Document:

exv10w1

 

Exhibit 10.1

FORM
OF SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of March 27, 2008,
between Oculus Innovative Sciences, Inc., a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an
effective registration statement under the Securities Act of 1933, as amended (the “Securities
Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

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

ARTICLE I.

DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, 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.

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     “Closing Price” means on any particular date (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg
L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then
the closing bid price on the Trading Market on the date nearest preceding such date (as
reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock
is not then listed or quoted on a Trading Market 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) if the shares of Common Stock are not then publicly
traded 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.

     “Commission” means the Securities and Exchange Commission.

     “Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed 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 Hanover Street, Palo Alto, CA 94304.

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

     “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, consultants, officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the non-employee members of the
Board of Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b) warrants to purchase up to 50,000 shares of Common Stock
to consultants/independent contractors in consideration of services provided to the Company
in any 12-month period at a value determined 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, (c) securities upon the exercise or exchange of or conversion
of any Securities issued hereunder and/or other

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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 (d) 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).

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

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

     “Liens” means a lien, charge, 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).

     “Per Share Purchase Price” equals $5.25, 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.

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

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

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

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

     “Registration Statement” means the effective registration statement with
Commission file No. 333-149233 which registers the sale of the Shares and the Warrant Shares
by the Purchasers.

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

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

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

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

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

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

     “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.

     “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 and any other
documents or agreements executed in connection with the transactions contemplated hereunder.

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     “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, 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 A 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 $[___,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.

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

(i) this Agreement duly executed by the Company;

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

     (iii) a copy of the irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to deliver via the Depository Trust Company Deposit
Withdrawal Agent Commission System (“DWAC”) 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 50% of such Purchaser’s Subscription
Amount divided by 6.85, with an exercise price equal to $6.85, subject to adjustment
therein (such Warrant certificate may be delivered within three Trading Days of the
Closing Date); and

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

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

     (iii) a certificate of Rodman, substantially in the form of Exhibit C 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;

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

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     (iv) the delivery by Rodman of the certificate referenced in Section
2.2(b)(iii);

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

     (i) the accuracy in all material respects 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). Except as set forth in 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

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

     (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 articles of incorporation, bylaws or other organizational or

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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 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 Prospectus Supplement, (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) such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

     (f) Issuance of the Securities; Registration. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens 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
Warrants, 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. The
Company has prepared and filed the Registration Statement in conformity with the
requirements of the Securities Act, which became effective on February 26, 2008 (the
“Effective Date”), including the Prospectus, and such
amendments and supplements thereto as may have been required to the date of this
Agreement. The Registration Statement is effective under the Securities Act and no stop
order preventing or suspending the effectiveness of the Registration Statement or suspending
or preventing the use of the Prospectus has been issued by the Commission and no proceedings
for that purpose have been instituted or, to the knowledge of the Company, are threatened by
the Commission. The Company, if required by the rules and regulations of the Commission,
proposes to file the Prospectus, with the SEC pursuant to Rule 424(b). At the time the
Registration Statement and any amendments thereto became

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effective, at the date of this
Agreement and at the Closing Date, the Registration Statement and any amendments thereto
conformed and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendments or supplements thereto, at the
time the Prospectus or any amendment or supplement thereto was issued and at the Closing
Date, conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

     (g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g). Except as set forth on Schedule 3.1(g), 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. Except as set forth on Schedule 3.1(g), no Person
has any right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction Documents. Except
as a result of the purchase and sale of the Securities, and except as disclosed in the SEC
Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents. Except as set forth
in Schedule 3.1(g), 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

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

     (i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i)
there has been no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to existing Company
stock option plans 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.

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     (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 or 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 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

12

 

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

     (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”).
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 in the SEC Reports. 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

13

 

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 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 in the Prospectus Supplement, 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

14

 

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) 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.

     (u) Registration Rights. Except as set forth on Schedule 3.1(u), no Person
has any right to cause the Company to effect the registration under the Securities Act of
any securities of the Company.

     (v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. Except as
set forth on Schedule 3.1(v), the Company has not, in the 12 months preceding the
date hereof, received notice from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.

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

     (x) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information that it
believes constitutes or might constitute material, non-public information which is not
otherwise disclosed in the Prospectus Supplement. The Company understands and confirms
that the Purchasers will rely on the foregoing representation in effecting transactions in
securities of the Company. All 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

15

 

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.

