Document:

exv10w1

 

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This
Securities Purchase Agreement (this “Agreement”) is dated as of August 7, 2007,
between Oculus Innovative Sciences, Inc., a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
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 Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

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

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

     “Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person as
such terms are used in and construed under Rule 405 under the Securities Act. 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.

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

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

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

     “Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or waived.

     “Commission” means the Securities and Exchange Commission.

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

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

     “Company Counsel” means Pillsbury Winthrop Shaw Pittman LLP, with offices
located at 2475 Hannover, Palo Alto, California 94304.

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

     “Effective Date” means the date that the initial Registration Statement filed
by the Company pursuant to the Registration Rights Agreement is first declared effective by
the Commission.

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

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

     “Exempt
 Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established
for such purpose at a price at least equal to the market price at the
time of the grant or issuance, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, and (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors of the Company,
provided that any such issuance shall only be to a Person 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 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.

     “FWS” means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
Avenue, Suite 2620, New York, New York 10170-0002.

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

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

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

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

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

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

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

     “Participation Maximum” shall have the meaning ascribed to such term in Section
4.12.

     “Per
 Share Purchase Price” equals $8.00, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement.

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

     “Placement Agent” means Rodman & Renshaw, LLC.

     “Pre-Notice” shall have the meaning ascribed to such term in Section 4.12.

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

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

     “Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of Exhibit A
attached hereto.

     “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.

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

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

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

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

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

     “Shareholder Approval” means such approval as may be required by the applicable
rules and regulations of the Nasdaq Stock Market (or any successor entity) from the
shareholders of the Company with respect to the transactions contemplated by the Transaction
Documents, including the issuance of all of the Shares and Warrants Shares in excess of
19.99% of the issued and outstanding Common Stock on the Closing Date.

     “Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.

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

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

     “Subsequent Financing” shall have the meaning ascribed to such term in Section
4.12.

     “Subsequent Financing Notice” shall have the meaning ascribed to such term in
Section 4.12.

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

     “Trading Day” means a day on which the New York Stock Exchange is open for
trading.

     “Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.

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

     “Transfer Agent” means Mellon Investor Services, LLC the current transfer agent
of the Company, with a mailing address of 525 Market Street, Suite 3500, San Francisco,

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CA 94105 and a facsimile number of 415-951-4181, and any successor transfer agent of the Company.

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

     “Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
be exercisable 181 days after the Closing Date and have a term of exercise equal to 5 years,
in the form of Exhibit C attached hereto.

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

ARTICLE II.

PURCHASE AND SALE

     2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree
to purchase, up to an aggregate of $20,000,000 of Shares and Warrants. Each Purchaser shall
deliver to the Company, via wire transfer, immediately available funds equal to its Subscription
Amount and the Company shall deliver to each Purchaser its respective Shares and a Warrant as
determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver, or cause
to be delivered, the other items set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of FWS or such other location as the parties shall mutually agree.

     2.2 Deliveries.

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

     (i) this Agreement duly executed by the Company;

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

     (iii) a copy of the irrevocable instructions to the Transfer Agent instructing
the Transfer Agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser’s Subscription Amount divided by the Per
Share Purchase Price, registered in the name of such Purchaser;

     (iv) a
 Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 33% of the number of shares of Common
Stock purchased by such Purchaser, with an exercise price equal to
$9.50, subject to
adjustment therein; and

     (v) the Registration Rights Agreement duly executed by the Company.

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

     (i) this Agreement duly executed by such Purchaser;

     (ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company;

     (iii) the Registration Rights Agreement duly executed by such Purchaser; and

     (iv) a
certificate of the Placement Agent to the Company, substantially in the
form of Exhibit D hereto.

     2.3 Closing Conditions. 

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

     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;

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

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

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

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     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;

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

     (iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

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

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

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

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

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

     (b) Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as

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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 or default of any of the provisions of its respective certificate or certificate
of incorporation, bylaws or other organizational or charter documents. Each of the Company
and the Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

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

     (d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the consummation by
the Company of the other transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or certificate of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other

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understanding to
which the Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect.

     (e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Registration Statement, (iii)
application(s) to each applicable Trading Market for the listing of the Securities for
trading thereon in the time and manner required thereby, and (iv) the filing of Form D with
the Commission and such filings as are required to be made under applicable state securities
laws (“Required Approvals”).

     (f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents. The
Warrant Shares, when issued in accordance with the terms of the Transaction Documents, will
be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents. 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 capitalization of the Company is as set forth on
Schedule 3.1(g), which Schedule 3.1(g) shall
also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of
the date hereof. The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion or exercise of Common Stock Equivalents outstanding as of
the date of the most recently filed periodic report under the Exchange Act. No Person has
any right of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire, any shares

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of Common Stock, or contracts, commitments, understandings or arrangements by which the Company
or any Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents. The issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities. There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any of the
Company’s stockholders.

     (h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange Act, as
applicable, and none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

     (i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i)
there has been no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not

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incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to existing Company
stock option plans or securities outstanding as of the date hereof. The Company does not
have pending before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement or as set forth on
Schedule 3.1(i), no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business, properties,
operations or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or deemed made that
has not been publicly disclosed at least 1 Trading Day prior to the date that this
representation is made.

