Exhibit 10.1


   


SECURITIES PURCHASE AGREEMENT


   


This Securities Purchase
Agreement (this “Agreement”) is dated as of April 22, 2012, between Oculus Innovative Sciences, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).


 


WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act
of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, 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 each Purchaser agree as follows:


 


ARTICLE I.


DEFINITIONS


 


1.1   Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as defined herein), and (b) 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 4.7.


 


“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.


 


“Certificate
of Designation” means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary
of State of Delaware, in the form of Exhibit A attached hereto.


 


“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.


  



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“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than
the third Trading Day following the date hereof.


 


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


 


“Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


“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, right, option, warrant 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 Trombly Business Law, P.C., with offices located at 1320 Centre Street, Suite 202, Newton, MA 02459.


 


“Conversion
Price” shall have the meaning ascribed to such term in the Certificate of Designation.


 


“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in
accordance with the terms hereof.


   


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.


 


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


 


“EGS”
means Ellenoff Grossman & Schole LLP, with offices located at 150 East 42nd Street, New York, New York 10017.


 


“Escrow
Agent” means Signature Bank, a New York State chartered bank, with offices at 261 Madison Avenue, New York, New York
10016.


 


“Escrow
Agreement” means the escrow agreement entered into prior to the date hereof, by and among the Company, the Escrow Agent
and Rodman & Renshaw, LLC, pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be
applied to the transactions contemplated hereunder.


 


“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.


   



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“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, consultants, 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 Securities 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 and (c) 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.


 


“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.


 


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


 


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


 


“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(z).


 


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


 


“Liens”
means a lien, charge, pledge, 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).


 


“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.18.


 


“OFAC”
means Office of Foreign Assets Control of the U.S. Treasury Department.


  



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“Per
Share Purchase Price” equals $0.90, 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


 


“Permitted
Liens” shall have the meaning as set forth on Schedule 3.1(a).


 


“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.


 


“Pharmaceutical
Product” shall have the meaning ascribed to such term in Section 3.1(gg).


 


“Preferred
Stock” means the up to 1,000 shares of the Company’s Series A 0% Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.


 


“Preferred
Stock Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for the Preferred Stock purchased
hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Preferred
Stock Subscription Amount,” in United States dollars and in immediately available funds.


 


“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.


 


“Prospectus”
means the final prospectus filed for the Registration Statement.


 


“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with
the Commission and delivered by the Company to each Purchaser at the Closing.


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10.


 


“Registration
Statement” means the effective registration statement with Commission file No. 333-171411 which registers the sale of
the Shares, Preferred Stock, the Warrants and the Underlying Shares to the Purchasers.


 


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


 


“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants
or conversion in full of all shares of Preferred Stock, ignoring any conversion or exercise limits set forth therein, and that
any previously unconverted shares of Preferred Stock are held until the third anniversary of the Closing Date.


  



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“Rule
144” means Rule 144 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.


 


“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”
means the Shares, Preferred Stock, the Warrants and the Underlying Shares.


 


“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 each Purchaser pursuant to this Agreement, but in no event more than 4.99%
of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of the aggregate number
of shares of Common Stock pursuant to this Agreement.


 


“Share
Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for the Shares purchased hereunder
as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Share Subscription
Amount,” in United States dollars and in immediately available funds.


 


“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). 


 


“Stated
Value” means $1,000 per share of Preferred Stock.


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for the Shares, Preferred Stock and Warrants purchased
hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.


 


“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.


  



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“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 NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).


 


“Transaction
Documents” means this Agreement, the Certificate of Designation, the Warrants and any other documents or agreements executed
in connection with the transactions contemplated hereunder.


 


“Transfer
Agent” means Computershare Shareowner Services LLC, the current transfer agent of the Company, with a mailing address
of 480 Washington Blvd., Jersey City, NJ 07310, and an email address of shrrelations@bnymellon.com,
and any successor transfer agent of the Company.


 


“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock and upon exercise
of the Warrants.


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).


 


“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common
Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable on the six month anniversary of the Closing Date and have a term of exercise equal
to 2 years, in the form of Exhibit C attached hereto.


 


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


  



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ARTICLE II.


