Exhibit
10.1

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of September 28, 2010, between ProUroCare Medical Inc., a Nevada corporation
(the “Company”), and the
purchaser identified on the signature page hereto (the “Purchaser”).

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.

     

    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 and the Purchaser agree as
follows:

     

    ARTICLE
I.

    DEFINITIONS

     

    1.1           Definitions.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:

     

    “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.

     

    “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

     

    “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 405 under the Securities Act.

     

    “Board of Directors”
means the board of directors of the Company.

     

    “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

     

    “Closing” means the
Initial Closing and each Subsequent Closing.

     

    “Closing Dates” means
the Initial Closing Date and each Subsequent Closing Date.

     

    “Commission” means the
United States Securities and Exchange Commission.

     

    “Common Stock” means
the common stock of the Company, par value $0.00001 per share, and any other
class of securities into which such securities may hereafter be reclassified or
changed.


    
      
         


      

      
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    “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

     

    “Company Counsel”
means Dorsey & Whitney LLP.

     

    “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

     

    “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

     

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

    


    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Shares issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities, (c) securities to be issued to Artann
Laboratories with respect to existing or  future development or
licensing agreements, (d) securities to be issued as consideration for existing
loans and loan guarantees and renewals thereof or conversions thereof into the
Company’s equity securities, and (e) securities issued pursuant to acquisitions
or strategic transactions approved by a majority of the disinterested directors
of the Company, provided that any such issuance shall only be to a Person (or to
the equityholders of a Person) which is, itself or through its subsidiaries, an
operating company or an owner of an asset in a business synergistic with the
business of the Company and shall provide to the Company additional benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in
securities.

     

    “Floor” shall mean
$1.25 (as the same may be proportionately adjusted in respect of any stock
split, stock dividend, combination, recapitalization or the like with respect to
the Common Stock).

     

    “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(aa).


    
      
         


      

      
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    “Initial Closing”
means the closing of the purchase and sale of the Common Stock pursuant to
Section 2.1.

     

    “Initial Closing Date”
means the date when all of the Transaction Documents and all other documents
required to be executed and delivered in connection with the Initial Closing
pursuant this Agreement have been executed and delivered by the applicable
parties thereto, and all conditions precedent to the Purchaser’s obligations to
purchase the Shares, and the Company’s obligations to issue and deliver the
Shares, have been satisfied or waived with respect to the Initial
Closing.

     

    “Initial Per Share Purchase
Price” means $0.625.

     

    “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

     

    “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

     

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

     

    “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

     

    “Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

     

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

     

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

     

    “Public Information
Failure” shall have the meaning ascribed to such term in Section
4.2(b).

     

    “Public Information Failure
Payments” shall have the meaning ascribed to such term in Section
4.2(b).

     

    “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.

     

    “Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

     

    “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
rule.


    
      
         


      

      
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    “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such rule.


     

    “SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

     

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

     

    “Shares” means the
shares of Common Stock issued or issuable to the Purchaser pursuant to this
Agreement (as the same may be proportionately adjusted in respect of any stock
split, stock dividend, combination, recapitalization or the like with respect to
the Common Stock).

     

    “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock). 

     

    “Subscription Amount”
means the aggregate amount to be paid for Shares at a Closing by the Purchaser
in United States dollars and in immediately available funds.

     

    “Subsequent Closing”
means each closing of the purchase and sale of the Common Stock pursuant to
Section 2.2.

     

    “Subsequent Closing
Date” means (i) for the first Subsequent Closing, the Trading Day
mutually agreed to by the parties but no more than thirty (30) days following
the date the Company’s ProUroScan System, a prostate imaging system, is granted
clearance by the U.S. Food and Drug Administration, and (ii) for the following
five (5) Subsequent Closings, the day that is thirty (30) days subsequent to the
previous Subsequent Closing Date (or, if such day is not a Trading Day, then the
first day thereafter that is a Trading Day), or, in each case, such later dates
when all conditions precedent to the Purchaser’s obligations to purchase the
Shares, and the Company’s obligations to issue and deliver the Shares, have been
satisfied or waived with respect to the Subsequent Closing, unless such
Subsequent Closing is cancelled pursuant to Section 2.5 or this Agreement is
earlier terminated pursuant to the terms hereof.

     

    “Subsequent Per Share
Purchase Price” shall be an amount equal to the daily volume weighted
average of actual trading prices (measured in hundredths of cents) of the Common
Stock on the Trading Market for the ten (10) consecutive Trading Days
immediately prior to a Subsequent Closing Date, as reported by Bloomberg
Financial Markets, multiplied by 0.50.

     

    “Subsequent Financing”
means from the date hereof until December 31, 2011, any issuance by the Company
or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash
consideration, Indebtedness (or a combination of units hereof).


    
      
         


      

      
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    “Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.

     

    “Trading Day” means a
day on which the principal Trading Market is open for trading.

     

    “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the New York Stock Exchange, the
NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the OTC Bulletin Board (or any successors to any of the
foregoing).

     

    “Transaction
Documents” means this Agreement and all schedules hereto and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.

     

    “Transfer Agent” means
Interwest Transfer Company, Inc., the current transfer agent of the Company,
with a mailing address of 1981 Murray Holladay Road, Suite 100, Salt Lake City,
UT 84117 and a facsimile number of (801) 277-3147, and any successor transfer
agent of the Company.