     (y) 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, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of any applicable shareholder approval provisions of
any Trading Market on which any of the securities of the Company are listed or designated.

     (z) Solvency. Based on the consolidated financial condition of the Company as
of the Closing Date, after giving effect to the receipt by the Company of the proceeds from
the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on
its business 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(z) 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

16

 

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.

     (aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and 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.

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

     (cc) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(cc) 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.

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

     (ee) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e)
and 4.14 hereof), it is understood and acknowledged by the Company (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

17

 

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
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.

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

     (gg) FDA. As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal Food, Drug and
Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company
or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such
Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold
and/or marketed by the Company in compliance 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 in the SEC
Reports, there is no pending, completed or, to the Company’s knowledge, threatened, action
(including any lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its Subsidiaries, 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,

18

 

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 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 this Agreement and otherwise to carry
out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary corporate 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 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 immediately pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws) in violation

19

 

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 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) 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
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 Warrant Shares. If all or any portion of a Warrant is exercised at a time when there
is an effective registration statement to cover the issuance or resale of the Warrant Shares or if
the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any such
exercise shall be issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the Warrant Shares) is
not effective or is not otherwise available for the sale or resale of the Warrant Shares, the
Company shall immediately notify the holders of the Warrants in writing that such registration
statement is not then effective and thereafter shall promptly notify such holders when the
registration statement is effective again and available for the sale or resale of the Warrant
Shares.

20

 

The Company shall use best efforts to keep a registration statement (including the
Registration Statement) registering the issuance or resale of the Warrant Shares effective during
the term of the Warrants or until all Warrant Shares may be freely tradable under Rule 144 or
otherwise.

     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. 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 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 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 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

21

 

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 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

22

 

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 use reasonable efforts
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 Closing Date) to list all of the Shares
and Warrant Shares on such Trading Market. 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.

     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 Purchaser.

     4.12 [Reserved]

     4.13 Subsequent Equity Sales. From the date hereof until 30 days after the Closing
Date, neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock
Equivalents, other than Exempt Issuances; provided, however, the 30 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) 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.

23

 

     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. 
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.

ARTICLE V.

MISCELLANEOUS

     5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before April 4, 2008; 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, the Prospectus and the Prospectus Supplement, 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.

24

 

     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 electronic mail or facsimile at the e-mail address (in the case
of Purchasers only) or facsimile number, as the case may be, 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 e-mail (in the
case of Purchasers only) or facsimile at the e-mail address or the facsimile number, as the case
may be, 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 51% 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.

     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 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

25

 

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, warranties, covenants and agreements 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 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

26

 

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 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
any of the Purchasers but only Rodman. The Company has elected to provide

27

 

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

(Signature Pages Follow)

28

 

          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:	 	 
	 

	 	 	 	 	 	1129 N. McDowell Blvd.	 	 
	 

	 	 	 	 	 	Petaluma, CA 94954	 	 
	 

	 	 	 	 	 	Attn: Jim Schutz	 	 
	By:

	 	 	 	 	 	Fax: (707) 283-0551	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 

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

Pillsbury Winthrop Shaw Pittman LLP

2475 Hanover Street

Palo Alto, CA 94304

Attn: Sylvia K. Burks

Fax: 650-233-4545

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

29

 

[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]

30

 

[ONLY FOR PURCHASERS THAT ARE ALSO PARTY TO THAT CERTAIN SECURITIES PURCHASE AGREEMENT DATED AUGUST
7, 2007]

     The undersigned acknowledges and agrees that Oculus Innovative Sciences, Inc. (the “Company”)
is in compliance with any and all notice requirements pursuant to Section 4.12 of that certain
Securities Purchase Agreement dated August 7, 2007 by and among the Company and certain investors.

ACCEPTED AND AGREED:

Dated:                     , 2008

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:            
            
              
            
            
          
          
            
                          

[SIGNATURE PAGES CONTINUE]

31exv10w2

 

     EXHIBIT 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered
into by and between Triad Financial Corporation, a California corporation (the “Company”),
with offices at 5201 Rufe Snow Drive, North Richland Hills, Texas, and Chris
A. Goodman, (the “Executive”), 5201 Rufe Snow Drive, North Richland Hills, Texas, 76180.

RECITALS

	A.	 	The Executive currently serves as a Senior Vice President of the Company, and, along with the
Company, is currently a party to that certain Employment Agreement (the “Existing Agreement”)
dated as of July 1, 2005.
	 
