Securites Purchase Agreement



 EXHIBIT 4.1 
  

SECURITIES PURCHASE AGREEMENT 
  
 This Securities Purchase Agreement (this “Agreement”) is dated as of June 1, 2004, among OSI SYSTEMS, INC., a California corporation (the
“Company”), and each of the purchasers identified on the signature pages hereto (each a “Purchaser” and collectively the “Purchasers”). 
  
 WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act
of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each of the Purchasers, and each of the Purchasers, severally and not jointly, desires to purchase from the
Company, shares of the Company’s common stock, no par value, and certain Warrants (as defined below), 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 of the Purchasers agree as follows: 
  
 ARTICLE I. 
 DEFINITIONS 
  
 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings
indicated: 
  
 “Affiliate” means
any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. 
  
 “Business Day” means any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close. 
  
 “Closing” means the closing of the purchase
and sale of the Securities pursuant to Section 1.2. 
  
 “Closing Bid Price” means on any particular date (a) the closing bid price per share of Common Stock on such date on the Trading Market or on such Eligible Market, or if there is no such price on such date, then the closing
sale price on the Trading Market or on such Eligible Market on the date nearest preceding such date, or (b) if the shares of Common Stock are not then listed or quoted on the Trading Market or on such Eligible Market, the closing sale price for a
share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices) at the close of 







 business on such date, or (c) if the shares of Common Stock are not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the relevant conversion period, as determined in good faith by the
Purchasers, or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined in good faith by the Purchasers owning a majority of the Shares. 
  
 “Closing Date” means the date of the
Closing. 
  
 “Commission” means
the Securities and Exchange Commission. 
  
 “Common Stock” means the common stock of the Company, no par value, and any securities into which such common stock may hereafter be converted or for which it may be exchanged. 
  
 “Company Counsel” means Loeb & Loeb
LLP, counsel to the Company. 
  
 “Effective Date” means the date that the Registration Statement is first declared effective by the Commission. 
  
 “Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market. 
  
 “Exchange
Act” means the Securities Exchange Act of 1934, as amended. 
  
 “Per Unit Purchase Price” shall be $21.524. 
  
 “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 any court or other federal, state, local or other governmental authority or other entity of any kind. 
  
 “Proceeding” means an action, claim, suit,
investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 
  
 “Purchaser Counsel” means Proskauer Rose LLP. 
  
 “Registration Statement” means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares and the Warrant Shares. 
  
 “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of this Agreement, among
the Company and the Purchasers, in the form of Exhibit B hereto. 
  

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 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 
  
 “Securities” means the Shares, the Warrants and Warrant Shares. “Securities Act”
means the Securities Act of 1933, as amended. 
  
 “Shares” means the shares of Common Stock issued to the Purchasers pursuant to this Agreement. 
  
 “Strategic Transaction” means a transaction or relationship in which the Company issues shares of Common Stock to a
Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives material 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. 
  
 “Subsidiary” means any subsidiary of the Company that is required to be listed in Schedule
3.1(a). 
  
 “Trading Day” means
(i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day. 
  
 “Trading Market” means the Nasdaq National
Market or any other national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted. 
  
 “Transaction Documents” means this Agreement, the Registration Rights Agreement, the Transfer Agent Instructions, the
Warrants and any other documents or agreements executed in connection with the transactions contemplated hereunder. 
  
 “Warrant” means a Common Stock purchase warrant, in the form of Exhibit A. 
  
 “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. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally and not jointly, purchase from the Company, such number of Shares
and a Warrant, each as set forth below such Purchaser’s name on the signature page of this Agreement, for the aggregate purchase price set forth below such Purchaser’s name on the signature page of this Agreement. The Closing shall take
place at the offices of Purchaser Counsel on the date hereof or at such other location or time as the parties may agree. 
  