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1           Initial Closing.  On
the Initial Closing Date, upon the terms and subject to the conditions set forth
herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchaser
agrees to purchase, 1,400,000 Shares (as the same may be proportionately
adjusted in respect of any stock split, stock dividend, combination,
recapitalization or the like with respect to the Common Stock) at the Initial
Per Share Purchase Price. The Purchaser shall deliver to the Company via wire
transfer or a certified check of immediately available funds equal to the
Subscription Amount for the Initial Closing, and the Company shall deliver to
the Purchaser its Shares, and the Company and the Purchaser shall deliver the
other items set forth in Section 2.3 deliverable at the Initial
Closing.  Upon satisfaction or waiver of the covenants and conditions
set forth in Sections 2.3 and 2.4, the Initial Closing shall occur on the
Initial Closing Date remotely or at such location as the parties shall mutually
agree.

     

    2.2           Subsequent
Closings.

     

    (a)           At
the first Subsequent Closing following the Initial Closing, upon the terms and
subject to the conditions set forth herein (including but not limited to Section
2.5), the Company agrees to sell, and the Purchaser agrees to purchase, $750,000
of Shares at the Subsequent Per Share Purchase Price. The Purchaser shall
deliver to the Company via wire transfer or a certified check of immediately
available funds equal to the Subscription Amount for the first Subsequent
Closing, and the Company shall deliver to the Purchaser the applicable number of
Shares, and the Company and the Purchaser shall deliver the other items set
forth in Section 2.3 deliverable at such first Subsequent
Closing.  Upon satisfaction or waiver of the covenants and conditions
set forth in Sections 2.3 and 2.4, the first Subsequent Closing shall occur on
the first Subsequent Closing Date remotely or at such location as the parties
shall mutually agree.


    
      
         


      

      
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    (b)           For
each Subsequent Closing following the first Subsequent Closing, upon the terms
and subject to the conditions set forth herein (including but not limited to
Section 2.5), the Company agrees to sell, and the Purchaser agrees to purchase,
$300,000 of Shares at the Subsequent Per Share Purchase Price. The Purchaser
shall deliver to the Company via wire transfer or a certified check of
immediately available funds equal to the Subscription Amount for each such
Subsequent Closing, and the Company shall deliver to the Purchaser the
applicable number of Shares, and the Company and the Purchaser shall deliver the
other items set forth in Section 2.3 deliverable at each such Subsequent
Closing.  Upon satisfaction or waiver of the covenants and conditions
set forth in Sections 2.3 and 2.4, each such Subsequent Closing shall occur on
the applicable Subsequent Closing Date remotely or at such location as the
parties shall mutually agree.

     

    2.3           Deliveries.

     

    (a)           On
or prior to each Closing Date, the Company shall deliver or cause to be
delivered to the Purchaser the following:

     

    (i)           solely
on the Initial Closing Date, this Agreement duly executed by the
Company;

     

    (ii)          solely
on the Initial Closing Date, the opinion of Company Counsel, substantially in
the form of Exhibit
B hereto; and

     

    (iii)        an
officer’s certificate of the Company’s Chief Executive Officer or Chief
Financial Officer in substantially the form of Exhibit A attached
hereto; and

     

    (iv)        a
copy of the irrevocable instructions to the Transfer Agent instructing the
Transfer Agent to deliver, on an expedited basis, a certificate evidencing, with
respect to the Initial Closing Date, 1,400,000 Shares and, with respect to each
Subsequent Closing Date, a number of Shares equal to the applicable Subscription
Amount divided by the applicable Subsequent Per Share Purchase Price, in each
case registered in the name of the Purchaser.

     

    (b)           On
or prior to each Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company the following:

     

    (i)          solely
on the Initial Closing Date, this Agreement duly executed by the Purchaser;
and


    
      
         


      

      
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    (ii)           the
applicable Subscription Amount by wire transfer to the account as specified in
writing by the Company, and in each case less the amount due the Purchaser for
reimbursement of its expenses pursuant to Section 5.2 hereof.

     

    2.4           Closing
Conditions.

     

    (a)           The
obligations of the Company hereunder in connection with each Closing are subject
to the following conditions being met:

     

    (i)           the
accuracy on the Closing Date of the representations and warranties of the
Purchaser contained herein (unless as of a specific date therein);

     

    (ii)          all
obligations, covenants and agreements of the Purchaser required to be performed
at or prior to the Closing Date shall have been performed;

     

    (iii)         the
delivery by the Purchaser of the items set forth in Section 2.3(b) of this
Agreement; and

     

    (iv)         with
respect to any Subsequent Closing, the Subsequent Per Share Purchase Price shall
equal or exceed the Floor, as set forth in Section 2.5 of this
Agreement.

     

    (b)           The
obligations of the Purchaser hereunder in connection with each Closing are
subject to the following conditions being met:

     

    (i)           the
accuracy on the Closing Date of the representations and warranties of the
Company contained herein (unless as of a specific date therein);

     

    (ii)          all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;

     

    (iii)        the
delivery by the Company of the items set forth in Section 2.3(a) of this
Agreement;

     

    (iv)        with
respect to any Subsequent Closing, the Subsequent Per Share Purchase Price shall
equal or exceed the Floor, as set forth in Section 2.5 of this
Agreement;

     

    (v)         there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof;

     

    (vi)        the
Purchaser shall have completed its due diligence of the Company to its own
satisfaction;

     

    (vii)       the
purchase of Shares at a Subsequent Closing from the Company shall not cause the
Purchaser’s beneficial ownership of the Common Stock, calculated in accordance
with Rule 13d-3 promulgated by the Commission, to exceed 9.9%;
and


    
      
         


      

      
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    (viii)      from
the date hereof to each Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares at the Closing.