     (j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of the
Company. 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 which could
reasonably be expected to result in a Material Adverse Effect. None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to such
employee’s relationship with the Company or such Subsidiary, and neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its
Subsidiaries believe that their relationships with their employees are good. No executive
officer, to the knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the

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continued employment of each
such executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

     (l) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of
any 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 applicable to its business and
all such laws that affect the environment, except in each case as could not have or
reasonably be expected to result in a Material Adverse Effect.

     (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as described
in the SEC Reports, except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.

     (n) Title to Assets. Except as set forth on Schedule 3.1(n), the
Company and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them and good and marketable title in all personal property owned by them
that is material to the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to penalties. Any real
property, facilities and tangible property held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases with which
the Company and the Subsidiaries are in compliance.

     (o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights 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”).

12

 

Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any
of the Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person except as described on Schedule 3.1(o). To
the knowledge of the Company, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.

     (p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance coverage at least
equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.

     (q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner, in each
case in excess of $60,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company, (iii)
other employee benefits, including stock option agreements under any stock option plan of
the Company, and (iv) as set forth in the SEC Reports.

     (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be disclosed by

13

 

the Company
in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.

     (s) Certain Fees. Except as set forth on Schedule 3.1(s), no brokerage
or finder’s fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction Documents. The
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 the Transaction Documents.

     (t) Private Placement. Assuming the accuracy of the Purchasers representations
and warranties set forth in Section 3.2, and the accuracy of the statements set forth in the
certificate of the Placement Agent referenced in Section 2.2(b), 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.

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

     (v) Registration Rights. Except as set forth on Schedule3.1(v), other
than each of the Purchasers, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.

     (w) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or

14

 

maintenance requirements of such
Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance
requirements.

     (x) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.

     (y) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All disclosure furnished by or on behalf of the Company to the Purchasers
regarding the Company, its business and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a whole do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were
made and when made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2 hereof.

     (z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, and the accuracy of the statements
set forth in the certificate of the Placement Agent referenced in Section 2.2(b),
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of (i) the Securities Act
which would require the registration of any such securities under the Securities Act, or
(ii) any applicable shareholder approval provisions of any Trading Market on which any of
the securities of the Company are listed or designated. 

     (aa) Solvency. Based on the consolidated financial condition of the Company as
of the Closing Date, after giving effect to the receipt by the Company of the proceeds

15

 

from
the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on
its business 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 liabilities when such
amounts are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(aa) sets forth as of the date thereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     (bb) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted or threatened against
the Company or any Subsidiary.

     (cc) No General Solicitation. Assuming the accuracy of the statements set
forth in the certificate of the Placement Agent referenced in Section 2.2(b),
neither the Company nor any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general advertising. The Company
has offered the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

     (dd) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or

16

 

domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.

     (ee) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(ee) of the Disclosure Schedule. To the knowledge and belief of the Company, such
accounting firm (i) is a registered public accounting firm as required by the Exchange Act
and (ii) shall express its opinion with respect to the financial statements to be included
in the Company’s Annual Report on Form 10-K for the year ending March 31, 2008.

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

     (gg) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.

     (hh) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f)
and 4.14 hereof), it is understood and acknowledged by the Company (i) that none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that past or future open market or other
transactions by any Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded
securities; (iii) that any Purchaser, and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Purchaser shall not be deemed to have any
affiliation with or control over any arm’s length counter-party in any “derivative”
transaction. The

17

 

Company further understands and acknowledges that (a) one or more
Purchasers may engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value
of the Warrant Shares deliverable with respect to Securities are being determined and (b)
such hedging activities (if any) could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging activities are being
conducted. The Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.

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

     (jj) FDA. As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and
the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested,
distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”), such Pharmaceutical Product is being
manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in
compliance with all applicable requirements under FDCA and similar laws, rules and
regulations relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory practices, good
clinical practices, product listing, quotas, labeling, advertising, record keeping and
filing of reports, except where the failure to be in compliance would not have a Material
Adverse Effect. Except as set forth on Schedule 3.1(jj), there is no pending, completed or,
to the Company’s knowledge, threatened, action (including any lawsuit, arbitration, or legal
or administrative or regulatory proceeding, charge, complaint, or investigation) against the
Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has
received any notice, warning letter or other communication from the FDA or any other
governmental entity, which (i) contests the premarket clearance, licensure, registration, or
approval of, the uses of, the distribution of, the manufacturing or packaging of, the
testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii)
withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of
advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii)
imposes a clinical hold on any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the Company or any of its
Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction
with the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any
laws, rules or regulations by the Company or any of its Subsidiaries, and which, either
individually or in the aggregate, would have a Material Adverse Effect. The

18

 

properties,
business and operations of the Company have been and are being conducted in all material
respects in accordance with all applicable laws, rules and regulations of the FDA. The
Company has not been informed by the FDA that the FDA will prohibit the marketing, sale,
license or use in the United States of any product proposed to be developed, produced or
marketed by the Company nor has the FDA expressed any concern as to approving or clearing
for marketing any product being developed or proposed to be developed by the Company.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for
no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date
to the Company as follows:

     (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 full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of the Transaction
Documents and performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate or similar action
on the part of such Purchaser. Each Transaction Document to which it is a party has been
duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.

