exv10w1






Exhibit 10.1




PURCHASE AGREEMENT




     THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 26th day of January, 2009 by and among
Oculus Innovative Sciences, Inc., a Delaware corporation (the “Company”), and Robert Burlingame
(the “Investor”).



Recitals




     WHEREAS, the Company and the Investor are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the provisions of Regulation D
(“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under
the Securities Act of 1933, as amended; and



     WHEREAS, the Investor wishes to purchase from the Company, and the Company wishes to sell and
issue to the Investor, upon the terms and conditions stated in this Agreement, (i) an aggregate of
796,813 shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), at
a purchase price of $1.255 per share, (ii) Warrants to purchase Common Stock as further described
below;



     NOW THEREFORE, In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:


1. Definitions. In addition to those terms defined above and elsewhere in this Agreement,
for the purposes of this Agreement, the following terms shall have the meanings set forth below:



“Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common
control with, such Person.



“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York
City are open for the general transaction of business.



“Company’s Knowledge” means the actual knowledge of the executive officers (as defined in
Rule 405 under the 1933 Act) of the Company, after due inquiry.



“Confidential Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans, and customer and
supplier lists and related information).



“Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.



“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities,
results of operations, condition (financial or otherwise), business, or prospects of the Company,
or (ii) the ability of the Company to perform its obligations under the Transaction Documents.



“Person” means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.



“Securities” means the Shares, the Warrants and the Warrant Shares.




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“Warrant Shares” means the shares of Common Stock issuable upon the exercise of the
Warrants.



“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and the
rules and regulations promulgated thereunder.



“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor statute,
and the rules and regulations promulgated thereunder.



2. Purchase and Sale of the Shares and Warrants. Subject to the terms and conditions of
this Agreement, on each Closing Date, the Investor shall purchase, and the Company shall sell and
issue to the Investor, the Shares and Warrants in the amounts set forth below.



The Investor will pay:





	 	•	 	$167,000 on January 26, 2009;
	 
	 	•	 	$167,000 on March 2, 2009; and
	 
	 	•	 	$666,000 no later than August 1, 2009.




The Company will issue to the Investor a total of 796,813 shares of Common Stock in three tranches
pro rata to the investment amounts paid by the Investor on each date the Investor provides funds to
the Company.



The Company will issue to the Investor Series A Warrants, in substantially the same form as Exhibit
A, to purchase a total of 500,000 shares of Common Stock at an exercise price of $1.87 per share.
The Series A Warrants shall be exercisable after six months and will have a five year term. The
Series A Warrants will also have a cashless feature in the event the shares of Common Stock
underlying the Series A Warrants are not registered. The Company will issue the Series A Warrants
in three tranches pro rata to the investment amounts paid by the Investor.



Each warrant will have a prohibition on exercise in the event that the holder of such warrant would
beneficially own over 9.99% of the Company’s stock. Additionally, each warrant will contain a
provision that prohibits exercise in the event that exercise will permit a “change of control” as
that term is interpreted by the applicable rules and interpretations of any market on which the
Company’s securities trade.



3. Closing. On the date of each investment, as identified in Section 2 (each, a “Closing”)
once the Company receives the designated payment in full and confirms that the other conditions to
closing specified herein have been satisfied or duly waived by the Investor, the Company shall
deliver to the Investor, a certificate or certificates, registered in such name or names as the
Investor may designate, representing the Shares and the Series A and Series B Warrants. Each
Closing of the purchase and sale of the Shares and Warrants shall take place at the Company’s
headquarters, 1129 North McDowell Blvd., Petaluma, California 94954, or at such other location and
on such other date as the Company and the Investor shall mutually agree.



4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investor the following:



4.1 Organization, Good Standing and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not had and could not reasonably be expected to have a Material Adverse
Effect.




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4.2 Authorization. The Company has full power and authority and has taken all requisite
action on the part of the Company, its officers, directors and stockholders necessary for (i) the
authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for
issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability, relating to or affecting creditors’ rights generally.



4.3 Valid Issuance. The Shares have been duly and validly authorized and, when issued and
paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and
shall be free and clear of all encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws. The Warrants have been duly and validly authorized. Upon the
due exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except for restrictions on
transfer imposed by applicable securities laws. The Company has reserved a sufficient number of
shares of Common Stock for issuance upon the exercise of the Warrants, free and clear of all
encumbrances and restrictions, except for restrictions on transfer imposed by applicable securities
laws.