	B.	 	The Executive and the Company have determined that it is in their mutual interests to modify
the Existing Agreement in certain respects, all as more specifically set forth herein.
	 
	C.	 	The Executive and the Company intend for this Agreement to supersede and replace the Existing
Agreement, together with any and all prior employment agreements the Executive may at any time
have had with the Company or any predecessor of the Company.

AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company and the Executive hereby agree as follows:

     1. Employment.

          (a) Service to the Company. Executive shall devote all of his professional time,
energy, skill and efforts to the performance of his duties hereunder and to the business of the
Company, and shall perform his duties in a diligent, trustworthy, and business-like manner, all for
the purpose of advancing the business of the Company. Executive shall be primarily responsible for
the operation of the Direct Lending Program offered by the Company, in addition to such other
duties as may be delegated to him from time to time. Executive shall report directly to the
President and Chief Executive Officer of the Company, and shall be subject to the policies and
procedures adopted by the Company from time to time.

          (b) Other Commitments. Notwithstanding the commitment of the Executive’s professional
time, energy, skill and efforts to the Company as set forth in this Section 1(a) above,
Executive may serve on corporate, civic, or charitable boards or committees, provided that such
service does not interfere with the performance of the Executive’s duties under this Agreement, and
provided the Executive keeps the Company reasonably informed of such commitments. If the Company
determines that any such commitments conflict with or interfere with the performance of the
Executive’s duties to the Company, the Company shall give written notice of such conflict or
interference to the Executive, who then shall be given thirty days in which to remedy the conflict.

 

 

     2. Employment Term.

          (a) Initial Term. Subject to the terms and conditions hereof, the Executive’s term of
employment under this Agreement (the “Employment Term”) shall commence effective as of
August  ,, 2007 (the “Effective Date”), and continue through July 31, 2010 (the
“Initial Term”), subject to the extension provisions of Section 2(b), unless
terminated earlier in accordance with the provisions contained herein.

          (b)  Renewal. Provided the Executive remains in the employ of the Company, this
Agreement will be automatically renewed and extended for an additional one-year term, to be
effective August 1 of each subsequent year (the “Anniversary Date”), unless either party provides
the other with written notice that they do not wish to extend the Agreement on or before the
1st day of July immediately preceding the Anniversary Date. . If neither party provides
the other with notice of non-renewal, then the Agreement will be extended for an additional year on
the same terms and conditions as set forth above. If the Agreement is not renewed, then the
contractual obligations of the parties will survive the Agreement, and the parties will be
obligated to adhere to all performance and payment obligations contained herein.

          (c) Effect of Non-Renewal. A notice of non-renewal of the Agreement pursuant to
Section 2 (b) shall not be deemed to be a termination of the Executive’s employment with the
Company, but either party may terminate at any time after the receipt of such notice. In the event
of a termination by either party following a notice of non-renewal, the Executive shall be treated
as having remained employed through the end of the term (except with respect to any benefit,
benefit plan, bonus or incentive plan that requires active employment as a condition precedent for
participation in such plan).

     3. Salary and Benefits.

          (a) Salary. During his employment pursuant to this Agreement, the Executive shall
receive a total annual salary of Two Hundred Seventy Thousand U.S. Dollars (U.S. $270,000) as
compensation for his services to the Company (the “Base Salary”), such compensation to be
payable in regular installments in accordance with the Company’s policy for salaried employees.

          (b) Target Bonus. For each fiscal year of the Company ending during the term of this
Agreement, the Executive shall be eligible to receive an annual incentive bonus with a target
payout based on the Company’s performance for such fiscal year (the “Annual Bonus”),
provided that the performance objectives established by the Board of Directors of the Company (the
“Board”) for both the Company and the Executive for such fiscal year are attained and provided the
Executive is serving as an employee of the Company as of the end of such fiscal year. Any Annual
Bonus that is payable hereunder will be paid after the completion of the annual audit of the
Company with respect to such fiscal year.

          (c) Benefit Plans. During his employment pursuant to this Agreement, subject to
eligibility requirements, applicable employee contributions and the terms and conditions of the
applicable plan, and except as otherwise expressly provided in this Agreement, the Executive shall
be entitled to participate in the Company-sponsored employee benefit plans, medical benefit plans,
group life insurance plans or other employee welfare plans that the Company may adopt for employees
generally from time to time during the Executive’s employment pursuant to this Agreement, and as
such plans may be modified, amended, terminated, or replaced from time to time.