     (b) Own Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for its own
account and not with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of the Securities Act
or any applicable state securities law and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding the distribution of such
Securities (this representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance with
applicable federal and state securities laws) in violation of the Securities Act or any
applicable state securities law. 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 any Warrants,
it will be either: (i) an “accredited investor” as defined

19

 

in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer”
as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.

     (d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such investment.

     (e) General Solicitation. 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) Short Sales and Confidentiality Prior To The Date Hereof. Other than
consummating the transactions contemplated hereunder, such Purchaser has not, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the securities of the
Company during the period commencing from the time that such Purchaser first received notice
of the identity of the Company as the issuer in the transaction from the Company or any
other Person representing the Company contemplated hereunder until the date hereof
(“Discussion Time”). Notwithstanding the foregoing, in the case of a Purchaser that
is a multi-managed investment vehicle whereby separate portfolio managers manage separate
portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of
the investment decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other Persons party to
this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and terms of this
transaction).

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

     (a) The 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 or Rule 144, to the Company or 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 selected by
the transferor and reasonably acceptable to the Company, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the

20

 

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.

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

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED
BY SUCH SECURITIES.

     The Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement 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 legal
counsel of the pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At the 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, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling Stockholders
thereunder.

     (c) Certificates evidencing the Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a registration

21

 

statement
(including the Registration Statement) covering the resale of such security is effective
under the Securities Act, or (ii) following any sale of such Shares or Warrant Shares
pursuant to Rule 144, or (iii) if such Shares or Warrant Shares 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). The Company shall cause its counsel to issue a legal opinion to the
Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect
the removal of the legend hereunder. If all or any portion of a Warrant is exercised at a
time when there is an 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 (3) Trading Days following the delivery by a
Purchaser to the Company or the Transfer Agent of a certificate representing Shares or
Warrant Shares, as the case may be, issued with a restrictive legend
(such third Trading
Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser
a certificate representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to the Transfer
Agent that enlarge the restrictions on transfer set forth in this Section. Certificates for
Securities subject to legend removal hereunder shall be transmitted by the Transfer Agent to
the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository
Trust Company System as directed by such Purchaser.

     (d) In addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of
Shares or Warrant Shares (based on the VWAP of the Common Stock on the date such Securities
are submitted to the Transfer Agent) delivered for removal of the restrictive legend and
subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each
Trading Day commencing on the third Trading Day after the Legend
Removal Date until such certificate is delivered without a legend. In addition to any other
rights available to the Purchaser, if the Company fails to cause its transfer agent to
transmit to the Purchaser an unlegended certificate or certificates representing the Shares
or Warrant Shares, as applicable, on or before the Legend Removal Date, and if after such
date the Purchaser is required by its broker to purchase (in an open market transaction or
otherwise) or the Purchaser’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction
of a sale by the Purchaser of the Shares or Warrant Shares which the Purchaser anticipated
receiving (a “Buy-In”), then the Company shall pay in cash to the Purchaser the
amount by which (x) the Purchaser’s total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Shares or Warrant Shares that the Company was required to
deliver to the Purchaser times (B) the price at which the sell order giving rise to such
purchase obligation was executed. For example, if the Purchaser purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted sale
of shares of Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, the Company shall be required to pay the Purchaser

22

 

$1,000. The
Purchaser shall provide the Company written notice indicating the amounts payable to the
Purchaser in respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit such Purchaser’s right to pursue actual damages for
the Company’s failure to deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.

     (e) Each Purchaser, severally and not jointly with the other Purchasers, agrees that
such Purchaser will sell any Securities pursuant to either the registration requirements of
the Securities Act, including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon
this understanding.

     4.2 Furnishing of Information. Until the earliest of the time that (i) no Purchaser owns
Securities or (ii) the Warrants have expired, the Company covenants to use reasonable efforts 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
even if the Company is not then subject to the reporting requirements of the Exchange Act. As long
as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the
Exchange Act, 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, to the extent required from time to time to enable
such Person to sell such Securities without registration under the Securities Act within the
requirements of the exemption provided by Rule 144.

     4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated
with the offer or sale of the 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 to the Purchasers for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such subsequent
transaction.

     4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York
City time) on the Trading Day immediately following the date hereof, issue a Current Report on Form
8-K, disclosing the material terms of the transactions contemplated hereby, and filing the
Transaction Documents as exhibits thereto. The Company and each Purchaser shall consult with each
other in issuing any other press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each

23

 

Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the other party with
prior notice of such public statement or communication. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except (i) as required by federal securities law in connection with (A)
any registration statement contemplated by the Registration Rights Agreement and (B) the filing of
final Transaction Documents (including signature pages thereto) with the Commission and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure permitted under this clause (ii).

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

     4.6 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that it will not provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior thereto such Purchaser
shall have 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 covenant
in effecting transactions in securities of the Company.

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

     4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any
such

24

 

Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by the Purchaser
of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more than one such
separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (i)
for any settlement by a Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement
or in the other Transaction Documents.

     4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the
Warrants.

