Company by the Company’s employees, nor the conduct of the business of theCompany as now conducted or as proposed to be conducted, will conflict with orresult in a breach of the terms, conditions or provisions of, or constitute adefault under, any contract, covenant or instrument under which any of suchemployees is now obligated.  The Companyis not aware of any instances where its employees, agents, advisors, consultants,independent contractors or representatives, have transferred IntellectualProperty of the Company or its Subsidiaries without the Company’s consent.  To the Company’s knowledge, the Company isnot required to utilize any inventions of any of its employees (or people itcurrently intends to hire) made prior to their employment by the Company.

 

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### (c)           Schedule 2.12(c) hereto setsforth each (i) patent that has been issued or assigned to the Company withrespect to any of its Intellectual Property, (ii) pending patent applicationthat the Company has made with respect to any of its Intellectual Property,(iii) any copyright or trademark registration or application with respect tothe Company’s Intellectual Property, and (iv) license or other agreementspursuant to which the Company has granted any rights to any third party withrespect to any of its Intellectual Property.

###  

### (d)           Schedule 2.12(d) hereto setsforth each agreement with a third party pursuant to which the Company obtainsrights to Intellectual Property material to the business of the Company (otherthan software that is generally commercially available) that is owned by aparty other than the Company.  Other thanlicense fees for software that is generally commercially available and exceptas disclosed on Schedule 2.12(d) hereto, the Company is not obligated topay any royalties or other compensation to any third party in respect of theirownership, use or license of any of such third party’s Intellectual Property.

###  

### (e)           The Company has taken reasonableprecautions (i) to protect its rights in its Intellectual Property and (ii) tomaintain the confidentiality of its trade secrets, know-how and otherconfidential Intellectual Property, and to the Company’s knowledge, there havebeen no acts or omissions by the officers, directors, shareholders andemployees of the Company the result of which would be to compromise the rightsof any aspects of the Company to apply for or enforce appropriate legal protectionof any aspects of the Company’s Intellectual Property that are material to theCompany’s business as conducted or as proposed to be conducted at the time ofsuch acts or omissions.

###  

### (f)            The products, processes, proprietarytechnology and other proprietary know-how owned or used by the Company weredeveloped by the Company’s present or former employees or independentcontractors or consultants.  Theconcepts, inventions and original works of authorship owned or used by theCompany were developed or conceived by employees, independent contractors orconsultants within the scope of their employment or retention by the Companyand are connected with the Company’s underlying products, services, processesand proprietary technology.  With respectto any independent contractors or consultants who were used or employed by theCompany in the development of the products, processes, proprietary technologyand other proprietary know-how owned or used by the Company, each has executedvalid “work for hire” agreements and/or assignments of all rights to suchproducts, processes, proprietary technology and other proprietaryknow-how.  No portion of the Company’sIntellectual Property was jointly developed with any third party other thanthose who have assigned their entire right, title and interest therein to theCompany.

###  

### (g)           Except as disclosed in Schedule2.12(g) hereto, neither the Company nor any Subsidiary has granted orassigned to any other person or entity the right to manufacture any products ordevelop or conduct research on any Intellectual Property or other services ofthe Company.

###  

### (h)           The Company is unaware that any ofits officers, employees or consultants has disclosed or may be disclosing orhas utilized or may be utilizing any trade secret or proprietary information ofany third party; or has unlawfully interfered or may be unlawfully interferingin the employment relationship with any third party and any of its present orformer employees.

 

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**SECTION 2.13****               Real Property.**

## ** **

### (a)           The Company does not own any realproperty.

###  

### (b)           Schedule 2.13(b) hereto setsforth a complete list of all material real property and material interests inreal property leased by the Company (each a “***Real Property Lease***,” and collectively,the “***Real PropertyLeases***”) as lessee or lessor. The Real Property Lease identified in Schedule 2.13(b) is anoral, month-to-month lease, and the Company is not in default under such lease.

###  

**SECTION2.14****               Assets. **  The Company has good, legal andmarketable title to all of its personal property and assets, in each case freeand clear of all Liens, charges, restrictions, claims or encumbrances of anynature whatsoever, except for such Liens, charges, restrictions, claims orencumbrances granted to the Purchaser. With respect to the material personal property and material assets thatthe Company leases (each a *“**Personal Property Lease**”*, andcollectively, the *“**Personal Property Leases**”*) (a)the Company is in compliance with such Personal Property Leases, (b) thePersonal Property Leases are enforceable in accordance with their terms and (c)the Company holds a valid leasehold interest free and clear of any Liens,charges, restrictions, claims or encumbrances of any nature whatsoever.  Each of the Personal Property Leases is avalid and subsisting agreement, duly authorized and entered into andenforceable in accordance with its terms, and there is no default under anyPersonal Property Lease by the Company or, to the Company’s knowledge, by anyother party thereto, and no event has occurred that with the lapse of time orthe giving of notice or both would constitute a default thereunder.  The Company has delivered or otherwise madeavailable to the Purchaser and its counsel true, correct and complete copies ofthe Personal Property Leases, together with all amendments, modifications,supplements or side letters affecting the obligations of any partythereunder.  All material items ofpersonal property and assets owned or leased by the Company are in goodoperating condition, normal wear and tear excepted, are reasonably fit andusable for the purposes for which they are being used, are adequate andsufficient for the Company’s business, and conform in all material respectswith all applicable laws.  The carryingvalue of the Company’s assets on the Financial Statements is not overstated inany material respect.

 

**SECTION2.15****               Insurance. **  There is in full force andeffect one or more policies of insurance issued by insurers of recognizedresponsibility insuring the Company and its properties, business and projectsagainst such losses and risks, and in such amounts, on both a per occurrenceand an aggregate basis, as are customary in the case of corporations engaged inthe same or similar business and similarity situated.  The Company has not received any notice orcommunication, either oral or written (a) regarding the actual or possiblecancellation or invalidation of any of such policies or regarding any actual orpossible adjustment in the amount of premiums payable with respect to any ofsaid policies, (b) regarding any actual or possible refusal of coverage under,or any actual or possible rejection of any claim under, any of such policies,(c) that the Company will be unable to renew its existing insurance coverage asand when the same shall expire or (d) that the issuer of any such policies maybe unwilling or unable to perform any of its obligations thereunder.  There is no pending claim under any of theCompany’s insurance policies, and no event has occurred or condition orcircumstance exists that might (with or without notice or lapse of time)directly or indirectly give rise to, or serve as a basis for, any suchclaim.  The Company is not in defaultwith respect to any provision contained 

 

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inany insurance policy, and the Company has not failed to give any notice orpresent any presently existing claims under any insurance policy in due andtimely fashion.  Schedule 2.15hereto sets forth a list of each insurance policy maintained by the Companyrelating to its properties, assets, business or personnel.

 

**SECTION2.16****               Taxes.**  The Company has accurately and timely filedall federal, state, county and local tax returns and reports required to befiled by it within the applicable period, and the Company has paid all taxesshown to be due by such returns as well as all other taxes, assessments andgovernmental charges which have become due or payable.  Such returns and reports are true and correctin all material respects.  The Companyhas established adequate reserves on the Financial Statements for all taxesaccrued but not yet payable.  TheCompany’s federal income tax returns have never been audited by the InternalRevenue Service.  No claim or deficiencyassessment with respect to or proposed adjustment of the Company’s federal,state, county or local taxes is currently assessed or pending or, to the bestof the Company’s knowledge, threatened, and, to the Company’s knowledge, thereis no basis for any such claim, assessment or adjustment.  There is no tax Lien (other than for currenttaxes not yet due and payable), whether imposed by any federal, state, countyor local taxing authority, outstanding against the Company’s assets, propertiesor business.  The Company has notexecuted any waiver of the statute of limitations on the assessment orcollection of any tax or governmental charge. The Company is not a party to any agreement relating to the sharing,allocation or indemnification of taxes. Neither the Company nor any of its present or former stockholders hasever made an election pursuant to Section 1362 or Section 341(f) of theInternal Revenue Code of 1986, as amended (the “***Code***”), that the Company be taxed as aSubchapter S corporation or a collapsible corporation or any other electionpursuant to the Code (other than elections that relate solely to methods ofaccounting, depreciation or amortization) that would result in a MaterialAdverse Change.  The Company has withheldor collected from each payment made to each of its employees, the amount of alltaxes (including, but not limited to, federal income taxes, Federal InsuranceContribution Act taxes and Federal Unemployment Tax Act taxes) required to bewithheld or collected therefrom, and has paid the same to the proper taxreceiving officers or authorized depositories. The Company has properly charged, collected and paid all applicablesales, use and other similar taxes.

 

**SECTION2.17****               Agreements.**

## ** **

### (a)           The Company is not a party to orotherwise bound by any written or oral agreement, instrument, commitment orrestriction which, assuming due performance by the parties thereto,individually or in the aggregate could reasonably be expected to result in aMaterial Adverse Change.  Except as setforth in Schedule 2.17 hereto, the Company is not a party to, nor is itor any of its assets or properties bound by, any written or oral:

###  

#### (i)         distributor, dealer, marketing,manufacturer’s representative or sales agency agreement which is not terminableon less than ninety (90) days notice without cost or other liability to theCompany;

####  

#### (ii)        agreement with any labor union orcollective bargaining agreement;

 

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#### (iii)       agreement with any supplier containingany provision permitting any party other than the Company to renegotiate theprice or other terms, or containing any pay-back or other similar provision,upon the occurrence of a failure by the Company to meet its obligations underthe agreement when due or the occurrence of any other event;

####  

#### (iv)       agreement for the future purchase offixed assets or for the future purchase of materials, supplies, services orequipment in excess of its normal operating requirements or at an excessiveprice, or any agreement that will result in a loss to the Company uponcompletion of performance;

####  

#### (v)        agreement for the employment of anyofficer, employee or other Person (whether of a legally binding nature or inthe nature of informal understandings) on a full-time, part-time or consultingbasis which is not terminable on notice without cost or other liability to theCompany;

####  

#### (vi)       bonus, pension, profit-sharing,retirement, hospitalization, insurance, stock purchase, stock option or otherplan, agreement or understanding pursuant to which benefits are provided to anyemployees, officers, directors, consultants, advisors, agents, stockholders orrepresentatives of the Company;