 2.2 Closing Deliveries. At the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following: 
  
 (i) a certificate evidencing the number of Shares indicated
below such Purchaser’s name on the signature page of this Agreement, registered in the name of such Purchaser; 
  
 (ii) a Warrant, registered in the name of such Purchaser, pursuant to which such Purchaser shall have the right to acquire the number of
shares of Common Stock equal to 22.5% of the Shares to be issued to such Purchaser at the Closing; 
  
 (iii) a legal opinion of Company Counsel, in agreed form, addressed to the Purchasers; 
  
 (iv) a Registration Rights Agreement duly executed by the
Company; and 
  
 (v) Transfer Agent Instructions
executed by the Company and delivered to and acknowledged by the Company’s transfer agent. 
  
 (b) At the Closing, each Purchaser shall deliver or cause to be delivered to the Company the following: 
  
 (i) the subscription amount indicated below such
Purchaser’s name on the signature page of this Agreement, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose; and 
  
 (ii) a Registration Rights Agreement duly executed by such
Purchaser. 
  

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 ARTICLE III. 
 REPRESENTATIONS AND WARRANTIES 
  
 3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchasers: 
  
 (a) Subsidiaries. The Company has no direct or indirect subsidiaries other than those listed in Schedule 3.1(a). Except as
disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any lien, charge, security interest, encumbrance, right of first refusal or other restriction (collectively,
“Liens”), and all 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. If the Company has no subsidiaries, then
references in the Transaction Documents to the Subsidiaries will be disregarded. 
  
 (b) Organization and Qualification. Each of the Company and 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 (as applicable), 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 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, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any Transaction Document, (ii) have or result in a material adverse
effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company’s ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”). 
  
 (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its Board of Directors or its stockholders. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents. 
  

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 (d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated 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, 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) 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 and the rules and regulations of any self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is bound or affected; except as do not, individually or in the aggregate, have or could not 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 the filing with the Commission of the Registration Statement, the application(s) to each Trading Market for the listing of the Shares and Warrant Shares for
trading thereon in the time and manner required thereby, and applicable Blue Sky filings (collectively, the “Required Approvals”). 
  
 (f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be subject to preemptive rights or similar rights of stockholders. The Company has reserved from its duly authorized capital stock
the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. 
  
 (g) Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock of the Company is set
forth in Schedule 3.1(g). No securities of the Company are entitled to preemptive or similar rights, and 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 and except as disclosed in Schedule 3.1, there are no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or obligations convertible into 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 
  

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 additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. There are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issue 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 such securities.

  
 (h) SEC Reports; Financial Statements.
The Company has filed all reports required to be filed by it 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 to file such material) (the foregoing materials being collectively referred to herein as the “SEC Reports” and, together with the Schedules to this Agreement, the “Disclosure Materials”) 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. The Company has delivered to the Purchasers a copy of all SEC Reports filed within the 10 days preceding
the date hereof. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, 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 light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in accordance with 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 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. Since the date of the latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could 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 required to be
disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (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, 
  

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

  
 (k) Labor Relations. No material labor
dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company. 
  
 (l) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, 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 does not, individually or in the aggregate, 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, individually or in the aggregate, have or 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. 
  

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 (n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance. 
  
 (o) Patents and Trademarks. The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material 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”). Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. 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. 
  
 (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. 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 SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than
for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 
  
 (r) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of 
  

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 financial statements in conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. 
  
 (s) Solvency. Based on the financial condition of the Company as of the Closing Date, (i) the Company’s fair saleable value of its 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, 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 debt 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). 
  
 (t) Certain Fees. Except as
described in Schedule 3.1(t), no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with
respect to the transactions contemplated by this Agreement. 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 that may
be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless the Purchasers, their employees, officers, directors, agents, and partners, and their respective Affiliates, from and against
all claims, losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred. 
  
 (u) Private Placement. Assuming the accuracy of the
Purchasers representations and warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale
of the Securities hereunder does not contravene the rules and regulations of the Trading Market and no shareholder approval is required for the Company to fulfill its obligations under the Transaction Documents. 
  
 (v) Form S-3 Eligibility. The Company is eligible to
register the resale of its Common Stock for resale by the Purchasers under Form S-3 promulgated under the Securities Act. 
  

