exv10w1



 





Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




BY AND AMONG




SOLAR POWER, INC.,




THE INVESTORS LISTED ON

THE SCHEDULE OF INVESTORS

ATTACHED HERETO AS EXHIBIT A,




AND




THE SHAREHOLDERS OF SOLAR POWER, INC.,

LISTED ON THE SCHEDULE

OF PARTICIPATING SHAREHOLDERS

ATTACHED HERETO AS EXHIBIT B.




DATED: DECEMBER ___, 2007




 









 






TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Article I DEFINITIONS	 	 	 2	 
	1.1
	 	Definitions	 	 	2	 
	 
	 	 	 	 	 	 
	Article II PURCHASE AND SALE	 	 	6	 
	2.1
	 	Closing	 	 	6	 
	2.2
	 	Closing Deliveries	 	 	6	 
	 
	 	 	 	 	 	 
	Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	7	 
	3.1
	 	Subsidiaries	 	 	7	 
	3.2
	 	Organization and Qualification	 	 	7	 
	3.3
	 	Authorization; Enforcement	 	 	7	 
	3.4
	 	No Conflicts	 	 	8	 
	3.5
	 	The Securities	 	 	8	 
	3.6
	 	Capitalization	 	 	8	 
	3.7
	 	SEC Reports; Financial Statements	 	 	9	 
	3.8
	 	Material Adverse Effect	 	 	9	 
	3.9
	 	Absence of Litigation	 	 	10	 
	3.10
	 	Compliance	 	 	10	 
	3.11
	 	Title to Assets	 	 	10	 
	3.12
	 	No General Solicitation; Placement Agents' Fees	 	 	10	 
	3.13
	 	No Integration	 	 	11	 
	3.14
	 	Private Placement	 	 	11	 
	3.15
	 	Eligibility for Registration	 	 	11	 
	3.16
	 	Listing and Maintenance Requirements	 	 	11	 
	3.17
	 	Registration Rights	 	 	11	 
	3.18
	 	Application of Takeover Protections	 	 	11	 
	3.19
	 	Disclosure	 	 	12	 
	3.20
	 	Acknowledgment Regarding Investors' Purchase of Securities	 	 	12	 
	3.21
	 	Patents and Trademarks	 	 	12	 
	3.22
	 	Insurance	 	 	13	 
	3.23
	 	Regulatory Permits	 	 	13	 
	3.24
	 	Transactions With Affiliates	 	 	13	 
	3.25
	 	Internal Accounting Controls	 	 	13	 
	3.26
	 	Sarbanes-Oxley Act	 	 	13	 
	3.27
	 	Foreign Corrupt Practices	 	 	13	 
	3.28
	 	Indebtedness	 	 	14	 
	3.29
	 	Employee Relations	 	 	14	 
	3.30
	 	Labor Matters	 	 	15	 
	3.31
	 	Environmental Laws	 	 	15	 
	3.32
	 	Subsidiary Rights	 	 	15	 
	3.33
	 	Tax Status	 	 	15	 






i









 





TABLE OF CONTENTS

(Cont.)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	3.34
	 	Regulation M Compliance	 	 	15	 
	3.35
	 	Disclosure Controls and Procedures	 	 	16	 
	 
	 	 	 	 	 	 
	Article IV REPRESENTATIONS AND WARRANTIES OF THE PARTICIPATING SHAREHOLDERS	 	 	16	 
	4.1
	 	Ownership of Capital Stock	 	 	16	 
	4.2
	 	Authority of the Participating Shareholders	 	 	16	 
	4.3
	 	Absence of Litigation	 	 	17	 
	4.4
	 	SEC Reports	 	 	17	 
	4.5
	 	No General Solicitation; Placement Agents' Fees	 	 	17	 
	 
	 	 	 	 	 	 
	Article V REPRESENTATIONS AND WARRANTIES OF THE INVESTORS	 	 	17	 
	5.1
	 	Organization; Authority	 	 	17	 
	5.2
	 	No Public Sale or Distribution	 	 	18	 
	5.3
	 	Investor Status	 	 	18	 
	5.4
	 	Experience of Such Investor	 	 	18	 
	5.5
	 	Access to Information	 	 	18	 
	5.6
	 	No Governmental Review	 	 	18	 
	5.7
	 	No Conflicts	 	 	19	 
	5.8
	 	Prohibited Transactions	 	 	19	 
	5.9
	 	Restricted Securities	 	 	19	 
	5.10
	 	Legends	 	 	19	 
	5.11
	 	No Legal, Tax or Investment Advice	 	 	19	 
	5.12
	 	Brokers or Finders	 	 	20	 
	 
	 	 	 	 	 	 
	Article VI OTHER AGREEMENTS OF THE PARTIES	 	 	20	 
	6.1
	 	Transfer Restrictions	 	 	20	 
	6.2
	 	Furnishing of Information	 	 	22	 
	6.3
	 	Integration	 	 	22	 
	6.4
	 	Reservation of Securities	 	 	22	 
	6.5
	 	Securities Laws Disclosure; Publicity	 	 	22	 
	6.6
	 	Use of Proceeds	 	 	23	 
	6.7
	 	Form D; Blue Sky Filings	 	 	23	 
	6.8
	 	Covenant Regarding No Offerings	 	 	23	 
	 
	 	 	 	 	 	 
	Article VII CONDITIONS	 	 	23	 
	7.1
	 	Conditions Precedent to the Obligations of the Investors	 	 	23	 
	7.2
	 	Conditions Precedent to the Obligations of the Company	 	 	24	 
	7.3
	 	Conditions Precedent to the Obligations of the Participating Shareholders	 	 	24	 
	 
	 	 	 	 	 	 
	Article VIII REGISTRATION RIGHTS	 	 	25	 
	8.1
	 	Registration Statement	 	 	25	 






ii









 




TABLE OF CONTENTS

(Cont.)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	8.2
	 	Registration Procedures	 	 	27	 
	8.3
	 	Registration Expenses	 	 	30	 
	8.4
	 	Indemnification	 	 	30	 
	8.5
	 	Dispositions	 	 	33	 
	8.6
	 	No Piggyback on Registrations	 	 	33	 
	8.7
	 	Piggy-Back Registrations	 	 	33	 
	 
	 	 	 	 	 	 
	Article IX MISCELLANEOUS	 	 	34	 
	9.1
	 	Termination	 	 	34	 
	9.2
	 	Fees and Expenses	 	 	34	 
	9.3
	 	Entire Agreement	 	 	34	 
	9.4
	 	Notices	 	 	34	 
	9.5
	 	Amendments; Waivers	 	 	35	 
	9.6
	 	Construction	 	 	35	 
	9.7
	 	Successors and Assigns	 	 	35	 
	9.8
	 	Persons Entitled to Benefit of Agreement	 	 	35	 
	9.9
	 	Governing Law; Venue; Waiver of Jury Trial	 	 	36	 
	9.10
	 	Survival	 	 	36	 
	9.11
	 	Execution	 	 	36	 
	9.12
	 	Severability	 	 	36	 
	9.13
	 	Rescission and Withdrawal Right	 	 	36	 
	9.14
	 	Replacement of Securities	 	 	37	 
	9.15
	 	Remedies	 	 	37	 
	9.16
	 	Payment Set Aside	 	 	37	 
	9.17
	 	Adjustments in Share Numbers and Prices	 	 	37	 
	9.18
	 	Independent Nature of Investors' Obligations and Rights	 	 	37	 
	 
	 	 	 	 	 	 
	EXHIBITS:
	 	 	 	 	 	 
	A
	 	Schedule of Investors	 	 	 	 
	B
	 	Schedule of Participating Shareholders	 	 	 	 
	C
	 	Instruction Sheet for Investors	 	 	 	 
	D-1
	 	Opinion of Company Corporate Counsel	 	 	 	 
	D-2
	 	Opinion of Company PRC Counsel	 	 	 	 
	D-3
	 	Opinion of Company Hong Kong Counsel	 	 	 	 
	E
	 	Plan of Distribution	 	 	 	 
	F
	 	Company Transfer Agent Instructions	 	 	 	 
	G
	 	Form of Warrant	 	 	 	 







iii











 





SECURITIES PURCHASE AGREEMENT




     SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of December ___, 2007, by
and among Solar Power, Inc., a California corporation with headquarters located at 1115 Orlando
Avenue, Roseville, California 95661 (the “Company”), the investors listed on the Schedule
of Investors attached hereto as Exhibit A (individually, an “Investor” and
collectively, the “Investors”), and the shareholders of the Company listed on the Schedule
of Participating Shareholders attached hereto as Exhibit B. (individually a
“Participating Shareholder” and collectively, the “Participating Shareholders”).



BACKGROUND




     A. The Company wishes to sell to the Investors, upon the terms and conditions stated in this
Agreement, an aggregate of                      shares (the “Company Shares”) of the common stock, par
value $0.0001 per share, of the Company (the “Common Stock”).



     B. The Participating Shareholders wish to sell to the Investors, upon the terms and conditions
stated in this Agreement, an aggregate of 300,000 shares of Common Stock held by such Participating
Shareholders as set forth on Exhibit B (the “Affiliate Shares”).



     C. Each Investor, severally and not jointly, wishes to purchase, upon the terms and conditions
stated in this Agreement (i) from the Company and the Participating Shareholders, that aggregate
number of shares of Common Stock set forth opposite such Investor’s name under the column entitled
“Common Shares” on the Schedule of Investors attached hereto as Exhibit A (which aggregate
amount for all Investors together shall be equal to the sum of the Affiliate Shares and the Company
Shares which is                      shares of Common Stock and shall collectively be referred to herein
as the “Common Shares”) and (ii) from the Company, the warrants, in substantially the form
attached hereto as Exhibit G (the “Warrants”) to acquire up to that number of
additional shares of Common Stock set forth opposite such Investor’s name under the column entitled
“Warrant Shares” on Exhibit A (the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants, collectively, the “Warrant Shares”).