     4.10 Listing
of Common Stock.(a) The Company hereby agrees to
maintain the listing of the Common Stock on a Trading Market, and as soon as reasonably practicable
following the Closing (but not later than the earlier of the Effective Date and the first
anniversary of the Closing Date) to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares and Warrant Shares, and
will take such other action as is necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market
and will comply in all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Trading Market.

25

 

     4.11 Equal Treatment of Purchasers. 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 the Transaction
Documents unless the same consideration is also offered to all of the parties to the Transaction
Documents. For clarification purposes, this provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or voting of Securities
or otherwise. The provisions of this section 4.11 notwithstanding, nothing in this agreement shall
prohibit the Company from negotiating and entering into separate settlements with any Purchaser in
the event of litigation arising out of the transactions contemplated by the Transaction Documents
without triggering the obligation to make a similar payment to any other Purchaser.

     4.12 Participation in Future Financing.

     (a) From the date hereof until the date that is the 24 month anniversary of the
Effective Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock
or Common Stock Equivalents for cash consideration (a “Subsequent Financing”), each
Purchaser shall have the right to participate in the Subsequent Financing up to an amount
equal to 25% of the Subsequent Financing (the “Participation Maximum”) on the same
terms, conditions and price provided for in the Subsequent Financing.

     (b) At least 5 Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it
wants to review the details of such financing (such additional notice, a “Subsequent
Financing Notice”). Upon the request of a Purchaser, and only upon a request by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than
1 Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.
The Subsequent Financing Notice shall describe in reasonable detail the
proposed terms of such Subsequent Financing, the amount of proceeds intended to be
raised thereunder and the Person or Persons through or with whom such Subsequent Financing
is proposed to be effected and shall include a term sheet or similar document relating
thereto as an attachment.

     (c) Any Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time) on the
5th Trading Day after all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing, the amount of the
Purchaser’s participation, and that the Purchaser has such funds ready, willing, and
available for investment on the terms set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 5th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate.

     (d) If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of
the Purchasers have received the Pre-Notice, notifications by the Purchasers of their
willingness to participate in the Subsequent Financing is, in the aggregate, less than the

26

 

total amount of the Subsequent Financing, then the Company may effect the remaining portion
of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent
Financing Notice.

     (e) If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of
the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent
Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the
Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata
Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means
the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a
Purchaser participating under this Section 4.12 and (y) the sum of the aggregate
Subscription Amounts of Securities purchased on the Closing Date by all Purchasers
participating under this Section 4.12.

     (f) The Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in this
Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice
within 60 Trading Days after the date of the initial Subsequent Financing Notice.

     (g) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of (i)
an Exempt Issuance or (ii) an underwritten public offering of Common Stock.

     4.13 Subsequent Equity Sales.

     (a) From the
 date hereof until 90 days after the Effective Date, neither the Company
nor any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents other than
Exempt Issuances; provided, however, the 90 day period set forth in this
Section 4.13 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, or (ii)
following the Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for the resale of
the Shares and Warrant Shares.

     (b) From the
 date hereof until such time as no Purchaser holds any of the Securities,
the Company shall be prohibited from effecting or entering into an agreement to effect any
Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or include the
right to receive additional shares of Common Stock either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock

27

 

or (ii) enters
into any agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price. Any Purchaser shall be entitled
to obtain injunctive relief against the Company to preclude any such issuance, which remedy
shall be in addition to any right to collect damages.

     (c) Unless Shareholder Approval has been obtained and deemed effective, neither the
Company nor any Subsidiary shall make any issuance whatsoever of Common Stock or Common
Stock Equivalents which would cause any adjustment of the Exercise Price to the extent the
holders of Warrants would not be permitted, pursuant to Section 2(d) of the Warrants, to
exercise their respective Warrants in full, ignoring for such purposes the exercise
limitations therein. Any Purchaser shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance, which remedy shall be in addition to any right to
collect damages

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

     4.14 Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute any Short Sales during the period
commencing at the Discussion Time and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.4,
such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules. Each Purchaser severally and not jointly
with any other Purchaser, understands and acknowledges, and agrees, to act in a manner that will
not violate the positions of the Commission as set forth in Item 65, Section A, of the Manual of
Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.4. Notwithstanding the foregoing, in the case
of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion
of assets managed by the
portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement.

     4.15  Delivery of Securities After Closing. The Company shall deliver, or cause to be
delivered, the respective Securities purchased by each Purchaser to such Purchaser within 3 Trading
Days of the Closing Date.

     4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy thereof, promptly
upon request of any Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale
to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of
the United States, and shall provide evidence of such actions promptly upon request of any
Purchaser.

     4.17 Capital Changes. [Until the one year anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or reclassification of the Common

28

 

Stock without the prior written consent of the Purchasers holding a majority in interest of the
Shares.

ARTICLE V.

MISCELLANEOUS

     5.1 Termination. This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before August 8, 2007; provided, however, that no such
termination will affect the right of any party to sue for any breach by the other party (or
parties).

     5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.

     5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.

     5.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile
number set forth on the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature pages attached hereto.

     5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the
Purchasers of at least 67% of the Shares still held by the Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is sought. No waiver of any
default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right.

29

 

     5.6 Headings. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

     5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”

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

     5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any
other manner permitted by law. If either party shall commence an action or proceeding to enforce
any provisions of the Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

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

     5.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become

30

 

effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page were an original thereof.