          (d) Vacation. The Executive shall be entitled to four weeks of paid vacation each
fiscal year of this Agreement, to be taken in accordance with the Company’s policy then in effect,
and to the same paid Holidays provided to the other employees of the Company. The Executive’s
vacation days

2

 

will be pro-rated based on the number of full months, if less than twelve, that the Executive
is employed hereunder in the applicable fiscal year.

          (e) Reimbursement of Expenses. The Company shall reimburse the Executive for all
reasonable out-of-pocket expenses incurred by the Executive on behalf of the Company in the course
of his duties, upon presentation of appropriate documentation of such costs as and when required by
and to the satisfaction of the Company, on a basis that is consistent with the Company’s past
practices. The Executive shall be entitled to fly Business Class on flights that have a scheduled
flight time of two hours or more, to the extent a Business Class seat is available. All other
flights shall be Economy Class or its equivalent.

          (g) Car Allowance. During his employment pursuant to this Agreement, the Executive
shall be entitled to a vehicle allowance of One Thousand Two Hundred Fifty Dollars ($1,250) per
month in addition to his salary and other benefits.

4. Non-solicitation/Covenant Not to Compete.

The Executive acknowledges that he is considered a key employee of the Company and agrees that
he will work on a full-time basis to accomplish the Company’s business plan, and that he is being
entrusted with certain Confidential Information (defined herein) in order to perform the tasks
required of him. In consideration of the Company providing Executive access to new confidential
and proprietary information and materials belonging to the Company to assist Executive in the
performance of Executive’s duties and Executive agreeing to keep all such information strictly
confidential, and as a means to aid in the performance and enforcement of the terms of the
Confidential Information provisions in Section 5 herein, the Executive agrees that from the
Effective Date and until the two-year anniversary of the termination of the Executive’s employment
under this Agreement for any reason:

	 	(a)	 	The Executive shall not, directly or indirectly, own, manage, operate, control,
or participate in the ownership, management, operation or control of, or be connected
as an officer, employee, partner, director, agent, representative of, or have any
financial interest in, or aid or assist anyone else in the conduct of any business that
involves the indirect financing of motor vehicle purchases by consumers, or the lending
of money directly to consumers for the purpose of purchasing, financing or refinancing
a motor vehicle (a “Competitive Operation”) which competes with any business conducted
by the Company or by any group, division or subsidiary of the Company (a “Company
Operation”) in any area where such Company Operation is being conducted at the time of
the Executive’s termination.
	 
	 	(b)	 	The Executive shall not, directly or indirectly, use Confidential Information (defined
below) that constitutes a protectable trade secret to solicit business from, attempt to do
business with, or do business with any customers, lenders, suppliers, joint venturers or
business referral sources, in each case which either: (1) the Executive contacted, called
on, serviced, transacted business with or had significant contact with during the
Executive’s employment with the Company or that the Executive attempted to contact, call on,
service, or do business with during the Executive’s employment with the Company; or (2) the
Executive became acquainted with as a result of the Executive’s employment with the Company.
The restriction set forth in this Section 4 applies only to business that is in the
scope of services or products provided by the Company during the term of the Executive’s
employment hereunder.

3

 

	 	(c)	 	The Executive shall not, directly or indirectly, on behalf of the Executive or any other
person or entity, solicit, induce, encourage, attempt to solicit or induce, or assist
another to induce or attempt to induce, any employee or independent contractor of the
Company to terminate his or her employment or relationship with the Company.

     The Executive agrees that if a court of competent jurisdiction determines that the length of
time or any other restriction, or portion thereof, set forth in this Section 4 is overly
restrictive and unenforceable, the court may reduce or modify such restrictions to those which it
deems reasonable and enforceable under the circumstances, and as so reduced or modified, the
parties hereto agree that the restrictions of this Section 4 shall remain in full force and
effect. The Executive further agrees that if a court of competent jurisdiction determines that any
provision of this Section 4 is invalid or against public policy, the remaining provisions
of this Section 4 and the remainder of this Agreement shall not be affected thereby, and
shall remain in full force and effect.

     The Executive acknowledges that the scope and duration of the restrictions contained herein
are reasonable in light of the business plan for the Company, the time that the Executive has been
engaged in (and is expected to be engaged in) the business of the Company, the Executive’s
reputation in the markets for the Company’s businesses and the Executive’s relationship with the
Company’s actual and prospective lenders, clients, employees and management team.