####  

#### (vii)      loan agreement, credit agreement,promissory note, indenture, subordination agreement, letter of credit or otheragreement relating to the borrowing of money or to the mortgaging or pledgingof, or otherwise placing a Lien or security interest on, any asset of theCompany;

####  

#### (viii)     guaranty of any obligation for borrowedmoney or otherwise;

####  

#### (ix)        voting trust or agreement, stockholders’agreement, pledge agreement, buy-sell agreement, first refusal or preemptiverights agreement relating to any of the Company’s securities;

####  

#### (x)         acquisition, sale or lease agreementoutside of the Company’s ordinary course of business;

####  

#### (xi)        partnership or joint venture agreement;

####  

#### (xii)       agreement (A) which prohibits or requiresconsent for (1) a Change of Control (as defined in Section 7.19 hereof)or merger of the Company, (2) the sale of all or substantially all of the Company’sassets, (3) the transfer or issuance of any securities of the Company or (4)the assignment, subletting or other transfer of the rights under such agreementor (B) which terminates, is subject to termination, is materially and adverselyaffected or is subject to being materially and adversely affected as a resultof the occurrence of any event described in subsection (A) hereof;

####  

#### (xiii)      agreement, or group of related agreementswith the same party or any group of affiliated parties, under which the Companyhas advanced or agreed to advance money or has agreed to lease any property aslessee or lessor;

 

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#### (xiv)     agreement or obligation (contingent orotherwise) to issue, sell, transfer, assign or otherwise distribute or disposeof, repurchase, redeem or otherwise acquire, or retire any shares of itscapital stock or any of its other equity securities;

####  

#### (xv)      assignment, license or other agreementwith respect to any form of intangible property;

####  

#### (xvi)     agreement under which it has granted anyPerson an exclusive right to market or distribute any of the Company’s productsor services;

####  

#### (xvii)    agreement under which it has granted anyPerson any registration rights;

####  

#### (xviii)   agreement under which it has limited orrestricted its right to operate or to compete with any Person in any respect;

####  

#### (xix)      agreement, or group of related agreementswith the same party, involving more than $100,000 or continuing over a periodof more than six (6) months from the date or dates thereof (including renewalsor extensions optional with another party), which agreement or group ofagreements is not terminable by the Company without penalty upon notice ofthirty (30) days or less, or any agreement not made in the ordinary course ofbusiness;

####  

#### (xx)       agreement with any federal, state,municipal or other governmental body, department, commission, board, bureau,agency or instrumentality, domestic or foreign;

####  

#### (xxi)      confidentiality agreement or standstillagreement, other than those made in the ordinary course of business; or

####  

#### (xxii)     binding commitment or agreement to enterinto any of the foregoing.

####  

### (b)           The Company****and****to the bestof the Company’s knowledge, each other party thereto: (i) has performed all theobligations required to be performed by them to date (or each non-performingparty has received a valid, enforceable and irrevocable written waiver withrespect to its non-performance) and (ii) has received no notice of default andare not in default (or, with due notice or lapse of time or both, would be indefault) under any agreement, contract, license, understanding, evidence ofindebtedness, note, indenture, instrument, commitment, plan or arrangement towhich the Company is a party or by which it or its property or assets may bebound.  The Company has no presentexpectation or intention of terminating or not fully performing any of itsobligations under any agreement, contract, license, understanding, evidence ofindebtedness, note, indenture, instrument, commitment, plan or arrangement, andthe Company has no knowledge of any breach or anticipated breach by the otherparty to any agreement, contract, license, understanding, evidence ofindebtedness, note, indenture, instrument, commitment, plan or arrangement towhich the Company is a party.  TheCompany is in full compliance with all of the terms and provisions of itsCharter and Bylaws.

###  

### (c)           No previous or current party to anyagreement or contract listed in Schedule 2.17 hereto has given writtennotice to the Company of, or made any claim with respect to, a desire orintention to exercise any optional termination, cancellation or accelerationright thereunder, and the Company has no knowledge of any notice of, or claimwith respect to, any such desire or 

 

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### intention.  TheCompany has delivered or otherwise made available to the Purchaser true,correct and complete copies of each of the agreements listed in Schedule2.17 hereto, together with all amendments, modifications, supplements orside letters affecting the obligations of any party thereunder.  Each of these agreements is valid andenforceable against the Company in accordance with its terms.

###  

**SECTION2.18****               Loans and Advances.**  The Company does not have any outstanding loansor advances to any Person and is not obligated to make any such loans oradvances, except, in each case, for ordinary course advances to employees ofthe Company in respect of reimbursable business expenses anticipated to beincurred by them in connection with their performance of services for theCompany.

 

**SECTION2.19****               Assumptions,Guaranties, Etc. of Indebtedness of Other Persons.**  TheCompany has not assumed, guaranteed, endorsed or otherwise become directly orcontingently liable for any indebtedness of any other Person (including,without limitation, liability by way of agreement, contingent or otherwise, topurchase, to provide funds for payment, to supply funds to or otherwise investin such Person, or to otherwise assure any creditor of such Person againstloss), except for guaranties by endorsement of negotiable instruments fordeposit or collection in the ordinary course of business.

 

**SECTION2.20****               SignificantCustomers and Suppliers. **  Nocustomer or supplier which was significant to the Company during the periodcovered by the Financial Statements or which has been significant to theCompany thereafter, has terminated or breached, materially reduced orthreatened to terminate, breach or materially reduce its purchases from orprovision of products or services to the Company, as the case may be.

 

**SECTION2.21****               Offerings. **  Assuming the accuracy of thePurchaser’s representations and warranties set forth in Article III hereof, theCompany has complied with the Securities Act and all applicable statesecurities laws in connection with (i) the offer, issuance and sale of allpreviously issued securities of the Company, (ii) the offer, issuance and saleof the Shares, the Warrant and Warrant Shares and (iii) upon conversion of theShares and Warrant Shares, the issuance and delivery of the Preferred StockConversion Shares, and all of the foregoing issuances are exempt from theregistration requirements of the Securities Act and any applicable statesecurities laws, and neither the Company nor any authorized agent acting on itsbehalf has taken any action that could cause the loss of such exemptions.  Neither the Company nor any Person authorizedor employed by the Company as agent, broker, dealer or otherwise in connectionwith the offering or sale of the Shares, the Warrant, the Warrant Shares, thePreferred Stock Conversion Shares or any security of the Company similar to theforegoing has offered the Shares, the Warrant, the Warrant Shares, thePreferred Stock Conversion Shares or any such similar security for sale to, orsolicited any offer to buy the Shares, the Warrant, the Warrant Shares, thePreferred Stock Conversion Shares or any such similar security from, orotherwise approached or negotiated with respect thereto with, any Person orPersons other than Persons who are “accredited investors” as defined inRegulation D of the Securities Act. Neither the Company nor any Person acting on its behalf has taken orwill take any other action (including, without limitation, any offer, issuanceor sale of any security of the Company under circumstances which might requirethe integration of such security with the Shares, the Warrant, the WarrantShares or the Preferred Stock Conversion Shares under the Securities Act or the

 

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rules and regulations of theSEC promulgated thereunder), in either case so as to subject the offering,issuance or sale of the Shares, the Warrant, the Warrant Shares, and thePreferred Stock Conversion Shares to the registration provisions of theSecurities Act.  Neither the Company norany Person acting on its behalf has offered the Shares, the Warrant, theWarrant Shares or the Preferred Stock Conversion Shares to any Person by meansof general or public solicitation or general or public advertising, such as bynewspaper or magazine advertisements, by broadcast media, or at any seminar ormeeting whose attendees were solicited by such means.

 

**SECTION2.22****               Brokers; FinancialAdvisors. **  Otherthan with respect to fairness opinions, no agent, broker, investment banker,finder, financial advisor or other Person is or will be entitled to anybroker’s or finder’s fee or any other commission or similar fee from theCompany, directly or indirectly, in connection with the transactions contemplatedby this Agreement and the other Transaction Documents, and, other than withrespect to fairness opinions, no Person is entitled to any fee or commission orlike payment from the Company in respect thereof based in any way onagreements, arrangements or understandings made by or on the Company’s behalf.

 

**SECTION2.23****               Transactions With Affiliates. ** Except as set forth on Schedule 2.23hereto, no employee, officer, director, or Affiliate of the Company, or memberof the family of any such Person, or any corporation, limited liabilitycompany, partnership, trust or other entity in which any such Person, or anymember of the family of any such Person, is an officer, director, trustee,partner or holder of more than five percent (5%) of the outstanding equityinterests thereof, is a party to, or during the past 24 months has been a partyto, any transaction with the Company, including any contract, agreement orother arrangement providing for the employment of, furnishing of services by,rental of real or personal property from or otherwise requiring payments to anysuch Person, other than employment-at-will arrangements in the ordinary courseof business.  None of the Personsdescribed in this Section 2.23 has any direct or indirect ownershipinterest in any Person that the Company is an Affiliate of or with which theCompany has a business relationship, or any Person that competes with theCompany.

 

**SECTION2.24****               Employees.**

## ** **

### (a)           To the Company’s knowledge, no keyemployee or independent contractor and no group of the Company’s key employeesor independent contractors has any plans to terminate his, her or itsemployment or relationship as an employee or independent contractor with theCompany, nor does the Company have any present intention to terminate theemployment of any key employee or independent contractor, or group of employeesor independent contractors.

###  

### (b)           Schedule 2.24(b) hereto setsforth a true and complete list of (i) the names of the Company’s officers,together with the title or job classification of each such Person and the totalcompensation anticipated to be paid to each such Person by the Company duringcalendar year 2004 and anticipated to be paid in 2005, (ii) the name and amountof annual compensation of each employee of the Company whose current annualcompensation is, or will be, $100,000 or more, together with such employee’sjob title and amounts and forms of compensation and fringe and severancebenefits and (iii) the name and amount of annual compensation of eachconsultant, contractor or subcontractor equivalent of the Company whosecompensation is, or will be, $100,000 or more during calendar year 2004 and forwhich a Form 1099 has been, or will be, 

 

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### filed.  Exceptas set forth on Schedule 2.24(e), none of these individuals has anemployment agreement or understanding with the Company, whether oral orwritten, which is not terminable on notice by the Company without cost or otherliability to the Company.