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

     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, in the case
of a rescission of an exercise of a Warrant, the Purchaser shall be required to return any shares
of Common Stock delivered in connection with any such rescinded exercise notice.

     5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for
a new certificate or instrument under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance of such replacement Securities.

     5.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in
any action for specific performance of any such obligation the defense that a remedy at law would
be adequate.

     5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such

31

 

enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

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

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

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

     5.20 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.

     5.21 Waiver of Jury Trial. In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and intentionally, to the
greatest

32

 

extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and
expressly waives forever trial by jury.

(Signature Pages Follow)

33

 

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

	 	 	 	 	 	 	 
	OCULUS INNOVATIVE SCIENCES, INC.	 	 	 	Address for Notice:
	 
	 	 	 	 	 	 
	By:
	 	/s/ Jim Schutz	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name: Jim Schutz

Title: General Counsel
	 	 	 	Fax:
	 
	 	 	 	 	 	 
	With a copy to (which shall not constitute notice):	 	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

34

 

[PURCHASER SIGNATURE PAGES TO OCLS SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:                                                                   
              

Signature of Authorized Signatory of Purchaser:                                                           
                      

Name of Authorized Signatory:                                                                                 

Title of Authorized Signatory:                                                                
                 

Email Address of Purchaser:                                                                
                 

Fax Number of Purchaser:                                                                 
                

Address for Notice of Purchaser:                                                                
                 

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

Subscription Amount: $                    

Shares:                     

Warrant Shares:                     

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

35exv10w2

 

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of
August 7, 2007, between Oculus Innovative Sciences, Inc., a Delaware corporation (the
“Company”) and each of the several purchasers signatory hereto (each such purchaser, a
“Purchaser” and, collectively, the “Purchasers”).

          This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, between the Company and each Purchaser (the “Purchase Agreement”).

          The Company and each Purchaser hereby agrees as follows:

     1. Definitions

          Capitalized terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

     “Advice” shall have the meaning set forth in Section 6(d).

     “Effectiveness Date” means, with respect to the Initial Registration Statement
required to be filed hereunder, the 90th calendar day following the date hereof
(or, in the event of a “full review” by the Commission, the 120th calendar day following the
date hereof) and with respect to any additional Registration Statements which may be
required pursuant to Section 3(c), the 90th calendar day following the date on which an
additional Registration Statement is required to be filed hereunder; provided,
however, that in the event the Company is notified by the Commission that one or
more of the above Registration Statements will not be reviewed or is no longer subject to
further review and comments, the Effectiveness Date as to such Registration Statement shall
be the fifth Trading Day following the date on which the Company is so notified if such date
precedes the dates otherwise required above.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Event” shall have the meaning set forth in Section 2(b).

     “Event Date” shall have the meaning set forth in Section 2(b).

     “Filing Date” means, with respect to the Initial Registration Statement
required hereunder, the 30th calendar day following the date hereof and, with
respect to any additional Registration Statements which may be required pursuant to Section
3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file
such additional Registration Statement related to the Registrable Securities.

1

 

     “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Initial Registration Statement” means the initial Registration Statement filed
pursuant to this Agreement.

     “Initial Shares” means a number of Registrable Securities equal to the lesser
of (i) the total number of Registrable Securities and (ii) one-third of the number of issued
and outstanding shares of Common Stock that are held by non-affiliates of the Company on the
day immediately prior to the filing date of the Initial Registration Statement.

     “Losses” shall have the meaning set forth in Section 5(a).

     “Plan of Distribution” shall have the meaning set forth in Section 2(a).

     “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

     “Registrable Securities” means (i) all Shares; (ii) all Warrant Shares
(assuming on the date of determination the Warrants are exercised in full without regard to
any exercise limitations therein), and (iii) any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event with respect
to the foregoing.

     “Registration Statement” means the registration statement required to be filed
hereunder and any additional registration statements contemplated by Section 3(c), including
(in each case) the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in such
registration statement.

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

2

 

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

     “Selling Shareholder Questionnaire” shall have the meaning set forth in Section
3(a).

     “SEC Guidance” means (i) any publicly-available written or oral guidance,
comments, requirements or requests of the Commission staff and (ii) the Securities Act.

     2. Shelf Registration

     (a) On or prior to each Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all or such maximum portion of
the Registrable Securities as permitted by SEC Guidance (provided that the Company shall use
commercially reasonable efforts to advocate with the Commission for the registration of all
of the Registrable Securities in accordance with the SEC Guidance, including without
limitation, the Manual of Publicly Available Telephone Interpretations D.29) that are not
then registered on an effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3
(except if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another appropriate form
in accordance herewith) and shall contain (unless otherwise directed by at least a 67%
majority in interest of the Holders) substantially the “Plan of Distribution”
attached hereto as Annex A. Subject to the terms of this Agreement, the Company
shall use commercially reasonable efforts to cause a Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing thereof, but in
any event prior to the applicable Effectiveness Date, and shall use commercially reasonable
efforts to keep such Registration Statement continuously effective under the Securities Act
until all Registrable Securities covered by such Registration Statement have been sold, or
may be sold without volume limitations pursuant to Rule 144(k), as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed and acceptable
to the Transfer Agent and the affected Holders (the “Effectiveness Period”). The
Company shall telephonically request effectiveness of a Registration Statement as of 5:00
p.m. New York City time on a Trading Day. The Company shall immediately notify the Holders
via facsimile or by e-mail of the effectiveness of a Registration Statement on the same
Trading Day that the Company telephonically confirms effectiveness with the Commission,
which shall be the date requested for effectiveness of such Registration Statement. The
Company shall, by 9:30 a.m. New York City time on the Trading Day after the effective date
of such Registration Statement, file a final Prospectus with the Commission as required by
Rule 424. Failure to so notify the Holder within 2 Trading Days of such notification of
effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event
under Section 2(b). Notwithstanding any other provision of this Agreement and subject to
the payment of