4.4 Delivery of SEC Filings; Business. The Company has made available to the Investor,
through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on
Form 10-K for the fiscal year ended March 31, 2008 (the “10-K”), and all other reports filed by the
Company pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof
(collectively, the “SEC Filings”). The SEC Filings are the only filings required of the Company
pursuant to the 1934 Act for such period. The Company is engaged in all material respects only in
the business described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its Subsidiaries, taken as
a whole.



4.5 Use of Proceeds. The net proceeds of the sale of the Shares and the Warrants hereunder
shall be used by the Company for working capital and general corporate purposes.



4.6 No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person
acting on its behalf has conducted any general solicitation or general advertising (as those terms
are used in Regulation D) in connection with the offer or sale of any of the Securities.



4.7 Private Placement. The offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933 Act.



5. Representations and Warranties of the Investor. The Investor hereby represents and
warrants to the Company that:



5.1 Organization and Existence. The Investor is a validly existing corporation and has all
requisite corporate power and authority to invest in the Securities pursuant to this Agreement.



5.2 Authorization. The execution, delivery and performance by the Investor of the
Transaction Documents to which the Investor is a party have been duly authorized and will
constitute the valid and legally binding obligation of the Investor, enforceable against the
Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability, relating to or
affecting creditors’ rights generally.



5.3 Purchase Entirely for Own Account. The Securities to be received by the Investor
hereunder will be acquired for the Investor’s own account, not as nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the 1933 Act, and the
Investor has no present intention of selling, granting any




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participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to the Investor’s
right at all times to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by the Investor to hold the Securities for any period of time. The Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in a business that would require it
to be so registered.



5.4 Investment Experience. The Investor acknowledges that it can bear the economic risk and
complete loss of its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.



5.5 Disclosure of Information. The Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the
Securities. The Investor acknowledges that true and complete copies of the Company’s SEC Filings
have been made available to the Investor through the EDGAR system. Neither such inquiries nor any
other due diligence investigation conducted by the Investor shall modify, limit or otherwise affect
the Investor’s right to rely on the Company’s representations and warranties contained in this
Agreement.



5.6 Restricted Securities. The Investor understands 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 1933 Act
only in certain limited circumstances.



5.7 Legends. It is understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:



(a) “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.”



(b) If required by the authorities of any state in connection with the issuance of sale of the
Securities, the legend required by such state authority.



5.8 Accredited Investor. The Investor is an accredited investor as defined in Rule 501(a)
of Regulation D, as amended, under the 1933 Act.



5.9 No General Solicitation. The Investor did not learn of the investment in the Securities
as a result of any general solicitation or general advertising.



5.10 Brokers and Finders. No Person will have, as a result of the transactions contemplated
by the Transaction Documents, any valid right, interest or claim against or upon the Company, any
Subsidiary or the Investor for any commission, fee or other compensation pursuant to any agreement,
arrangement or understanding entered into by or on behalf of such Investor.



5.11 Prohibited Transactions. During the last thirty (30) days prior to the date hereof,
neither the Investor nor any Affiliate of the Investor which (a) had knowledge of the transactions
contemplated hereby, (b) has or shares discretion relating to the Investor’s investments or trading
or information concerning the Investor’s investments, including in respect of the Securities, or
(c) is subject to the Investor’s review or input concerning




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such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has, directly or indirectly, effected or agreed to effect any
short sale, whether or not against the box, established any “put equivalent position” (as defined
in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any other right
(including, without limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant part of its value from
the Common Stock or otherwise sought to hedge its position in the Securities (each, a “Prohibited Transaction”). The Investor
agrees that, prior to the termination of this Agreement, the Investor shall not, and shall cause
its Trading Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction. The
Investor acknowledges that the representations, warranties and covenants contained in this Section
5.11 are being made for the benefit of the Investor as well as the Company.



5.12 Reliance on Exemptions. The Investor understands that the Securities are being offered
and sold to in reliance upon specific exemptions from the registration requirements of the 1933
Act, the rules and regulations promulgated thereunder and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of the Investor set
forth herein in order to determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.



5.13 Investment Decision. The Investor understands that nothing in the Agreement or any
other materials presented to the Investor in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice. The Investor has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.