PURCHASE AND SALE


 


2.1   Closing.  On
the 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 Purchasers, severally and not jointly, agree
to purchase, up to an aggregate of $3,124,001 of Shares, shares of Preferred Stock with an aggregate Stated Value for each Purchaser
equal to such Purchaser’s Preferred Stock Subscription Amount as set forth on the signature page hereto executed by such
Purchaser, and Warrants as determined by pursuant to Section 2.2(a).  The aggregate number of shares of Preferred Stock
sold hereunder shall be up to 1,000.  Each Purchaser shall deliver to the Escrow Agent, via wire transfer or a certified
check, immediately available funds equal to its Subscription Amount, and the Company shall deliver to each Purchaser its respective
Shares, shares of Preferred Stock and Warrants, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such other location as the parties
shall mutually agree.


 


2.2   Deliveries.


 


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


 


(i)   this
Agreement duly executed by the Company;


 


(ii)   a
legal opinion of Company Counsel, substantially in the form of Exhibit B attached hereto;


 


(iii)   a
copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via
The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s
Share Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;


 


(iv)   a
certificate evidencing the number of shares of Preferred Stock equal to such Purchaser’s Preferred Stock Subscription Amount
divided by the Stated Value, registered in the name of such Purchaser and evidence of the filing and acceptance of the Certificate
of Designation from the Secretary of State of Delaware; provided, however, that the Company shall deliver Conversion
Shares on the Closing Date to any Purchaser that delivers to the Company a duly executed Notice of Conversion (as defined in the
Certificate of Designation) prior to the Closing Date;


   



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(v)   a
Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 100% of such Purchaser’s
Shares and Conversion Shares, with an exercise price equal to $1.18, subject to adjustment therein (such Warrant certificate may
be delivered within three Trading Days of the Closing Date); and


 


(vi)   the
Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).


 


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


 


(i)   to
the Company, this Agreement duly executed by such Purchaser; and


 


(ii)   to
the Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the account specified in the Escrow Agreement.


 


2.3   Closing
Conditions.


 


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


  


(i)   the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);


 


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


  


(iii)   the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.


 


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


 


(i)   the
accuracy in all material respects when made and 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 2.2(a) of this Agreement;


   



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


 


(v)   from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, 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 such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the
Closing.


 


ARTICLE III.


REPRESENTATIONS AND WARRANTIES


 


3.1   Representations
and Warranties of the Company.  Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall
be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained
in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties
to each Purchaser:


 


(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,
except for Permitted 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.


 


(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 have or reasonably be expected to 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, prospects 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.


   



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(c)   Authorization;
Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder.  The execution and delivery of this Agreement and each of the other 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 herewith or therewith other than in connection with the Required Approvals, except that an issuance of over 20% of
the Company’s equity will require shareholder approval pursuant to NASDAQ rules. This Agreement and each other 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.


 


(d)   No
Conflicts.  The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents
to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, or (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, except
for Permitted Liens, 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 have or reasonably be expected to 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 4.3 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement,
(iii) application(s) to each applicable Trading Market for the listing of the Underlying Shares for trading thereon in the time
and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws (collectively,
the “Required Approvals”).


   



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(f)   Issuance
of the Securities; Registration.  The Securities 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, except for Permitted Liens, imposed by the Company.  The Underlying Shares, when issued in accordance with the
terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for
issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof. The Company has prepared and filed
the Registration Statement in conformity with the requirements of the Securities Act, which became effective on May 3, 2011
(the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been
required to the date of this Agreement.  The Registration Statement is effective under the Securities Act and to the
Company’s knowledge, no stop order preventing or suspending the effectiveness of the Registration Statement or suspending
or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted
or, to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and regulations
of the Commission, proposes to file the Prospectus, with the Commission pursuant to Rule 424(b).  At the time the Registration
Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration
Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements
thereto, at the time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will
conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.


 


(g)   Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g).  The Company has not issued a material amount
of 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 and directors pursuant
to the Company’s employee stock purchase plans as described on Form 4s 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 Securities, 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 Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other
than the Purchasers) 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, other than as set forth on Schedule 3.1(g). All of the outstanding shares of
capital stock of the Company are duly authorized, 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 Securities, except that an issuance of over 20% of
the Company’s equity will require shareholder approval pursuant to NASDAQ rules. 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.