###  

### (c)           To the Company’s knowledge,****no employee of the Company is a party toor is otherwise bound by any agreement or arrangement (including, withoutlimitation, confidentiality agreements, noncompetition agreements, licenses,covenants or commitments of any nature) or subject to any judgment, decree, ororder of any court or governmental body, (i) that would conflict with suchemployee’s ability to perform his or her duties that have been assigned to himor her****or (ii) that would conflictwith the Company’s business as now conducted or as proposed to be conducted.

###  

### (d)           The Company is not delinquent inpayments to any of its employees for any wages, salaries, commissions, bonusesor other direct compensation for any services performed through the date hereofor amounts required to be reimbursed to them through the date hereof.  The Company is in compliance with allapplicable federal, state and local laws, rules and regulations respectingemployment, employment practices, labor, terms and conditions of employment andwages and hours.  The Company is neitherbound by nor subject to (and none of its assets or properties is bound by orsubject to) any written or oral commitment or arrangement with any labor union,and no labor union has, to the best of the Company’s knowledge, sought torepresent any of the Company’s employees, representatives or agents.  There is no labor strike, dispute, slowdownor stoppage pending or, to the best of the Company’s knowledge, threatenedagainst or involving the Company.

###  

### (e)           Schedule 2.24(e) hereto setsforth a list of all written employment agreements to which the Company is aparty, each of which is a legal, valid and binding obligation of the Company,enforceable against the Company in accordance with its terms.  No key employee of or key consultant to theCompany is in violation of any term of any employment contract or any othercontract or agreement relating to the relationship of any such employee orconsultant with the Company.

###  

**SECTION2.25****               Environmental andSafety Laws. **  TheCompany is not in violation of any applicable laws relating to the environmentor occupational health and safety which is likely to result in a MaterialAdverse Change and no material expenditures are or will be required in order tocomply with any such existing laws.

 

**SECTION2.26****               Employee Benefits. **  Except as set forth in Schedule2.26 hereto, the Company does not have in effect any employment agreements,consulting agreements with individuals, deferred compensation, incentivecompensation, stock option or other equity-based stock awards, pension orretirement agreements whether or not subject to the Employee Retirement IncomeSecurity Act of 1974, as amended (“***ERISA***”), or arrangements, bonus, incentive orprofit-sharing plans or arrangements, or labor or collective bargainingagreements, written or oral, other than oral at-will employment agreements (“***Benefit Plans***”).  All Benefit Plans covering employees (the “***Plans***”), to theextent subject to ERISA, are in compliance with ERISA, the Code and all otherapplicable law.  Each Plan which is an“employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a“***Pension Plan***”)and which is intended to be qualified under Section 401(a) of the Code, hasreceived a favorable determination letter from 

 

19

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the Internal Revenue Serviceand the Company is not aware of any circumstances likely to result inrevocation of any such favorable determination letter.  There is no pending or, to the best of theCompany’s knowledge, threatened litigation relating to the Plans.  Neither the Company nor any of its Affiliateshas engaged in a transaction with respect to any Plan that, assuming thetaxable period of such transaction expired as of the date hereof, could subjectthe Company or any Affiliate to a tax or penalty imposed by either Section 4975of the Code or Section 502(i) of ERISA in an amount which would bematerial.  No Pension Plan of the Companyor any ERISA Affiliate (as defined below) is, nor has any Pension Plan of theCompany or any ERISA Affiliate ever been, subject to Title IV of ERISA orSection 412 of the Code. Neither the Company, any of its Affiliates nor anentity which is considered one employer with the Company under Section 4001 ofERISA or Section 414 of the Code (an “***ERISA Affiliate***”) has contributed to a“multi-employer plan”, within the meaning of Section 3(37) of ERISA.  All contributions required to be made underthe terms of any Benefit Plan have been timely made or have been reflected on theFinancial Statements.  No ERISA Affiliatemaintains or has ever maintained any “employee benefit plan” as that term isdefined in Section 3(3) of ERISA or any other employee benefit policy,arrangement or the like which could result in any liability of the Company.

 

**SECTION2.27****               Foreign CorruptPractices Act.**  Neither the Company, nor to the best of theCompany’s knowledge, any employees, officers, directors, consultants, advisors,agents, stockholders or representatives of the Company or other Person actingon behalf of the Company, has taken any action which would cause the Company tobe in violation of the Foreign Corrupt Practices Act of 1977, as amended (the “***FCPA***”), or any rulesand regulations thereunder.  Each of theCompany’s internal management and accounting practices and controls areadequate to ensure compliance with the FCPA. There is not now, and there has never been, any employment by theCompany of any governmental or political official in any country in the world.

 

**SECTION2.28****               Illegal or UnauthorizedPayments; Political Contributions. **  Neither the Company nor, to the best of theCompany’s knowledge, any of the Company’s employees, officers, directors,consultants, advisors, agents, stockholders or representatives has, directly orindirectly, made or authorized any payment, contribution or gift of money,property, or services, in contravention of applicable law:  (a) as a kickback or bribe to any Person or(b) to any political organization, or the holder of or any aspirant to anyelective or appointive public office, except for personal politicalcontributions not involving the direct or indirect use of the Company’s funds.

 

**SECTION2.29****               Pending Changes. **  There is no pending or, to theCompany’s knowledge, threatened change in any law, rule, regulation or orderapplicable to its business, operations, properties, assets, products andservices which is likely to result in a Material Adverse Change.

 

**SECTION2.30****               Investment CompanyAct. **  TheCompany is not, nor is it directly or to its knowledge, indirectly Controlledby or acting on behalf of, any Person that is an “investment company” withinthe meaning of the Investment Company Act of 1940, as amended.

 

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**SECTION2.31****               Product Liability. **  The Company has no liabilities(and, to the Company’s knowledge, there is no basis for any present or futureaction against the Company giving rise to any liability) arising out of anyinjury to individuals or property as a result of ownership, possession or useof any product designed, manufactured, sold, leased or delivered by or anyservices or procedures performed or delivered by the Company.

 

**SECTION2.32****               Passive ForeignInvestment Company. **  Except as set forth in Section 2.32,neither the Company nor any Subsidiary will constitute a Control ForeignCorporation, a Foreign Personal Holding Company or a Passive Foreign InvestmentCompany within the meaning of Section 1297 of the Code (“***PFIC***”) as of theClosing Date, and neither the Company nor any Subsidiary expects to become aPFIC, a Control Foreign Corporation (“***CFC***”) or a Foreign Personal HoldingCorporation after the Closing Date.

 

**SECTION2.33****               RegistrationRights. **  Except for the rights granted to thestockholders under the Investors’ Rights Agreement and as set forth on Schedule2.33, no Person has demand or other rights to cause the Company to file anyregistration statement under the Securities Act relating to any securities ofthe Company or any right to participate in any such registration statement,including, without limitation, piggyback registration rights.

 

**SECTION2.34****               Books and Records. **  The Company’s books of account,ledgers, order books, records and documents accurately and completely reflectin accordance with usual and customary prudent business practices all materialinformation relating to the Company’s business, the location and collection ofthe Company’s assets and the nature of all transactions giving rise to theCompany’s obligations and accounts receivable. The Company has previously delivered or made available to the Purchaserand its counsel complete and correct copies of the Charter and Bylaws and allamendments thereto, as in effect at the time of the Closing and all minutes andconsents reflecting meetings and actions taken by the Company’s Board ofDirectors and its stockholders prior to December 31, 2004.

 

**SECTION2.35****               Disclosure. ** The Company has disclosed to thePurchaser all facts material to the Company’s business, operations, assets,liabilities, prospects, properties, condition (financial or otherwise) andresults of operations.  Neither thisAgreement, nor any Schedule or Exhibit to this Agreement, nor any otherstatements, documents or certificates made or delivered in connection herewithor therewith contains any untrue statement of a material fact or omits to statea material fact necessary to make the statements contained herein and thereinnot misleading in light of the circumstances under which such statements weremade.  None of the statements, documents,certificates or other items prepared or supplied by the Company with respect tothe transactions contemplated hereby contains an untrue statement of a materialfact or omits to state a material fact necessary to make the statementscontained therein not misleading in light of the circumstances under which suchstatements were made.  There is no factwhich the Company has not disclosed to the Purchaser and its counsel in writingand of which the Company is aware which has resulted in, or could result in, aMaterial Adverse Change.  As of the datehereof, no facts have come to the Company’s attention that would, in itsopinion, require the Company to revise or amplify the assumptions underlyingsuch projections and other estimates or the conclusions derived therefrom.

 

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**SECTION2.36****               FDA Trials.**   The Company is currently in compliance withthe FDA protocols (as modified from time to time) for Phase II clinical trialswith respect to its PresVIEW Scleral Implant and PresVIEW Incision System(G970152) for the treatment of presbyopia (hereinafter referred to collectivelyas the “Procedure”).  The Company has notreceived a notice from the FDA that has not been resolved to permit thecontinuation of its current clinical trials, and the Company reasonablybelieves, as of the date hereof based on the advice of its outside FDA expert,that the FDA is likely to issue its approval to initiate Phase III of theclinical trial and to issue its final approval of the Procedure, in each case,in due course.

# ** **

# **REPRESENTATIONS,WARRANTIES AND COVENANTS OF THE PURCHASER**

# ** **

**SECTION3.01****               Representationsand Warranties of the Purchaser. **  ThePurchaser represents and warrants to the Company that:

 

### (a)           it is an “accredited investor” withinthe meaning of Rule 501 of Regulation D under the Securities Act;

###  

### (b)           it has sufficient knowledge andexperience in investing in companies similar to the Company in terms of theCompany’s stage of development so as to be able to evaluate the risks andmerits of its investment in the Company and it is able financially to bear therisks thereof, including a total loss of its investment;

###  

### (c)           it has received all the informationit considers necessary or appropriate to make an informed investment decisionwith respect to the Shares, the Warrant, the Warrant Shares and the PreferredStock Conversion Shares to be purchased by the Purchaser under thisAgreement.  The Purchaser further has hadan opportunity to ask questions and receive answers from the Company regardingthe Company and the terms and conditions of the offering of the Shares and theWarrant.  The foregoing, however, doesnot in any way limit or modify the representations and warranties made by theCompany in Article II;

###  

### (d)           the Shares, the Warrant, the WarrantShares and the Preferred Stock Conversion Shares being purchased by it arebeing acquired for its own account for the purpose of investment and not with aview to, or for resale in connection with, any distribution thereof within themeaning of the Securities Act;

###  

### (e)           it understands that (i) the Shares,the Warrant, the Warrant Shares and the Preferred Stock Conversion Shares havenot been registered under the Securities Act or any state securities laws byreason of their issuance in a transaction exempt from the registrationrequirements of the Securities Act and such laws, (ii) the Shares and WarrantShares, and, upon conversion thereof, the Preferred Stock Conversion Sharesmust be held indefinitely, unless a subsequent disposition thereof isregistered under the Securities Act or is exempt from such registration, and(iii) the Preferred Stock Conversion Shares will bear the legend to such effectset forth in Section 3.03 hereof;

###  

### (f)            this Agreement and the otherTransaction Documents to which it is a party constitutes the Purchaser’s validand legally binding obligation, enforceable in accordance with 

 

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### its terms.  ThePurchaser represents that it has full power and authority to enter into thisAgreement and each of the other Transaction Documents to which it is a party;and

###  

### (g)           this Agreement and each of the otherTransaction Documents to which the Purchaser is a party have been duly executedand delivered by the Purchaser.