3

 

liquidated damages pursuant to Section 2(b), if any SEC Guidance sets forth a
limitation on the number of Registrable Securities permitted to be registered on a
particular Registration Statement (and notwithstanding that the Company used commercially
reasonable efforts to advocate with the Commission for the registration of all or a greater
portion of Registrable Securities), unless otherwise directed in writing by a Holder as to
its Registrable Securities, the number of Registrable Securities to be registered on such
Registration Statement will first be reduced by Registrable Securities represented by
Warrant Shares (applied, in the case that some Warrant Shares may be registered, to the
Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by
such Holders).

     (b) If: (i) the Initial Registration Statement is not filed on or prior to its Filing
Date (if the Company files the Initial Registration Statement without affording the Holders
the opportunity to review and comment on the same as required by Section 3(a) herein, the
Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to
file with the Commission a request for acceleration of a Registration Statement in
accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that such Registration Statement will not be
“reviewed” or will not be subject to further review, or (iii) prior to the effective date of
a Registration Statement, the Company fails to file a pre-effective amendment and otherwise
respond in writing to comments made by the Commission in respect of such Registration
Statement within 15 Trading Days after the receipt of comments by or notice from the
Commission that such amendment is required in order for such Registration Statement to be
declared effective, or (iv) as to, in the aggregate among all Holders on a pro-rata basis
based on their purchase of the Securities pursuant to the Purchase Agreement, a Registration
Statement registering for resale all of the Initial Shares is not declared effective by the
Commission by the Effectiveness Date of the Initial Registration Statement, or (v) all of
the Registrable Securities are not registered for resale pursuant to one or more effective
Registration Statements on or before August 31, 2008, or (vi) after the effective date of a
Registration Statement, such Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities included in such Registration
Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to
resell such Registrable Securities, for more than 10 consecutive calendar days or more than
an aggregate of 15 calendar days (which need not be consecutive calendar days) during any
12-month period (any such failure or breach being referred to as an “Event”, and for
purposes of clause (i), (iv) and (v) the date on which such Event occurs, and for purposes
of clause (ii) the date on which such five Trading Day period is exceeded, and for purposes
of clause (iii) the date which such 10 calendar day period is exceeded, and for purposes of
clause (vi) the date on which such 10 or 15 calendar day period, as applicable, is exceeded
being referred to as “Event Date”), then, in addition to any other rights the
Holders may have hereunder or under applicable law, on each such Event Date and on each
monthly anniversary of each such Event Date (if the applicable Event shall not have been
cured by such date) until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to 1% of
the aggregate purchase

4

 

price paid by such Holder pursuant to the Purchase Agreement for any unregistered
Registrable Securities then held by such Holder. The parties agree that (1) to the extent
an Event is caused by the occurrence of a prior Event, for purposes of calculation of
liquidated damages hereunder, only one Event shall be deemed to have occurred; (2) the
Company shall not be liable for liquidated damages under this Agreement with respect to any
Warrants or Warrant Shares and (3) the maximum aggregate liquidated damages payable to a
Holder under this Agreement shall be 15% of the aggregate Subscription Amount paid by such
Holder pursuant to the Purchase Agreement. If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily
from the date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of
an Event.

     3. Registration Procedures.

     In connection with the Company’s registration obligations hereunder, the Company shall:

     (a) Not less than 5 Trading Days prior to the filing of each Registration Statement and
not less than one Trading Day prior to the filing of any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to each Holder copies of
all such documents substantially in the form proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to each Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not file a
Registration Statement or any such Prospectus or any amendments or supplements thereto
relating to the Registrable Securities to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that the Company is notified of
such objection in writing no later than 5 Trading Days after the Holders have been so
furnished copies of a Registration Statement or 1 Trading Day after the Holders have been so
furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder
agrees to furnish to the Company a completed questionnaire in the form attached to this
Agreement as Annex B (a “Selling Shareholder Questionnaire”) not less than
three Trading Days prior to the Filing Date or by the end of the fourth Trading Day
following the date on which such Holder receives draft materials in accordance with this
Section.

     (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously

5

 

effective as to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and, as so supplemented or amended, to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to a Registration Statement or any amendment
thereto and provide as promptly as reasonably possible to the Holders true and complete
copies of all correspondence from and to the Commission relating to a Registration Statement
(provided that the Company may excise any information contained therein which would
constitute material non-public information as to any Holder which has not executed a
confidentiality agreement with the Company); and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by a Registration Statement during the applicable period
in accordance (subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as so amended or
in such Prospectus as so supplemented.