   



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(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, together
with the Prospectus and the Prospectus Supplement, 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.


 


(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, (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 Securities 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 businesses, prospects, 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.


 


(j)   Litigation.  Except
as disclosed in the Company’s SEC Reports, 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 Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to 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. To the Company’s knowledge, 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 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.  To the knowledge of the
Company, no executive officer of the Company or any Subsidiary, 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.


 


 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 other governmental authority 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 have
or reasonably be expected to 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 (i) 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,
(ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance
with GAAP and, the payment of which is neither delinquent nor subject to penalties, and (iii) Permitted Liens.  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.


   



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(o)   Intellectual
Property.  Except as disclosed in the Company’s SEC Reports and as disclosed as Permitted Liens set forth on
Schedule 3.1(a), 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 necessary or required for use in connection with their respective businesses as described in the SEC
Reports 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, or which Intellectual Property Rights could not have or
reasonably be expected to not have a Material Adverse Effect. 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 could not have or reasonably
be expected to 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.  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 or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary 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, providing for the borrowing of money from or lending of money to 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, stockholder, member or partner, in each case
in excess of $120,000 per fiscal year 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 plan and option agreements
under any stock option plan of the Company.


   



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(r)   Sarbanes-Oxley;
Internal Accounting Controls.  The Company and the Subsidiaries are 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 and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and the Subsidiaries 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 disclosure controls and procedures of the Company and the Subsidiaries as of the
end of the period covered by the 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 internal control over financial reporting
(as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the
internal control over financial reporting of the Company and its Subsidiaries.


 


(s)   Certain
Fees.  Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or
will be payable by the Company or any Subsidiary 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 Purchasers 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 3.1(s) that may be due in connection with the transactions contemplated by the Transaction Documents.


 


(t)   Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, 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.


 


(u)   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 or any Subsidiary.


   



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(v)   Listing
and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. On February 7, 2012, the Company received notice from the Listing Qualifications staff of the NASDAQ
Stock Market LLC notifying the Company that, for the previous 30 consecutive business days, the Company failed to comply
with NASDAQ Listing Rule 5550(b)(2), which required the Company to maintain a minimum Market Value of Listed Securities, as defined
in the Listing Rule, of $35 million for continued listing on the NASDAQ Capital Market. On March 6, 2012, the Company received
notification from the Listing Qualifications staff of the NASDAQ Stock Market LLC that the Company has regained compliance with
NASDAQ Listing Rule 5550(b)(2) as its Market Value of Listed Securities has closed at $35 million or greater for the last ten consecutive
business days.  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.


 


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


 


(x)   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 any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed
in the Prospectus Supplement.   The Company understands and confirms that the Purchasers 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 Purchasers regarding the Company and its Subsidiaries, their respective businesses 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 no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section
3.2 hereof.


   



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(y)   No
Integrated Offering. Assuming the accuracy of the Purchasers’ 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 Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions
of any Trading Market on which any of the securities of the Company are listed or designated.


 


(z)   Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements
and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.  The Company does not
intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of its debt).  The Company has no knowledge of any facts or circumstances which 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. The Company’s outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments as of December 31, 2011 is set forth in its SEC Reports. 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
consolidated 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.


   



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(aa)   Tax
Status.  Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and
local 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.


 


(bb)   Foreign
Corrupt Practices.  Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary,
any agent or other person acting on behalf of the Company or any Subsidiary, 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 any Subsidiary (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 FCPA.


 


(cc)   Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules.  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 fiscal year ending March 31, 2012.


 


(dd)   Acknowledgment
Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers
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 no Purchaser is 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 any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company
further represents to each 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.


   



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(ee)   Acknowledgement
Regarding Purchaser’s Trading Activity.  Except as set forth in this Agreement or elsewhere herein to
the contrary notwithstanding (except for Sections 3.2(e) and 4.14 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to agree, nor has any 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 Securities for any specified term; (ii) past or future open market or other
transactions by any 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) any Purchaser, and counter-parties in “derivative”
transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) each 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) one or more Purchasers may engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined 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.


