EX-10.3



 





Exhibit 10.3




FORM OF
REGISTRATION RIGHTS AGREEMENT




          REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of October 31, 2006, by and among
Electro-Optical Sciences, Inc., a corporation organized under the laws of Delaware, with its
principal offices at 3 West Main Street, Suite 201, Irvington, New York 10533 (the “Company”), and
the undersigned buyers (each, a “Buyer”, and collectively, the “Buyers”).




          WHEREAS:




          A. In connection with the Securities Purchase Agreements by and among the parties hereto of
even date herewith (collectively, the “Securities Purchase Agreement”), the Company has agreed,
upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and
sell on the date hereof to each Buyer (i) shares (the “Common Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), and (ii) warrants (the “Warrants”), which
will be exercisable to purchase shares of Common Stock (as exercised collectively, the “Warrant
Shares”).




          B. To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute (collectively, the “1933
Act”), and applicable state securities laws.




          NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Buyers hereby agree as follows:




          1. Definitions.




          Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:




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



               b.  “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.



               c.  “Effective Date” means the date the Registration Statement has been declared effective by
the SEC.



               d.  “Effectiveness Deadline” means the date that is 120 days after the Closing Date.



 









 





               e.  “Filing Deadline” means the date that is 30 days after the Closing Date.



               f.  “Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.



               g.  “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.



               h.  “register,” “registered,” and “registration” refer to a registration effected by preparing
and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act
and pursuant to Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.



               i.  “Registrable Securities” means (i) the Common Shares, (ii) the Warrant Shares issued or
issuable upon exercise of the Warrants and (iii) any shares of capital stock issued or issuable
with respect to the Common Shares, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to
any limitations on exercise of the Warrants.



               j.  “Registration Statement” means a registration statement or registration statements of the
Company filed under the 1933 Act covering the Registrable Securities.



               k.  “Required Holders” means the holders of at least a majority of the Registrable Securities.



               l.  “Required Registration Amount” for the Registration Statement means 100% of the sum of (i)
the number of Common Shares issued pursuant to the Securities Purchase Agreement and (ii) the
number of Warrant Shares issued and issuable pursuant to the Warrants as of the trading day
immediately preceding the applicable date of determination, all subject to adjustment as provided
in Section 2(e) (without regard to any limitations on exercise of the Warrants).



               m.  “Rule 415” means Rule 415 promulgated under the 1933 Act or any successor rule providing
for offering securities on a continuous or delayed basis.



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



          2. Registration.




               a. Mandatory Registration. The Company shall prepare, and, as soon as practicable but
in no event later than the Filing Deadline, use its commercially reasonable



2









 




efforts to file with the SEC the Registration Statement on Form S-3 covering the resale of at
least the number of shares of Common Stock equal to the Required Registration Amount determined as
of date the Registration Statement is initially filed with the SEC. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as is available for such
a registration on another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(d). The Registration Statement shall contain (except if otherwise
directed by the Required Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit B. The
Company shall use its commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the Effectiveness Deadline.
By 9:30 am on the Business Day following the Effective Date, the Company shall file with the SEC
in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with
sales pursuant to such Registration Statement.




               b. Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have the
right to select one legal counsel to review and oversee any registration pursuant to this Section 2
(“Legal Counsel”), which shall be counsel designated by the Required Holders. The Company and
Legal Counsel shall reasonably cooperate with each other in performing the Company’s obligations
under this Agreement.



               c. Ineligibility for Form S-3. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company shall (i) register the
resale of the Registrable Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by the SEC.



               d. Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover
all of the Registrable Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to Section 2(b), the Company
shall amend the applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable, but in any event not
later than fifteen (15) days after the necessity therefor arises. The Company shall use its
reasonable best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as reasonably practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the number of shares of
Common Stock available for resale under the Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. The
calculation set forth in the foregoing sentence shall be made without regard to any limitations on
the exercise of the Warrants and such calculation shall assume that the Warrants



3









 




are then exercisable for shares of Common Stock at the then prevailing Exercise Price (as
defined in the Warrants).