     D. The Company and each Investor are executing and delivering this Agreement to provide for
the sale and purchase of the Company Shares in reliance upon the exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”),
and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the Securities Act.



     E. Each Participating Shareholder and each Investor are executing and delivering this
Agreement to provide for the sale and purchase of the Affiliate Shares in reliance upon Section
4(2) of the Securities Act.



     F. The Common Shares, the Warrants and the Warrant Shares issued pursuant to this Agreement
are collectively referred to herein as the “Securities.”



1









 





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



ARTICLE I

DEFINITIONS




     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:



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




          (b) “Affiliate Shares” has the meaning set forth in the preamble.




          (c) “Agent” has the meaning set forth in Section 3.12.




          (d) “Agreement” has the meaning set forth in the Preamble.




          (e) “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to remain closed.




          (f) “Closing” means the closing of the purchase and sale of the Securities pursuant to
Article II.




          (g) “Closing Date” means the date and time of the Closing and shall be on such date
and time as is mutually agreed to by the Company and each Investor.




          (h) “Company” has the meaning set forth in the Preamble.




          (i) “Company Counsel” means Weintraub Genshlea Chediak Law Corporation.




          (j) “Common Shares” has the meaning set forth in the Preamble.




          (k) “Common Stock” has the meaning set forth in the Preamble.




          (l) “Contingent Obligation” has the meaning set forth in Section 3.28.




          (m) “Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.




          (n) “Disclosure Materials” has the meaning set forth in Section 3.7.




          (o) “Effective Date” means the date that the Registration Statement is first declared
effective by the SEC.




2









 








          (p) “Effectiveness Period” has the meaning set forth in Section 8.1(b).




          (q) “8-K Filing” has the meaning set forth in Section 6.5.




          (r) “Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, The Nasdaq Global Select Market, The Nasdaq Global Market, The Nasdaq Capital Market or
the OTC Bulletin Board.




          (s) “Environmental Laws” has the meaning set forth in Section 3.31.




          (t) “Event” has the meaning set forth in Section 8.1(d).




          (u) “Event Payments” has the meaning set forth in Section 8.1(d).




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




          (w) “Excluded Events” has the meaning set forth in Section 8.1(d)(ii).




          (x) “Filing Date” means 20days after the Closing Date.




          (y) “GAAP” has the meaning set forth in Section 3.7.




          (z) “Hazardous Materials” has the meaning set forth in Section 3.31.




          (aa) “Indebtedness” has the meaning set forth in Section 3.28.




          (bb) “Indemnified Party” has the meaning set forth in Section 8.4(c).




          (cc) “Indemnifying Party” has the meaning set forth in Section 8.4(c).




          (dd) “Insolvent” has the meaning set forth in Section 3.8.




          (ee) “Intellectual Property Rights” has the meaning set forth in Section 3.21.




          (ff) “Investor” has the meaning set forth in the Preamble.




          (gg) “Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.




          (hh) “Losses” means any and all losses, claims, damages, liabilities, settlement costs
and expenses, including, without limitation, reasonable attorneys’ fees.




          (ii) “Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a
whole on a consolidated basis, or (ii) materially and adversely impair the Company’s ability to
perform its obligations under any of the Transaction Documents, provided, that none of the
following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) a
change in the market price or trading volume of the Common Stock or (ii) changes in general
economic conditions or changes affecting the industry in which the Company operates generally




3









 







(as opposed to Company-specific changes) so long as such changes do not have a
disproportionate effect on the Company and its Subsidiaries taken as a whole.




          (jj) “Material Permits” has the meaning set forth in Section 3.22.




          (kk) “Options” means any outstanding rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.




          (ll) “Participating Shareholder” has the meaning set forth in the preamble.




          (mm) “Person” means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, or joint stock company.




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




          (oo) “Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance upon Rule 430A, 430B
or Rule 430C promulgated under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement, and all other amendments and supplements to the Prospectus
including post-effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.




          (pp) “Registrable Securities” means the Common Shares and the Warrant Shares issued or
issuable pursuant to the Transaction Documents, together with any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization or similar event with
respect to the foregoing.




          (qq) “Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated by reference in
such registration statement.




          (rr) “Regulation D” has the meaning set forth in the Preamble.




          (ss) “Required Effectiveness Date” means the date which is the earliest of (i) if the
Registration Statement does not become subject to review by the SEC, (a) ninety (90) days after the
Closing Date or (b) five (5) Trading Days after the Company receives notification from the SEC that
the Registration Statement will not become subject to review and the Company fails to request to
accelerate the effectiveness of the Registration Statement, or (ii) if the Registration Statement
becomes subject to review by the SEC, one hundred seventy five (175) days after the Closing Date.




4









 








          (tt) “Rule 144,” “Rule 415,” “Rule 424,” “Rule 430A,”
“Rule 430B,” and “Rule 430C” means Rule 144, Rule 415, Rule 424, Rule 430A, Rule
430B, and Rule 430C respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the
SEC having substantially the same effect as such Rule.




          (uu)
“SEC” has the meaning set forth in the Preamble.




          (vv)
“SEC Reports” has the meaning set forth in Section 3.7.




          (ww)
“Securities” has the meaning set forth in the Preamble.




          (xx)
“Securities Act” has the meaning set forth in the Preamble.




          (yy)
“Shares” means shares of Common Stock.




          (zz)
“Short Sales” has the meaning set forth in Section 5.8.




          (aaa)
“Subsidiary” means any direct or indirect subsidiary of the Company.




          (bbb) “Trading Day” means (a) any day on which the Common Stock is listed or quoted or
traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted or
traded on its primary Trading Market, the any date on which the common Stock is listed or quoted or
traded on any other Eligible Market (or any respective successor thereto), or (c) if trading ceases
to occur on any Eligible Market (or any respective successor thereto), any Business Day.




          (ccc) “Trading Market” means The Nasdaq Capital Market or any other Eligible Market or
any national securities exchange, market or trading or quotation facility on which the Common Stock
is then listed or quoted.




          (ddd) “Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Warrants and the Transfer Agent Instructions.




          (eee) “Transfer Agent” means Computershare Trust Co., Inc. or any successor transfer
agent for the Company.




          (fff) “Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit F, executed by the Company
and delivered to and acknowledged in writing by the Transfer Agent.




          (ggg)
“Warrants” has the meaning set forth in the Preamble.




          (hhh)
“Warrant Shares” has the meaning set forth in the Preamble.








5









 








ARTICLE II

PURCHASE AND SALE




     2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing: the Company shall issue and sell, and the Participating Shareholders shall sell and
transfer, to each Investor, and each Investor shall, severally and not jointly, purchase from the
Company and the Participating Shareholders, such number of Common Shares set forth opposite such
Investor’s name on Exhibit A under the columns entitled “Common Shares”, and the Company
shall issue and sell the number of Warrants for the number of Warrant Shares, and each Investor
shall, severally and jointly, purchase from the Company such number of Warrants for the number of
Warrant Shares set forth opposite such Investor’s name on Exhibit A under the columns
entitled “Warrants” and “Warrant Shares,” for the price set forth opposite such Investor’s name on
Exhibit A hereto under the heading “Purchase Price.” The date and time of the Closing
shall be 11:00 a.m., New York City Time, on the Closing Date. The Closing shall take place at the
offices of the Company’s Counsel.



     2.2 Closing Deliveries.



          (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the
following:




               (i) one or more stock certificates (or copies thereof provided by the Transfer Agent),
containing the restrictive and other legends provided in Sections 6.1(b) and 6.1(c) hereof,
evidencing such number of Common Shares set forth opposite such Investor’s name on Exhibit
A hereto under the heading “Common Shares,” registered in the name of such Investor;



               (ii) a Warrant, issued in the name of such Investor, pursuant to which such Investor shall
have the right to acquire such number of Warrant Shares set forth opposite such Investor’s name on
Exhibit A hereto under the heading “Warrant Shares”;



               (iii) a legal opinion of Company Counsel, in the form of Exhibit D-1, executed by such
counsel and delivered to the Investors;



               (iv) a legal opinion of Hylands Law Firm, PRC counsel for the Company, in the form of
Exhibit D-2, executed by such counsel and delivered to the Investors; and



               (v) a legal opinion of Boughton Peterson Yong Anderson, Hong Kong counsel for the Company, in
the form of Exhibit D-3, executed by such counsel and delivered to the Investors.



          (b) At the Closing, each Participating Shareholder shall deliver a certificate or certificates
representing the number of Affiliate Shares set forth opposite such Participating Shareholder’s
name on Schedule B hereto, together with stock powers (or the equivalent) duly executed in blank,
together with such other documents as may be required to transfer to Investors good and marketable
title to such Affiliate Shares free and clear of all Liens, against payment of the relevant
purchase price therefor as described herein.




6









 








          (c) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
purchase price set forth opposite such Investor’s name on Exhibit A hereto under the
heading “Purchase Price” in United States dollars and in immediately available funds, by wire
transfer to an account designated in writing to such Investor by the Company for such purpose.




          (d) The Company shall pay to each Participating Shareholders the portion of the purchase price
for the Affiliate Shares sold by such Participating Shareholder within two (2) Business Days of the
Closing.




ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY




     Except as disclosed in the corresponding section of the Schedules, which Schedules shall be
deemed a part hereof, the Company hereby represents and warrants to the Investors and the Agent as
follows:



     3.1
Subsidiaries. The Company has no Subsidiaries other than those listed in Schedule
3.1 hereto. Except as disclosed in Schedule 3.1 hereto, the Company owns, directly or indirectly,
all of the capital stock or comparable equity interests of each Subsidiary free and clear of any
Lien and all the issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights.



     3.2 Organization and Qualification. Each of the Company and the Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite corporate or other legal
authority to own and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse Effect.



     3.3 Authorization; Enforcement. The Company has the requisite corporate authority to
enter into and to consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents to which it is a party by the Company
and the consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company and no further consent or
action is required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents to which it is a party has been (or upon delivery will be) duly executed by
the Company and is, or when delivered in accordance with the terms hereof, will constitute, the
valid and binding obligation of the Company enforceable



7









 







against the Company in accordance with its terms, except as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law
governing the availability of specific performance and other equitable remedies.



     3.4 No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party and the consummation by the Company of the
transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound, or affected, except to the
extent that such conflict, default or rights would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, or to its knowledge (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (including, assuming the
accuracy of the representations and warranties of the Investors set forth in Article V hereof and
the representations and warranties of the Participating Shareholder set forth in Article IV hereof,
federal and state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are subject, including all
applicable Trading Markets), or by which any property or asset of the Company or a Subsidiary is
bound or affected, except to the extent that such violation would not reasonably be expected to
have a Material Adverse Effect.



     3.5 The Securities. The Securities (including the Warrant Shares) are duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens and will not be subject
to preemptive or similar rights. The Company has reserved from its duly authorized capital stock
the maximum number of shares of Common Stock issuable upon exercise of the Warrants.



     3.6 Capitalization. The aggregate number of shares and type of all authorized, issued
and outstanding classes of capital stock, options and other securities of the Company (whether or
not presently convertible into or exercisable or exchangeable for shares of capital stock of the
Company) is set forth in Schedule 3.6 hereto. All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in compliance with
all applicable securities laws. Except as disclosed in Schedule 3.6 hereto, the Company does not
have outstanding any other options, warrants, script rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or entered into any agreement giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth on Schedule 3.6 hereto, and except
for customary adjustments as a result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by the Company (or



8









 







in any agreement providing rights to security holders) and the issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Investors) and will not result in a right of any holder of securities to
adjust the exercise, conversion, exchange or reset price under such securities. To the knowledge of
the Company, except as disclosed in the SEC Reports and any Schedules filed with the SEC pursuant
to Rule 13d-1 of the Exchange Act by reporting persons or in Schedule 3.6 hereto, no Person or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange
Act), or has the right to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common Stock.



     3.7 SEC Reports; Financial Statements. The Company has filed all reports required to
be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof. Such
reports required to be filed by the Company under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, together with any materials filed or furnished by the Company under the
Exchange Act, whether or not any such reports were required being collectively referred to herein
as the “SEC Reports” and, together with this Agreement and the Schedules to this Agreement,
the “Disclosure Materials”, on a timely basis or has received a valid extension of such
time of filing for any of the SEC Reports and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has made available to the Investors or their
respective representatives true, correct and complete copies of the SEC Documents not available on
the SEC’s EDGAR system. As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”), and fairly
present in all material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end
audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are included as part of
or identified in the SEC Reports, to the extent such agreements are required to be included or
identified pursuant to the rules and regulations of the SEC.



     3.8 Material Adverse Effect. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in Schedule 3.8 hereto, (i) there
has been no event, occurrence or development that, individually or in the aggregate, has had or
that could result in a Material Adverse Effect, (ii) neither the Company nor any Subsidiary has
incurred any material liabilities other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B) liabilities not required to
be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the SEC, (iii) the Company has not altered its method of accounting or changed
its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or
other property



9









 







to its stockholders, in their capacities as such, or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (except for repurchases by the
Company of shares of capital stock held by employees, officers, directors, or consultants pursuant
to an option to repurchase such shares upon the termination of employment or services), and (v) the
Company has not issued any equity securities to any officer, director or Affiliate, except pursuant
to current or previously existing Company stock-based plans. The Company has not taken any steps to
seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The Company is not as of the
date hereof, and after giving effect to the transactions contemplated hereby to occur at the
applicable Closing, will not be Insolvent (as defined below). For purposes of this Section 3.8,
“Insolvent” means (i) the present fair saleable value of the Company’s assets is less than
the amount required to pay the Company’s total Indebtedness (as defined in Section 3.28), (ii) the
Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured, (iii) the Company intends to incur or believes
that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) the
Company has unreasonably small capital with which to conduct the business in which it is engaged as
such business is now conducted and is proposed to be conducted.



     3.9 Absence of Litigation. Except as disclosed in Schedule 3.9, there is no action,
suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or investigation, before or by
any court, public board, government agency, or self-regulatory organization pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, have a Material Adverse Effect.



     3.10 Compliance. Except as described in Schedule 3.10, neither the Company nor any
Subsidiary, except in each case as would not, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect, (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received written notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any
governmental authority.



     3.11 Title to Assets. Neither the Company nor any Subsidiary owns any real property.
The Company and the personal property owned by them that is used in the business of the Company and
the Subsidiaries, in each case free and clear of all Liens, except for Liens that do not,
individually or in the aggregate, have or result in a Material Adverse Effect. Any real property
and facilities held under lease by the Company and the Subsidiaries are held by them under valid
and subsisting leases of which the Company and the Subsidiaries and, to the Company’s knowledge,
the other parties thereto, are in material compliance.



     3.12 No General Solicitation; Placement Agents’ Fees. Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the



10









 







offer or sale of the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commission (other than for persons
engaged by any Investor or its investment advisor) relating to or arising out of the issuance of
the Securities pursuant to this Agreement. The Company acknowledges that it has engaged Needham &
Company, LLC and Roth Capital Partners, LLC as its placement agents (the “Agents”) in
connection with the sale of the Securities. Other than the Agents, the Company has not engaged any
placement agent or other agent in connection with the sale of the Securities.



     3.13 No Integration. Neither the Company nor to its knowledge any of its Affiliates
nor, any Person acting on the Company’s behalf has, directly or indirectly, at any time within the
past six months, made any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the offer and sale by
the Company of the Securities as contemplated hereby or (ii) cause the offering of the Securities
pursuant to the Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any Trading Market. The Company is not required to be registered as,
and is not an Affiliate of, an “investment company” within the meaning of the Investment Company
Act of 1940, as amended. The Company is not required to be registered as, a United States real
property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act
of 1980.



     3.14 Private Placement. Assuming the accuracy of the representations and warranties of
the Investors contained in Article V of this Agreement and the compliance by the Investors with the
provisions set forth herein, it is not necessary, in connection with the issuance and sale of any
Securities, in the manner contemplated by the Transaction Documents, to register any Securities
under the Securities Act.



     3.15 Eligibility for Registration. The Company is eligible to register the Common
Shares and the Warrant Shares for resale by the Investors using Form SB-2 promulgated under the
Securities Act.



     3.16 Listing and Maintenance Requirements. The Company has not, in the twelve months
preceding the date hereof, received written notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is in compliance, in all
material respects, with all such listing and maintenance requirements.



     3.17 Registration Rights. Except as provided herein, the Company has not granted or
agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any
securities of the Company registered with the SEC or any other governmental authority that have not
been satisfied or waived.



     3.18 Application of Takeover Protections. Except as described in Schedule 3.18, there
is no control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s charter
documents or the laws of its state of incorporation that is or could become applicable to any of



11









 







the Investors as a result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without limitation, as a result
of the Company’s issuance of the Securities and the Investors’ ownership of the Securities.



     3.19 Disclosure. The Company confirms that neither it nor any of its officers,
directors or Affiliates, has provided any of the Investors or their agents or counsel with any
information that constitutes or might constitute material, nonpublic information (other than the
existence and terms of the issuance of Securities, as contemplated by this Agreement). The Company
understands and confirms that each of the Investors will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided by the Company to the
Investors regarding the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on the behalf of the Company are true and correct
in all material respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. To the Company’s knowledge, no event or
circumstance has occurred or information exists with respect to the Company or any of the
Subsidiaries or its or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed. The Company acknowledges and agrees that no
Investor makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those set forth in the Transaction Documents.



     3.20 Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that
each of the Investors is acting solely in the capacity of an arm’s length purchaser with respect to
the Transaction Documents and the transactions contemplated hereby and thereby. The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions contemplated hereby and
any advice given by any Investor or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and thereby is merely
incidental to the Investors’ purchase of the Securities. The Company further represents to each
Investor that the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company and its
representatives.



     3.21 Patents and Trademarks. To the Company’s knowledge, the Company and its
Subsidiaries own, or possess adequate rights or licenses to use, all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent applications, patent
rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual Property Rights”) necessary to conduct
their respective businesses as now conducted. Except as set forth in Schedule 3.21, none of the
Company’s Intellectual Property Rights have expired or terminated, or are expected to expire or
terminate, within three years from the date of this Agreement. The Company does not have any
knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of
others. Except as disclosed in Schedule 3.21, there is no claim, action or proceeding



12









 







being made or brought, or to the knowledge of the Company, being threatened, against the
Company or its Subsidiaries regarding its Intellectual Property Rights.



     3.22 Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses and location in which the Company and the Subsidiaries are engaged.



     3.23 Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports
(“Material Permits”), except where the failure to possess such Material Permits does not
have or could not reasonably be expected to result in, individually or in the aggregate, a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any written notice of
proceedings relating to the revocation or modification of any Material Permit.