###  

**SECTION3.02****               Certain Covenantsof the Purchaser. **  Without in any way limiting therepresentations set forth above in Section 3.01, the Purchaser agreesnot to make any disposition of all or any portion of the Shares, the Warrant,the Warrant Shares or the Preferred Stock Conversion Shares unless and until:

 

### (a)           there is then in effect aregistration statement under the Securities Act covering such proposeddisposition and such disposition is made in accordance with such registrationstatement; or

###  

### (b)           the Purchaser shall have notified theCompany of the proposed disposition and shall have furnished the Company with astatement of the circumstances surrounding the proposed disposition, and, atthe expense of the Purchaser or its transferee if requested by the Company,with an opinion of counsel (reputable in securities matters) that suchdisposition will not require registration of such securities under theSecurities Act or applicable state securities laws.

###  

Notwithstandingthe provisions of paragraphs (a) and (b) above, no such registration statementor opinion of counsel shall be required for any transfer of Preferred StockConversion Shares by the Purchaser to (A) a partner of such partnership, (B) aretired partner of such partnership who retires after the date hereof, (C) theestate of any such partner, or (D) an entity under common Control with thePurchaser; provided, however, that in each of the foregoingcases, the transferee agrees in writing to be subject to the terms of thisArticle III to the same extent as if the transferee were an original Purchaserhereunder.

 

**SECTION3.03****               Legend. **  The Purchaser acknowledges thatthe certificates evidencing the Shares, the Warrant Shares and the PreferredStock Conversion Shares will bear the legend set forth below or substantiallysimilar legend:

 

THESECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAINSTATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY ANDRESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACTAND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTIONTHEREFROM.  THE ISSUER OF THESESECURITIES MAY REQUIRE AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY)IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANYPROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLESTATE SECURITIES LAWS.

 

Thelegend set forth above shall be removed by the Company from any certificateevidencing Shares, Warrant Shares or Preferred Stock Conversion Shares, and theCompany shall issue a certificate without such legend to the holder thereof, ifrequested, upon delivery to the Company 

 

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ofan opinion by counsel (which may be counsel for the Company) that such securitycan be freely transferred in a public sale without a registration statementbeing in effect and that such transfer will not jeopardize the exemption orexemptions from registration pursuant to which the Company issued the Shares,Warrant Shares, or Preferred Stock Conversion Shares; provided, however,that no opinion from counsel shall be required for any dispositions pursuant toRule 144(k) under the Securities Act.

 

# **ARTICLE IV.**

# ** **

# **CONDITIONSTO THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY**

# ** **

**SECTION4.01****               Conditions to thePurchaser’s Obligations at the Closings. **  The Purchaser’s obligation to purchase andpay for the Series A-1 Shares and Warrant being purchased by it on the FirstClosing Date, and the Series A-2 Shares being purchased by it on the SecondClosing Date is, at its option, subject to the satisfaction, on or before suchClosing Dates, of the following conditions, any of which may be waived in wholeor in part by the Purchaser:

 

### (a)           *Opinionof Company’s Counsel.*  ThePurchaser shall have received from Jenkens & Gilchrist, counsel for theCompany, an opinion dated such Closing Date, in form and scope reasonablysatisfactory to the Purchaser and its counsel.

###  

### (b)           *Representationsand Warranties to be True and Correct.*  The representations and warranties of theCompany under this Agreement shall be true, complete and correct at and as ofsuch Closing, except with respect to provisions including the word “material”or words of similar import, and except with respect to materiality, asreflected under GAAP, in the representations and warranties contained in Section2.06 relating to the Financial Statements, with respect to which suchrepresentations and warranties must have been on and as of such Closing Date.

###  

### (c)           *Performance.*  The Company shall have performed and compliedwith all agreements and covenants contained herein required to be performed orcomplied with by it prior to or at such Closing Date.

###  

### (d)           *AllProceedings to be Satisfactory.* All corporate and other proceedings to be taken by the Company inconnection with the transactions contemplated hereby and all documents incidentthereto shall be reasonably satisfactory in form and substance to the Purchaserand its respective counsel, and the Purchaser and its respective counsel shallhave received all such counterpart originals or certified or other copies ofsuch documents as they reasonably may request.

###  

### (e)           *Approvals.*  The Company shall have obtained any and allconsents, waivers, registrations, approvals or authorizations, with or by anygovernmental body and all consents, waivers, approvals or authorizations of anyother Person required for the valid execution of this Agreement and each of theother Transaction Documents and for the consummation of the transactionscontemplated hereby and thereby.

###  

### (f)            *NoInjunction.*  No governmentalbody or any other Person shall have issued an order, injunction, judgment,decree, ruling or assessment which shall then be in effect restraining orprohibiting the completion of the transactions contemplated hereby or under anyof the other 

 

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### Transaction Documents, nor, shall any such order,injunction, judgment, decree, ruling or assessment be pending or, to the Company’sknowledge, threatened.

###  

### (g)           *Investors’Rights Agreement*.  The Companyand the other holders of Preferred Stock named therein shall have executed anddelivered the Investors’ Rights Agreement.

###  

### (h)           *Certificateof Designation. *With respectto the First Closing, the Certificate of Designation shall have been filed withthe Secretary of State of the State of Delaware.

###  

### (i)            *Non-Disclosureand Proprietary Information and Inventions Agreements.*  Each employee and independent contractor ofand consultant to the Company will have entered into a Non-Disclosure andProprietary Information and Inventions Agreement.

###  

### (j)            *Non-CompetitionAgreements*.  Each keyemployee, consultant or investigative physician of the Company will haveentered into a non-competition agreement in a form acceptable to the Purchaser.

###  

### (k)           *Boardof Directors.*  The number ofdirectors constituting the entire Board shall have been fixed at no more thanten, one-half of which shall have been designated by the Purchaser (the “***Purchaser Directors***”),and one of the Purchaser Directors shall have been elected the vice-chairman ofthe Board.  There shall have beenestablished compensation and audit committees of the Board, each consisting ofup to four members, one of which, at the Purchaser’s option shall be aPurchaser Director.

###  

### (l)            *PreemptiveRights.*  All stockholders ofthe Company having any preemptive, first refusal or other rights with respectto the issuance of the Shares, Warrant Shares or the Preferred Stock ConversionShares (other than those contemplated by the Transaction Documents) shall haveirrevocably waived the same in writing.

###  

### (m)          *Expenses.*  The Company shall have paid the fees andexpenses of the Purchaser, including the****feesand disbursements of the Purchaser’s counsel invoiced at such Closing, inaccordance with Section 6.01 hereof.

###  

### (n)           *KeyPerson Insurance. *The Companyshall have obtained the life insurance policies described in Section 5.13.

###  

### (o)           *MaterialAdverse Change*.  In the caseof the Second Closing, there shall not have occurred a Material Adverse Change.

###  

### (p)           *CIBADebt Obligations*.  At orbefore the First Closing Date, the Company will have executed an amendment tothat certain License Transfer and Transition Services Agreement, dated January30, 2004, by and among the Company, Refocus Ocular, Inc., CIBA Vision and CIBAVision Corporation, upon terms reasonably acceptable to The Purchaser.

###  

### (q)           *SecondClosing Milestones.* Withrespect to the Second Closing, the Company shall have been authorized inwriting to commence Phase III Clinical Trials for Presbyopia without anymaterial limitations as evidenced by written approval from the FDA (“SecondClosing Milestones”.)

 

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### (r)            *Bylaws*.  On or before the First Closing Date, theBylaws of the Company shall have been amended (i) to permit any PurchaserDirector to call a special meeting of the Board,  (ii) to permit any Purchaser Director or theholders of at least 51% of the outstanding Series A-1 Preferred Stock, SeriesA-2 Preferred Stock and Series A-3 Preferred Stock, together as if a singleclass, to call a special meeting of the stockholders, and (iii) to require theBoard to meet bimonthly for one year following the First Closing Date and atleast quarterly thereafter.

###  

### (s)           *SupportingDocuments.*  The Purchaser andits counsel shall have received copies of the following documents:

###  

#### (i)            (A) the Charter, certified as of arecent date by the Secretary of State of the State of Delaware and (B) acertificate of said Secretary dated as of a recent date as to the Company’s dueincorporation and good standing and the Company’s payment of all franchisetaxes, and listing all documents of the Company on file with said Secretary;

####  

#### (ii)           a certificate of the Company’sSecretary dated the applicable Closing Date, certifying:  (A) that attached thereto is a true, correctand complete copy of the Bylaws as in effect on the date of such certificationand that no amendments or modifications to such Bylaws have been authorized;(B) that attached thereto is a true, correct and complete copy of allresolutions adopted by the Board authorizing the execution, delivery andperformance of each of the Transaction Documents, the issuance, sale anddelivery of the Shares and the Warrant, and the reservation of the WarrantShares and the Preferred Stock Conversion Shares, and that all such resolutionsare in full force and effect, have not been amended, modified or rescinded andare the only resolutions adopted in connection with the transactions contemplatedby the Transaction Documents; (C) that the Charter has not been amended sincethe date of the last amendment referred to in the certificate deliveredpursuant to clause (i)(A) above; and (D) to the incumbency and specimensignature of each officer of the Company executing any of the TransactionDocuments, and any certificate or instrument furnished pursuant hereto, and acertification by another authorized officer of the Company as to the incumbencyand signature of the officer signing the certificate referred to in this clause(ii); and

####  

#### (iii)          a certificate, executed by an officerof the Company, dated the applicable Closing Date, certifying to thefulfillment of the specific conditions set forth in Sections 4.01(b), 4.01(c)hereto and to the fulfillment of all of the conditions in this Article IV ingeneral.