               e. Effect of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement. If (i) a Registration Statement covering all of the Registrable Securities required
to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not
filed with the SEC on or before the Filing Deadline (a “Filing Failure”) or (B) not declared
effective by the SEC on or before the Effectiveness Deadline (an “Effectiveness Failure”) or (ii)
on any day after the Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an Allowable Grace Period
(as defined in Section 3(r)) pursuant to such Registration Statement (including, without
limitation, because of a failure to keep such Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration Statement or to
register a sufficient number of shares of Common Stock) (a “Maintenance Failure”) then, as partial
relief for the damages to any holder by reason of any such delay in or reduction of its ability to
sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), subject to Section 2(g) hereof, the Company shall pay to
each holder of Registrable Securities relating to such Registration Statement an amount in cash
equal to one percent (1.0%) of the aggregate Purchase Price (as such term is defined in the
Securities Purchase Agreement) of such Investor’s Registrable Securities included in such
Registration Statement on each of the following dates: (i) the day of a Filing Failure and on every
thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until such
Filing Failure is cured; (ii) the day of an Effectiveness Failure and on every thirtieth day (pro
rated for periods totaling less than thirty (30) days) thereafter until such Effectiveness Failure
is cured; and (iii) the initial day of a Maintenance Failure and on every thirtieth day (pro rated
for periods totaling less than thirty (30) days) thereafter until such Maintenance Failure is
cured. The payments to which a holder shall be entitled pursuant to this Section 2(f) are referred
to herein as “Registration Delay Payments.” Registration Delay Payments shall be paid on the
earlier of (I) the last day of the calendar month during which such Registration Delay Payments are
incurred and (II) the third Business Day after the event or failure giving rise to the Registration
Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a
timely manner, such Registration Delay Payments shall bear interest at the rate of one percent
(1.0%) per month (prorated for partial months) until paid in full. Notwithstanding anything herein
or in the Securities Purchase Agreement to the contrary, in no event shall the aggregate amount of
Registration Delay Payments (other than Registration Delay Payments payable pursuant to events that
are within the control of the Company) exceed, in the aggregate, 10% of the aggregate Purchase
Price of the Common Shares.



               f. Selling Investor Questionnaire. Each Investor agrees to furnish to the Company a
completed Questionnaire in the form attached to this Agreement as Annex A or in such other
form that provides substantially similar information (a “Selling Investor Questionnaire”). The
Company shall not be required to include the Registrable Securities of an Investor in a
Registration Statement and shall not be required to pay any Registration Delay Payments under
Section 2(f) hereof to any Investor who fails to furnish the Company a fully completed Selling
Holder Questionnaire at least three Trading Days prior to the Filing Deadline or fails to comply
with its obligations pursuant to Section 4 hereof.



4









 





          3. Related Obligations.




          At such time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(c) or 2(d), the Company will use its reasonable best efforts to effect
the registration of the Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have the following obligations:




               a. The Company shall submit to the SEC, within five (5) Business Days after the Company learns
that no review of a particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on a particular Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a time and date not
later than 48 hours after the submission of such request. The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) (or any successor thereto) promulgated under the 1933
Act or (ii) the date on which the Investors shall have sold all of the Registrable Securities
covered by such Registration Statement (the “Registration Period”). The Company shall ensure that
each Registration Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements therein (in the
case of prospectuses, in the light of the circumstances in which they were made) not misleading.



               b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under
the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the seller or sellers thereof
as set forth in such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-QSB,
Form 10-K, Form 10-KSB or any analogous report under the Securities Exchange Act of 1934, as
amended (the “1934 Act”), the Company shall have incorporated such report by reference into such
Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on
the same day on which the 1934 Act report is filed which created the requirement for the Company to
amend or supplement such Registration Statement.



               c. The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration
Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments
and supplements to all Registration Statements (except for Annual Reports on Form 10-K and Form
10-KSB, and Reports on Form 10-Q and Form 10-QSB and any similar or successor reports) within a
reasonable number of days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto in a



5









 




form to which Legal Counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably
withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its representatives relating
to any Registration Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an Investor, and all
exhibits and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to
this Section 3.




               d. The Company shall furnish to each Investor whose Registrable Securities are included in any
Registration Statement, without charge, (i) promptly after the same is prepared and filed with the
SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, if requested
by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.