     3.24 Transactions With Affiliates. Except as set forth in the Company’s SEC Reports,
none of the officers or directors of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries that would be required to be disclosed pursuant to Item 404 of
Regulation S-B (other than for ordinary course services as officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any such officer or director or, to the Company’s knowledge, any corporation, partnership,
trust or other entity in which any such officer or director has a substantial interest or is an
officer, director, trustee or partner.



     3.25 Internal Accounting Controls. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.



     3.26 Sarbanes-Oxley Act. The Company is in compliance in all respects with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by
the SEC thereunder, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.



     3.27 Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company, any director, officer, agent, employee or other Person acting on
behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt



13









 







Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic government official or
employee.



     3.28 Indebtedness. Except as disclosed in Schedule 3.28, neither the Company nor any
of its Subsidiaries (i) has any outstanding Indebtedness (as defined below) or (ii) is a party to
any contract, agreement or instrument relating to any Indebtedness. For purposes of this
Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness
for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase
price of property or services (other than trade payables entered into in the ordinary course of
business), (C) all reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to
in clauses (A) through (G) above; and (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of such liability will
be protected (in whole or in part) against loss with respect thereto.



     3.29 Employee Relations. Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or, to the Company’s knowledge, employs any member of a union.
The Company believes that its relations with its employees are as disclosed in the SEC Reports and
no disturbance by the Company’s employees exists or, to the Company’s knowledge, is imminent.
Except as disclosed in Schedule 3.29, no current executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified in writing the Company
or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or
otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the
knowledge of the Company or any such Subsidiary, no executive officer of the Company or any of its
Subsidiaries is in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract
or agreement or any restrictive covenant, and the



14









 







continued employment of each such executive officer does not subject the Company or any such
Subsidiary to any liability with respect to any of the foregoing matters.



     3.30 Labor Matters. The Company and its Subsidiaries are in compliance in all material
respects with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.



     3.31 Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all Environmental Laws (as hereinafter defined), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply
could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
The term “Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder.



     3.32 Subsidiary Rights. Except as set forth in Schedule 3.32, the Company or its
Subsidiaries have the unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities or ownership interest of the
Subsidiaries as owned by the Company or such Subsidiary.



     3.33 Tax Status. The Company and each of its Subsidiaries (i) has made or filed all
foreign, federal and state income and all other material tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such returns,
reports and declarations, and (iii) has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such
claim.



     3.34 Regulation M Compliance. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the Company, other
than,



15









 







in the case of clauses (ii) and (iii), compensation paid to the Agents in connection with the
placement of the Securities.



     3.35 Disclosure Controls and Procedures. The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 of the General Rules and Regulations under
the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls
and procedures have been designed to ensure that information required to be disclosed by the
Company and its Subsidiaries is accumulated and communicated to the Company’s management, including
the Company’s principal executive officer and principal financial officer by others within those
entities, such disclosure controls and procedures are effective.



ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF 

THE PARTICIPATING SHAREHOLDERS




     Each Participating Shareholder, severally and not jointly, hereby represents and warrants to
the Investors and the Agent as follows:



     4.1 Ownership of Capital Stock. Such Participating Shareholder owns beneficially and
of record the number of Affiliate Shares set forth opposite such Seller’s name on Exhibit B
attached hereto, free and clear of any and all Liens. Such Participating Shareholder shall use
such Participating Shareholder’s best efforts to collect the certificates for the Affiliate Shares
to be sold by such Participating Shareholder to the Investors hereunder and prepare them for
delivery to a custodian, if appropriate, endorsed in blank or with blank stock powers duly executed
with a signature appropriately guaranteed.



     4.2 Authority of the Participating Shareholders. Such Participating Shareholder has
full right, authority, power and legal capacity to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of such Participating
Shareholder pursuant to or as contemplated by this Agreement and to carry out the transactions
contemplated hereby and thereby. This Agreement, when executed and delivered by such Participating
Shareholder constitute, valid and binding obligations of such Participating Shareholder in
accordance with its respective terms. The execution, delivery and performance by such Participating
Shareholder of this Agreement (a) assuming the accuracy of the Investors’ representations and
warranties set forth in this Agreement, do not and will not violate or contravene any laws of the
United States, or any state or other jurisdiction applicable to such Participating Shareholder or
require such Participating Shareholder to obtain any approval, consent or waiver of, or to make any
filing with, any Person (governmental or otherwise); and (b) do not and will not result in a breach
of, constitute a default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which such Participating Shareholder is a party or by
which the property of such Participating Shareholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of such Participating Shareholder or of the Company
or any Subsidiary.



16









 





     4.3 Absence of Litigation. There is no claim, action, proceeding or investigation
pending, or to the best knowledge of such Participating Shareholder, threatened against, relating
to or affecting such Participating Shareholder before any court, arbitrator or administrative
governmental or regulatory authority or body, that if determined adversely to such Participating
Shareholder, would materially impair the ability or the obligation of such Participating
Shareholder to perform fully on a timely basis such Participating Shareholder’s obligations under
this Agreement.



     4.4 SEC Reports. Such Participating Shareholder has no knowledge of any material fact
or condition not set forth in the SEC Reports that has adversely affected, or may adversely affect,
the business, properties, business prospects, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, and the sale of the Common Shares proposed to be
sold by such Participating Shareholder is not prompted by any such knowledge.



     4.5 No General Solicitation; Placement Agents’ Fees. Neither such Participating
Shareholder, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. Such Participating Shareholder shall be
responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’
commission (other than for persons engaged by any Investor or its investment advisor) relating to
or arising out of the issuance of the Affiliate Shares to be sold by such Participating Shareholder
pursuant to this Agreement. Such Participating Shareholder acknowledges that the Company has
engaged Needham & Company, LLC and Roth Capital Partners, LLC as its placement agents (the
“Agents”) in connection with the sale of the Securities. Other than the Agents, such
Participating Shareholder has not engaged any placement agent or other agent in connection with the
sale of the Securities and, except as provided herein, has not incurred or become liable for any
broker’s commission or finder’s fee relating to or in connection with the transactions contemplated
by this Agreement.



ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS




     Each Investor hereby, as to itself only and for no other Investor, represents, warrants and
covenants to the Company and the Agents as follows:



     5.1 Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Investor of the Securities hereunder has been duly
authorized by all necessary corporate, partnership or other action on the part of such Investor.
This Agreement has been duly executed and delivered by such Investor and constitutes the valid and
binding obligation of such Investor, enforceable against it in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors rights generally, and (ii) the
effect of rules of law governing the availability of specific performance and other equitable
remedies.



17









 





     5.2 No Public Sale or Distribution. Such Investor is (i) acquiring the Common Shares
and the Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
upon exercise thereof, in the ordinary course of business for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution thereof, except pursuant
to sales registered under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws, and such Investor does not have a
present arrangement to effect any distribution of the Securities to or through any person or
entity; provided, however, that by making the representations herein, such Investor
does not agree to hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.



     5.3 Investor Status. At the time such Investor was offered the Securities, it was, and
at the date hereof it is, either (A) a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act or (B) an “accredited investor” as defined in Rule 501(a)(1), (2) or (3)
under the Securities Act. Such Investor is not a registered broker dealer registered under Section
15(a) of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of
being a broker dealer. Except as otherwise disclosed in writing to the Company on Exhibit C-2
(attached hereto) on or prior to the date of this Agreement, such Investor is not affiliated with
any broker dealer registered under Section 15(a) of the Exchange Act, or a member of the NASD, Inc.
or an entity engaged in the business of being a broker dealer.



     5.4 Experience of Such Investor. Such Investor, either alone or together with its
representatives has such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Investor understands
that it must bear the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such investment.



     5.5 Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public information) about the
Company and the Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or
affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties contained in the Transaction Documents.



     5.6 No Governmental Review. Such Investor understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the



18









 







investment in the Securities nor have such authorities passed upon or endorsed the merits of
the offering of the Securities.



     5.7 No Conflicts. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of such Investor, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Investor is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to such Investor, except in the case of clauses (ii) and
(iii) above, for such that are not material and do not otherwise affect the ability of such
Investor to consummate the transactions contemplated hereby.



     5.8 Prohibited Transactions. Neither such Investor, directly or indirectly, nor any
Person acting on behalf of or pursuant to any understanding with such Investor, has engaged in any
purchases or sales of any securities, including any derivatives, of the Company (including, without
limitation, any Short Sales (as defined below) involving any of the Company’s securities) (a
“Transaction”) since the time that such Investor was first contacted by the Company, either
Agent or any other Person regarding the investment in the Company contemplated hereby. Such
Investor covenants that neither it nor any Person acting on its behalf or pursuant to any
understanding with such Investor will engage, directly or indirectly, in any Transactions prior to
the time the transactions contemplated by this Agreement are publicly disclosed. “Short
Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements
(including on a total return basis), and sales and other transactions through non-U.S.
broker-dealers or foreign regulated brokers.



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



     5.10 Legends. It is understood that, except as provided in Section 6.1(b) of this
Agreement, certificates evidencing such Securities may bear the legend set forth in Section 6.1(b).



     5.11 No Legal, Tax or Investment Advice. Such Investor understands that nothing in
this Agreement or any other materials presented by or on behalf of the Company to the Investor in
connection with the purchase of the Securities constitutes legal, tax or investment advice. Such
Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Securities. Such Investor
understands that the Agents have acted solely as the agent of the Company in this placement of the
Securities, and that the Agents make no representation or warranty with regard to the merits of
this transaction or as to the accuracy of any information such Investor may have received in



19









 







connection therewith. Such Investor acknowledges that it has not relied on any information or
advice furnished by or on behalf of the Agents.