 


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


 


(gg)   FDA.  As
to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical
Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed
by the Company in compliance, except where the failure to be in compliance would not have a Material Adverse Effect, with all applicable
requirements under FDCA and similar laws, rules and regulations relating to registration, investigational use, premarket clearance,
licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing,
quotas, labeling, advertising, record keeping and filing of required reports. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its Subsidiaries which could constitute a Material Adverse Effect.  Except
as disclosed in the SEC Reports, none of the Company or any of its Subsidiaries has received any notice, warning letter or other
communication from the FDA or any other governmental entity, which, either individually or in the aggregate, would have a Material
Adverse Effect, and which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution
of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product,
(ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising
or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation
by the Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v)
enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi)
otherwise alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries. The properties, business
and operations of the Company have been and are being conducted in all material respects in accordance with all applicable laws,
rules and regulations of the FDA.  As of the Closing Date, the Company has not been informed by the FDA that the FDA will
prohibit the marketing, sale, license or use in the United States of any product proposed to be developed, produced or marketed
by the Company nor has the FDA expressed any concern, which constitutes a Material Adverse Effect, as to approving or clearing
for marketing any product being developed or proposed to be developed by the Company.


   



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


 


(ii)   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 Purchaser’s
request.


 


(jj)   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 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.


 


(kk)   Money
Laundering.  The operations of the Company and its Subsidiaries 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 or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.


 


(ll)   Seniority.  As
of the Closing Date, except as set forth on Schedule 3.1(ll), no Indebtedness or other claim against the Company is senior
to the Preferred Stock in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby)
and capital lease obligations (which is senior only as to the property covered thereby).


   



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(mm)   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.


 


3.2   Representations
and Warranties of the Purchasers.  Each Purchaser, for itself and for no other 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.  Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited
liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance
by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of such Purchaser.  Each Transaction Document
to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such 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)   Understandings
or Arrangements.  Such Purchaser is acquiring the Securities as principal for its own account and has no direct or
indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.


   



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(c)   Purchaser
Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each
date on which it exercises any Warrants or converts any shares of Preferred Stock, it will be 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.  Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.


 


(d)   Experience
of Such Purchaser.  Such 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 Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.


 


(e)   Certain
Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser
has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed
any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time
that such 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.
Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such 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 such 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.


   



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ARTICLE IV.


OTHER AGREEMENTS OF THE
PARTIES


 


4.1   Underlying
Shares.  The shares of Common Stock underlying the shares of Preferred Stock shall be issued free of legends.  If
all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance
or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any
such exercise shall be issued free of all legends, if permissible by law.  If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective
or is not otherwise available for the sale or resale of the Warrant Shares, the Company shall immediately notify the holders of
the Warrants in writing that such registration statement is not then effective and thereafter shall promptly notify such holders
when the registration statement is effective again and available for the sale or resale of the Warrant Shares (it being understood
and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant
Shares in compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep
a registration statement (including the Registration Statement) registering the issuance or resale of the Warrant Shares effective
during the term of the Warrants.


 


4.2   Acknowledgment
of Dilution.  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges
that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares
pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay
or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless
of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.


 


4.3   Furnishing
of Information.  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 for at least 30 months thereafter
pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.


 


4.4   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 Securities 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.


   



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4.5   Securities
Laws Disclosure; Publicity.  The Company shall (a) by 9:00 a.m. (New York City time) on the Trading Day immediately
following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b)
file a current report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time
required by the Exchange Act.  From and after the issuance of such press release, the Company represents to the Purchasers
that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers 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 each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated hereby, and neither the Company nor any 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 any Purchaser, or without the prior consent of each 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 any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required
by federal securities law in connection with the filing of final Transaction Documents 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 Purchasers with prior
notice of such disclosure permitted under this clause (b).