               e. The Company shall use its reasonable best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors of the Registrable
Securities covered by a Registration Statement under such other securities or “blue sky” laws of
all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall reasonably promptly notify Legal Counsel and each
Investor who holds Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the Registrable Securities
for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of notice of the initiation or threatening of any proceeding for such purpose.



               f. The Company shall notify Legal Counsel and each Investor in writing of the happening of any
event, as reasonably promptly as practicable after becoming



6









 




aware of such event, as a result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section 3(r), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request).
The Company shall also reasonably promptly notify Legal Counsel and each Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when
a Registration Statement or any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related information, and (iii) of
the Company’s reasonable determination that a post-effective amendment to a Registration Statement
would be appropriate.




               g. The Company shall use its reasonable best efforts to prevent the issuance of any stop order
or other suspension of effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an
order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Investor who holds Registrable Securities
being sold of the issuance of such order and the resolution thereof or its receipt of notice of the
initiation or threat of any proceeding for such purpose.



               h. If any Investor is required under applicable securities law to be described in the
Registration Statement as an underwriter, at the reasonable request of such Investor, the Company
shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request (i) a letter,
dated such date, from the Company’s independent certified public accountants in form and substance
as is customarily given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering, addressed to the
Investors.



               i. Upon the written request of any Investor in connection with any Investor’s due diligence
requirements, if any, the Company shall make available for inspection by (i) any Investor, (ii)
Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and
employees to supply all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a



7









 




misstatement or omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or
order from a court or government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure in violation of
this or any other Transaction Document. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to
sell Registrable Securities in a manner which is otherwise consistent with applicable laws and
regulations.




               j. The Company shall hold in confidence and not make any disclosure of information concerning
an Investor provided to the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.



               k. The Company shall use its reasonable best efforts either to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on each securities exchange
on which securities of the same class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all of the Registrable Securities covered by a
Registration Statement on The NASDAQ Capital Market or (iii) if, despite the Company’s best efforts
to satisfy, the preceding clauses (i) and (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) and (ii), to secure the inclusion for quotation on the The New York Stock
Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market or the American Stock Exchange
for such Registrable Securities and, without limiting the generality of the foregoing, to use its
reasonable best efforts to arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. (“NASD”) as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).



               l. The Company shall cooperate in all reasonable respects with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.



8









 





               m. If requested by an Investor, the Company shall (i) as soon as reasonably practicable
incorporate in a prospectus supplement or post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as soon as reasonably
practicable make all required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as reasonably practicable, supplement or make
amendments to any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.



               n. The Company shall use its reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.



               o. The Company shall make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first day of the
Company’s fiscal quarter next following the effective date of a Registration Statement.



               p. The Company shall otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the SEC in connection with any registration hereunder.



               q. Within two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.



               r. Notwithstanding anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the
Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the
Company, otherwise required (a “Grace Period”); provided, that the Company shall reasonably
promptly (i) notify the Investors in writing of the existence of material, non-public information
giving rise to a Grace Period (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Investors) and the date on which the Grace
Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed five (5) consecutive days and during
any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of
twenty (20) days and the first day of any Grace Period



9









 




must be at least five (5) trading days after the last day of any prior Grace Period (each, an
“Allowable Grace Period”). For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the Investors receive the notice referred to in
clause (i) and shall end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g)
hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of
the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with
respect to the information giving rise thereto unless such material, non-public information is no
longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for sale, and delivered a
copy of the prospectus included as part of the applicable Registration Statement (unless an
exemption from such prospectus delivery requirement exists), prior to the Investor’s receipt of the
notice of a Grace Period and for which the Investor has not yet settled.




               s. All information disclosed in the notices contemplated in this Section 3 shall be kept
confidential by the recipient thereof until such information is publicly disclosed by the Company
unless disclosure by the recipient is required by law or legal process.