     

    2.5           The Floor; Limitation on
Purchases.

     

    (a)           
In the event that the Subsequent Per Share Purchase Price does not equal or
exceed the Floor, as calculated with respect to any Subsequent Closing Date,
then such Subsequent Closing will not occur.  In each such event,
there will be one fewer Subsequent Closing pursuant to this Agreement and the
amount invested by the Purchaser shall be reduced by the applicable Subscription
Amount for each such Subsequent Closing that does not occur because the Floor
has not been reached.  The failure to have a Subsequent Closing due to
failure to meet the Floor will not impact any other Subsequent
Closings.

     

    (b)           In
no event will any Subsequent Closing occur if, as a result of the Purchaser’s
purchase of Shares at such Subsequent Closing, the Purchaser’s beneficial
ownership of the Common Stock, calculated in accordance with Rule 13d-3
promulgated by the Commission, will exceed 9.9%.  In such event, the
Purchaser will (i) purchase only that number of Shares that will cause its
beneficial ownership, calculated in accordance with Rule 13d-3, to remain below
9.9%, and (ii) use its commercially reasonable best efforts to propose
alternative investment vehicles to fund the Company’s capital
requirements.  Nothing herein shall be deemed to be or construed to
impose any obligation on the part of the Purchaser to make any such alternative
investment.

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    3.1           Representations and
Warranties of the Company. Except as set forth in the SEC Reports or in
the section of the disclosure schedules dated the date hereof and delivered by
the Company to the Purchaser with respect to this Agreement (the “Disclosure
Schedules”) that corresponds to such section of this Section 3.1,
the Company hereby makes the following representations and warranties to the
Purchaser:


    
      
         


      

      
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    (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

     

    (b)           Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and 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 nor
default 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 conduct 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
reasonably be expected to have or result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

     

    (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.


    
      
         


      

      
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    (d)           No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Shares and
the consummation by it of the transactions contemplated hereby and thereby to
which it is a party 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, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, 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, or (iii) subject to the Required Approvals, conflict with or
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 federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not reasonably be expected to have or result in a Material
Adverse Effect.

     

    (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.4 of this Agreement, and
(ii) the filing of Form D with the Commission and such filings as are required
to be made under applicable state securities laws (collectively, the “Required
Approvals”).

     

    (f)           Issuance of the
Shares.  The Shares are duly authorized and, when issued and
paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents.


    
      
         


      

      
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    (g)           Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date
hereof.  The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to
the exercise of employee stock options under the Company’s stock option plans,
the issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or exercise of
Common Stock Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act.  No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the Shares,
there are no outstanding options, warrants, scrip 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 giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents.  The issuance and sale of the Shares will
not obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Purchaser) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under any of such securities.  All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities.  No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Shares.  There are no stockholders agreements, voting agreements or
other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company’s stockholders.

     

    (h)          SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, 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 Company has never been an issuer subject to Rule
144(i) under the Securities Act.  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
Commission 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”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the 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, immaterial,
year-end audit adjustments.


    
      
         


      

      
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    (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof or the date of a Subsequent Closing, as applicable: (i) there has
been no event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) 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 disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.  The Company does not
have pending before the Commission any request for confidential treatment of
information.  Except for the issuance of the Shares contemplated by
this Agreement or as set forth on Schedule 3.1(i), no
event, liability, fact, circumstance, occurrence or development has occurred or
exists, or is reasonably expected to occur or exist, with respect to the Company
or its Subsidiaries or their respective business, properties, operations, assets
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or
deemed made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made or deemed made.

     

    (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Shares or (ii) could, if there were an
unfavorable decision, reasonably be expected to have or result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.  The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.


    
      
         


      

      
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    (k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (l)           Compliance.  Neither
the Company nor any Subsidiary: (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 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 judgment, decree, or
order of any court, arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor matters, except in
each case as could not reasonably be expected to have or result in a Material
Adverse Effect.

     

    (m)           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, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

    (n)           Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance in all material respects.


    
      
         


      

      
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    (o)           Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”).  None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the date of this
Agreement.  Neither the Company nor any Subsidiary has received, since
the date of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as would not have a Material Adverse Effect.  To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.  The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     

    (p)           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 in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount from all
Closings.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

     

    (q)           Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.


    
      
         


      

      
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    (r)           Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of the date
hereof and as of the Closing Date.  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
GAAP 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. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     

    (s)           Certain
Fees.  Except for a fee payable to Lane Capital Markets, no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.

     

    (t)           Private Placement.
Assuming the accuracy of the Purchaser’s representations and warranties set
forth in Section 3.2, no registration under the Securities Act is required for
the offer and sale of the Shares by the Company to the Purchaser as contemplated
hereby.  The issuance and sale of the Shares hereunder does not
contravene the rules and regulations of the Trading Market.

     

    (u)           Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Shares, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to registration under the
Investment Company Act of 1940, as amended.

     

    (v)           Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company.


    
      
         


      

      
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    (w)           Listing and Maintenance
Requirements.  The Company has not, in the 12 months preceding
the date hereof, received 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, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

     

    (x)           Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchaser as a
result of the Purchaser 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 Shares and the
Purchaser’s ownership of the Shares.

     

    (y)           Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided the Purchaser or its
agents or counsel with any information that it believes constitutes or might
constitute material, non-public information.   The Company
understands and confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All of the disclosure furnished by or on behalf of the
Company to the Purchaser regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading.  The Company acknowledges and agrees that the
Purchaser does not make and has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.