     5.12 Brokers or Finders. Such Investor has not engaged any brokers, finders or agents,
and neither the Company nor any Investor has, nor will, incur, directly or indirectly, as a result
of any action taken by each Investor, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with the transactions contemplated hereby.



ARTICLE VI

OTHER AGREEMENTS OF THE PARTIES




     6.1 Transfer Restrictions.



          (a) The Investors covenant that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements of, the Securities
Act or pursuant to an available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the Company, or
pursuant to Rule 144(k), the Company may require the transferor to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register on the books of the Company and with the Transfer Agent, without any such
legal opinion, except to the extent that the Transfer Agent requests such legal opinion, any
transfer of Securities by an Investor to an Affiliate of such Investor, provided that the
transferee certifies to the Company that it is an “accredited investor” as defined in Rule 501(a)
under the Securities Act and provided that such Affiliate does not request any removal of any
existing legends on any certificate evidencing the Securities.




          (b) The Investors agree to the imprinting, so long as is required by this Section (b), of the
following legend on any certificate evidencing any of the Securities:





THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.



20









 





     Certificates evidencing Securities shall not be required to contain such legend or any other
legend (i) following the Effective Date upon written request of an Investor which request confirms
in writing that such Investor will comply with the provisions of Section 6.1(a); (ii) following any
sale of such Securities pursuant to an effective registration statement (including the Registration
Statement) covering the resale of the Securities, (iii) following any sale of such Securities
pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the documents
upon which the legal opinion is based) reasonably acceptable to the Company to the effect that the
Securities can be sold under Rule 144, (iv) if the holder provides the Company with a legal opinion
(and the documents upon which the legal opinion is based) reasonably acceptable to the Company to
the effect that the Securities are eligible for sale under Rule 144(k), or (v) if the holder
provides the Company with a legal opinion (and the documents upon which the legal opinion is based)
reasonably acceptable to the Company to the effect that the legend is not required under applicable
requirements of the Securities Act (including controlling judicial interpretations and
pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to issue the
notice included in the Transfer Agent Instructions to the Transfer Agent on the Effective Date.
Following the Effective Date or at such earlier time as a legend is no longer required for certain
Securities, the Company will no later than three Trading Days following the delivery by an Investor
to the Company or the Transfer Agent of (i) a legended certificate representing such Securities,
and (ii) an opinion of counsel to the extent required by Section 6.1(a), deliver or cause to be
delivered to such Investor a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this
Section 6.1(b).



     If within three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i) and (ii) of the paragraph immediately above, the
Company shall fail to issue and deliver to such Investor a certificate representing such Securities
that is free from all restrictive and other legends, and if on or after such Trading Day the
Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Investor of shares of Common Stock that the Investor anticipated
receiving from the Company without any restrictive legend (the “Covering Shares”), then the
Company shall, within three Trading Days after the Investor’s request, pay cash to the Investor in
an amount equal to the excess (if any) of the Investor’s total purchase price (including brokerage
commissions, if any) for the Covering Shares, over the product of (A) the number of Covering
Shares, times (B) the closing bid price on the date of delivery of such certificate and the other
documents as specified in Clauses (i) and (ii) of the paragraph immediately above.



          (c) The Company will not object to and shall permit (except as prohibited by law) an Investor
to pledge or grant a security interest in some or all of the Securities in connection with a bona
fide margin agreement or other loan or financing arrangement secured by the Securities, and if
required under the terms of such agreement, loan or arrangement, the Company will not object to and
shall permit (except as prohibited by law) such Investor to transfer pledged or secured Securities
to the pledgees or secured parties. Except as required by law, such a pledge or transfer would not
be subject to approval of the Company, no legal opinion of the pledgee, secured party or pledgor
shall be required in connection therewith, and no notice shall be required of such pledge. Each
Investor acknowledges that the Company shall not be responsible for any pledges relating to, or the
grant of any security interest in, any of the




21









 







Securities or for any agreement, understanding or arrangement between any Investor and its
pledgee or secured party. At the appropriate Investor’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably
request in connection with a pledge or transfer of the Securities, including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders
thereunder. Provided that the Company is in compliance with the terms of this Section 6.1(c), the
Company’s indemnification obligations pursuant to Section 6.4 shall not extend to any Proceeding or
Losses arising out of or related to this Section 6.1(c)




     6.2
Furnishing of Information. Until the date that all Investors owning Shares or
Warrant Shares may sell all of them under Rule 144(k) of the Securities Act (or any successor
provision), the Company covenants to use its best efforts to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. The Company further covenants that
it will take such further action as any holder of Securities may reasonably request to satisfy the
provisions of this Section 6.2.



     6.3 Integration. The Company shall not, and shall use its best efforts to ensure that
no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any Trading Market.



     6.4 Reservation of Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance of the Common Shares and Warrant Shares in such
amount as may be required to fulfill the Company’s obligations to issue such Common Shares and
Warrant Shares. In the event that at any time the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations to issue such Common Shares and Warrant
Shares, the Company shall use reasonable best efforts to take such actions as may be required to
increase the number of authorized shares.



     6.5 Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release reasonably acceptable to the Investors disclosing all material terms of the transactions
contemplated hereby. On the Closing Date, the Company shall file a Current Report on Form 8-K with
the SEC (the “8-K Filing”) describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to 8-K Filing the Transaction Documents (including
the schedules and the names, and addresses of the Investors and the amount(s) of Securities
respectively purchased) and the form of Warrants, in the form required by the Exchange Act.
Thereafter, the Company shall timely file any filings and notices required by the SEC or applicable
law with respect to the transactions contemplated hereby and provide copies thereof to the
Investors promptly after filing. Except as herein provided, the Company shall not publicly disclose
the name of any Investor, or include the name of any Investor in any press release without the
prior written consent of such Investor, unless otherwise required by law. The Company shall not,
and shall cause each of its Subsidiaries and its and each of their respective



22









 







officers, directors, employees and agents not to, provide any Investor with any material
nonpublic information regarding the Company or any of its Subsidiaries from and after the issuance
of the above referenced press release without the express written consent of such Investor.



     6.6 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital and general corporate purposes. The Company also may use a portion
of the net proceeds, currently intended for general corporate purposes, to acquire or invest in
technologies, products or services that complement its business, or properties and buildings in
which to conduct its business. Pending these uses, the Company intends to invest the net proceeds
from this offering in short-term, interest-bearing, investment-grade securities, or otherwise
pursuant to the Company’s customary investment policies.



     6.7 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof, promptly upon
request of any Investor. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale
to the Investors at the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request of any Investor.



     6.8 Covenant Regarding No Offerings; Lock-Up.



          (a) For a period of ninety (90) days from the effective date of the Registration Statement,
the Company shall not, without the prior written consent of Needham & Company, LLC, not be
unreasonably withheld, sell, contract to sell or otherwise dispose of or issue any securities of
the Company, except (i) in connection with the Company’s 2006 Equity Incentive Plan; (ii) upon
exercise of the Warrants; (iii) in connection with any acquisition by the Company, whether through
an acquisition of stock or a merger of any business, assets or technologies the primary purpose of
which is not to raise equity capital; (iv) in connection with any other strategic transaction or
alliance the primary purpose of which is not to raise equity capital; and (v) upon conversion or
exercise of any Options which are outstanding on the date hereof.




          (b) The Company will cause its executive officers and directors not to dispose of any equity
securities of the Company for a period of ninety (90) days from the effective date of the
Registration Statement without the prior written consent of Needham & Company, LLC and will use its
best efforts to cause such shareholders to become subject to a lock-up arrangement reasonably
acceptable to Needham & Company, LLC containing such prohibitions.




ARTICLE VII

CONDITIONS




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



          (a) Representations and Warranties. The representations and warranties of the Company
and the Participating Shareholder contained herein shall be true and correct in all




23









 







material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing as though made on and as of such date;




          (b) Closing Deliveries. The Company shall have delivered or caused to be delivered the
closing deliveries specified in Section 2.2(a) and the Participating Shareholders shall have
delivered or caused to be delivered the closing deliveries specified in Section 2.2(b);




          (c) Performance. The Company, each Participating Shareholder and each other Investor
shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing; and




          (d) Common Stock. The Common Stock shall be authorized for quotation or trading on the
Trading Market, trading in the Common Stock shall not have been suspended for any reason, and all
the Common Shares and Warrant Shares shall be approved for listing or trading on the Trading
Market.




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



          (a) Representations and Warranties. The representations and warranties of the
Investors and Participating Shareholders contained herein shall be true and correct in all material
respects (except for those representations and warranties that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all respects) as of the date when made
and as of the Closing Date as though made on and as of such date;




          (b) Closing Deliveries. Each Investor shall have delivered or caused to be delivered
the closing deliveries specified in Section 2.2(c) and each Participating Shareholder shall have
delivered or caused to be delivered the closing deliveries specified in Section 2.2(b); and




          (c) Performance. The Investors and Participating Shareholders shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by the Investors
at or prior to the Closing.




     7.3 Conditions Precedent to the Obligations of the Participating Shareholders. The
obligation of the each Participating Shareholder to sell the Affiliate Shares at the Closing is
subject to the satisfaction or waiver by such Participating Sharheolder, at or before the Closing,
of each of the following conditions:



          (a) Representations and Warranties. The representations and warranties of the Company
and the Investors contained herein shall be true and correct in all material respects (except for
those representations and warranties that are qualified by materiality or Material Adverse Effect,
which shall be true and correct in all respects) as of the date when made and as of the Closing
Date as though made on and as of such date;




24









 








          (b) Closing Deliveries. Each Investor shall have delivered or caused to be delivered
the Closing Deliveries specified in Section 2.2(c) and the Company shall have delivered or caused
to be delivered to the Investors the closing deliveries specified in Section 2.2(a); and




          (c) Performance. The Investors, the Company and the other Participating Shareholder
shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Investors at or prior to the Closing.