5.14 Risk of Loss. The Investor understands that its investment in the Securities involves
a significant degree of risk, including a risk of total loss of the Investor’s investment, and the
Investor has full cognizance of and understands all of the risk factors related to the Investor’s
purchase of the Securities, including, but not limited to, those set forth under or incorporated by
reference under the caption “Risk Factors” in the SEC Filings. The Investor understands that the
market price of the Common Stock can fluctuate and that no representation is being made as to the
future value of the Common Stock.



5.15 No Government Review. The Investor understands that no United States federal or state
agency or any other government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities.



5.16 Residency. The Investor’s principal executive office is in the jurisdiction set forth
immediately below the Investor’s name on the signature page attached hereto.



6. Conditions to Closing.



6.1 Conditions to the Investors’ Obligations. The obligation of the Investor to purchase
the Shares and the Warrants at the Closing is subject to the fulfillment to the Investor’s
satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be
waived by the Investor:



(a) The Company shall have delivered a Certificate or Certificates representing the number of
shares of Common Stock to be issued.



(b) The Company shall have delivered the Series A  warrants.



6.2 Conditions to Obligations of the Company. The Company’s obligation to sell and issue
the Shares and the Warrants at the Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the Closing Date of the following conditions, any of which may be waived by
the Company:




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(a) The Investor shall have delivered the investment amount described in Section 2 to the Company.



(b) The Investor shall have designated the number of shares of Common Stock to be represented on
each Certificate and provided the tax identification number, delivery address and any other
information the Company may reasonably request to issue the Certificates.



7. Covenants and Agreements of the Company.



7.1 Reservation of Common Stock. The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall from time to time
equal the number of shares sufficient to permit the exercise of the Warrants issued pursuant to
this Agreement in accordance with their respective terms.



7.2 No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investor under the Transaction Documents.



7.3 Compliance with Laws. The Company will comply in all material respects with all
applicable laws, rules, regulations, orders and decrees of all governmental authorities.



8. Miscellaneous.



8.1 Successors and Assigns. This Agreement may not be assigned by a party hereto without
the prior written consent of the Company or the Investor, as applicable. The provisions of this
Agreement shall inure to the benefit of and be binding upon the respective permitted successors and
assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.



8.2 Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed and transmitted via facsimile or by .pdf (portable
document format) via electronic mail, each of which shall be deemed an original.



8.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.



8.4 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed
given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the address
as follows, or at such other address as such party may designate by ten days’ advance written
notice to the other party:




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If to the Company:




Oculus Innovative Sciences, Inc.

1129 North McDowell Blvd.

Petaluma, California 94954

Attention: Jim Schutz, Vice President Corporate Development and General Counsel

Fax: (707) 283-0551




With a copy to:




Trombly Business Law

1320 Centre Street, Suite 202

Newton, MA 02459

Attention: Amy Trombly

Fax: (617) 243-0066




If to the Investor:




To the Address listed on Schedule A


8.5 Expenses. Each of the parties hereto shall pay its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby, including the
fees and expenses of its counsel and other experts. In the event that legal proceedings are
commenced by any party to this Agreement against another party to this Agreement in connection with
this Agreement or the other Transaction Documents, the party or parties which do not prevail in
such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing
party in such proceedings.



8.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the Investor. Any
amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of
any Securities purchased under this Agreement at the time outstanding, each future holder of all
such Securities, and the Company.



8.7 Severability. Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof but shall be interpreted
as if it were written so as to be enforceable to the maximum extent permitted by applicable law,
and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law,
the parties hereby waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.



8.8 Entire Agreement. This Agreement, including the Exhibits, and the other Transaction
Documents constitute the entire agreement among the parties hereof with respect to the subject
matter hereof and thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and thereof.



8.9 Further Assurances. The parties shall execute and deliver all such further instruments
and documents and take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.



8.10 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of California without
regard to the choice of law




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principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of California for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Agreement and the transactions
contemplated hereby. Service of process in connection with any such suit, action or proceeding may
be served on each party hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in
such court. Each party hereto irrevocably waives any objection to the laying of venue of any such
suit, action or proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an inconvenient forum.




[signature page follows]




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     IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.



	 	 	 	 	 
	 	OCULUS INNOVATIVE SCIENCES, INC.

 	 
	 	By:  	/s/ Hojabr Alimi	 
	 	 	Hojabr Alimi 	 
	 	 	President, Chief Executive Officer and

Chairman of the Board 	 
	 
	 	 	 
	 	By:  	
/s/ Robert Burlingame	 
	 	 	Robert Burlingame 	 
	 	 	 	 



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EXHIBIT A TO THE PURCHASE AGREEMENT



NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COMPANY COUNSEL THAT THIS WARRANT OR
SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED
IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS.