          4. Obligations of the Investors.




               a. At least five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the information in
addition to the information required pursuant to the Selling Investor Questionnaire, the Company
requires from each such Investor if such Investor elects to have any of such Investor’s Registrable
Securities included in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request.



               b. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement hereunder, unless such Investor has notified
the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.



               c. Each Investor agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of 3(f)
or receipt of notice that no supplement or amendment is



10









 




required. Notwithstanding anything to the contrary, the Company shall use its reasonable best
efforts to cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in connection with
any sale of Registrable Securities with respect to which an Investor has entered into a contract
for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event
of the kind described in Section 3(g) or the first sentence of 3(f) and for which the Investor has
not yet settled.




               d. Each Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales
of Registrable Securities pursuant to the Registration Statement.



               e. Each Investor agrees not to take any action with respect to any distribution deemed to be
made pursuant to such Registration Statement which would constitute a violation of Regulation M
under the Exchange Act or any other applicable rule, regulation or law.



          5. Expenses of Registration.




          All reasonable expenses, other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company, shall be paid by the Company;
provided, however, that all selling commissions applicable to the sale of Registrable Securities
and all fees and expenses of legal counsel for any Investor shall be borne by such Investor.




          6. Indemnification.




          In the event any Registrable Securities are included in a Registration Statement under this
Agreement:




               a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend each Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within the meaning of the
1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid
in settlement or expenses, joint or several, (collectively, “Claims”) (it being understood and
agreed that Claims shall not include any Claims for loss of market value of the Registrable
Securities) incurred in investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement
or any post-effective amendment thereto or in any filing made in



11









 




connection with the qualification of the offering under the securities or other “blue sky”
laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the statements made therein,
in the light of the circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other
law, including, without limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or
(iv) any violation of this Agreement by the Company (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable,
for any reasonable legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a
Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by such Indemnified
Person for such Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(d) and (ii) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.




               b. In connection with any Registration Statement in which an Investor is participating, each
such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, agents and employees and each Person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act and their directors, officers, agents and their
employees (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in connection with such
Registration Statement; and, subject to Section 6(c), such Investor will reimburse any legal or
other expenses reasonably incurred by an Indemnified Party in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement contained in this Section
6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided,
further, however, that the Investor shall be liable under this Section 6(b) for only that amount of
a Claim or Indemnified



12









 




Damages as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.




               c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel reasonbly satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel with the fees and
expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential differing interests between
such Indemnified Person or Indemnified Party and any other party represented by such counsel in
such proceeding. In the case of an Indemnified Person, legal counsel referred to in the
immediately preceding sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or Claim by the indemnifying
party and shall furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person reasonably apprised at all times as to
the status of the defense or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding effected without its
prior written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the Indemnified Party.
Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action.



13









 





               d. The indemnification required by this Section 6 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
Indemnified Damages are incurred and bills therefor are received.



               e. The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.



          7. Contribution.




          To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no Person involved in the sale of Registrable
Securities, which Person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) in connection with such sale, shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of such Registrable
Securities pursuant to such Registration Statement.




          8. Reports Under the 1934 Act.




          With a view to making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration (“Rule 144”), the
Company agrees to:




               a. make and keep public information available, as those terms are understood and defined in
Rule 144;



               b. file with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is required for the applicable
provisions of Rule 144; and



               c. furnish to each Investor so long as such Investor owns Registrable Securities, reasonably
promptly upon request, (i) a written statement by the Company, if true, that it has complied with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to permit the Investors
to sell such securities pursuant to Rule 144 without registration.



          9. Assignment of Registration Rights.




          The rights under this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of such Investor’s Registrable Securities if: (i) the




14









 







Investor agrees in writing with the transferee or assignee to assign such rights and a copy of
such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee and (b) the securities with
respect to which such registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities by the transferee
or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement and applicable securities laws.




          10. Amendment of Registration Rights.




          Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration 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 also is offered to all of the parties to this Agreement.




          11. Miscellaneous.




               a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is
deemed to own of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from
the such record owner of such Registrable Securities.



               b. Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:



     If to the Company:


If to the Company:



Electro-Optical Sciences, Inc.

3 West Main Street, Suite 201




15









 








     Irvington, New York 10533


Telephone: (914) 541-3783

Facsimile: (914) 591-3701

Attention: Chief Financial Officer




     If to Legal Counsel:


Dreier LLP

499 Park Ave



New York, NY 10022

Telephone: (212) 328-6100

Facsimile: (212) 328-6101

Attention: Valerie Price




     With a copy (for informational purposes) to:


Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone: (212) 756-2000

Facsimile: (212) 593-5955

Attention: Eleazer N. Klein, Esq.