     (c) If during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall file as soon as reasonably practicable, but in any case
prior to the applicable Filing Date, an additional Registration Statement covering the
resale by the Holders of not less than the number of such Registrable Securities.

     (d) Notify the Holders of Registrable Securities to be sold (which notice shall,
pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than two Trading Days prior
to such filing) and (if requested by any such Person) confirm such notice in writing no
later than two Trading Days following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any other
federal or state governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any
event or passage of time that makes the financial statements included in a Registration
Statement ineligible for

6

 

inclusion therein or any statement made in a Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to a Registration Statement, Prospectus or
other documents so that, in the case of a Registration Statement or the Prospectus, as the
case may be, it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and (vi) of the
occurrence or existence of any pending corporate development with respect to the Company
that the Company believes may be material and that, in the determination of the Company,
makes it not in the best interest of the Company to allow continued availability of a
Registration Statement or Prospectus, provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes public, unless
disclosure by a Holder is required by law; provided, further, that
notwithstanding each Holder’s agreement to keep such information confidential, each such
Holder makes no acknowledgement that any such information is material, non-public
information.

     (e) Use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable
moment.

     (f) Furnish to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by reference to
the extent requested by such Person, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission; provided, that any such item which is
available on the EDGAR system need not be furnished in physical form.

     (g) Subject to the terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).

     (h) The Company shall cooperate with any broker-dealer effecting resales of Registrable
Securities in making any required filing with the National Association of Securities
Dealers, Inc. (“NASD”) Corporate Financing Department pursuant to NASD Rule 2710 and
pay the filing fee required by such filing.

     (i) Prior to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the

7

 

Registration or qualification) of such Registrable Securities for the resale by the
Holder under the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep each registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and all other
acts or things reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such
jurisdiction.

     (j) If requested by a Holder, cooperate with such Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities, other than
Warrants, to be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holder may request.

     (k) Upon the occurrence of any event contemplated by Section 3(d), as promptly as
reasonably possible under the circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an 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
light of the circumstances under which they were made, not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to
suspend the use of any Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The Company will use
commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company shall be entitled to exercise its right under this
Section 3(k) to suspend the availability of a Registration Statement and Prospectus, subject
to the payment of partial liquidated damages otherwise required pursuant to Section 2(b),
for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12
month period.

     (l) Comply with all applicable rules and regulations of the Commission.

     (m) The Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such Holder and,
if required by the Commission, the natural persons thereof that have voting and dispositive
control over the shares. If the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely

8

 

because any Holder fails to furnish such information within three Trading Days of the
Company’s request, the Company may exclude such Holder’s Registrable Securities from the
Registrable Securities being registered, until such Holder shall have provided all such
required information (provided there is sufficient time to include such Registrable Shares),
and such non-responsive Holder shall have no recourse against the Company therefor.

     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses of the Company’s counsel and
auditors) (A) with respect to filings made with the Commission, (B) with respect to filings
required to be made with any Trading Market on which the Common Stock is then listed for trading,
(C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the
Company in writing (including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and
(D) if not previously paid by the Company in connection with an Issuer Filing, with respect to any
filing that may be required to be made by any broker through which a Holder intends to make sales
of Registrable Securities with the NASD pursuant to NASD Rule 2710, so long as the broker is
receiving no more than a customary brokerage commission in connection with such sale, (ii) printing
expenses (including, without limitation, expenses of printing certificates for Registrable
Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties), the expense of any
annual audit and the fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions of any Holder or, except to the extent provided
for in the Transaction Documents, any legal fees or other costs of the Holders.

     5. Indemnification.

     (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such titles, notwithstanding a lack
of such title or any other title) of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, shareholders,

9

 

partners, agents and employees (and any other Persons with a functionally equivalent
role of a Person holding such titles, notwithstanding a lack of such title or any other
title) of each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as
incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a
material fact contained in a Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of any
Prospectus or supplement thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in
connection with the performance of its obligations under this Agreement, except to the
extent, but only to the extent, that (i) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information relates to such
Holder or such Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case
of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by
such Holder of an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(d). The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding arising from or
in connection with the transactions contemplated by this Agreement of which the Company is
aware.

     (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all
Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities Act or (y) any
untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the
extent that such information relates to such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement (it being

10

 

understood that the Holder has approved Annex A hereto for this purpose), such
Prospectus or in any amendment or supplement thereto or (ii) in the case of an occurrence of
an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and the reasonable fees and expenses
of no more than one separate counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.

     Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred in

11

 

connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder.

     (d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other
fees or expenses incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.

     The indemnity and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous.

     (a) Remedies. In the event of a breach by the Company or by a Holder of any of their
respective obligations under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, shall be entitled to specific performance of its rights under this

12

 

Agreement. The Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for specific performance in
respect of such breach, it shall not assert or shall waive the defense that a remedy at law would
be adequate.

     (b) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement.

     (c) Discontinued Disposition. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will use commercially reasonable
efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The
Company agrees and acknowledges that any periods during which the Holder is required to discontinue
the disposition of the Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).