 


4.6   Conversion
and Exercise Procedures.  Each of the form of Notice of Exercise (as defined in the Warrant) included in the Warrants
and the form of Notice of Conversion (as defined in the Certificate of Designation) included in the Certificate of Designation
set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Preferred
Stock.  No additional legal opinion, notarization, signature guarantees or other information or instructions shall be
required of the Purchasers to exercise their Warrants or convert their Preferred Stock.  The Company shall honor exercises
of the Warrants and conversions of the Preferred Stock and shall deliver Underlying Shares in accordance with the terms, conditions
and time periods set forth in the Transaction Documents.


 


4.7   Shareholder
Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person,
that any 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 any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.


 


4.8   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 any Purchaser
or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such
information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.


   



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4.9   Use
of Proceeds.  Except as set forth on Schedule 4.9 attached hereto, the Company shall use the net proceeds
from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds: (a) for 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) for the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of
any outstanding litigation or (d) in violation of FCPA or OFAC regulations.


    


4.10   Indemnification
of Purchasers.   Subject to the provisions of this Section 4.10, the Company will indemnify and hold each 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 such 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 such 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 a Purchaser
in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based
upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements
or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or
federal securities laws or any conduct by such Purchaser Party 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, such 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 such 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 such 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 such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.10 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 any liabilities the Company may be subject
to pursuant to law.


   



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4.11   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, and concurrently with the Closing, the Company shall apply to list or quote
all of the Underlying Shares on such Trading Market and promptly secure the listing of all of the Underlying 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 Underlying Shares, and will take such other action as is necessary to cause all of
the Underlying 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 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.


 


4.12   [RESERVED]


 


4.13   Subsequent
Equity Sales.


 


(a)   From
the date hereof until 180 days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement
to issue or announce the issuance or proposed issuance of more than, in the aggregate over such period, the number of shares of
Common Stock or Common Stock Equivalents (subject to adjustment for reverse and forward stock splits and the like) as set forth
on Schedule 4.13 attached hereto, which securities shall not have demand registration rights or be registered or immediately
registered for resale and which shall have an effective price per share at least equal to market price.


 


(b)   From
the date hereof until the 12 month anniversary of the Closing Date, the Company shall be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents
(or a combination of units thereof) involving a Variable Rate Transaction.  “Variable Rate Transaction”
means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market
for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company
may sell securities at a future determined price.  Any Purchaser shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.


 


(c)   Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall
be an Exempt Issuance.


  



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4.14   Equal
Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered
or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same
consideration is also offered to all of the parties to this Agreement.  For clarification purposes, this provision constitutes
a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group
with respect to the purchase, disposition or voting of Securities or otherwise.


 


4.15   Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, 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 4.5. Each Purchaser, severally and not jointly with the other
Purchasers, 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 4.5, such Purchaser will maintain the confidentiality
of the existence and terms of this transaction and the information included in the Disclosure Schedules. 
Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes any 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 4.5, (ii) no
Purchaser shall 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 4.5 and (iii) no Purchaser shall have
any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described
in Section 4.5.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.


 


4.16   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 Purchasers holding a majority in interest
of the Shares and the shares of Preferred Stock.


   



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ARTICLE V.


MISCELLANEOUS


 


5.1   Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before April 27, 2012; provided, however, that no such termination will affect the
right of any party to sue for any breach by any other party (or parties).


 


5.2   Fees
and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay
all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered
by the Company), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.


 


5.3   Entire
Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus
Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and thereof 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 at or 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.


 


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 Purchasers holding at least a majority in interest of (i) the shares
of Preferred Stock then outstanding and (ii) the Shares based on the initial Share Subscription Amounts hereunder 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.


   



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


 


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 4.10.


 


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, partners, members, 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, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition
to the obligations of the Company under Section 4.10, the prevailing party in such action, suit 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.


   



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


 


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 each other party, it being understood
that the 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   Rescission
and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission
of a conversion of the Preferred Stock or an exercise of a Warrant, the applicable Purchaser shall be required to return any shares
of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Purchaser of the
aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such
shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored
right).


 


5.14   Replacement
of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (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
Securities.


  



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5.15   Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the
Purchasers 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.


 


5.16   Payment
Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction
Document or a 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.