ARTICLE VIII

REGISTRATION RIGHTS




     8.1 Registration Statement.



          (a) As promptly as possible, and in any event on or prior to the Filing Date, the Company
shall prepare and file with the SEC a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance with the Securities Act and the Exchange Act) and shall contain
(except if otherwise directed by the Investors or requested by the SEC) the Plan of Distribution in
substantially the form attached hereto as Exhibit E.




          (b) The Company shall use its reasonable best efforts to cause the Registration Statement to
be declared effective by the SEC as promptly as possible after the filing thereof, but in any event
prior to the Required Effectiveness Date, and shall use its reasonable best efforts to keep the
Registration Statement continuously effective under the Securities Act until the earlier of the
date that all Common Shares and Warrant Shares covered by such Registration Statement have been
sold or can be sold publicly under Rule 144(k) (the “Effectiveness Period”); provided that,
upon notification by the SEC that a Registration Statement will not be reviewed or is no longer
subject to further review and comments, the Company shall request acceleration of such Registration
Statement within five (5) Trading Days after receipt of such notice and file a prospectus
supplement for any Registration Statement, whether or not required under Rule 424 (or otherwise),
by 9:00 a.m. New York City time the day after the Effective Date. Notwithstanding the foregoing,
if the SEC, by written or oral comment or otherwise, limits the Company’s ability to request
effectiveness, or prohibits the effectiveness of, a Registration Statement with respect to any or
all the Registrable Securities pursuant to Rule 415, it shall not be a breach or default by the
Company under this Agreement and shall not be deemed a failure by the Company to use reasonable
best efforts. Any limitations on the number of Registrable Securities pursuant to Rule 415 will be
made pro rata to each Investor.




          (c) The Company shall notify the Investors in writing promptly (and in any event within two
Trading Days) after receiving notification from the SEC that the Registration Statement has been
declared effective.




25









 








          (d) Should an Event (as defined below) occur, then upon the occurrence of such Event, and on
every monthly anniversary thereof until the applicable Event is cured, the Company shall pay to
each Investor an amount in cash, as liquidated damages and not as a penalty, equal to one percent
(1.0%) of (i) the number of Common Shares held by such Investor as of the date of such Event,
multiplied by (ii) the purchase price paid by such Investor for such Common Shares then held;
provided, however, that the total amount of payments pursuant to this Section 6.1(d) shall not
exceed, when aggregated with all such payments paid to all Investors, ten percent (10%) of the
aggregate purchase price. The payments to which an Investor shall be entitled pursuant to this
Section 8.1(d) are referred to herein as “Event Payments.” Any Event Payments payable
pursuant to the terms hereof shall apply on a pro rated basis for any portion of a month prior to
the cure of an Event. In the event the Company fails to make Event Payments in a timely manner,
such Event Payments shall bear interest at the rate of one percent (1.0%) per month (prorated for
partial months) until paid in full. All pro rated calculations made pursuant to this paragraph
shall be based upon the actual number of days in such pro rated month.




     For such purposes, each of the following shall constitute an “Event”:



               (i) the Registration Statement is not filed on or prior to the Filing Date or is not declared
effective on or prior to the Required Effectiveness Date;



               (ii) except as provided for in Section 8.1(e) (the “Excluded Events”), after the
Effective Date, an Investor is not permitted to sell Registrable Securities under the Registration
Statement (or a subsequent Registration Statement filed in replacement thereof) for any reason
(other than the fault of such Investor) for five or more Trading Days (whether or not consecutive);



               (iii) the Common Stock is not listed or quoted, or is suspended from trading, on an Eligible
Market for a period of three Trading Days (which need not be consecutive Trading Days) during the
Effectiveness Period; or



               (iv) with respect to an Investor, the Company fails for any reason to deliver a certificate
evidencing any Securities to such Investor within five Trading Days after delivery of such
certificate is required pursuant to any Transaction Document or the exercise rights of the
Investors pursuant to the Warrants are otherwise suspended for any reason.



          (e) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive Trading
Days of continuous effectiveness of the initial Registration Statement filed and declared effective
pursuant to this Agreement, the Company may, by written notice to the Investors, suspend sales
under a Registration Statement after the Effective Date thereof and/or require that the Investors
immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of
any subsequent Registration Statement if the Company is engaged in a material merger, acquisition
or sale and the Board of Directors determines in good faith, by appropriate resolutions, that, as a
result of such activity, (A) it would be materially detrimental to the Company (other than as
relating solely to the price of the Common Stock) to maintain a Registration Statement at such time
or (B) it is in the best interests of the Company to suspend sales under such registration at such
time. Upon receipt of such notice, each Investor shall immediately discontinue any sales of
Registrable Securities pursuant to such registration




26









 







until such Investor is advised in writing by the Company that the current Prospectus or
amended Prospectus, as applicable, may be used. In no event, however, shall this right be exercised
to suspend sales beyond the period during which (in the good faith determination of the Company’s
Board of Directors) the failure to require such suspension would be materially detrimental to the
Company. The Company’s rights under this Section 8.1(e) may be exercised for a period of no more
than 20 Trading Days at a time and not more than three times in any twelve-month period, without
such suspension being considered as part of an Event Payment determination. Immediately after the
end of any suspension period under this Section 8.1(e), the Company shall take all necessary
actions (including filing any required supplemental prospectus) to restore the effectiveness of the
applicable Registration Statement and the ability of the Investors to publicly resell their
Registrable Securities pursuant to such effective Registration Statement.




          (f) The Company shall not, from the date hereof until the Effective Date of the Registration
Statement, prepare and file with the SEC a registration statement relating to an offering for its
own account or the account of others under the Securities Act of any of its equity securities,
other than any registration statement or post-effective amendment to a registration statement (or
supplement thereto) relating to the Company’s employee benefit plans registered on Form S-8.




     8.2 Registration Procedures. In connection with the Company’s registration obligations
hereunder, the Company shall:



          (a) Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, furnish via email to those Investors who
have supplied the Company with email addresses copies of all such documents proposed to be filed,
which documents (other than any document that is incorporated or deemed to be incorporated therein
by reference) will be subject to the review of such Investors. The Company shall reflect in each
such document when so filed with the SEC such comments regarding the Investors and the Plan of
Distribution as the Investors may reasonably and promptly propose no later than two Trading Days
after the Investors have been so furnished with copies of such documents as aforesaid.




          (b) (i) Subject to Section 8.18.1(e), prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously effective, as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file with the SEC
such additional Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) respond as promptly as reasonably possible, and in any event within 15 Trading Days
(except to the extent that the Company reasonably requires additional time to respond to accounting
or Rule 415 comments), to any comments received from the SEC with respect to the Registration
Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of
the Securities Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in accordance with
the intended methods of disposition




27









 







by the Investors thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.




          (c) Notify the Investors as promptly as reasonably possible and as simultaneously as
reasonably possible, and (if requested by any Investor) confirm such notice in writing no later
than three Trading Days thereafter, of any of the following events: (i) the SEC notifies the
Company whether there will be a “review” of any Registration Statement; (ii) the SEC comments in
writing on any Registration Statement; (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the SEC or any other Federal or state governmental authority
requests any amendment or supplement to any Registration Statement or Prospectus or requests
additional information related thereto; (v) the SEC issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for that purpose; (vi) the
Company receives notice of any suspension of the qualification or exemption from qualification of
any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any
Proceeding for such purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any Registration Statement or Prospectus or
other document contains any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.




          (d) Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as possible.




          (e) If requested by an Investor, provide such Investor and any counsel selected by a majority
of holders of the Securities (“Investor Counsel”), without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including financial statements and
schedules, and all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such documents with the SEC.




          (f) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Investors in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement
thereto to the extent permitted by federal and state securities laws and regulations.




          (g) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering all of the Registrable Securities;
(ii) take all steps necessary to cause such Common Shares to be approved for listing on each
Trading Market as soon as possible thereafter; (iii) provide to Investor Counsel evidence of such
listing; and (iv) during the Effectiveness Period, maintain the listing of such Common Shares on
each such Trading Market or another Eligible Market.





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          (h) Prior to any public offering of Registrable Securities, use reasonable best efforts to
register or qualify or cooperate with the selling Investors in connection with the registration or
qualification (or exemption from such registration or qualification) of such Registrable Securities
for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective for so long as required, but not to exceed the duration of the
Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable
to enable the disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be obligated
to file any general consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.




          (i) Cooperate with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this Agreement
and under law, of all restrictive legends.




          (j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly reasonably
possible, prepare a supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.




          (k) Cooperate with any reasonable due diligence investigation undertaken by the Investors in
connection with the sale of Registrable Securities, including, without limitation, by making
available documents and information; provided that the Company will not deliver or make available
to any Investor material, nonpublic information unless such Investor requests in advance in writing
to receive material, nonpublic information and agrees to keep such information confidential.




          (l) Comply with all applicable rules and regulations of the SEC under the Securities Act and
the Exchange Act applicable to the registration of the Securities, including, without limitation,
Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment
thereof, with the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Holders in
writing if, at any time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Holders are required to make
available a Prospectus in connection with any disposition of Registrable Securities and take such
other actions as may be reasonably necessary to facilitate the registration of the Registrable
Securities hereunder.