If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached
hereto, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to
such other address and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five (5) days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.




               c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.



               d. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York. Each party hereby irrevocably submits to the



16









 




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, 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 brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of any provision of this Agreement in any
other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.




               e. This Agreement, the other Transaction Documents (as defined in the Securities Purchase
Agreement) and the instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the other Transaction Documents and the instruments referenced
herein and therein supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.



               f. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and
be binding upon the permitted successors and assigns of each of the parties hereto.



               g. The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.



               h. This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.



               i. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.



17









 





               j. All consents and other determinations required to be made by the Investors pursuant to this
Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.



               k. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent and no rules of strict construction will be applied against any
party.



               l. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.



               m. The obligations of each Investor hereunder are several and not joint with the obligations
of any other Investor, and no provision of this Agreement is intended to confer any obligations on
any Investor vis-à-vis any other Investor. Nothing contained herein, and no action taken by any
Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated herein.



* * * * * *




18









 








          IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Registration Rights Agreement to be duly executed as of the date first written above.




	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	ELECTRO-OPTICAL SCIENCES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:






 









 






          IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Registration Rights Agreement to be duly executed as of the date first written above.




	 	 	 	 	 
	 	 	BUYERS:
	 
	 	 	 	 
	 	 	[BUYERS]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:






 









 






SCHEDULE OF BUYERS




	 	 	 	 	 	 	 
	 	 	Buyer’s Address	 	Buyer's Representative’s Address
	Buyer	 	and Facsimile Number	 	and Facsimile Number
	[Buyers]

	 	[Address]	 	 	 	 
	 

	 	Attention:
	 	[          ]	 	 
	 

	 	Facsimile:
	 	(  ) -	 	 
	 

	 	Telephone:
	 	(  ) -	 	 
	 

	 	 	 	(  ) -	 	 
	 

	 	Residence:
	 	[          ]	 	 






 









 






EXHIBIT A




FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT




[          ]

[          ]

[          ]

Attention: [     ]




          Re: Electro-Optical Sciences, Inc.



Ladies and Gentlemen:




          [We are][I am] counsel to Electro-Optical Sciences, Inc., a corporation organized under the
laws of Delaware (the “Company”), and have represented the Company in connection with that certain
Securities Purchase Agreement (the “Securities Purchase Agreement”), entered into by and among the
Company and the buyers named therein (collectively, the “Holders”) pursuant to which the Company
issued to the Holders its shares of the Company’s Common Stock, par value $0.001 per share (the
"Common Stock”) and warrants exercisable for shares of Common Stock (the “Warrants”). Pursuant to
the Securities Purchase Agreement, the Company also has entered into a Registration Rights
Agreement with the Holders (the “Registration Rights Agreement”) pursuant to which the Company
agreed, among other things, to register the resale of the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable upon exercise of the
Warrants under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the
Company’s obligations under the Registration Rights Agreement, on                      ___, 2006, the
Company filed a Registration Statement on Form S-3 (File No. 333-                    ) (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.




          In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has
advised [us][me] by telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the SEC and the Registrable Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.




          This letter shall serve as our standing instruction to you that the shares of Common Stock are
freely transferable by the Holders pursuant to the Registration Statement. You need not require
further letters from us to effect any future legend-free issuance or reissuance of shares of Common
Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
October ___, 2006, provided at the time of such




1









 







reissuance, the Company has not otherwise notified you that the Registration Statement is
unavailable for the resale of the Registrable Securities.




	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	[ISSUER’S COUNSEL]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	CC: [LIST NAMES OF HOLDERS]
	 	 	 	 






2









 






EXHIBIT B




SELLING STOCKHOLDERS




     The shares of common stock being offered by the selling stockholders are those previously
issued to the Selling Stockholders and those issuable to the Selling Stockholders upon exercise of
the warrants. For additional information regarding the issuances of common stock and the warrants,
see “Private Placement of Common Shares and Warrants” above. We are registering the shares of
common stock in order to permit the selling stockholders to offer the shares for resale from time
to time. Except for the ownership of the shares of common stock and the warrants, the selling
stockholders have not had any material relationship with us within the past three years.