     (d) Piggy-Back Registrations. If, at any time during the Effectiveness Period, there
is not an effective Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in connection with the
Company’s stock option or other employee benefit plans, then the Company shall deliver to each
Holder a written notice of such determination and, if within fifteen days after the date of the
delivery of such notice, any such Holder shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable Securities such Holder requests to
be registered; provided, however, that the Company shall not be required to
register any Registrable Securities pursuant to this Section 6(d) that are eligible for resale
pursuant to Rule 144(k) promulgated by the Commission pursuant to the Securities Act or that are
the subject of a then effective Registration Statement.

     (e) Amendments and Waivers. The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of a majority of the then outstanding Registrable Securities
(including, for this purpose any Registrable Securities issuable upon exercise or conversion of any
Security). If a Registration Statement does not register all of the Registrable Securities
pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders
and each Holder shall have the right to designate which of its

13

 

Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of a Holder or some Holders and that does not directly or
indirectly affect the rights of other Holders may be given by such Holder or Holders of all of the
Registrable Securities to which such waiver or consent relates; provided, however,
that the provisions of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the first sentence of this Section 6(f).

     (f) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

     (g) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign (except by merger) its rights or obligations
hereunder without the prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.

     (h) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has
entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities, that would
conflict with the provisions hereof. Except as set forth on Schedule 6(i), neither the
Company nor any of its Subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person that have not been
satisfied in full.

     (i) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data
file, such signature shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if such facsimile or
“.pdf” signature page were an original thereof.

     (j) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be determined in accordance with the provisions of the
Purchase Agreement.

     (k) Cumulative Remedies. Except as otherwise provided herein, the remedies provided
herein are cumulative and not exclusive of any other remedies provided by law.

     (l) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to

14

 

achieve the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

     (m) Headings. The headings in this Agreement are for convenience only, do not
constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

     (n) Independent Nature of Holders’ Obligations and Rights. The obligations of each
Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled
to protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.

********************

15

 

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

	 	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jim Schutz	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jim Schutz

Title: General Counsel	 	 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

16

 

[SIGNATURE PAGE OF HOLDERS TO OCLS RRA]

Name of Holder:                                                             

Signature of Authorized Signatory of Holder:                                                             

Name of Authorized Signatory:                                                             

Title of Authorized Signatory:                                                             

[SIGNATURE PAGES CONTINUE]

17

 

Annex A

Plan of Distribution

     Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the NASDAQ Global Market or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods
when selling shares:

	 	•	 	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;
	 
	 	•	 	settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
	 
	 	•	 	a combination of any such methods of sale; or
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess of a customary brokerage

18

 

commission in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

     In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it
does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent (8%).

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

     Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.

     We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

19

 

     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation M, prior
to the commencement of the distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of shares of the common stock by
the Selling Stockholders or any other person. We will make copies of this prospectus available to
the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act).

20

 

Annex B

OCULUS INNOVATIVE SCIENCES, INC.

Selling Securityholder Notice and Questionnaire

     The undersigned beneficial owner of common stock (the “Registrable Securities”) of
Oculus Innovative Sciences, Inc., a Delaware corporation (the “Company”), understands that
the Company has filed or intends to file with the Securities and Exchange Commission (the
“Commission”) a registration statement (the “Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended (the
“Securities Act”), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the “Registration Rights Agreement”) to which this document
is annexed. A copy of the Registration Rights Agreement is available from the Company upon request
at the address set forth below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.

     Certain legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

NOTICE

     The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it in the Registration
Statement.

21

 

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

1. Name.

	 	(a)	 	Full Legal Name of Selling Securityholder
	 
	 	 	 	 

	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities are held:
	 
	 	 	 	 

	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by this Questionnaire):
	 
	 	 	 	 

2. Address for Notices to Selling Securityholder:

 

 

 

	 	 	 
	Telephone:
	 	 
	 

	 	 

	 	 	 
	Fax:
	 	 
	 

	 	 

	 	 	 
	Contact Person:
	 	 
	 

	 	 

3. Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes  o      No  o

	 	(b)	 	If “yes” to Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company?

Yes  o       No  o

Note: If “no” to Section 3(b), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
     
Statement.

22

 

	 	(c)	 	Are you an affiliate of a broker-dealer?

Yes  o
     No  o

	 	(d)	 	If you are an affiliate of a broker-dealer, do you certify that you purchased
the Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

Yes  o     No  o

	 	Note: If “no” to Section 3(d), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration

     Statement.

4. Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder.

Except as set forth below in this Item 4, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the securities issuable
pursuant to the Purchase Agreement.

	 	(a)	 	Type and Amount of other securities beneficially owned by the Selling
Securityholder:

	 	 	 	 

	 	 	 	 

23

 

5. Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

 

 

     The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

     By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 5 and the inclusion of such information in the
Registration Statement and the related prospectus            and any amendments or supplements
thereto . The undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement and the related
prospectus.

     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Date:                                         

	 	 	 	 	 	 	 
	 

	 	Beneficial Owner:
	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	 
	 

	 	 	 	Title:	 	 

PLEASE FAX A COPY OF THE COMPLETED AND
 EXECUTED NOTICE AND QUESTIONNAIRE TO 650-233-4545, ATTENTION:
SEBASTIEN NICOLAS, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO: SEBASTIEN NICOLAS, 2475 HANOVER STREET, PALO
ALTO, CA 94304.

24

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