 


5.17   Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document
are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained
herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated
by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights including,
without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary
for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been
represented by its own separate legal counsel in its review and negotiation of the Transaction Documents.  For reasons
of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through
EGS.  EGS does not represent any of the Purchasers and only represents Rodman & Renshaw, LLC, the placement agent.  The
Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by any of the Purchasers.  It is expressly understood and agreed
that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser,
solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.


   



    	31



    	 



    

   


5.18   Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any
time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated
with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing Date
thereof forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded
to the Company, the manner of handling such excess to be at such Purchaser’s election.


 


5.19   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.


 


5.20   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.


 


5.21   Construction.
The parties agree that each of them and/or their respective counsel have 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 thereto. 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.


 


5.22   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.


 






    	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.


 


 


	
        OCULUS INNOVATIVE SCIENCES, INC.

         

         
	Address for Notice:
	
        By: /s/ Hoji Alimi                         

               Name: Hoji Alimi

               Title: President & Chief Executive Officer

         

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

         

        Amy Trombly, Esq.

        Trombly Business Law, P.C.

        1320 Centre Street, Suite 202

        Newton, MA 02459

        Fax: (617) 243-0066
	
        Oculus Innovative Sciences, Inc.

        1129 N. McDowell Blvd.

        Petaluma, California 94954

        Fax: (707) 283-0551

         



 


 


 


[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK


SIGNATURE PAGE FOR PURCHASER
FOLLOWS]


    



    	33



    	 



    

  




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


  


Name of Purchaser: Sabby
Healthcare Volatility Master Fund, Ltd.


   


Signature of Authorized
Signatory of Purchaser: /s/ Robert Grundstein


  


Name of Authorized Signatory:
Robert Grundstein


  


Title of Authorized
Signatory: COO of Purchaser’s Investment Manager


  


Facsimile Number of Authorized
Signatory: 201-661-8654


  


Address for Notice to Purchaser:


  




c/o Sabby Management,
LLC


10 Mountainview Road,
Suite 205


Upper Saddle River,
NJ 07458


 


Address for Delivery of
Securities to Purchaser (if not same as address for notice):


 


Bank of America, Merrill
Lynch


222 Broadway, 6th Floor


New York, New York 10038-2510


Attention: Miguelina
Seda


 


Subscription Amount: $2,124,001


 


Preferred Stock Subscription
Amount: $1,000,000


 


Share Subscription Amount:
$1,124,001


 


Shares of Preferred Stock:
1,000


 


Shares: 1,248,890


 


Warrants: 2,360,001


 


[SIGNATURE PAGES CONTINUE]


  



    	34



    	 



    

  


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


 


Name of Purchaser: Sabby
Volatility Warrant Master Fund, Ltd.


  


Signature of Authorized
Signatory of Purchaser: /s/ Robert Grundstein


 


Name of Authorized Signatory:
Robert Grundstein


 


Title of Authorized
Signatory: COO of Purchaser’s Investment Manager


  


Facsimile Number of Authorized
Signatory: 201-661-8654


  


Address for Notice to Purchaser:


 


c/o Sabby Management,
LLC


10 Mountainview Road,
Suite 205


Upper Saddle River,
NJ 07458


 


Address for Delivery of
Securities to Purchaser (if not same as address for notice):


 


Bank of America, Merrill
Lynch


222 Broadway, 6th
Floor


New York, New York 10038-2510


Attention: Miguelina
Seda


 


Subscription Amount: $999,999.90


 


Preferred Stock Subscription
Amount: $0


 


Share Subscription Amount:
$999,999.90


 


Shares of Preferred Stock:
0


 


Shares: 1,111,111


 


Warrants: 1,111,111


 


 






    	35



    	 



    
 





Disclosure Schedules to the Securities Purchase
Agreement 


 


	Schedule 3.1(a)	Subsidiaries.




 


The Company is in a control relationship with the following subsidiaries:


 


Aquamed Technologies, Petaluma, CA


MicroMed Laboratories, Inc., Petaluma, CA


L3 Pharmaceuticals, Inc., Petaluma, CA


Oculus Technologies of Mexico, S.A. de C.V.


Oculus Innovative Sciences Netherlands, B.V.


 


	Schedule 3.1(a)	Permitted Liens.