     Notwithstanding the foregoing, it shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to the Registrable



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Securities of any particular Investor or to make any Event Payments set forth in Section 8.1(c) to
such Investor that such Investor furnish to the Company the information specified in Exhibits
C-1, C-2 and C-3 hereto and such other information regarding itself, the
Registrable Securities and other shares of Common Stock held by it and the intended method of
disposition of the Registrable Securities held by it (if different from the Plan of Distribution
set forth on Exhibit E hereto) as shall be reasonably required to effect the registration
of such Registrable Securities and shall complete and execute such documents in connection with
such registration as the Company may reasonably request.




     8.3 Registration Expenses. The Company shall pay all fees and expenses incident to the
performance of or compliance with Article VI of this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without limitation those
related to filings with the SEC, any Trading Market, any required filing with the Financial
Industry Regulatory Authority by the Agents, and in connection with applicable state securities or
Blue Sky laws, (b) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees
and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading Market.



     8.4 Indemnification.



          (a) Indemnification by the Company. The Company shall, notwithstanding any termination
of this Agreement, indemnify and hold harmless each Investor, the officers, directors, partners,
members, agents and employees of each of them, each Person who controls any such Investor (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, partners, members, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to (i) any misrepresentation or breach of any representation or warranty
made by the Company in the Transaction Documents, (ii) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents, (iii) any cause of action, suit
or claim brought or made against such Indemnified Party (as defined in Section 8.4(c) below) by a
third party (including for these purposes a derivative action brought on behalf of the Company),
arising out of or resulting from (x) execution, delivery, performance or enforcement of the
Transaction Documents or (y) the status of Indemnified Party as holder of the Securities or (iv)
any untrue or alleged untrue statement of a material fact contained in the Registration Statement,
any Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in
any Company preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading, except to the extent, but only to the
extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions
are based solely upon information regarding such Investor furnished in writing to the Company by
such Investor for use therein, or to the extent that such information relates to such Investor or
such Investor’s proposed method of distribution of Registrable Securities and was reviewed and
expressly approved by such Investor expressly for use in the Registration Statement, or (B) with




30









 







respect to any prospectus, if the untrue statement or omission of material fact contained in such
prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if
such corrected prospectus was timely made available by the Company to the Holder, and the Holder
seeking indemnity hereunder was advised in writing not to use the incorrect prospectus prior to the
use giving rise to Losses.




          (b) Indemnification by Investors. Each Investor shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses arising solely out of
any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or
any form of prospectus, or in any amendment or supplement thereto, or arising out of or relating to
any omission of a material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading, but only to the extent that such
untrue statement or omission is contained in any information so furnished by such Investor in
writing to the Company specifically for inclusion in such Registration Statement or such Prospectus
or to the extent that (i) such untrue statements or omissions are based solely upon information
regarding such Investor furnished to the Company by such Investor in writing expressly for use
therein, or to the extent that such information relates to such Investor or such Investor’s
proposed method of distribution of Registrable Securities and was reviewed and expressly approved
by such Investor expressly for use in the Registration Statement (it being understood that the
information provided by the Investor to the Company in Exhibits C-1, C-2 and
C-3 and the Plan of Distribution set forth on Exhibit E, as the same may be
modified by such Investor, constitutes information reviewed and expressly approved by such Investor
in writing expressly for use in the Registration Statement), such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. In no event shall the liability of any
selling Investor hereunder be greater in amount than the dollar amount of the net proceeds (after
discounts and commissions but before expenses) received by such Investor upon the sale of the
Registrable Securities giving rise to such indemnification obligation.




          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that
it shall be finally determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.




     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel



31









 




shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and expenses of separate
counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties,
which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party
shall not be liable for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.




          (d) Contribution. If a claim for indemnification under Section 8.4(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to
the limitations set forth in Section 8.4(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided for in this Section
was available to such party in accordance with its terms.




     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 8.4(d) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 8.4(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds
actually received by such Investor from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that such Investor has otherwise been



32









 




required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.




     The indemnity and contribution agreements contained in this Section 8.4(d) are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.



     8.5 Dispositions. Each Investor agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement and shall sell its Registrable Securities in
accordance with the Plan of Distribution set forth in the Prospectus. Each Investor further agrees
that, upon receipt of a notice from the Company of the occurrence of any event of the kind
described in Sections 6.2(c)(v), (vi) or (vii), such Investor will discontinue disposition of such
Registrable Securities under the Registration Statement until such Investor is advised in writing
by the Company that the use of the Prospectus, or amended Prospectus, as applicable, may be used.
The Company may provide appropriate stop orders to enforce the provisions of this paragraph.



     8.6 No Piggyback on Registrations. Neither the Company nor any of its security holders
(other than the Investors in such capacity pursuant hereto, the Agents for any placement agent
warrants issued as compensation for this offering and any other placement agent receiving warrants
issued as compensation for this offering) may include securities of the Company in the Registration
Statement other than the Registrable Securities.



     8.7 Piggy-Back Registrations. If at any time during the Effectiveness Period there is not
an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Investor not then eligible to
sell all of their Registrable Securities under Rule 144 in a three-month period, written notice of
such determination and if, within ten days after receipt of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities such Investor requests to be registered. Notwithstanding the foregoing,
in the event that, in connection with any underwritten public offering, the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the Company shall be
obligated to include in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder as the underwriter
shall permit; provided, however, that (i) the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities in such
Registration Statement or are not contractually entitled to pro rata inclusion with the



33









 




Registrable
Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to inclusion of their
securities in such Registration Statement by reason of demand registration rights, in proportion to
the number of Registrable Securities or other securities, as applicable, sought to be included by
each such Investor or other holder. If an offering in connection with which an Investor is entitled
to registration under this Section 8.7 is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless otherwise agreed
by the Company, offer and sell such Registrable Securities in an underwritten offering using the
same underwriter or underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such underwritten offering and
shall enter into an underwriting agreement in a form and substance reasonably satisfactory to the
Company and the underwriter or underwriters. Upon the effectiveness the registration statement for
which piggy-back registration has been provided in this Section 8.7, any Event Payments payable to
an Investor whose Securities are included in such registration statement shall terminate.




ARTICLE IX

MISCELLANEOUS




     9.1 Termination. This Agreement may be terminated by the Company or any Investor, by
written notice to the other parties, if the Closing has not been consummated by the third Business
Day following the date of this Agreement; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).



     9.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and
issuance of their applicable Securities.



     9.3 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute and
deliver to the Investors such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.



     9.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section on a day that is not a Trading Day or later than



34









 




6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses, facsimile numbers and email
addresses for such notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing hereafter, in the same
manner, by any such Person.




     9.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in
a written instrument signed, in the case of an amendment, by the Company and each of the Investors
or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Investors under Article VI may be
given by Investors holding at least a majority of the Registrable Securities to which such waiver
or consent relates.



     9.6 Construction. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The
language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.



     9.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investors” and (iv) such
transfer shall have been made in accordance with the applicable requirements of this Agreement
and with all laws applicable thereto.



     9.8 Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and each Investor and their respective successors and permitted
assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give
any person, other than those persons mentioned in the preceding sentence or otherwise explicitly
mentioned in this Agreement, any legal or equitable right, remedy or claim under or in respect of
this Agreement, or any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive benefit of such persons
and for the benefit of no other person; except that each Indemnified Party is an intended third
party beneficiary of Section 8.4 and (in each case) may enforce the provisions of such
Section directly against the parties with obligations thereunder.



35









 





     9.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF
CALIFORNIA SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT
TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT
THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE
COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.



     9.10 Survival. The representations and warranties, agreements and covenants contained
herein shall survive the Closing.



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



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



     9.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,



36









 




whenever any Investor
exercises a right, election, demand or option owed to such Investor by the Company under a
Transaction Document and the Company does not timely perform its related obligations within the
periods therein provided, then, prior to the performance by the Company of the Company’s related
obligation, such Investor may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.




     9.14 Replacement of Securities. If any certificate or instrument evidencing any Securities
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for
any losses in connection therewith. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.



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



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



     9.17 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision,
dividend or distribution payable in shares of Common Stock (or other securities or rights
convertible into, or entitling the holder thereof to receive directly or indirectly shares of
Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a number of shares
or a price per share shall be amended to appropriately account for such event.



     9.18 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor



37









 




to purchase
Securities pursuant to this Agreement has been made by such Investor independently of any other
Investor and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other
Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein or
in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such Investor in connection
with making its investment hereunder and that no other Investor will be acting as agent of such
Investor in connection with monitoring its investment hereunder. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the rights arising out
of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any
other Investor to be joined as an additional party in any proceeding for such purpose.




[SIGNATURE PAGES TO FOLLOW]





38











 





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



	 	 	 	 	 
	 	SOLAR POWER, INC.

 	 
	 	By:	 	 
	 	Name: 	Stephen C. Kircher 	 
	 	Title:	CEO/President	 
	 	
Address for Notice:

1115 Orlando Avenue

Roseville, CA 95661-5247

Facsimile No.: (916) 721-0493

Telephone No.: (916) 745-0900

Attn: Alan Lefko 	 
	 
	 	With a copy to:

 	 
	 	Weintraub Genshlea Chediak
 	 
	 	400 Capitol Mall, 11th Floor

Sacramento, CA 95814

Facsimile:  (916) 446-1611

Telephone:  (916) 558-6000

Attn: David Adams 	 



39









 






	 	 	 	 	 	 	 
	 	 	PARTICIPATING SHAREHOLDERS	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Bradley J. Ferrell	 	 
	 
	 	 	 	 	 	 
	 

	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Facsimile No.:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Telephone No.:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Attn:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Facsimile:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Telephone:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Attn:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Jeffrey Winzeler	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Facsimile No.:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Telephone No.:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Attn:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Facsimile:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Telephone:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Attn:	 	 	 	 
	 

	 	 	 	 

	 	 






40









 






Investor Signature Page




     By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
December ___, 2007 (the “Purchase Agreement”) by and among Solar Power Inc., the
Participating Shareholders (as defined therein), and the Investors (as defined therein), as to the
number of shares of Common Stock and Warrants set forth below, and authorizes this signature page
to be attached to the Purchase Agreement or counterparts thereof.