OCULUS INNOVATIVE SCIENCES, INC.




Form of Series A Warrants for the Purchase

of

Shares of Common Stock, Par Value $0.0001 per Share



No.                     

Issue Date:                                         





     THIS CERTIFIES that, for consideration, the receipt and sufficiency of which are hereby
acknowledged, and other value received,                      (the “Holder”) is entitled to subscribe for, and
purchase from, OCULUS INNOVATIVE SCIENCES, INC., a Delaware corporation (the “Company”), upon the
terms and conditions set forth herein, at any time or from time to time six months after the date
this warrant is issued (the “Initial Exercise Date”) until five years after the Issue Date (the
“Exercise Period”), up to an aggregate of                      shares of common stock, par value $0.0001 per
share (the “Common Stock”), of the Company. This Warrant is initially exercisable at a price of
$1.87 per share, subject to adjustment as described in this Warrant. The term “Exercise Price”
shall mean, depending on the context, the initial exercise price (as set forth above) or the
adjusted exercise price per share. The Company may, in its sole discretion, reduce the then
current Exercise Price to any amount or extend the Exercise Period, at any time. Such modifications
to the Exercise Price or Exercise Period may be temporary or permanent.



     As used herein, the term “this Warrant” shall mean and include this Warrant and any Warrant or
Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or
in part. Each share of Common Stock issuable upon the exercise hereof shall be hereinafter
referred to as a “Warrant Share.”



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     1. (a) Subject to the terms of this Warrant, this Warrant may be exercised at any time in
whole and from time to time in part, at the option of the Holder, on or after the Initial Exercise
Date and on or prior to the end of the Exercise Period. This Warrant shall initially be
exercisable in whole or in part for that number of fully paid and nonassessable shares of Common
Stock as indicated on the first page of this Warrant, for an exercise price per share equal to the
Exercise Price, by delivery to the Company at its office at 1129 North McDowell Blvd., Petaluma,
California 94954, or at such other place as is designated in writing by the Company, of:




     (i) a completed Election to Purchase, in the form set forth in Exhibit A,
executed by the Holder exercising all or part of the purchase rights represented by this
Warrant;




     (ii) this Warrant; and




     (iii) subject to Section 1(c) below, payment of an amount equal to the product of the
Exercise Price multiplied by the number of shares of Common Stock being purchased upon such
exercise in the form of, at the Holder’s option, (A) a certified or bank cashier’s check
payable to the Company, or (B) a wire transfer of funds to an account designated by the
Company.



     (b) As used herein:




     (i) “Fair Market Value” of a security shall mean, on any given day, the average of the
closing prices of such security’s sales on all securities exchanges on which such security
may at the time be listed on such day, or, if there has been no sales on any such exchange
on such day, the average of the highest bid and lowest asked prices on all such exchanges
at the end of such day, or, if on such day such security is not so listed, the average of
the representative bid and asked prices quoted on the over-the-counter bulletin board (the
“OTCBB”) as of 4:00 P.M., New York time, or, if on such day such security is not quoted on
the OTCBB, the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the Pink Sheet, LLC, or any similar
successor organization. If at any time such security is not listed on any securities
exchange or quoted on the OTCBB or the over-the-counter market, the “Fair Market Value”
shall be as determined by the Board of Directors of the Company in good faith, absent
manifest error.



     (c) Cashless Exercise. If at any time six months after the date of the issuance of
this Warrant there is no effective registration statement registering, or no current prospectus
available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be
exercised only at such time by means of a “cashless exercise” in which the Holder shall be entitled
to receive, without the payment by the Holder of any additional consideration, a certificate for
the number of Warrant Shares equal to the number as is computed using the following formula:



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X = Y (A-B)

     A




where





X = the number of Warrant Shares to be issued to the Holder pursuant to this
Warrant.




Y = the number of Warrant Shares covered by this Warrant with respect to which the
cashless exercise election is made pursuant to this Section 1(c).




A = the Fair Market Value (as defined above) of one Warrant Share.




B = the Exercise Price in effect at the time the cashless exercise election is made
pursuant to this Section 1(c).