 


Under the Intellectual Property Security Agreement
by and between the Company and Venture Lending & Leasing V, Inc. dated June 29, 2011 and the Intellectual Property Security
Agreement by and between the Company and Venture Lending & Leasing VI, Inc. dated June 29, 2011, the Company has granted a
security interest and mortgage to Venture Lending & Leasing V, Inc. and Venture Lending & Leasing VI, Inc. (the “Secured
Party”), as security, in and to Company’s entire right, title and interest in, to and under the following intellectual
property, now owned or hereafter acquired by Company or in which Company now holds or hereafter acquires any interest (all of which
shall collectively be called the “Collateral” for purposes hereto):


 


(a) Any and all copyrights, whether registered
or unregistered, held pursuant to the laws of the United States, any State thereof or of any other country; all registrations,
applications and recordings in the United States Copyright Office or in any similar office or agency of the United States, and
State thereof or any other country; all continuations, renewals, or extensions thereof; and any registrations to be issued under
any pending applications (collectively, the “Copyrights”);


 


(b) All letters patent of, or rights corresponding
thereto in, the United States or any other country, all registrations and recordings thereof, and all applications for letters
patent of, or rights corresponding thereto in, the United States or any other country, including, without limitation, registrations,
recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country; all reissues, continuations, continuations-in-part or extensions thereof; all petty patents,
divisionals, and patents of addition; and all patents to be issued under any such applications (collectively, the “Patents”);


 


(c) All trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and any applications in connection therewith, including, without limitation, registrations,
recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof, and reissues, extensions or renewals thereof, and
the entire goodwill of the business of Company connected with and symbolized by such trademarks (collectively, the “Trademarks”);






    	36



    	 



    
 


 


(d) Any and all claims for damages by way of
past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and
collect such damages for said use or infringement of the intellectual property rights identified above;


 


(e) All licenses or other rights to use any
of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such
license or rights;


 


(f) All amendments, renewals and extensions
of any of the Copyrights, Trademarks or Patents; and


 


(g) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.


 


Notwithstanding the foregoing the term “Collateral”
shall not include any of the following items: (i) exclusive distribution rights to liquid solutions based on Company’s Microcyn
Technology, specifically including Vetericyn Wound Care Spray, within the animal health markets solely for use in the treatment
of all types of animals (non-humans) within the United States of America, Canada, Puerto Rico, the People’s Republic of China,
Hong Kong, Taiwan, Japan, Korea, Singapore and Mexico, pursuant to the Revenue Sharing, Partnership, and Distribution Agreement
between Company and Vetericyn, Inc. (formerly VetCure, Inc.), dated January 26, 2009, as amended and restated by Amendment No.
1 dated February 24, 2009, amended by Amendment No. 2 dated July 24, 2009, and amended by Amendment No. 3 dated June 1, 2010 and
as such may be subsequently amended; (ii) non-exclusive right to market Company’s Microcyn over-the-counter liquid and hydrogel
products, pursuant to the Revenue Sharing Distribution Agreement between Company and Innovacyn, Inc. (formerly V&M Industries),
dated September 2009, as amended by Amendment No. 1 to Exhibit A dated June 1, 2010 and as such may be subsequently amended; (iii)
exclusive distribution rights to liquid solutions based on Company’s Microcyn Technology within advanced human wound care
for humans in hospital, pharmacy and clinic markets within the People’s Republic of China pursuant to the Distribution Agreement
between Company and Tianjian Ascent Import and Export Company, Ltd, dated January 28, 2011 and as such may be subsequently amended;
(iv) exclusive sales, marketing, and distribution agent for certain of Company’s liquid and gel products in the prescription
dermatology market in the United States, its territories and possessions, and Canada, pursuant to the Exclusive Sales and Distribution
Agreement between Company and Quinnova Pharmaceuticals, Inc., dated February 14, 2011 and as such may be subsequently amended;
(v) exclusive right to promote certain of Company’s liquid and gel prescription products designed for chronic wound care
under Company’s trademark in the field of podiatry in the continental United States, its territories, and Canada pursuant
to the Exclusive Co-Promotion Agreement between Company and Quinnova Pharmaceuticals, Inc., dated February 14, 2011 and as such
may be subsequently amended; (vi) exclusive sales, distribution, and marketing rights for Company’s Microcyn-based acne drug
candidate pursuant to the Product Option Agreement between the Company and AmDerma Pharmaceuticals, LLC, dated February 14, 2011
and as such may be subsequently amended; (vii) “intent-to-use” trademarks at all times prior to the first use thereof,
whether by the actual use thereof in commerce, the recording of a statement of use with the United States Patent and Trademark
Office or otherwise, but only to the extent the granting of a security interest in such “intent to use” trademarks
would be contrary to applicable law; and (viii) any contract, instrument or chattel paper in which Company has any right, title
or interest if and to the extent such contract, instrument or chattel paper includes a provision containing a restriction on assignment
such that the creation of a security interest in the right, title or interest of Company therein would be prohibited and would,
in and of itself, cause or result in a default thereunder enabling another person party to such contract, instrument or chattel
paper to enforce any remedy with respect thereto; provided, however, that the foregoing exclusion shall not apply if (A)
such prohibition has been waived or such other person has otherwise consented to the creation hereunder of a security interest
in such contract, instrument or chattel paper, or (B) such prohibition would be rendered ineffective pursuant to Sections 9-407(a)
or 9-408(a) of the UCC, as applicable and as then in effect in any relevant jurisdiction, or any other applicable law (including
the Bankruptcy Code) or principles of equity); provided further that immediately upon the ineffectiveness, lapse or termination
of any such provision, the term “Collateral” shall include, and Company shall be deemed to have granted a security
interest in, all its rights, title and interests in and to such contract, instrument or chattel paper as if such provision had
never been in effect; and provided further that the foregoing exclusion shall in no way be construed so as to limit, impair or
otherwise affect Secured Party’s unconditional continuing security interest in and to all rights, title and interests of
Company in or to any payment obligations or other rights to receive monies due or to become due under any such contract, instrument
or chattel paper and in any such monies and other proceeds of such contract, instrument or chattel paper.