     

    (z)           No Integrated
Offering. Assuming the accuracy of the Purchaser’s representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Shares to be integrated with prior offerings by the Company for purposes of (i)
the Securities Act which would require the registration of any such securities
under the Securities Act, or (ii) any applicable shareholder approval provisions
of any Trading Market on which any of the securities of the Company are listed
or designated.


    
      
         


      

      
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    (aa)           Indebtedness.  The
Company has no knowledge of any facts or circumstances that lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing
Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (bb)           Tax
Status.  Except for matters that would not, individually or in
the aggregate, reasonably be expected to have or result in a Material Adverse
Effect, the Company and each Subsidiary (i) has made or filed all United States
federal and state income and all foreign income and franchise 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 material 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 or of any Subsidiary know of
no basis for any such claim.

     

    (cc)           No General
Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising.  The Company has offered
the Shares for sale only to the Purchaser.

     

    (dd)           Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.

     

    (ee)           Accountants.  The
Company’s accounting firm is Baker Tilly Virchow Krause, LLP.  To the
knowledge and belief of the Company, such accounting firm: (i) is a registered
public accounting firm as required by the Exchange Act and (ii) shall express
its opinion with respect to the financial statements to be included in the
Company’s Annual Report for the year ending December 31, 2010.


    
      
         


      

      
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    (ff)         No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction
Documents.

     

    (gg)       
Acknowledgment
Regarding Purchaser’s Purchase of Shares.  The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by the Purchaser or any
of its representatives or agents in connection with the Transaction Documents
and the transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Shares.  The Company further represents to
the Purchaser that the Company’s decision to enter into this Agreement and the
other Transaction Documents has been based solely on the independent evaluation
of the transactions contemplated hereby by the Company and its
representatives.

     

    (hh)        Acknowledgment Regarding
Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.10 hereof), it is
understood and acknowledged by the Company that: (i) the Purchaser has not been asked
by the Company to agree, nor has
the Purchaser agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or “derivative” securities based
on securities issued by the Company or to hold the Shares for any
specified term, (ii) past or future open market or other transactions
by the Purchaser, specifically including, without limitation,
Short Sales or “derivative” transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price of
the Company’s publicly-traded
securities, (iii) the Purchaser, and
counter-parties in “derivative” transactions to which the Purchaser is a
party, directly or indirectly, may presently have a “short” position in the
Common Stock and (iv) the
Purchaser shall not be deemed to have any
affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
acknowledges that (y) the Purchaser may engage in hedging activities at various
times during the period that the Shares are outstanding, and (z) such hedging
activities (if any) could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging activities are
being conducted.  The Company acknowledges that such aforementioned hedging
activities do not constitute a breach of any of the Transaction
Documents.

     

    
      
        
        

      

      
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    (ii)           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 Shares,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Shares, 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, in the case of clauses (ii) and (iii), compensation paid to
the Company’s placement agent in connection with the placement of the
Shares.

     

    (jj)           Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s stock option plan
and (ii) with an exercise price at least equal to the fair market value of the
Common Stock on the date such stock option would be considered granted under
GAAP and applicable law.  No stock option granted under the Company’s
stock option plan has been backdated.  The Company has not knowingly
granted, and there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.

     

    (kk)         Office of Foreign Assets
Control.  Neither the Company nor, to the Company's knowledge,
any director, officer, agent, employee or affiliate of the Company is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).

     

    (ll)           U.S. Real Property Holding
Corporation.  The Company is not and has never been a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify upon the
Purchaser’s request.

     

    (mm)       Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries or
Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to
regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
Affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.  Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

     

    (nn)        Money
Laundering.  The operations of the Company are and have been
conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, applicable money laundering statutes and applicable
rules and regulations thereunder (collectively, the “Money Laundering
Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.

     

    
      
        
        

      

      
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    3.2          Representations and
Warranties of the Purchaser.  The Purchaser hereby represents
and warrants as of the date hereof and as of the Closing Date to the Company as
follows (unless as of a specific date therein):

     

    (a)           Organization;
Authority. The Purchaser is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization with
full right, corporate or partnership 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 execution
and delivery of the Transaction Documents and performance by the Purchaser of
the transactions contemplated by the Transaction Documents have been duly
authorized by all necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of the Purchaser.  Each
Transaction Document to which it is a party has been duly executed by the
Purchaser, and when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

     

    (b)           Own Account. The
Purchaser understands that the Shares are “restricted securities” and have not
been registered under the Securities Act or any applicable state securities law
and is acquiring the Shares as principal for its own account and not with a view
to or for distributing or reselling such Shares or any part thereof in violation
of the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Shares in violation of the Securities Act
or any applicable state securities law and has no direct or indirect arrangement
or understandings with any other persons to distribute or regarding the
distribution of such Shares in violation of the Securities Act or any applicable
state securities law (this representation and warranty not limiting the
Purchaser’s right to sell the Shares in compliance with applicable federal and
state securities laws). The Purchaser is acquiring the Shares hereunder in the
ordinary course of its business.

     

    (c)           Purchaser
Status.  At the time the Purchaser was offered the Shares, it
was, and as of the date hereof it is either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. The Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.  The principal
office or residence of the Purchaser is the address set forth on the signature
page attached hereto.