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 (w) Listing and Maintenance Requirements. The Company has not, in the two years
preceding the date hereof, received notice (written or oral) from any Eligible Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such
Eligible Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. 
  
 (x) Registration Rights. Except as described in Schedule 3.1(x), the Company has not granted
or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied. 
  
 (y) Application of Takeover Protections. The issuance
of the Securities to the Purchasers contemplated hereby will not trigger any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under California
law, the Company’s charter or its stockholders rights plan. The foregoing representation is made in reliance upon each Purchaser’s representation that it (together with any Affiliates or other Persons constituting a group pursuant to Rule
13d-5 of the Securities Exchange Act of 1934) is not, prior to execution of this Agreement, and will not be, after the issuance of Securities contemplated hereby, the beneficial owner (as construed in Rule 13d-3) of twenty (20%) percent or more of
the Company’s Common Stock. 
  
 (z)
Disclosure. 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 constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

  
 (aa) Acknowledgment Regarding
Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an individual arm’s length purchaser, and not together with any other Purchaser or other Person,
with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company or any other Purchaser (or in any similar 
  

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 capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Purchaser’s purchase of the Securities. The Company further represents to
each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. 
  
 (bb) Sarbanes-Oxley Act. The Company is in compliance
with the applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the Commission thereunder in effect as of the date of this Agreement, except where such noncompliance could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect. 
  
 3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants to the Company as follows: 
  
 (a) Organization; Authority. Such Purchaser is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement has been duly authorized by all necessary corporate action on
the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with terms hereof, will constitutes the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its terms. 
  
 (b) Investment Intent. Such Purchaser is acquiring the Securities for investment purposes only and not with a view to or for
distributing such Securities or any part thereof in violation of applicable securities laws, without prejudice, however, to such Purchaser’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Purchaser to hold Securities for any period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. 
  
 (c)
Purchaser Status. At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises the Warrants, it will be an “accredited investor” as defined in Rule 501(a) under
the Securities Act. Such Purchaser is not a registered broker-dealer under Section 15 of the Exchange Act. 
  

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 (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) General Solicitation. To the knowledge of such
Purchaser, such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general advertisement. 
  
 (f) Access to Information. Such Purchaser acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials
and the Company’s representations and warranties contained in the Transaction Documents. 
  
 (g) Beneficial Ownership Such Purchaser (together with any Affiliates or other Persons constituting a group pursuant to Rule 13d-5
of the Securities Exchange Act of 1934) is not, prior to execution of this Agreement, and will not be, after the issuance of Securities contemplated hereby, the beneficial owner (as construed in Rule 13d-3) of twenty (20%) percent or more of the
Company’s Common Stock. 
  
 The Company acknowledges and
agrees that each Purchaser does not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2. 
  
 ARTICLE IV. 
 OTHER AGREEMENTS OF THE PARTIES 
  
 4.1 Transfer Restrictions. Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration
statement, to the Company, to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel 
  

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 selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights Agreement. 
  
 (a) The Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of the following legend on any the
Securities: 
  
 NEITHER THESE SECURITIES NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 
  
 The Company acknowledges and agrees that a Purchaser may
from time to time pledge pursuant to a bona fide margin agreement or grant a security interest in some or all of the Securities and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of
such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.

  

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 (b) Certificates evidencing Securities shall not contain any legend (including the legend
set forth in Section 4.1(b)), (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Securities pursuant to Rule 144,
or (iii) if such Securities are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the
Commission). In the event that any certificate does not bear the legend set forth in Section 4.1(b), and, to the knowledge of the holder, none of the above-referenced conditions exist, then the holder shall submit the certificate to the Company for
application of such legend to the certificate. The Company shall cause its counsel to issue the legal opinion included in the Transfer Agent Instructions to the Company’s transfer agent on the Effective Date. If all or any portion of a Warrant
is exercised at a time when there is a effective registration statement to cover the resale of the Warrant Shares, such Warrant Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing Securities issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such Securities that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section. 
  
 4.2 Furnishing of Information. As long as any Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. Upon the request of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with the preceding sentence. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. 
  