####  

#### (iv)          such additional supporting documentsand other information with respect to the Company’s operations and affairs asthe Purchaser or its counsel reasonably may request.  All such documents shall be satisfactory inform and substance to the Purchaser and its counsel.

####  

**SECTION4.02****               Conditions to theCompany’s Obligations at each Closing. **  The Company’s obligation to sell and issuethe Shares and the Warrant on the applicable Closing Date is subject to thesatisfaction, on or before such Closing Date, of the following conditions, anyof which may be waived in whole or in part by the Company:

 

### (a)           *Representationsand Warranties to be True and Correct.*  The representations and warranties of thePurchaser contained in Article III shall be true, complete and correct****at and as 

 

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### of such Closing, with the same effect as though suchrepresentations and warranties had been made on and as of such date.

###  

### (b)           *Investors’Rights Agreement*.  ThePurchaser shall have executed and delivered the Investors’ Rights Agreement.

###  

### (c)           *Approvals.*  The Purchaser shall have obtained any and allconsents, waivers, approvals or authorizations, with or by any governmentalbody and all consents, waivers, approvals or authorizations of any other Personrequired for the valid execution of this Agreement and each of the otherTransaction Documents and for the consummation of the transactions contemplatedhereby and thereby.

###  

### (d)           *NoInjunction.*  No governmentalbody or any other Person shall have issued an order, injunction, judgment,decree, ruling or assessment which shall then be in effect restraining orprohibiting the completion of the transactions contemplated hereby, nor, to theCompany’s knowledge, shall any such order, injunction, judgment, decree, rulingor assessment be threatened or pending.

###  

### (e)           *PurchasePrice Paid.*  The Purchasershall have paid to the Company the applicable Share Purchase Price and, withrespect to the First Closing, the Warrant Purchase Price.

###  

# **ARTICLE V.**

# ** **

# **COVENANTSOF THE COMPANY**

# ** **

TheCompany covenants and agrees with the Purchaser that:

 

**SECTION5.01****               Reserve forWarrant Shares and Preferred Stock Conversion Shares.**

## ** **

### (a)           The Company shall at all times reserveand keep available out of its authorized but unissued shares of Series A-3Preferred Stock, for the purpose of issuing the Warrant Shares upon exercise ofthe Warrant and otherwise complying with the terms of this Agreement suchnumber of its duly authorized shares of Series A-3 Preferred Stock as shall besufficient to effect the exercise of the Warrant or otherwise to comply withthe terms of this Agreement.  If at anytime the number of authorized but unissued shares of Series A-3 Preferred Stockshall not be sufficient to effect the exercise of the Warrant or otherwise tocomply with the terms of this Agreement, the Company will forthwith take suchcorporate action as may be necessary to increase its authorized but unissuedshares of Series A-3 Preferred Stock to such number of shares as shall besufficient for such purposes.  TheCompany will use its best efforts to obtain any authorization, consent,approval or other action by or make any filing with any court or governmentalor administrative body that may be required under applicable state securitieslaws in connection with the issuance of shares of Series A-3 Preferred Stockupon exercise of the Warrant.

###  

### (b)           The Company shall at all timesreserve and keep available out of its authorized but unissued shares of SeriesA-2 Preferred Stock, for the purpose of effecting the purchase of 

 

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### the Series A-2 Shares and otherwise complying with theterms of this Agreement, such number of its duly authorized shares of SeriesA-2 Preferred Stock as shall be sufficient to effect the issuance of the SeriesA-2 Shares at the Second Closing or otherwise to comply with the terms of thisAgreement.  If at any time the number ofauthorized but unissued shares of Series A-2 Preferred Stock shall not besufficient to effect the Second Closing or otherwise to comply with the termsof this Agreement, the Company will forthwith take such corporate action as maybe necessary to increase its authorized but unissued shares of Series A-2Preferred Stock to such number of shares as shall be sufficient for suchpurposes.  The Company will use its bestefforts to obtain any authorization, consent, approval or other action by ormake any filing with any court or governmental or administrative body that maybe required under applicable state securities laws in connection with theissuance of shares of Series A-2 Preferred Stock.

###  

### (c)           The Company shall at all timesreserve and keep available out of its authorized but unissued shares of CommonStock, for the purpose of effecting the conversion of the Shares and theWarrant Shares and otherwise complying with the terms of this Agreement, suchnumber of its duly authorized shares of Common Stock as shall be sufficient toeffect the conversion of the Shares and Warrant Shares from time to timeoutstanding or otherwise to comply with the terms of this Agreement. If at anytime the number of authorized but unissued shares of Common Stock shall not besufficient to effect the conversion of the Shares and the Warrant Shares orotherwise to comply with the terms of this Agreement, the Company willforthwith take such corporate action as may be necessary to increase itsauthorized but unissued shares of Common Stock to such number of shares as shallbe sufficient for such purposes.  TheCompany will use its best efforts to obtain any authorization, consent,approval or other action by or make any filing with any court or governmentalor administrative body that may be required under applicable state securitieslaws in connection with the issuance of shares of Common Stock upon conversionof the Shares and the Warrant Shares.

###  

**SECTION5.02****               CorporateExistence. **  TheCompany shall preserve and maintain, and, except as otherwise permitted by Section5.15, cause each Subsidiary to preserve and maintain, its corporateexistence, rights, franchises and privileges in the jurisdiction of itsincorporation, and qualify and remain qualified, and cause each Subsidiary toqualify and remain qualified, as a foreign corporation in each jurisdiction inwhich such qualification is necessary or desirable in view of its business andoperations or the ownership or lease of its properties.

 

**SECTION5.03****               Preservation ofProperty and Assets. **  TheCompany shall use its best efforts to secure, preserve and maintain, and causeany Subsidiary to use its best efforts to secure, preserve and maintain, alllicenses and other rights to use the patents, processes, licenses, permits,trademarks, trade names, inventions, copyrights or other Intellectual Propertyrights owned or possessed by it and deemed by the Company to be material to theconduct of its business or the business of any Subsidiary.  The Company shall also use its best effortsto maintain and preserve, and cause each Subsidiary to use its best efforts tomaintain and preserve, all of its other properties and assets necessary for theproper conduct of its business, in good repair, working order and condition,ordinary wear and tear excepted, and, from time to time, make all necessary andproper repairs, renewals, replacements, additions and improvements thereto; andthe Company and its Subsidiaries will at all times comply with each materialprovision of all leases to which any of them is a party or under which any of themoccupies property.

 

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**SECTION5.04****               Properties,Business, Insurance. **  TheCompany shall obtain and maintain and cause each of its Subsidiaries (if any)to maintain as to its respective properties and business, with financiallysound and reputable insurers, insurance against such casualties andcontingencies and of such types and in such amounts as is customary forcompanies similarly situated.

 

**SECTION5.05****               Directors andOfficers Insurance. **The Company will obtain and maintaincustomary directors and officers liability insurance with coverage limits noless than $5,000,000 and will at all times maintain and exercise the powersgranted to it by its Charter, its Bylaws, and by applicable law to indemnifyand hold harmless to the fullest extent permitted by applicable law present orformer directors and officers of the Company against any threatened or actualclaim, action, suit, proceeding or investigation made against them arising fromtheir service in such capacities (or service in such capacities for anotherenterprise at the request of the Company).

 

**SECTION5.06****               Inspection,Consultation and Advice. **  TheCompany shall permit, and cause each any of its Subsidiaries to permit, thePurchaser and such persons as it may designate, at such holder’s expense, tovisit and inspect any of the properties of the Company and any Subsidiary,examine their books and take copies and extracts therefrom, discuss theaffairs, finances and accounts of the Company and any Subsidiary with theirofficers, employees and public accountants (and the Company hereby authorizessaid accountants to discuss with such holder and such designees such affairs,finances and accounts), and consult with and advise the management of the Companyand any Subsidiary as to the Company’s affairs, finances and accounts, all atreasonable times and upon reasonable notice, provided that the Purchaser shallcause the persons they so designate to maintain any and all informationrelating to the Company confidential.  Inthe event of the Company’s breach of any of the covenants contained in thisArticle V, the Company shall be responsible for the fees and expenses incurredby such holder in enforcing its rights under this Section 5.06.

 

**SECTION5.07****               RestrictiveAgreements Prohibited. **  Neither the Company nor any Subsidiary shallbecome a party to any agreement that by its terms restricts the Company’sperformance of this Agreement, any of the other Transaction Documents, theCharter or the Bylaws.

 

**SECTION5.08****               Transactions withAffiliates.**  Except for transactions contemplated by thisAgreement or as otherwise approved by the Board, neither the Company nor anySubsidiary shall enter into any transaction with any director, officer,employee or holder of more than five percent (5%) of the outstanding capitalstock of any class or series of capital stock of the Company or any Subsidiary,member of the family of any such Person, or any corporation, partnership, trustor other entity in which any such Person, or member of the family of any suchPerson, is a director, officer, trustee, partner or holder of more than fivepercent (5%) of the outstanding capital stock thereof.

 

**SECTION5.09****               Compensation andExpenses.**

## ** **

### (a)           Directors.  The Company shall promptly reimburse in fulleach director of the Company who is not an employee of the Company, for all ofhis or her reasonable out-of-pocket 

 

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### expenses incurred in attending each meeting of theBoard or any committee thereof.  Inaddition, the Company shall pay to the Purchaser Director of the Board whoserves at the vice-chairman of the Board an annual compensation of $50,000.

###  

### (b)           Purchaser.  The Company shall promptly reimburse in fullthe Purchaser for all amounts paid by Purchaser to any Person retained, withthe Company’s approval, in connection with activities conducted on theCompany’s behalf.

###  

**SECTION5.10****               Use of Proceeds. **  The Company shall use theproceeds from the sale of the Shares for general working capital purposes, torepay outstanding indebtedness, including, without limitation, the Bridge Loanand for capital expenditures as approved by the Board, which approval mustinclude the approval of a majority of the Purchaser Directors.