     

    
      
        
        

      

      
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    (d)           Experience of the
Purchaser. The Purchaser, 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 Shares, and has so evaluated the merits and
risks of such investment. The Purchaser is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to afford a complete
loss of such investment.  The Purchaser has had an opportunity to
consult with legal counsel in connection with the Transaction Documents and the
transactions contemplated thereby.  The Purchaser has also had an
opportunity to review the purchase of the Securities with its financial and tax
advisors and is fully familiar with the financial affairs of the
Company.  The Purchaser has been given the opportunity to obtain any
information it desired about the Company and to ask questions and receive
answers concerning the Company and its business.

     

    (e)           General Solicitation.
The Purchaser is not purchasing the Shares as a result of any advertisement,
article, notice or other communication regarding the Shares published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.

     

    (f)           Certain
Transactions
and Confidentiality.  Other than consummating the transactions
contemplated hereunder, the Purchaser has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with the
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that the
Purchaser first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Other than to other Persons party to this
Agreement, the Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation or warranty,
or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or
similar transactions in the future.

     

    The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect the Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby.

     

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1           Transfer
Restrictions.

     

    (a)           The
Shares may only be disposed of in compliance with state and federal securities
laws.  In connection with any transfer of Shares other than pursuant
to an effective registration statement or Rule 144, to the Company or to an
Affiliate of the Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Shares under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights and
obligations of the Purchaser under this Agreement.

     

    
      
        
        

      

      
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    (b)           The
Purchaser agrees to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Shares in the following form:

     

    THIS
SECURITY HAS 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”), 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 ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

     

    The
Company acknowledges and agrees that the Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Shares to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and that agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, the Purchaser may transfer
pledged or secured Shares to the pledgees or secured parties.  Such a
pledge or transfer would not be subject to approval of the Company and no legal
opinion of legal counsel of the pledgee, secured party or pledgor shall be
required in connection therewith.  Further, no notice shall be
required of such pledge.  At the Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Shares may reasonably request in connection with a pledge or transfer of the
Shares, including, if the Shares are then registered for resale, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of selling stockholders.

     

    
      
        
        

      

      
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    (c)           Certificates
evidencing the Shares shall not contain any legend (including the legend set
forth in Section 4.1(b) hereof), (i) while a registration statement covering the
resale of such security is effective under the Securities Act, (ii) following
any sale of such Shares pursuant to Rule 144, (iii) if such Shares are eligible
for sale under Rule 144, without the requirement for the Company to be in
compliance with the current public information required under Rule 144 as to
such Shares and without volume or manner-of-sale restrictions, or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission).  From and after six (6) months from the Closing Date,
unless the Purchaser is then an Affiliate of the Company, the Company shall
cause its counsel to issue a legal opinion to the Transfer Agent if required by
the Transfer Agent to effect the removal of the legend hereunder.  The
Company agrees that following the time as such legend is no longer required
under this Section 4.1(c), it will, no later than three Trading Days following
the delivery by the Purchaser to the Company or the Transfer Agent of a
certificate representing Shares issued with a restrictive legend (such third
Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to the Purchaser a certificate
representing such shares 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 4.  Certificates for Shares subject to legend
removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company System as directed by the Purchaser.

    


    (d)           In
addition to the Purchaser’s other available remedies, the Company shall pay to
the Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares (based on the VWAP of the Common Stock on the date such
Shares are submitted to the Transfer Agent) delivered for removal of the
restrictive legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such damages have
begun to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend. Nothing herein shall limit the
Purchaser’s right to pursue actual damages for the Company’s failure to deliver
certificates representing any Shares as required by the Transaction Documents,
and the Purchaser shall have the right to pursue all remedies available to it at
law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief.

     

    (e)           The
Purchaser agrees with the Company that the Purchaser will sell any Shares
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Shares are sold pursuant to a registration statement,
they will be sold in compliance with the plan of distribution set forth therein,
and acknowledges that the removal of the restrictive legend from certificates
representing Shares as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.

     

    4.2           Furnishing of
Information;
Public Information.

     

    (a)           For
a period of one year from the Closing Date, the Company covenants 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 Section 15(d) of the Exchange Act even if the Company is not then
subject to the reporting requirements of the Exchange Act.  As long as
the Purchaser owns Shares, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchaser to sell the Shares, including without limitation,
under Rule 144. The Company further covenants that it will take such further
action as any holder of Shares may reasonably request, to the extent required
from time to time to enable such Person to sell such Shares without registration
under the Securities Act, including without limitation, within the requirements
of the exemption provided by Rule 144.

     

    
      
        
        

      

      
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    (b)           At
any time during the period commencing on the Closing Date and ending at such
time that all of the Shares may be sold without the requirement for the Company
to be in compliance with Rule 144(c)(1) and otherwise without restriction or
limitation pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to the Purchaser’s other available remedies,
the Company shall pay to the Purchaser, in cash, as liquidated damages and not
as a penalty, by reason of any such delay in or reduction of its ability to sell
the Shares, an amount in cash equal to $10,000 per Business Day, up to an
aggregate maximum of $100,000, for each Business Day or part thereof during
which a Public Information Failure is in effect. The payments to which the
Purchaser shall be entitled pursuant to this Section 4.2(b) are referred to
herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid
within five (5) Business Days of the occurrence of the Public Information
Failure.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit the Purchaser’s right to pursue actual
damages for the Public Information Failure, and the Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.

     

    4.3           Integration.  The
Company shall not 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 Shares in a manner
that would require the registration under the Securities Act of the sale of the
Shares or that would be integrated with the offer or sale of the Shares for
purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.