     The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of common stock by each of the selling stockholders. The second column
lists the number of shares of common stock beneficially owned by each selling shareholder, based on
its ownership of the shares of common stock and the warrants, as of ___, 2006, assuming
exercise of the warrants held by the selling stockholders on that date, without regard to any
limitations on exercise.



     The third column lists the shares of common stock being offered by this prospectus by the
selling stockholders.



     In accordance with the terms of registration rights agreements with the holders of the shares
of common stock and the warrants, this prospectus generally covers the resale of that number of
shares of common stock equal to the number of shares of common stock issued and the shares of
common stock issuable upon exercise of the related warrants, determined as if the outstanding
warrants were exercised, as applicable, in full, in each case, as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC. The fourth column
assumes the sale of all of the shares offered by the selling stockholders pursuant to this
prospectus.



     Under the terms of the warrants, a selling shareholder may not exercise the warrants, to the
extent such exercise would cause such selling shareholder, together with its affiliates, to
beneficially own a number of shares of common stock which would exceed [4.99]% of our then
outstanding shares of common stock following such exercise, excluding for purposes of such
determination shares of common stock issuable upon exercise of the warrants which have not been
exercised. The number of shares in the second column does not reflect this limitation. The
selling stockholders may sell all, some or none of their shares in this offering. See “Plan of
Distribution.”



1









 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Maximum Number of Shares	 	 	 	 
	 	 	Number of Shares Owned	 	 	to be Sold Pursuant to this	 	 	Number of Shares Owned	 
	Name of Selling Stockholder	 	Prior to Offering	 	 	Prospectus	 	 	After Offering	 
	(1) [Buyers]
	 	 	 	 	 	 	 	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(1)
	 	 	 	 	 	 	 	 	 	 	 	 






2









 






PLAN OF DISTRIBUTION




     We are registering the shares of common stock previously issued and the shares of common stock
issuable upon exercise of the warrants to permit the resale of these shares of common stock by the
holders of the common stock and warrants from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by the selling stockholders of the shares of
common stock. We will bear all fees and expenses incident to our obligation to register the shares
of common stock.



     The selling stockholders may sell all or a portion of the shares of Common Stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or
commissions or agent’s commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,




	 	•	 	on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
	 
	 	•	 	in the over-the-counter market;
	 
	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
	 
	 	•	 	through the writing of options, whether such options are listed on an options
exchange or otherwise;
	 
	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	short sales;
	 
	 	•	 	sales pursuant to Rule 144;




C-1









 






	 	•	 	broker-dealers may agree with the selling securityholders to sell a specified number
of such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.





     If the selling stockholders effect such transactions by selling shares of Common Stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of Common Stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of Common Stock or otherwise,
the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short and deliver shares of
Common Stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling stockholders may also loan or pledge shares of
Common Stock to broker-dealers that in turn may sell such shares.



     The selling stockholders may pledge or grant a security interest in some or all of the
convertible notes, warrants or shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell the
shares of Common Stock from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of Common Stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.



     The selling stockholders and any broker-dealer participating in the distribution of the shares
of Common Stock may be deemed to be “underwriters” within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of shares of Common Stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.



     Under the securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of Common Stock may not be sold unless such shares have been registered or qualified



C-2









 




for sale in such state or an exemption from registration or qualification is available and is
complied with.




     There can be no assurance that any selling stockholder will sell any or all of the shares of
Common Stock registered pursuant to the registration statement, of which this prospectus forms a
part.



     The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of Common Stock to engage in market-making
activities with respect to the shares of Common Stock. All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of Common Stock.



     We will pay all expenses of the registration of the shares of Common Stock pursuant to the
registration rights agreement, estimated to be $[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholders against liabilities,
including some liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by the selling stockholder specifically
for use in this prospectus, in accordance with the related registration rights agreement, or we may
be entitled to contribution.



     Once sold under the registration statement, of which this prospectus forms a part, the shares
of Common Stock will be freely tradable in the hands of persons other than our affiliates.




C-3