 

**SECTION5.11****               FinancialReporting. **  TheCompany shall provide to the Purchaser:

 

### (a)           within 90 days after the end of thefiscal year of the Company a consolidated balance sheet of the Company and itsSubsidiaries as of the end of each fiscal year and the related consolidatedstatements of income, stockholders’ equity and cash flows for the fiscal yearthen ended, prepared in accordance with GAAP and certified by a firm ofindependent public accountants of recognized national standing selected by theBoard or the Audit Committee thereof;

###  

### (b)           within 45 days after the end of eachquarter in each fiscal year (other than the last quarter in each fiscal year) aconsolidated balance sheet of the Company and its Subsidiaries and the relatedconsolidated statements of income unaudited but prepared in accordance withGAAP and certified by the chief financial officer of the Company, suchconsolidated balance sheet to be as of the end of such quarter and suchconsolidated statements of income to be for such quarter and for the periodfrom the beginning of the fiscal year to the end of such quarter;

###  

### (c)           at the time of delivery of eachquarterly statement pursuant to Section 5.11(b), a management narrativereport including a discussion and analysis of such report and, subject toRegulation FD promulgated by the SEC, explanation of significant variances fromforecasts and all significant current developments; and

###  

### (d)           subject to Regulation FD promulgatedby the SEC, promptly, from time to time, such other information regarding thebusiness, prospects, condition (financial or otherwise), operations, property,assets or affairs of the Company and its Subsidiaries as the Purchaser mayreasonably request.

###  

### (e)           If the Company fails to comply withthe requirements of Section 5.11(a) through (d), the PurchaserDirectors, in their sole discretion, may appoint an independent accounting firmto conduct an audit of the Company’s books and records, at the Company’s soleexpense.

###  

**SECTION5.12****               Non-Disclosure,Non-Solicitation and Proprietary Information and Inventions Agreement. **  The Company shall cause eachofficer, director, employee, consultant and independent contractor now orhereafter employed by it, or its Subsidiaries (if any), to enter into theNon-Disclosure, Non-Solicitation and Proprietary Information and 

 

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InventionsAgreement.  The Company shall not amend,modify, terminate, waive or otherwise alter, in whole or in part, any of theNon-Disclosure and Proprietary Information and Inventions Agreement without theconsent of a majority of the Purchaser Directors.

 

**SECTION5.13****               Key PersonInsurance. **  TheCompany shall obtain as soon as practicable after the First Closing andmaintain key person life insurance in the amount of $1,000,000 on the lives ofeach of Terence A. Walts and Mark A. Cox. The Company shall be designated the beneficiary of the foregoingpolicies.

 

**SECTION5.14****               Payment of Taxes;Trade Debt. ** TheCompany shall pay and discharge, and cause each Subsidiary to pay and discharge,all taxes, assessments and governmental charges or levies imposed upon it orupon its income, profits or business, or upon any properties belonging to it,prior to the date on which penalties attach thereto, and all lawful claimswhich, if unpaid, might become a Lien or charge upon any properties of theCompany or any subsidiary; provided, however, that neither theCompany, nor any subsidiary, shall be required to pay any such tax, assessment,charge, levy or claim which is being contested or extended in good faith and byappropriate proceedings if the Company or any subsidiary shall have set asideon its books sufficient reserves, if any, with respect thereto.  The Company shall pay and cause anySubsidiary to pay, when due, or in conformity with customary trade terms, alllease obligations, all trade debt, and all other indebtedness incident to theoperations of the Company or any Subsidiary, except such as are being contestedin good faith and by proper proceedings if the Company or Subsidiary concernedshall have set aside on its books sufficient reserves, if any, with respectthereto.

 

**SECTION5.15****               InternalAccounting Controls. **  TheCompany shall devise and maintain a system of internal accounting controlssufficient to provide reasonable assurances that (a) transactions are executedin accordance with Company management’s general or specific authorization, (b)transactions are recorded as necessary to permit preparation of financialstatements in conformity with GAAP or any other criteria applicable to suchstatements, and to maintain accountability for assets, (c) access to assets ispermitted only in accordance with Company management’s general or specificauthorization, and (d) the recorded accountability for assets is compared withthe existing assets at reasonable intervals and appropriate action is takenwith respect to any differences.

 

**SECTION5.16****               Indemnity.**

## ** **

### (a)           The Company agrees to indemnify,defend and hold harmless the Purchaser (and its partners (and each officer anddirector thereof), directors, managers, officers, members, stockholders,employees, Affiliates, agents and permitted assigns) (collectively, “***Purchaser Indemnified Parties***”)from and against any and all losses, claims, liabilities, damages,deficiencies, costs or expenses (including, without limitation, interest,penalties, reasonable attorneys’ fees, disbursements and related charges andany costs or expenses that a Purchaser Indemnified Party incurs to enforce itsright to indemnification) (collectively, “***Losses***”) based upon, arising out of orotherwise in respect of any material inaccuracy in or material breach of anyrepresentations, warranties, covenants or agreements of the Company containedin this Agreement or any of the other Transaction Documents.  For the purposes of this Agreement, aninaccuracy or breach shall be deemed “material” when the Losses arising fromsuch inaccuracy 

 

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### or breach total $25,000 or more or the Losses arisingfrom all inaccuracies or breaches total $200,000 or more in the aggregate.

###  

### (b)           The Purchaser agrees to indemnify,defend and hold harmless the Company and its directors, officers, employees,Affiliates, agents and control persons) (collectively, the “***Company Indemnified Parties***”)from and against any and all Losses based upon, arising out of or otherwise inrespect of any material inaccuracy in or material breach of anyrepresentations, warranties, covenants or agreements of the Purchaser containedin this Agreement or any of the other Transaction Documents.

###  

### (c)           The provisions of this Section5.16 shall not limit or impair any right or remedy arising from breach ofthis Agreement or any of the other Transaction Documents.  In addition to any other remedy provided bylaw, injunctive relief may be obtained to enjoin the breach, or threatenedbreach, of any provision of this Agreement and each party shall be entitled tospecific performance by the others of their obligations hereunder andthereunder.  All remedies, either underthis Agreement, by law or as may otherwise be afforded to the Purchaser or theCompany, as the case may be, shall be cumulative.

###  

(d)           The respective obligations of thePurchaser and the Company under this Section 5.16 shall expire ninety(90) days after the delivery by the Company to the Purchaser of the Company’saudited financial statements for its fiscal year ending December 31, 2005;provided, however, this Section 5.16(d) shall not release the Purchaseror the Company from their respective indemnification obligations with respectto Losses based upon, arising out of or otherwise in respect of any fraud orintentional breach.

 

**SECTION5.17****               Compliance withLaws. **  TheCompany shall comply, and cause each Subsidiary to comply, with all applicablelaws, rules, regulations and orders.

 

**SECTION5.18****               Keeping of Recordsand Books of Account. **  TheCompany shall keep, and cause each Subsidiary to keep, adequate records andbooks of account, in which complete entries will be made in accordance withGAAP consistently applied, reflecting all financial transactions of the Companyand any Subsidiary, and in which, for each fiscal year, all proper reserves fordepreciation, depletion, obsolescence, amortization, taxes, bad debts and otherpurposes in connection with its business shall be made.

 

**SECTION5.19****               PFIC Covenant. **  The Company and any Subsidiaryshall monitor its respective status as to whether it is a PFIC, a CFC or anFPHC, and the Company shall promptly notify the Purchaser if the Company or anyof its Subsidiaries is treated as a PFIC, a CFC or an FHPC at any time.  If at any time either the Company or anySubsidiary becomes a PFIC, such entity shall, at its sole expense, provide thePurchaser with such information and take such other actions as may be necessaryto permit the Purchaser to make a timely election under Section 1295 of theCode to treat the Company as a “qualified electing fund.”  Further, at the request of the Purchaser, theCompany shall, at the Company’s expense, timely provide the Purchaser with anyinformation that the Purchaser reasonably requests for purposes of completingUnited State federal, state or local income tax returns, including, withoutlimitation, with respect to the status as a CFC or an FHPC of the Company orany Subsidiary.

 

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**SECTION5.20****               Publicity. **  Except as may be required bylaw, the Company shall not issue or cause the publication of any press release,advertisement or other public communication relating to (a) the Purchaser (or anyAffiliate of the Purchaser) or (b) this Agreement or any of the otherTransaction Documents, without the Purchaser’s prior written consent, whichconsent shall not be unreasonably withheld or delayed.

 

# **ARTICLE VI.**

# ** **

# **ADDITIONALCOVENANTS OF THE COMPANY**

# ** **

Forso long as at least twenty-five percent (25%) of the shares of Series A-1Preferred Stock originally issued hereunder remain outstanding, the Companyshall not, and the Company shall cause its Subsidiaries not to:

 

**SECTION6.01****               ProtectiveProvisions Requiring Stockholder Approval.**   Without the approval of the holders of at least 75% of the Shares of theSeries A-1 Preferred Stock, Series A-2 Preferred Stock and Series A-3 PreferredStock then outstanding, voting together as a single class:

 

### (a)           amend the Charter and Bylaws in anymanner that would alter or change any of the rights, preferences, privileges orrestrictions of the Shares, Warrant Shares and Preferred Stock ConversionShares;

###  

### (b)           reclassify any outstanding securitiesinto securities having rights, preferences or privileges senior to, or on aparity with, the Shares and the Warrant Shares;

###  

### (c)           authorize or issue any additionalshares of Preferred Stock (other than to Purchaser in accordance with thisAgreement) or any other stock having rights or preferences senior to, or on aparity with, the Shares or Warrant Shares;

###  

### (d)           merge or consolidate with or into anycorporation if such merger or consolidation would result in the stockholders ofthe Company immediately prior to such merger or consolidation holding (byvirtue of securities issued as consideration in such transaction or otherwise)less than a majority of the voting power of the stock of the survivingcorporation immediately after such merger or consolidation;

###  

### (e)           sell all or substantially all theirrespective assets in a single transaction or series of related transactions;

###  

### (f)            license all or substantially all oftheir respective intellectual property in a single transaction or series ofrelated transactions;

###  

### (g)           liquidate or dissolve; or

###  

### (h)           alter any rights of the PurchaserDirectors or the holders of the Shares and the Warrant Shares or change thesize of the Board.