     

    4.4           Securities Laws Disclosure;
Publicity.  The Company shall timely file a Current Report
on Form 8-K and press release disclosing the material terms of the transactions
contemplated hereby, and including the Transaction Documents as exhibits
thereto.  From and after the issuance of such press release, the
Company shall have publicly disclosed all material, non-public information
delivered to the Purchaser by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents.  The Company
and the Purchaser shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither the
Company nor the Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect
to any press release of the Purchaser, or without the prior consent of the
Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure is required
by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Purchaser, or include the name of the
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of the Purchaser, except: (a) as
required by federal securities law in connection with (i) any registration
statement contemplated by Section 4.15 and (ii) the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (b) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchaser with prior notice of such
disclosure permitted under this clause (b).

     

    
      
        
        

      

      
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    4.5           Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that the Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that the Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Shares under the Transaction Documents or
under any other agreement between the Company and the Purchaser.

     

    4.6           Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf, will provide the Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto the Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such
information.  The Company understands and confirms that the Purchaser
shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

     

    4.7           Use of
Proceeds.  Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Shares
hereunder for working capital and general corporate purposes and shall not use
such proceeds for: (a) the satisfaction of any portion of the Company’s debt
(other than payment of trade payables in the ordinary course of the Company’s
business and prior practices), (b) the redemption of any Common Stock or Common
Stock Equivalents, (c) the settlement of any outstanding litigation or (d) in
violation of the FCPA or OFAC regulations.

     

    
      
        
        

      

      
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    4.8           Indemnification of Purchaser.   Subject
to the provisions of this Section 4.8, the Company will indemnify and hold the
Purchaser and its directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls the Purchaser (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any Purchaser Party
may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted
against the Purchaser in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of the
Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of the
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings the Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance).  If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, the Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to the Purchaser
Party.  Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the
position of the Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by the Purchaser Party
in this Agreement or in the other Transaction Documents.  The
indemnification required by this Section 4.8 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others, and (y) any liabilities the
Company may be subject to pursuant to law.

     

    4.9           Listing of Common
Stock. The Company hereby agrees to use best efforts to maintain the
listing or quotation of the Common Stock on the Trading Market on which it
is currently listed (or shall use its best efforts to move the listing of the
Common Stock to a larger and more liquid Trading Market), and concurrently with
the Closing, the Company shall apply to list or quote all of the Shares on such
Trading Market and promptly secure the listing of all of the Shares on such
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares, and will take such other action as is necessary
to cause all of the Shares to be listed or quoted on such other Trading Market
as promptly as possible.  The Company will then take all action
reasonably necessary to continue the listing or quotation and trading of its
Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.

     

    
      
        
        

      

      
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    4.10        Certain
Transactions
and Confidentiality. The Purchaser covenants that neither it, nor any
Affiliate acting on its behalf or pursuant to any understanding with it, will
execute any purchases or sales, including Short Sales, of any of the Company’s
securities during the period commencing with the execution of this Agreement and
ending at such time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in
Section 4.4.  The Purchaser covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in Section 4.4, the
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Transaction Documents and the
Disclosure Schedules.  Notwithstanding the foregoing, and notwithstanding
anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) the Purchaser makes no representation, warranty
or covenant hereby that it will not engage in effecting transactions in any
securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced pursuant to the initial press
release as described in Section 4.4, (ii) the Purchaser shall not be restricted
or prohibited from effecting any transactions in any securities of the Company
in accordance with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4 and (iii) the
Purchaser shall have no duty of confidentiality to the Company or its
Subsidiaries after the issuance of the initial press release as described in
Section 4.4, provided, that the
Purchaser will not engage in any Short Sales while it holds any of the
Shares. 

     

    4.11        Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof, promptly upon request of the Purchaser. 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 Shares for, sale to the Purchaser 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 the Purchaser.

     

    4.12        Capital
Changes.  Until the one year anniversary of the Closing Date,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchaser.

     

    
      
        
        

      

      
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    4.13        Per Share Purchase Price
Protection.  From the date hereof until the earlier of December
31, 2011 and the date that the Shares are no longer outstanding, if in
connection with a Subsequent Financing, the Company or any Subsidiary shall
issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire shares of Common Stock at an effective price per share less
than the Initial Per Share Purchase Price or Subsequent Per Share Purchase
Price, as applicable, (subject to reverse and forward stock splits and the like)
(the “Discounted
Purchase Price,” as further defined below and such issuance, the “Dilutive Issuance”),
the Company shall issue to the Purchaser that number of additional shares of
Common Stock equal to (a) the Subscription Amount paid by the Purchaser at the
Closing divided by the Discounted Purchase Price, less (b) the Shares issued to
the Purchaser at the Closing pursuant to this Agreement and pursuant to this
Section 4.13.  The term “Discounted Purchase
Price” shall mean the amount actually paid in new cash consideration by
third parties for each share of Common Stock multiplied by a fraction, the
numerator of which is the number of shares of Common Stock issued and
outstanding immediately prior to the Dilutive Issuance plus the number of shares
of Common Stock which the offering price for such Dilutive Issuance would
purchase at the Initial Per Share Purchase Price or Subsequent Per Share
Purchase Price, as applicable, and the denominator of which shall be the sum of
the number of shares of Common Stock issued and outstanding immediately prior to
the Dilutive Issuance plus the number of shares of Common Stock so issued or
issuable in connection with the Dilutive Issuance.  The sale of Common
Stock Equivalents shall be deemed to have occurred at the time of the issuance
of the Common Stock Equivalents and the Discounted Purchase Price covered
thereby shall also include the actual exercise or conversion price thereof at
the time of the conversion or exercise (in addition to the consideration per
share of Common Stock underlying the Common Stock Equivalents received by the
Company upon such sale or issuance of the Common Stock
Equivalents).  If shares are issued for a consideration other than
cash, the per share selling price shall be the fair value of such consideration
as determined in good faith by the Board of Directors.  The Company
shall not refuse to issue to the Purchaser any additional Shares hereunder based
on any claim that the Purchaser or any one associated or affiliated with the
Purchaser has been engaged in any violation of law, agreement or for any other
reason, unless an injunction from a court, on notice, restraining and or
enjoining an issuance hereunder shall have been sought and obtained and the
Company posts a surety bond for the benefit of the Purchaser in the amount of
150% of the market value of such Shares (based on the closing price of the
Common Stock on the date of the event giving rise to the Company’s obligation
hereunder), which is subject to the injunction, which bond shall remain in
effect until the completion of litigation of the dispute and the proceeds of
which shall be payable to the Purchaser to the extent it obtains
judgment.  Nothing herein shall limit the Purchaser’s right to pursue
actual damages for the Company's failure to deliver Shares hereunder and the
Purchaser shall have the right to pursue all remedies available to it at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief.  On the date of closing of any transaction pursuant
to which securities are issued for a Discounted Purchase Price, the Company
shall give the Purchaser written notice thereof.  Notwithstanding
anything to the contrary herein, this Section 4.13 shall not apply to an Exempt
Issuance.