	 	 	 	 	 
	 	NAME OF INVESTOR:

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	  	Address: 	 



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Telephone No:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	Facsimile:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	E-mail:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Number of Shares:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 	 	Number of Warrants:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 	 	Aggregate Purchase Price: $	 	 	 	 
	 

	 	 	 	 	 	 

	 	 







41











 





ADDENDUM NO. 1 TO SECURITIES PURCHASE AGREEMENT



This Addendum No. 1 to the Securities Purchase Agreement (the “Addendum”) is made as of December
___, 2007 by and between Solar Power, Inc., a California corporation (the “Company”), and the
investors listed on the Schedule of Investors (individually, an “Investor” and collectively, the
“Investors”) attached as Exhibit A to the Securities Purchase Agreement dated as of the date hereof
by and among the Company and the Investors (the “Agreement”). Capitalized terms not specifically
defined hereunder shall have the meanings assigned to them under the Agreement.



1. Per Share Purchase Price Protection. A new Section 6.9 is hereby added to the Agreement to
provide for adjustment in purchase price in the event the Company sells securities within a twelve
month period from the Closing at a per share price that is lower than the per share price paid by
the Investors pursuant to the Agreement. Section 6.9 shall read in its entirety as follows:




          “6.9 Anti-dilution.





     (a) If at any time after the Closing and prior to the first anniversary of the
Closing, the Company sells or issues or agrees to sell or issue Dilutive Shares (as defined
below) to any person or entity for consideration per share that is less than the Trigger
Price (as defined below) in effect immediately prior to such issuance or sale (each, a
“Dilutive Issuance”), the Company shall concurrently, at the option of the Company, either
(A) issue to Investor for no consideration a number of shares of Common Stock equal to (i)
Investor’s Adjusted Shares (as defined below) less (ii) Investor’s Original Shares (as
defined below) (the “Anti-Dilution Shares”), or (B) pay to Investor an amount in cash equal
to the product of (x) an amount equal to the Trigger Price immediately prior to such
Dilutive Issuance less the consideration per share paid in respect of such Dilutive Shares
multiplied by (y) Investor’s Original Shares. For purposes of this Section 6.9, such shares
shall be allocated a portion of the consideration of the initial issuance of Common Stock
pursuant to the Agreement. No fractional shares of Common Stock shall be issued pursuant to
this Section 6.9. The number of shares of Common Stock issued shall be rounded up or down to
the nearest integral number of whole shares of Common Stock. For the purposes of this
Section 6.9, whenever Dilutive Shares are issued for a consideration other than cash, either
in whole or in part, the consideration per share paid in respect of such Dilutive Shares
shall be the fair market value of such consideration as established in good faith by
resolution of the Company’s board of directors.




     (b) Definitions. For the purposes of this Section 6.9, for each Dilutive Issuance, the
following terms shall have the following meanings:




     (i) “Adjusted Shares” means the number of shares of Common Stock equal to the product
of (x) the Investor’s Original Shares, multiplied by (y) the quotient of (1) the Trigger
Price in effect immediately prior to a Dilutive Issuance, divided by (2) the Trigger Price
in effect immediately after such Dilutive Issuance. Any Adjusted Shares issued under this
Agreement shall be deemed to be “Shares.”



 









 






     (ii) “Common Equivalent Shares” means shares of Common Stock issuable upon conversion,
exercise or exchange of convertible securities or any rights, warrants or options to
subscribe for or purchase Common Stock or convertible securities.




     (iv) “Dilutive Shares” means Common Equivalent Shares issued and sold at a price less
than the Trigger Price after the Closing and prior to the first anniversary of the Closing
other than:




     (A) shares of Common Stock issued upon conversion of any warrant or option in
accordance with its terms, which warrant or option was outstanding as of the
Closing, and including warrants to be issued to the placement agents in connection
with the sale of the securities;




     (B) shares of Common Stock and options to purchase Common Stock granted
pursuant to the Company’s 2006 Equity and Incentive Plan, and shares of Common Stock
issued upon exercise of any such options;




     (C) shares of Common Stock, or Convertible Securities issued upon exercise,
conversion or exchange of any Convertible Securities existing as of the Closing;




     (D) shares of Common Stock (and/or convertible securities and the shares of
Common Stock issuable upon conversion, exchange or exercise of such convertible
securities) issued in connection with any stock split, stock dividend, reverse stock
split, recapitalization, reorganization or other distribution of shares of Common
Stock (each, a “Recapitalization Event”) that does not affect the relative economic
interests or rights of holders of Common Stock; and/or




     (E) Common Stock warrants or other convertible securities issued as part of
any offering registered under the Securities Act (“Public Offering”).




     For purposes of this Clause (iv), Common Equivalent Shares are deemed to be
issues and sold when convertible securities or rights, warrants or options to
subscribe for or purchase Common Stock or convertible securities are issued and
sold, and the price per share at which such Common Equivalent Shares are deemed to
be issued and sold shall equal the initial conversion, exercise, subscription,
purchase or exchange price per share, as the case may be, of Common Stock underlying
such convertible securities, rights, warrants or options.




     (v) “Original Shares” means (x) with respect to the first Dilutive Issuance, the total
number of Common Shares acquired by Investor pursuant to the Agreement (as adjusted for any
Recapitalization Event) and (y) with respect to each Dilutive Issuance thereafter, the total
number of Adjusted Shares immediately prior to such Dilutive Issuance (as adjusted for any
Recapitalization Event). For the avoidance of doubt, any Common Shares acquired by Investor
or an affiliate of Investor from either the Company or any other stockholder of the Company
under any contract other than this Agreement



 









 






shall in no event be included in the number of Original Shares under this Section 6.9
or any adjustment pursuant to this Section 6.9.




     (vi) “Trigger Price” shall initially mean (A) $2.60 per share (as adjusted for any
Recapitalization Event). In connection with each Dilutive Issuance, the Trigger Price shall
be adjusted downwards to equal the lowest price per Dilutive Share paid for the Dilutive
Shares issued or sold in such Dilutive Issuance. The Trigger Price shall also be
proportionately adjusted from time to time for any Recapitalization Event pursuant to which
securities of the Company are issued with respect to the Original Shares and/or Adjusted
Shares.




     (c) Notwithstanding anything herein to the contrary, if the Company has not obtained
shareholder approval, if required by the applicable rules and regulations of the principal
Trading Market (or any successor entity) upon which the Company’s shares of Common Stock are
listed or quoted, then the Company may not issue under this Section 6.9, in the aggregate,
in excess of (1) 19.999% of the number of shares of Common Stock outstanding as of the date
hereof, less (2) the sum of (a) the Common Shares issued at the Closing and any shares of
Common Stock issued at the closing of a subsequent financing plus (b) any Anti-Dilution
Shares (such number of shares, the “Issuable Maximum”). Each Investor shall be entitled to a
portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the aggregate
number of Common Shares issued and sold to such Investor on the Closing by (y) the aggregate
number of shares of Common Stock issued and sold by the Company on the closing of the
subsequent financing.




     (d) The Investors agree that any term or provision of the Agreement or this Addendum
may be modified by consent of those Investors who hold a majority of the outstanding Common
Shares issued pursuant to the Agreement at the time of such consent, which modification
shall be binding on all Investors.




 











 





ADDENDUM NO. 2 TO SECURITIES PURCHASE AGREEMENT



This Addendum No. 2 to the Securities Purchase Agreement (the “Addendum”) is made as of December
___, 2007 by and between Solar Power, Inc., a California corporation (the “Company”), and the
investors listed on the Schedule of Investors (individually, an “Investor” and collectively, the
“Investors”) attached as Exhibit A to the Securities Purchase Agreement dated as of the date hereof
by and among the Company and the Investors (the “Agreement”). Capitalized terms not specifically
defined hereunder shall have the meanings assigned to them under the Agreement.





	 	1.	 	The Agreement is hereby amended to remove all reference to Participating
Shareholders, as that term is defined in paragraph A in the Background of the
Agreement, and the Participating Shareholders will not offer or sell any securities
pursuant to the Agreement. Accordingly, the Participating Shareholders will not
deliver any shares of Common Stock at Closing, and will receive no portion of any
proceeds pursuant to the Agreement. Accordingly, Sections 2.2(b) and 2.2(d) of the
Agreement are deleted in their entirety, and all of Article IV is deleted, as well as
all other references to Participating Shareholders found elsewhere in the Agreement.
Notwithstanding any other term or provision in the Agreement, the Participating
Shareholders may be granted registration rights by the Company with respect to the
aggregate 300,000 shares identified in the Agreement prior to this Addendum, subject to
further restrictions as the Company’s Board of Directors may deem appropriate, in
exchange for their withdrawal from participation pursuant to the Agreement.
	 
	 	2.	 	All other terms and conditions of the Agreement, including Addendums thereto,
remain unchanged, and in full force and effect. No signatures other than the Company
and the Investors shall be required to effect the consummation of the transactions
contemplated by the Securities Purchase Agreement.