 

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**SECTION6.02****               ProtectiveProvisions Requiring Board Approval.  **  Without the approval of theBoard, including at least two thirds of the Purchaser Directors:

 

### (a)           declare or pay any dividends (otherthan dividends payable solely in shares of Common Stock and dividends payableto the Company or another Subsidiary) on or declare or make any otherdistribution, directly or indirectly, on account of any shares of Common Stocknow or hereafter outstanding;

###  

### (b)           repurchase any outstanding shares ofcapital stock (other than repurchases of capital stock from employees of theCompany or any Subsidiary whose employment has been terminated for any reason,not to exceed $100,000 in the aggregate);

###  

### (c)           approve or modify by 10% or more theaggregate amount of any annual or other operating or capital budget, or approveor modify by 50% or more any single line item of any such operating or capitalbudget;

###  

### (d)           increase the salary of any officer orpay any bonus to any officer, director or employee not contemplated in a budgetor bonus plan approved by the Purchaser Directors;

###  

### (e)           retain, terminate or enter into anysalary or employment negotiations or employment agreement with any employee orany future employee;

###  

### (f)            incur indebtedness (other than tradepayables) in excess of $50,000 in the aggregate, or enter into contracts orleases which requires payments in excess of $50,000 in the aggregate;

###  

### (g)           make or incur any single capitalexpenditure in excess of $50,000 or aggregate capital expenditures in excess of$100,000 per fiscal year;

###  

### (h)           award stock options, stockappreciation rights or similar employee benefits or determine vestingschedules, exercise prices or similar features;

###  

### (i)            make any material change in thenature of its business or enter into any new line of business, joint venture orsimilar arrangement;

###  

### (j)            pledge its assets or guarantee theobligations of any other individual or entity;

###  

### (k)           recommend amendment of the Company’sexisting restricted stock and stock option plan or approval of any new equityincentive plan; or

###  

### (l)            form or acquire any subsidiary,joint venture or similar business entity.

###  

# **ARTICLE VII.**

# ** **

# **MISCELLANEOUS**

# ** **

**SECTION7.01****               Expenses. **  At each Closing, the Companyshall reimburse the Purchaser for all fees and expenses incurred by it inconnection with its due diligence and the 

 

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negotiationand documentation of the transactions contemplated hereby, including thereasonable fees and disbursements of the Purchaser’s counsel.  The Company agrees that the fees and expensesincurred by the Purchaser through the applicable Closing Date in connectionwith the transactions contemplated hereby may be paid directly by the Purchaserto the attorneys for the Purchaser and deducted from the purchase price payableat the Closing.  The Company furtheragrees to reimburse the Purchaser on demand for the Purchaser’s reasonableout-of-pocket expenses incurred in connection with any amendment to, or waiveror enforcement of, this Agreement or the other Transaction Documents.  The Company shall also pay all stamp and othertaxes and duties levied in connection with the issuance of the Shares, theWarrant, the Warrant Shares and the Preferred Stock Conversion Shares.

 

**SECTION7.02****               Survival ofAgreements. **  Allcovenants, agreements, representations and warranties made in any of theTransaction Documents or any certificate or instrument delivered to thePurchaser or the Company pursuant to or in connection with any of theTransaction Documents shall survive the execution and delivery of all of theTransaction Documents, the issuance, sale and delivery of the Shares and theWarrant, and the issuance and delivery of the Warrant Shares and the PreferredStock Conversion Shares, and all statements contained in any certificate orother instrument delivered by the Company or the Purchaser hereunder orthereunder or in connection herewith or therewith shall be deemed to constituterepresentations and warranties made by the Company or the Purchaser, as thecase may be.

 

**SECTION7.03****               Entire Agreement. **  This Agreement, together withthe Schedules hereto and any certificates, documents, instruments and writingsthat are delivered pursuant hereto and thereto, constitute the entire agreementand understanding of the parties in respect of the subject matter hereof andsupersede all prior understandings, agreements or representations by or amongthe parties, written or oral, to the extent they relate in any way to thesubject matter hereof.

 

**SECTION7.04****               Assignment;Binding Effect. **  Noparty may assign either this Agreement or any of its rights, interests orobligations hereunder without the prior written approval of the other parties; provided,however, that without the consent of any other party hereto the rightsof the Purchaser hereunder are assignable to an Affiliate of the Purchaser.  All of the terms, agreements, covenants,representations, warranties and conditions of this Agreement are binding upon,and inure to the benefit of and are enforceable by, the parties and theirrespective successors and permitted assigns, whether so expressed or not.Without limiting the generality of the foregoing, all representations,covenants and agreements benefiting the Purchaser shall inure to the benefit ofany and all subsequent holders from time to time of the Shares, the Warrant,the Warrant Shares or the Preferred Stock Conversion Shares, as the case maybe.  Nothing in this Agreement shallcreate or be deemed to create any third-party beneficiary rights in any Personnot a party to this Agreement except as provided below.  Whether or not any express assignment hasbeen made, the provisions of this Agreement which are for the benefit of thePurchaser as a purchaser or holder of the Shares, the Warrant or Warrant Shares(or any securities pursuant to which the Shares, the Warrant or Warrant Sharesmay be converted or exercised into) are also for the benefit of and enforceableby any subsequent holder of such Shares, Warrant, Warrant Share or othersecurities to the same extent they would have been enforceable by suchPurchaser.  Upon any permittedassignment, the references in this 

 

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Agreement to such Purchasershall also apply to any such assignee unless the context otherwise requires.

 

**SECTION7.05****               Notices. **  All notices, requests and othercommunications provided for or permitted to be given under this Agreement mustbe in writing and shall be given by personal delivery, by certified orregistered United States mail (postage prepaid, return receipt requested), by anationally recognized overnight delivery service for next day delivery, or byfacsimile transmission, as follows (or to such other address as any party maygive in a notice given in accordance with the provisions hereof):

 

Ifto the Purchaser:

 

MedcareInvestment Fund III, Ltd.

8122Datapoint Drive, Suite 1000

SanAntonio, Texas  78229

Fax:(210) 614-5841

Attn:Tim Lyles

 

Witha copy to (which does not constitute notice):

 

AkinGump Strauss Hauer & Feld LLP

300Convent Street, Suite 1500

SanAntonio, Texas 78205

Phone:(210) 281-7000

Fax:(210) 224-2035

Attn:Alan Schoenbaum, Esq.

 

Ifto the Company:

 

RefocusGroup, Inc.

10300North Central Expressway, Suite 104.

Dallas,Texas  75231

Fax:  (214) 368-0332

Attn:  President

 

Witha copy to (which does not constitute notice):

 

Jenkens& Gilchrist, P.C.

1445Ross Avenue, Suite 3200

Dallas,Texas  75202

Phone:  (214) 855-4500

Fax:  (214) 855-4300

Attn:  Robert W. Dockery, Esq.

 

Allnotices, requests or other communications will be effective and deemed givenonly as follows:  (i) if given by personaldelivery, upon such personal delivery, (ii) if sent by certified or registeredmail, on the fifth business day after being deposited in the United Statesmail, (iii) if sent for next day delivery by overnight delivery service, on thedate of delivery as confirmed by 

 

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writtenconfirmation of delivery, (iv) if sent by facsimile, upon the transmitter’sconfirmation of receipt of such facsimile transmission, except that if suchconfirmation is received after 5:00 p.m. (in the recipient’s time zone) on abusiness day, or is received on a day that is not a business day, then suchnotice, request or communication will not be deemed effective or given untilthe next succeeding business day. Notices, requests and other communications sent in any other manner,including by electronic mail, will not be effective.

 

**SECTION7.06****               SpecificPerformance; Remedies. **  Eachparty acknowledges and agrees that the other parties would be damagedirreparably if any provision of this Agreement were not performed in accordancewith its specific terms or were otherwise breached.  Accordingly, the parties will be entitled toan injunction or injunctions to prevent breaches of the provisions of thisAgreement and to enforce specifically this Agreement and its provisions in anyaction or proceeding instituted in any court of the United States or any statethereof having jurisdiction over the parties and the matter, in addition to anyother remedy to which they may be entitled, at law or in equity.  Except as expressly provided herein, therights, obligations and remedies created by this Agreement are cumulative andin addition to any other rights, obligations or remedies otherwise available atlaw or in equity. Except as expressly provided herein, nothing herein will beconsidered an election of remedies.

 

**SECTION7.07****               Submission toJurisdiction; Waiver of Jury Trial.**

## ** **

### (a)               Submission to Jurisdiction.  Any action, suit or proceeding seeking toenforce any provision of, or based on any matter arising out of or inconnection with, this Agreement or the transaction contemplated hereby shallonly be brought in any federal court located in the State of Texas or any Texasstate court, and each party consents to the exclusive jurisdiction and venue ofsuch courts (and of the appropriate appellate courts therefrom) in any suchaction, suit or proceeding and irrevocably waives, to the fullest extentpermitted by law, any objection that it may now or hereafter have to the layingof the venue of any such action, suit or proceeding in any such court or thatany such action, suit or proceeding brought in any such court has been broughtin an inconvenient forum.  Process in anysuch action, suit or proceeding may be served on any party anywhere in theworld, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, service ofprocess on such party as provided in Section 7.05 shall be deemedeffective service of process on such party.

###  

### (b)               Waiver of Jury Trial.  EACH PARTY ACKNOWLEDGES THAT ANY DISPUTE THATMAY ARISE OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATEDAND DIFFICULT ISSUES, AND THEREFORE SUCH PARTY HEREBY EXPRESSLY WAIVES ITSRIGHT TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENTOR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM RELATING TOTHE TRANSACTIONS CONTEMPLATED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL ACTIONS,SUITS AND PROCEEDINGS THAT RELATE TO THE SUBJECT MATTER OF THE TRANSACTIONSCONTEMPLATED HEREBY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTYCLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY REPRESENTS THAT (i) NOREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLYOR 

 

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### OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT IN THEEVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER,(ii) SUCH PARTY UNDERSTANDS AND WITH THE ADVICE OF COUNSEL HAS CONSIDERED THEIMPLICATIONS OF THIS WAIVER, (iii) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND(iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHERTHINGS, THE MUTUAL WAIVERS AND REPRESENTATIONS IN THIS SECTION 7.07(b).