 4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market. 
  

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 4.4 Company Financing Activities. 
  
 (a) From the date hereof until the sixteenth (16th) Trading Day after the Effective Date (the “Blockout Period”), the Company will not, directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its Subsidiaries’ equity or equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable for Common Stock (a “Subsequent Placement”) other than pursuant to a Strategic Transaction, the
sale of more than 50% of the voting stock of a Subsidiary, or a Company employee equity participation or stock option plan approved by the board of directors of the Company. Prior to the Filing Date of the initial Registration Statement, the Company
will not file any other registration statement with the Commission with respect to any Common Stock. 
  
 (b) The Blockout Period set forth in the preceding paragraph (a) shall be extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, (ii) the Registration Statement is not effective, or (iii) the prospectus included in the Registration Statement may not be used by the Purchasers for the resale of Registrable Securities
thereunder. 
  
 (c) From the end of the Blockout Period until the
six month anniversary thereof, the Company will not, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4.4(c). 
  
 (i) The Company shall deliver to each Purchaser a written notice (the “Offer”) of any proposed or
intended issuance or sale or exchange of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons or entities (if known) to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange with each Purchaser a pro-rata portion of twenty percent (20%) of such Offered Securities, based on such Purchaser’s pro rata portion of the aggregate purchase price paid
by the Purchasers for all of the Shares purchased hereunder (the “Basic Amount”), and with respect to each Purchaser that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic
Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than their Basic Amounts (the “Undersubscription Amount”). 
  
 (ii) To accept an Offer, in whole or in part, a Purchaser
must deliver a written notice to the Company prior to the end of the two (2) Trading Day period of the Offer, setting forth the portion of the Purchaser’s Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the “Notice of Acceptance”). If the 
  

 16 








 Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts, then
each Purchaser who has set forth an Undersubcription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Purchaser who has subscribed for any
Undersubscription Amount shall be entitled to purchase on that portion of the Available Undersubscription Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription
Amounts, subject to rounding by the Board of Directors to the extent its deems reasonably necessary. Notwithstanding anything to the contrary contained in this Section 4.4(c), the total of the Basic Amount and the Undersubscription Amount for any
single Purchaser shall not exceed 75% of the Offered Securities. 
  
 (iii) The Company shall have five (5) Trading Days from the expiration of the period set forth in Section 4.4(c)(ii) above to issue, sell or exchange all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Purchasers (the “Refused Securities”), but only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons
or less favorable to the Company than those set forth in the Offer. In addition, prior to disclosing the terms of the Offer, the Company may notify the Purchasers that it intends to disclose material non-public information and may request a
confidentiality agreement from such Purchasers with respect thereto (which confidentiality agreement shall terminate and expire five (5) Trading days from the date on which such agreement is entered into). In the event that the Company has the right
to request such a confidentiality agreement and the Purchaser agrees to enter into such confidentiality agreement, then from the time that a Purchaser receives the Offer until the earlier to occur of five (5) Trading Days thereafter or the public
announcement relating to the Offered Securities, such Purchaser will not engage in any purchase or sale transaction in the securities of the Company (including without limitation a short sale). In the event that a Purchaser refuses to execute a
confidentiality agreement after having been requested to do so as described above, such Purchaser shall be deemed to have waived its right to participate in the applicable Subsequent Placement pursuant to this Section 4.4. 
  
 (iv) In the event the Company shall propose to sell less
than 75% of all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4.4(c)(iii) above), then each Purchaser may, at its sole option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that the Purchaser elected to purchase pursuant to Section 4.4(c)(ii) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the 
  

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 Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold
to Purchasers pursuant to Section 4.4(c)(ii) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Purchaser so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Purchasers in accordance
with Section 4.4(c)(i) above. 
  
 (v) Upon the
closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Purchasers shall acquire from the Company, and the Company shall issue to the Purchasers, the number or amount of Offered Securities specified in the
Notices of Acceptance, as reduced pursuant to Section 4.4(c)(iv) above if the Purchasers have so elected, upon the terms and conditions specified in the Offer. The purchase by the Purchasers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Purchasers of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Purchasers and their respective counsel. 
  