     

    4.14        Delivery of Shares After
Closing.  The Company shall deliver, or cause to be delivered,
the respective Shares purchased by the Purchaser to the Purchaser within three
(3) Trading Days of the Closing Date.

     

    4.15        Piggyback Registration
Rights. Subject to the rights described in Schedule 3.1(v), if, at any
time after the Closing Date, the Company shall propose to file with the
Commission a registration statement under the Securities Act other than on Forms
S-4 or S-8 (or any successor to such forms), the Company shall give notice to
the Purchaser and include in such registration statement all or any part of the
Shares that the Purchaser requests to be registered; provided, however, that the
Company shall not be required (i) to include such number of Shares in any such
registration that would require the Company to use Form S-1 instead of Form S-3,
or (ii) to register any Shares pursuant to this Section 4.15 that are eligible
for resale pursuant to Rule 144 under the Securities Act without any requirement
for the Company to maintain current public information and without any
limitation on volume or manner of sale.  The Company shall use best
efforts to cause such registration statement to become effective as soon as
practicable; provided, however, that the
Company shall have the authority in its sole discretion to abandon such
registration at any time before or after its effective date.

     

    
      
        
        

      

      
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    ARTICLE
V.

    MISCELLANEOUS

     

    5.1  Termination. 
This Agreement may be terminated by the Purchaser:

     

    (a)           upon
written notice to the Company, if the Initial Closing has not been consummated
on or before October 2, 2010;
or

     

    (b)           upon
written notice to the Company, if at any time prior to the final Subsequent
Closing the Company consummates a reverse stock split or a financing to which
the Purchaser is not a party;

     

    provided, however, that no such
termination pursuant to this Section 5.1 will affect the right of any party to
sue for any breach by the other party (or parties).

     

    5.2           Fees and Expenses.
 Except as otherwise set forth in this Agreement and as set forth in this
Section 5.2 below, each party shall pay the fees and expenses of its own
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
stamp and other taxes and duties levied in connection with the delivery of the
Shares.  Notwithstanding the foregoing, at the Initial Closing the
Company shall reimburse the Purchaser for the fees and expenses of its counsel,
White White & Van Etten PC, in an amount equal to $25,000 and at each
Subsequent Closing the Company shall reimburse the Purchaser for the fees and
expenses of its counsel, White White & Van Etten PC, in an amount equal to
$2,500.  Such legal fees may be withheld by the Purchaser from the
Subscription Amount to be paid for the Shares purchased at the Initial Closing
and any Subsequent Closing.

     

    5.3           Entire
Agreement.  The Transaction Documents, together with the
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.

     

    5.4           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 at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 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 at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived provision 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 any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

    5.6           Headings.  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.

     

    5.7           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 Purchaser (other
than by merger). The Purchaser may assign any or all of its rights under this
Agreement to any Person to whom the Purchaser assigns or transfers any Shares,
provided that
such transferee agrees in writing to be bound, with respect to the transferred
Shares, by the provisions of the Transaction Documents that apply to the
“Purchaser.”

     

    5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8.

     

    5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or 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 waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  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 other manner
permitted by law.  If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then in
addition to the obligations of the Company under Section 4.8, the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    5.10         Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Shares.

     

    5.11         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 by e-mail delivery of a “.pdf” format data file, 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 “.pdf” signature page were an original thereof.

     

    5.12         Severability.  If
any term, provision, covenant or restriction of this Agreement 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 hereto shall use their commercially
reasonable 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 that may be
hereafter declared invalid, illegal, void or unenforceable.

     

    5.13         Replacement of Shares.  If
any certificate or instrument evidencing any Shares is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation), 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.  The applicant for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance of such
replacement Shares.

     

    5.14         Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchaser and the Company will
be entitled to 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 contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

     

    5.15         Payment Set
Aside.  To the extent that the Company makes a payment or
payments to the Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights 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, 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.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    5.16         Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

     

    5.17         Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.

     

    5.18         Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each
and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.

     

    5.19         WAIVER OF
JURY TRIAL.  IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

     

    (Signature
Pages Follow)

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
          
            
              	
                      ProUroCare
      Medical Inc.