###  

**SECTION7.08****               Headings. **  The article and sectionheadings contained in this Agreement are inserted for convenience only and willnot affect in any way the meaning or interpretation of this Agreement.

 

**SECTION7.09****               Governing Law. **  This Agreement will be governedby and construed in accordance with the laws of the State of Texas, withoutgiving effect to any choice of law principles.

 

**SECTION7.10****               Amendments. **  This Agreement may not beamended or modified without the written consent of the Company and the holdersof at least 75% of the Shares outstanding.

 

**SECTION7.11****               Extensions;Waivers. **  Anyparty may, for itself only, (a) extend the time for the performance of any ofthe obligations of any other party under this Agreement, (b) waive any inaccuraciesin the representations and warranties of any other party contained herein or inany document delivered pursuant hereto and (c) waive compliance with any of theagreements or conditions for the benefit of such party contained herein.  Any such extension or waiver will be validonly if set forth in a writing signed by the party to be bound thereby.  No waiver by any party of any default,misrepresentation or breach of warranty or covenant hereunder, whether intentionalor not, may be deemed to extend to any prior or subsequent default,misrepresentation or breach of warranty or covenant hereunder or affect in anyway any rights arising because of any prior or subsequent such occurrence.  Neither the failure nor any delay on the partof any party to exercise any right or remedy under this Agreement shall operateas a waiver thereof, nor shall any single or partial exercise of any right orremedy preclude any other or further exercise of the same or of any other rightor remedy.

 

**SECTION7.12****               Severability. **  The provisions of thisAgreement will be deemed severable and the invalidity or unenforceability ofany provision will not affect the validity or enforceability of the otherprovisions hereof; provided that if any provision of this Agreement, as appliedto any party or to any circumstance, is judicially determined not to beenforceable in accordance with its terms, the parties agree that the courtjudicially making such determination may modify the provision in a mannerconsistent with its objectives such that it is enforceable, and/or to deletespecific words or phrases, and in its modified form, such provision will thenbe enforceable and will be enforced.

 

**SECTION7.13****               Counterparts;Effectiveness. **  ThisAgreement may be executed in two or more counterparts, each of which will bedeemed an original but all of which together will constitute one and the sameinstrument.  This Agreement will becomeeffective when one or more counterparts have been signed by each of the partiesand delivered to the other parties.  For 

 

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purposesof determining whether a party has signed this Agreement or any documentcontemplated hereby or any amendment or waiver hereof, only a handwrittenoriginal signature on a paper document or a facsimile copy of such ahandwritten original signature shall constitute a signature, notwithstandingany law relating to or enabling the creation, execution or delivery of anycontract or signature by electronic means.

 

**SECTION7.14****               Construction. **  This Agreement has been freelyand fairly negotiated among the parties. If an ambiguity or question of intent or interpretation arises, thisAgreement will be construed as if drafted jointly by the parties and nopresumption or burden of proof will arise favoring or disfavoring any partybecause of the authorship of any provision of this Agreement.  Any reference to any law will be deemed torefer to such law as in effect on the date hereof and all rules and regulationspromulgated thereunder, unless the context requires otherwise.  The words “include,” “includes,” and“including” will be deemed to be followed by “without limitation.” Pronouns inmasculine, feminine, and neuter genders will be construed to include any othergender, and words in the singular form will be construed to include the pluraland vice versa, unless the context otherwise requires. The words “thisAgreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similarimport refer to this Agreement as a whole and not to any particular subdivisionunless expressly so limited. The parties intend that each representation,warranty, and covenant contained herein will have independent significance. Ifany party has breached any covenant contained herein in any respect, the fact thatthere exists another covenant relating to the same subject matter (regardlessof the relative levels of specificity) which the party has not breached willnot detract from or mitigate the fact that the party is in breach of the firstcovenant.

 

**SECTION7.15****               Attorneys’ Fees. **  If any dispute among anyparties arises in connection with this Agreement, the prevailing party in theresolution of such dispute in any action or proceeding will be entitled to anorder awarding full recovery of reasonable attorneys’ fees and expenses, costsand expenses (including experts’ fees and expenses and the costs of enforcingthis Section 7.15) incurred in connection therewith, including courtcosts, from the non-prevailing party.

 

**SECTION7.16****               Brokerage. **  Each party hereto willindemnify and hold harmless the others against and in respect of any claim forbrokerage or other commissions relative to this Agreement or to thetransactions contemplated hereby, based in any way on agreements, arrangementsor understandings made or claimed to have been made by such party with anythird party.

 

**SECTION7.17****               Adjustments forStock Splits, Etc. **  Wherever in this Agreement there is areference to a specific number of shares of the Company’s capital stock of anyclass or series, then, upon the occurrence of any subdivision, combination orstock dividend of such class or series of stock, the specific number of sharesso referenced in this Agreement will automatically be proportionally adjustedto reflect the effect of such subdivision, combination or stock dividend on theoutstanding shares of such class or series of stock.

 

**SECTION7.18****               Aggregation ofStock. **  Allshares of Common Stock owned or acquired by the Purchaser or its Affiliatedentities or persons (assuming full conversion, exchange and exercise of allconvertible, exchangeable and exercisable securities into Common 

 

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Stock) shall be aggregatedtogether for the purpose of determining the availability of any right under thisAgreement.

 

**SECTION7.19****               Certain DefinedTerms. **  Asused in this Agreement, the following terms shall have the following meanings(such meanings to be equally applicable to both the singular and plural formsof the terms defined):

 

“***Affiliate***” means, withrespect to any Person, (i) any other Person of which securities or otherownership interests representing more than fifty percent (50%) of the votinginterests are, at the time such determination is being made, owned, Controlledor held, directly or indirectly, by such Person, or (ii) any other Personwhich, at the time such determination is being made, is Controlling, Controlledby or under common Control with, such Person. As used herein, “***Control***”, whetherused as a noun or verb, refers to the possession, directly or indirectly, ofthe power to direct, or cause the direction of, the management or policies of aPerson, whether through the ownership of voting securities or otherwise.

 

“***Bridge Loan***” meansthat certain Secured Bridge Note in the principal amount of $500,000, datedJanuary 27, 2005, executed by the Company and delivered to the Purchaser.

 

“***Change of Control***”means (A) the acquisition at any time by a “person” or “group” (as such termsare used in Sections 13.(d) and 14.(d)(2) of the Exchange Act who or which arethe beneficial owners (as defined in Rule 13(d)-3 under the Exchange Act),directly or indirectly, of securities representing more than 50% of thecombined voting power of the election of directors of the then outstandingsecurities of the Company or any successor of the Company, unless theacquisition of securities resulting in such ownership by such person or grouphas been approved unanimously by the Board; (B) approval by the stockholders ofthe Company of any sale or disposition of substantially all of the assets orearning power of the Company; or (C) approval by the stockholders of theCompany of any merger, consolidation, or statutory share exchange to which theCompany is a party as a result of which the persons who were stockholdersimmediately prior to the effective date of the merger, consolidation or shareexchange shall have beneficial ownership of less than 50% of the combinedvoting power in the election of directors of the surviving corporation.

 

“***FDA***” means the UnitedStates Food and Drug Administration.

 

“***Fully Diluted Basis***”shall mean, at a given time, all shares of Common Stock, Preferred Stock andother capital securities of the Company issued and outstanding at such time,plus all such shares then issuable upon exercise of all then outstandingoptions, warrants and other convertible securities, whether or not suchoptions, warrants or convertible securities are actually exercisable orconvertible at such time, all calculated on an “as converted” to Common Stock basis.

 

“***Investors’ Rights Agreement***”shall mean the Investors’ Rights Agreement among the Company, the Purchaser andthe other parties thereto, in the form attached hereto as Exhibit C.

 

“***Lien***”**shall mean a mortgage, deed of trust,pledge, hypothecation, assignment, encumbrance, lien (statutory or otherwise,including, without limitation, any lien for taxes), 

 

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security interest, preference,participation interest, priority or security agreement or preferentialarrangement of any kind or nature whatsoever, including, without limitation,any conditional sale or other title retention agreement, any financing leasehaving substantially the same economic effect as any of the foregoing and thefiling of any document under the law of any applicable jurisdiction to evidenceany of the foregoing.

 

“***Material Adverse Change***”shall mean a material adverse change in the Company’s business, operations,assets, liabilities, prospects, properties, condition (financial or otherwise)or results of operations.

 

“***Person***” shall mean anindividual, corporation, trust, partnership, limited liability company, jointventure, unincorporated organization, government body or any agency orpolitical subdivision thereof, or any other entity.

 

“***Subsidiary***” shallmean, as to the Company, any corporation of which more than fifty percent (50%)of the outstanding stock having ordinary voting power to elect a majority ofthe Board of Directors of such corporation (irrespective of whether or not atthe time stock of any other class or classes of such corporation shall have ormight have voting power by reason of the happening of any contingency) is atthe time directly or indirectly owned by the Company, or by one or more of itssubsidiaries, or by the Company and one or more of its subsidiaries.

 

“***Transaction Documents***”shall mean this Agreement, the Warrant, and the Investors’ Rights Agreement.

 

**SECTION7.20****               Incorporation ofExhibits, Annexes and Schedules. **  Theexhibits, annexes and schedules identified in this Agreement are incorporatedherein by reference and made a part hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

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**SECURITIES PURCHASE AGREEMENT**

 

**Signature Page**

 

**IN WITNESS WHEREOF**, the Company and the Purchaser have executed this Securities PurchaseAgreement as of the day and year first above written.

 
|   | COMPANY:                                                          |
|--------|-------------------------------------------------------------------|
|   |                                                              |
|   | REFOCUS  GROUP, INC.                                              |
|   |                                                              |
|   |                                                              |
|   | By:                                                               | /s/  Terence A. Walts |   |
|   | Name:  Terence A. Walts                                           |
|   | Title:  President                                                 |
|   |                                                              |
|   |                                                              |
|   | PURCHASER:                                                        |
|   |                                                              |
|   | MEDCARE  INVESTMENT FUND III, LTD.                                |
|   |                                                              |
|   | By:  MEDCARE GP CORP, INC., a Texas  corporation, General Partner |
|   |                                                              |
|   |                                                              |
|   | By:                                                               | /s/  Thomas W. Lyles, Jr. |   |
|   |                                                              | Thomas  W. Lyles, Jr., President |
|        |                                                                   |  |  |  |  |

 

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