 (vi) Any Offered Securities not acquired by the Purchasers
or other Persons in accordance with Section 4.4(c)(iii) above may not be issued, sold or exchanged until they are again offered to the Purchasers under the procedures specified in this Agreement. 
  
 (d) The restrictions contained in paragraphs (a) and (c) of
this Section shall not apply to Common Stock issued pursuant to a Strategic Transaction, the sale of more than 50% of the voting stock of a Subsidiary, a bona fide underwritten public offering, or a Company employee equity participation or stock
option plan approved by the board of directors of the Company. 
  
 4.5 Securities Laws Disclosure: Publicity. The Company shall (i) at or before 11:00 a.m., Eastern Standard Time, on June 1, 2004, issue a press release reasonably acceptable to the Purchasers disclosing the transactions contemplated
hereby and (ii) on the Closing Date, make such other filings and notices in the manner and time required by the Commission, including without limitation the filing of a Current Report on Form 8-K with the Commission (the “8-K
Filing”) describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K this Agreement, the Registration Rights Agreement and the form of Warrants, in the form
required by the Exchange Act. Thereafter, the Company shall timely file any filings and notices required by the Commission or applicable law with respect to the transactions contemplated hereby and provide copies to the Purchasers promptly after
filing. The Company and the Purchasers shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither party, shall issue any such press release or otherwise make any such public
statement without the prior consent of the other, which consent shall not unreasonably be 
  

 18 








 withheld, 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 to the extent such disclosure (but not any disclosure as to the controlling Persons thereof) is required by law or Trading Market regulations, in which
case the Company shall provide the Purchasers with prior notice of such disclosure. 
  
 4.6 Reimbursement. If any Purchaser becomes involved in any capacity in any Proceeding by or against any Person who is a stockholder of the Company, solely as a result of such Purchaser’s acquisition of
the Securities under this Agreement and without causation by any other activity, obligation, condition or liability pertaining to such Purchaser and not to the transactions contemplated by this Agreement, the Company will reimburse such Purchaser
for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives
of the Company, the Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the
Company or any Person asserting claims on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement. 
  
 4.7 Indemnification of Purchasers. The Company will indemnify and hold the Purchasers and their directors, officers, shareholders, partners,
employees and agents (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 (collectively, “Losses”) that any such Purchaser Party may suffer or incur as a result of or relating to (a) any misrepresentation, breach or inaccuracy, or any allegation
by a third party that, if true, would constitute a breach or inaccuracy, of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Documents; or (b) any cause of action, suit or claim
brought or made against such Purchaser Party and arising solely out of or solely resulting from the execution, delivery, performance or enforcement of this Agreement or any of the other Transaction Documents and without causation by any other
activity, obligation, condition or liability pertaining to such Purchaser and not to the transactions contemplated by this Agreement. The Company will reimburse such Purchaser for its reasonable legal and other expenses 
  

 19 








 (including the cost of any investigation, preparation and travel in connection therewith) ‘incurred in connection
therewith, as such expenses are incurred. 
  
 4.8 Shareholders
Rights Plan. Assuming the accuracy of the representations and warranties of the Purchasers contained herein, no claim will be made or enforced by the Company or any other Person that any Purchaser is an “Acquiring Person” under any
shareholders rights plan or similar 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. 
  
 4.9 Non-Public Information. 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 or may constitute material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that
each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company. 
  
 4.10 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes or other proper
corporate purposes; provided, however, that the Company shall not use such net proceeds to make loans to any officer or director of the Company. 
  
 4.11 Previous Trading. Each Purchaser represents that, prior to the execution and delivery of this Agreement, it has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, engaged in any purchase or sale transaction in the securities of the Company (including, without limitation, any short sales involving the Company’s
securities) since the time that such Purchaser had contact with the Company or any other Person acting on behalf of the Company regarding the purchase of the Shares, which the parties hereto acknowledge to be approximately 5:00 p.m. on Friday, May
28, 2004. 
  