     (d) Upon the exercise of this Warrant, the Company shall issue and cause promptly to be
delivered upon such exercise to, or upon the written order of, the Holder a certificate or
certificates for the number of full Warrant Shares to which such Holder shall be entitled, together
with cash in lieu of any fraction of a Warrant Share otherwise issuable upon such exercise.



     (e) If this Warrant is exercised in respect of less than all of the Warrant Shares evidenced
by this Warrant at any time prior to the end of the Exercise Period, a new Warrant evidencing the
remaining Warrant Shares shall be issued to the Holder, or its nominee(s), without charge therefor.



     2. The Exercise Price for the Warrants in effect from time to time shall be subject to
adjustment as follows:



     (a) If the Company, at any time while this Warrant is outstanding: (i) subdivides outstanding
shares of Common Stock into a larger number of shares, (ii) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares, or (iii) issues by
reclassification of shares of the Common Stock any shares of capital stock of the Company, then in
each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section 2(a) shall become
effective immediately after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.



     (b) If the Company, at any time while this Warrant is outstanding, shall distribute to all or
substantially all holders of Common Stock (and not to the Holder) evidence of its



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indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security other than the Common Stock, then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by a fraction of
which (i) the denominator shall be the Fair Market Value per share of Common Stock determined as of
the record date mentioned above and (ii) the numerator shall be such Fair Market Value per share of
Common Stock on such record date less the then per share fair market value at such record date of
the portion of such evidence of indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security other than the Common Stock so
distributed applicable to one outstanding share of the Common Stock, which fair market value shall
be reduced by the fair market value of consideration, if any, paid to the Company by holders of
Common Stock in exchange for such evidence of indebtedness or assets or rights or warrants so
distributed, in each case as such Fair Market Value is determined by the Board of Directors of the
Company in good faith. In either case, the adjustments shall be described in a statement provided
to the Holder of the portion of evidences of indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other than the Common
Stock so distributed or such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.




     (c) All calculations under this Section 2 shall be made to the nearest cent.



     (d) The Company shall not be required upon the exercise of this Warrant to issue any
fractional shares, but may pay the value thereof to the Holder in cash on the basis of the Fair
Market Value per Warrant Share.



     (e) No adjustment in the Exercise Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in such price.



     3. Unless registered, the Warrant Shares issued on exercise of the Warrants shall be subject
to a stop transfer order and the certificate or certificates representing the Warrant Shares shall
bear the following legend:




THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT THE SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED



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WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.



     4. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of
any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate, without charge, of like date,
tenor and denomination, in lieu of such Warrant or stock certificate.



     5. The Company shall not be obligated to issue any shares of Common Stock upon exercise of
this Warrant if the issuance of such shares of Common Stock would cause a breach or violation of
the Company’s obligations under any applicable rules or regulations of any market on which the
Company’s securities trade.



     6. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the
right to exercise any portion of this Warrant, to the extent that after giving effect to such
issuance after exercise, such Holder (together with such Holder’s affiliates, and any other person
or entity acting as a group together with such Holder or any of such Holder’s affiliates), would
beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder
and its affiliates shall include the number of shares of Common Stock issuable upon exercise of
this Warrant with respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by such Holder or any of its affiliates and (B) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding
sentence, beneficial ownership shall be calculated in accordance with Section 13(d) of the The
Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Beneficial Ownership Limitation provisions of this section may be
waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to
the Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock
upon exercise of this Warrant, and the provisions of this section shall continue to apply. Upon
such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such
9.99% limitation, the Beneficial Ownership Limitation may not be further waived by such Holder.
The provisions of this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this section to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial



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Ownership Limitation herein contained or to make changes or supplements necessary or desirable
to properly give effect to such limitation. The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.




     7. (a) The Holder shall not have, solely on account of its status as a holder of a Warrant,
any rights of a stockholder of the Company, either at law or in equity, or to any notice of
meetings of stockholders or of any other proceedings of the Company, except as provided in this
Warrant.



          (b) No provision hereof, in the absence of affirmative action by the Holder to receive Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise
to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of
Company, whether such liability is asserted by Company or by creditors of Company.




     8. All notices that are required or permitted hereunder shall be in writing and shall be
sufficient if personally delivered, sent by facsimile, or sent by registered or certified mail or
Federal Express or other nationally recognized overnight delivery service. Any notices shall be
deemed given upon the earlier of the date when received at, the day when delivered via facsimile or
the third day after the date when sent by registered or certified mail or the day after the date
when sent by Federal Express to, the address set forth below, unless such address is changed by
notice to the other party hereto:




if to the Company:




Oculus Innovative Sciences, Inc.