    	37



    	 



    
 


 


	Schedule 3.1(g)	Capitalization.




 


The capitalization of the Company, as of April 20, 2012, is set
forth below.


 


	Common stock outstanding	29,007,903
	Common
    stock options	6,266,326
	Common
    stock purchase warrants	8,492,902
	 	43,767,131


 





Reset Provisions:


 


The common stock purchase warrants issued with the Company’s
August 13, 2007 private placement, and the common stock purchase warrants issued to the placement agent in the transaction, do
not have fixed settlement provisions because their exercise prices may be lowered if the Company issues securities at a lower price
in the future.


 


In accordance with the August 13, 2007 private placement, the Company
initially issued an aggregate of 416,622 common stock purchase warrants at an exercise price of $9.50 per share, subject to adjustment
in certain circumstances, to the accredited investors involved in the transaction. The Company also initially issued 88,375 common
stock purchase warrants at an exercise price of $9.50 per share, subject to adjustment in certain circumstances, to the placement
agent in the transaction.






    	38



    	 



    
 


 


	Schedule 3.1(i)	Material Changes; Undisclosed Events, Liabilities or Developments.




 


To the Company’s knowledge, no event, liability or development
has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation
is made that has not been publicly disclosed one trading day prior to the date that this representation is made.


 


	Schedule 3.1(cc)	Accountants.




 


Marcum LLP


750 Third Avenue, 11th Floor


New York, NY 10017


 


	Section 3.1(ll)	Seniority.




 


N/A


 


	Section 4.9	Use of Proceeds.




 


N/A


 


	Section 4.13	Subsequent Equity Sales.




Common Stock


 


	Consultant #1	100,000
	Consultant #2	190,000
	Consultant #3	100,000
	Total	390,000


 


Warrants


 


	Service Providers	180,000
	Total	180,000


 


 


 



    	39



    	 



    

EXHIBIT A


 


FORM OF CERTIFICATE OF DESIGNATION



    	40



    	 



    

EXHIBIT B


 


FORM OF LEGAL OPINION



    	41



    	 



    

EXHIBIT C


 


FORM OF WARRANT


 






    	42