                    	 	
                      Address for Notice:

                    
	 
      	 	 
      
	
                      By:

                    	
                      /s/Richard Carlson

                    	 	
                      6440
      Flying Cloud Drive

                    
	 
      	
                      Name:  Richard
      Carlson

                    	 	
                      Suite
      101

                    
	 
      	
                      Title:    Chief
      Executive Officer

                    	 	
                      Eden
      Prairie, MN 55344

                    
	 
      	 	
                      Attention:  Richard
      Carlson, CEO

                    
	 
      	 	
                      Fax:  952-698-4499

                    
	 
      	 	 
      
	
                      With
      a copy (which shall not constitute notice) to:

                    	 	
                      Dorsey
      & Whitney LLP

                    
	 
      	 	
                      Suite
      1500

                    
	 
      	 	
                      50
      South Sixth Street

                    
	 
      	 	
                      Minneapolis,
      MN  55402

                    
	 
      	 	
                      Attention:  Timothy
      S. Hearn, Esq.

                    
	 
      	 	
                      Fax:  612-340-2868

                    


            

          

        

      

    

    


    
      
        
          
            	
                    Seaside
      88, LP

                  	 	
                    Address for Notice:

                  
	 
      	 	 
      
	
                    By:  Seaside
      88 Advisors, LLC

                  	 	 
      
	 
      	 	
                    750
      Ocean Royale Way

                  
	 
      	 	
                    Suite
      805

                  
	
                    By:

                  	
                    /s/William J. Ritger

                  	 	
                    North
      Palm Beach, FL 33408

                  
	 
      	
                    Name:
      William J. Ritger

                  	 	
                    Attention:  William
      J. Ritger and

                  
	 
      	
                    Title:   Manager

                  	 	
                    Denis
      M. O’Donnell, M.D.

                  
	 
      	 	
                    Fax:  866-358-6721

                  
	 
      	 	 
      
	
                    With
      a copy (which shall not constitute notice) to:

                  	 	
                    White
      White & Van Etten PC

                  
	 
      	 	
                    55
      Cambridge Parkway

                  
	 
      	 	
                    Cambridge,
      MA 02142

                  
	 
      	 	
                    Attention:  David
      A. White, Esq.

                  
	 
      	 	
                    Fax:  617-225-0205

                  


          

        

      

    

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    Exhibit
A

    


    Officer’s
Certificate

    


    In connection with a Closing on the
date set forth below pursuant to that certain Securities Purchase Agreement
dated as of ____________, 2010 (the “Agreement”) by and between ProUroCare
Medical Inc., a Nevada corporation (the “Company”) and Seaside 88, LP, a Florida
limited partnership (“Seaside”), the undersigned, the duly elected and qualified
________________ of the Company, does hereby certify to Seaside as
follows:

    


    
      	
               
      

            	
              (i)

            	
              all
      representations and warranties of the Company contained in the Agreement
      are true and correct on and as of the date hereof as if made on and as of
      the date hereof (provided that
      representations and warranties that speak as of a specific date shall
      continue to be true and correct as of the Closing with respect to such
      date); and

            


    

    


    
      	
               
      

            	
              (ii)

            	
              the
      Company has performed or complied with all of its covenants and agreements
      contained in the Agreement and required to be performed or complied with
      by the Company on or before the date
hereof.

            


    

    


    Capitalized
terms used but not defined herein shall have the meanings given to them in the
Agreement.

    


    IN
WITNESS WHEREOF, the undersigned has caused this Officer’s Certificate to be
executed this _____ day of _____________, 2010.


    


    
      
        
          	 
      	
                  Inc.

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                


        

      

    

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    Exhibit
B

    


    1.           The
Company is a corporation duly organized under the General Corporation Law of the
State of Nevada, with corporate power and authority to enter into the Agreement
and the other Transaction Documents and perform its obligations thereunder. The
Company is validly existing and in good standing under the laws of the State of
Nevada and is qualified to do business and in good standing under the laws of
____________ and _________, the only states where the failure to be so qualified
and in good standing could have a Material Adverse Effect.

    


    2.           The
execution and delivery of the Agreement and the other Transaction Documents and
the issuance and sale of the Shares thereunder has been duly authorized by all
necessary corporate action of the Company, no further action is required by the
Company or its stockholders in connection therewith; and the Agreement and each
other Transaction Document has been duly executed and delivered by the Company
and is enforceable against the Company in accordance with its
terms.

    


    3.           The
Shares have been duly authorized and, when issued and delivered in accordance
with the terms of the Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights set forth in the Company’s Certificate of
Incorporation or Bylaws (or similar organizational documents) or any agreement
known to us or filed as an exhibit to any SEC Report.

    


    4.           The
execution and delivery by the Company of, and the performance by the Company of
its obligations under, the Agreement (including the issuance and sale of the
Shares) and the other Transaction Documents will not contravene any provision of
any statute, law, rule or regulation applicable to the Company, any agreement
filed as an exhibit to any SEC Report, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company that is
applicable to the Company or its properties.

    


    5.           No
consent, approval, authorization, order, registration or qualification of or
with any court or arbitrator or governmental body, regulatory authority or
Trading Market is required for the execution, delivery and performance by the
Company of its obligations under the Agreement or any other Transaction
Document, other than any notice filings as are required to be made in connection
with the Closing Date under applicable federal and state securities
laws.

    


    6.           The
Company is not, and will not be after consummation of the Agreement, the sale of
the Shares to the Purchaser and the application of the proceeds thereof, an
“investment company” as defined in the Investment Company Act of 1940, as
amended.

     

    
      
        
        

      

      
        35