1129 North McDowell Blvd.

Petaluma, California 94954

Attention: Jim Schutz, Vice President Corporate Development and General Counsel

Fax: (707) 283-0551




if to the Holder: As set forth in the Warrant Register of the Company.



          The Company or the Holder by notice to the other party may designate additional or different
addresses as shall be furnished in writing by such party.




     9. The provisions of this Warrant may not be amended, modified or changed except by an
instrument in writing signed by each of the Company and the Holder.



     10. All the covenants and provisions of this Warrant by or for the benefit of the Company or
the Holder shall be binding upon and shall inure to the benefit of their respective permitted
successors and assigns hereunder.



     11. The validity, interpretation and performance of this Warrant shall be governed by the laws
of the State of California, as applied to contracts made and performed within such State, without
regard to principles of conflicts of law.



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     12. The provisions hereof have been and are made solely for the benefit of the Company and the
Holder, and their respective successors and assigns, and no other person shall acquire or have any
right hereunder or by virtue hereof.



     13. The headings in this Warrant are for convenience only and shall not limit or otherwise
affect the meaning hereof.



     14. If any term, provision, covenant or restriction of this Warrant is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties shall use their best efforts
to find and employ an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may be hereafter
declared invalid, illegal, void or unenforceable.



     15. This Warrant is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to herein and therein.
This Warrant supersedes all prior agreements and understandings between the parties with respect
to such subject matter.



     16. The Company agrees to take such further action and to deliver or cause to be delivered to
each other after the date hereof such additional agreements or instruments as any of them may
reasonably request for the purpose of carrying out this Warrant and the agreements and transactions
contemplated hereby and thereby.



     17. Each party hereto acknowledges and agrees that irreparable harm, for which there may be no
adequate remedy at law and for which the ascertainment of damages would be difficult, would occur
in the event any of the provisions of this Warrant were not performed in accordance with its
specific terms or were otherwise breached. Each party hereto accordingly agrees that each other
party hereto shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Warrant, or any agreement contemplated hereunder, and to enforce specifically
the terms and provisions hereof or thereof in any court of the United States or any state thereof
having jurisdiction, in each instance without being required to post bond or other security and in
addition to, and without having to prove the inadequacy of, other remedies at law.



[signature page follows]




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	 	Dated as of: [date]

 	 
	 	OCULUS INNOVATIVE SCIENCES, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Seal]




                                                              

Secretary




-17-









 





EXHIBIT A




ELECTION TO PURCHASE




          The undersigned hereby irrevocably elects to exercise Warrants represented by this Warrant and
to purchase the shares of Common Stock or other securities issuable upon the exercise of said
Warrants, and requests that Certificates for such shares be issued and delivered as follows:



PORTION OF WARRANT BEING EXERCISED: (check applicable box or fill in number of Warrant Shares):




	 	 	 	 	 
	 

	 	Entire Warrant o	 	 
	 
	 	 	 	 
	 

	 	                     Warrant Shares	 	 
	 
	 	 	 	 
	ISSUE TO:
	 	 	 	 
	 

	 	 (Name) 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Address, Including Zip Code)	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Social Security or Tax Identification Number)	 	 
	 
	 	 	 	 
	DELIVER TO:
	 	 	 	 
	 

	 	(Name) 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Address, Including Zip Code)	 	 






          In payment of the purchase price with respect to this Warrant exercised, the undersigned
hereby either (A) tenders payment of $          by (i) certified or bank cashiers check payable to the order of the
Company o; or (ii) a wire transfer of such funds to an account designated by the Company o (check
applicable box) or (B) hereby provides notice to the Company that the undersigned is exercising this Warrant pursuant to the Cashless Exercise set forth in Section 1(c) of the Warrant. If the number of Warrant Shares hereby exercised is fewer than all the Warrant
Shares represented by this Warrant, the undersigned requests that a new Warrant representing the
number of full Warrant Shares not exercised to be issued and delivered as set forth below:




	 	 	 	 	 
	Name of Holder or Assignee:
	 	 	 	 
	 

	 	(Please Print) 

	 	 






	 	 	 	 	 
	Address:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 





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Signature:                                                             
DATED:       
                                    , 20 ___

(Signature must conform in all respects to name of holder as specified on the fact of this Warrant)




Signature Guaranteed:                                                                      
                    





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