 ARTICLE V. 
 MISCELLANEOUS 
  
 5.1 Fees and Expenses. At the Closing, the Company shall reimburse Mainfield Enterprises Inc. for $20,000 of their legal fees and expenses in
connection with the preparation and negotiation of the Transaction Documents. The amount contemplated by the immediately preceding sentence shall be retained by Mainfield Enterprises Inc. and shall not be delivered to the Company at the Closing.
Except as specified in the immediately preceding sentence and as contemplated in the Registration Rights Agreement, 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 
  

 20 








 Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Shares.

  
 5.2 Entire Agreement. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which
the parties acknowledge have been merged into such documents, exhibits and schedules. 
  
 5.3 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 specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the 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 follows: 
  

			
	 If to the Company:
	  	 OSI Systems, Inc.
 12525 Chadron Avenue
 Hawthorne, CA 90250
 Attn: Deepak Chopra
 Fax No.:310-978-3938

		
	 With a copy to:
	  	 Loeb & Loeb LLP
 10100 Santa Monica Boulevard
 22nd Floor
 Los Angeles, CA 90067
 Attn: Gerald M. Chizever, Esq.
 Fax
No.:310-282-2200

		
	 If to a Purchaser:
	  	 To the address set forth under such Purchaser’s
 name on the signature pages hereof;


  
 or such other address as may be
designated in writing hereafter, in the same manner, by such Person. 
  
 5.4 Amendments: Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default
or a waiver of any 
  

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 other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right. 
  
 5.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 
  
 5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers. 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 such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Purchasers.” 
  
 5.7 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 4.6 and 4.7. 
  
 5.8 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. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or
agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each party hereto 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 the 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. Each party
hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 
  

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 5.9 Survival. The representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery and exercise of the Securities, as applicable. 
  
 5.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, 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 signature page were an original thereof. 
  
 5.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 
  
 5.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the 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. 
  
 5.13 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. 
  
 5.14 Remedies. In addition to
being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the 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 described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a
remedy at law would be adequate. 
  

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 5.15 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 of the obligations of any other Purchaser under any Transaction
Document. The decision of each Purchaser to purchase Shares pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of the Subsidiary which may have been made or given by any other Purchaser or by any agent or employee of
any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any other Purchaser (or any other Person) relating to or arising from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser pursuant 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 Document. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in
connection with making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment hereunder. 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 represents and confirms that it has been represented by its own separate legal counsel in its review and negotiations of this Agreement and the Transaction Documents and that Proskauer Rose LLP represents only Mainfield Enterprises
Inc. 
  
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 SIGNATURE PAGE FOR PURCHASER FOLLOWS] 
  

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 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. Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. indicated above. 
  

			
	 OSI SYSTEM INC.

		
	By:	 	 
	 	 	

	Name:	 	Deepak Chokra
	Title:	 	Chief Executive Officer


  
 [REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK 
 SIGNATURE PAGE FOR PURCHASER FOLLOWS] 
  

 25 








 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

  

			
	 SMITHFIELD FIDUCIARY LLC

		
	By:	 	 
	 	 	

	Name:	 	Adam J. Chill
	Title:	 	Authorized Signatory


  

	
	 Subscription Amount: $10,762,000.00
 Number of Shares: 500,000
 Number of Warrants: 112,500

	
	 Address for Notice:
 c/o Highbridge Capital Management, LLC
 9 West 57th Street, 27th Floor
 New York, NY 10019
 Facsimile No.: 212-751-0755
 Attn: Ari J. Storch & Adam J.
Chill



  
  
  

 26 








 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

  

			
	 MAINFIELD ENTERPRISES INC.

		
	By:	 	 
	 	 	

	Name:	 	Avi Vigler
	Title:	 	Authorized Signatory


  

	
	 Subscription Amount: $16,143,000.00
 Number of Shares: 750,000
 Number of Warrants: 168,750

	
	 Address for Notice:
 c/o Sage Capital Growth Inc.
 660 Madison Avenue, 18th Floor
 New York, NY 10021
 Facsimile No.: (212) 651-9010
 Attn: Eldad Gal

	
	 With a copy to:
 Proskauer Rose LLP
 1585 Broadway
 New York, NY 10036-8299
 Facsimile No.: (212) 969-2900
 Attn: Adam J. Kansler, Esq.



  
  
  
  

 27 








 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

  

			
	 CRANSHIRE CAPITAL L.P.
  

		
	By:	 	 
	 	 	

	 Name:
 Title:
	 	 Mitchell P. Kopin
  
 Authorized Signature

	
	 Subscription Amount: $5,382,500
 Number of Shares: 250,000
 Number of Warrants: 56,250

	
	 Address for Notice:
 c/o Cranshire Capital
 666 Dundee Road, Suite 1901
 Northbrook, IL 60062
 Facsimile No.: 847-562-9031
 Attn: Mitchell P. Kopin



  

 28 








 SCHEDULES 







 SCHEDULE 3.1(a) 
 Subsidiaries 
  
 OSI Electronics. Inc. 
 OSI Fibercomm, Inc. 
 Osteometer MediTech USA, Inc. 
 Rapiscan Security Products (U.S.A.), Inc. 
 UDT Sensors, Inc. 
 Rapitec, Inc. Dolphin Medical, Inc. 
 Ferson Optics, Inc. 
 Metorex Security Products, Inc. 
 Advanced Micro Electronics AS 
 Corrigan Canada, Ltd. 
 Metorex Security Products, Oy 
 Opto Sensors (Singapore) Pte. Ltd. 
 Opto Sensors (Malaysia) Sdn. Bhd. 
 Opto Sensors—FSC, Inc. 
 Rapiscan Asia Pte. Ltd. 
 Rapiscan Consortium (M) Sdn. Bhd. 
 Rapiscan Security Products, Ltd. 
 Centro Vision 
 Dolphin Medical Pte. Ltd 
 OSI systems Pvt. Ltd. 
 Spacelabs Medical, Inc. 
 Spacelabs Medical Finland Oy 
 Spacelabs Medical SAS 
 Spacelabs Pte. Ltd. 
 Spacelabs Medical (Canada) Inc. 
 Spacelabs Medical Germany GmbH 
 Spacelabs Medical U.K. Ltd. 
 OSI Electronics, Inc. 
 OSI Defense Systems, LLC 
 Advanced Research and Applications Corporation 







 SCHEDULE 3.1(g) 
 Capitalization 
  
 Common Stock, no par value per share: 
 Authorized—40,000,000 shares 
 Issued and Outstanding as of May 31, 2003—14,519,903 shares 
  
 Preferred Stock, no par value per share: 
 Authorized—10,000,000 shares 
 Issued and Outstanding as of May 31, 2003—None 
  
 Stock Option Plan: 
 Authorized—An aggregate of 2,350,000 
 Issued and Outstanding as of May 31,
2003—An aggregate of 1,379,541 
  
 Warrants: 
  

										
	 Holder

	  	Issuance
Date

	  	Number
of Shares

	  	Expiration
Date

	  	Exercise
Price


	 Roth Capital Partners, LLC
	  	11/13/01	  	84,847	  	5/13/05	  	$	15.00
	 Roth Capital Partners, LLC
	  	12/10/01	  	103,500	  	12/10/08	  	$	23.47
	 Investors in December 2001 Private Placement
	  	12/10/01	  	517,500	  	12/10/08	  	$	23.47
	 Investors in October 2002 Private Placement
	  	10/21/02	  	281,250	  	10/21/09	  	$	21.22
	 TOTAL:
	  	 	  	987,097	  	 	  	 	 

  







 SCHEDULE 3.1(t) 
 Certain Fees 
  
 A cash fee payable to Roth
Capital Partners in the amount of 3.071% of the aggregate purchase price paid by all of the Purchasers and up to $300,000 to other licensed broker-dealers. 
  







 SCHEDULE 3.1(x) 
 Registration Rights 
  
 None, other than
those registration rights granted to the Purchasers pursuant to this Agreement.