     If the Executive violates any of the restrictions contained in Section 4 of this
Agreement, the restrictive period will be suspended and will not begin to run again in favor of the
Executive from the time of the commencement of any violation until the time when the Executive
cures the violation to the Company’s satisfaction.

     5. Confidential Information.

          (a) Confidential Information. For purposes of this Agreement, the term
“Confidential Information” means any trade secrets or confidential or proprietary
information of the Company, including without limitation the following:

               (i) Information concerning the Company’s investor or prospective investor lists, lenders,
customers, clients, marketing, business and operational methods of the Company and their customers
or clients, contracts, financial or other data, technical data, e-mail and other correspondence or
any other confidential or proprietary information possessed, owned or used by any of the Company;

               (ii) Business records, financial information, pricing, business strategies, marketing and
promotional practices (including internet-related marketing) and management methods and
information;

               (iii) Finances, strategies, systems, research, plans, reports, recommendations and
conclusions;

               (iv) Names, arrangements with, or other information relating to, any of the Company’s
investors, customers, clients, suppliers, financiers, owners, representatives and other persons who
have business relationships with the Company or who are prospects for business relationships with
the Company; and

               (v) Any matter or thing obtained or ascertained by Executive through Executive’s association
with the Company, the use or disclosure of which might reasonably be construed to be contrary to
the best interests of any the Company, its owners or employees.

4

 

     Upon termination of the Executive’s employment under any circumstances, the Executive or his
representatives, shall promptly return to the Company all property of the Company, including any
and all Confidential Information, computers, hard-drives, papers, books, records, documents,
memoranda, manuals, e-mail, electronic or magnetic recordings or data, electronic devices and
related data storage devices, including all copies thereof, which belong to the Company or relate
to the Company’s business and which are in Executive’s possession, custody or control, whether
prepared by Executive or others, and shall destroy or erase any data that cannot be returned (with
it being understood and agreed that subject to Section 5 hereof, the Executive shall be
permitted to retain his own rolodex, calendars, appointment lists and other personal lists
maintained during the course of his employment hereunder).

     If the Executive is subpoenaed, served with any legal process or notice or otherwise requested
to produce or divulge, directly or indirectly, any Confidential Information by any entity, agency
or person in any formal or informal proceeding, including without limitation any interview,
deposition, administrative or judicial hearing and/or trial, then promptly after the Executive’s
receipt of such subpoena, process, notice or request, the Executive shall notify the Company and
shall reasonably cooperate with the Company’s efforts to obtain a protective order or other relief
to protect the Company’s Confidential Information or to limit the scope of disclosure of such
information in such interview, deposition, administrative or judicial hearing and/or trial.

          (b) Non-disparagement. During the term of this Agreement and continuing after
termination of the Executive’s employment hereunder, the Executive shall not communicate or
publish, directly or indirectly, any confidential, personal or disparaging information concerning
the Company, any member of the Company, any director, officer or employee of any entity in the
Company or any entity or individual who controls, directly or indirectly, any entity in the
Company.

          (c) Works. Any works created during the term of this Agreement by the Executive shall
be deemed work for hire to the extent permitted by law, and the Company shall have the sole right
to any such works. In addition, the Executive hereby grants and shall grant to Company all his
rights, title and interest including, without limitation, all intellectual property and proprietary
rights, in all works developed or created by the Executive during the term of this Agreement. The
Executive hereby waives for the benefit of the Company and its successors, assigns and licensees
all moral rights that the Executive may have in such works. For greater clarity, the parties
acknowledge and agree that such works include without limitation the Developments defined in
Section 5(d) below.

          (d) Other Provisions/Exclusions. The Executive understands, acknowledges and agrees
that all Developments (as hereinafter defined) shall be made for hire by the Executive for the
Company. “Developments” means any idea, discovery, invention, design, method, technique,
improvement, enhancement, development, computer program, machine, algorithm or other work or
authorship that (i) relates to the business or operations of the Company, or (ii) results from or
is suggested by any undertaking assigned to the Executive or work performed by the Executive for or
on behalf of the Company, whether created alone or with others, during or after working hours. All
confidential or proprietary information described in Section 5(a) above and all
Developments shall remain the sole property of the Company. The Executive shall acquire no
proprietary interest in any confidential or proprietary information described in Section
5(a) above or Developments developed or acquired while the Executive is required to provide
services to the Company hereunder. To the extent the Executive may, by operation of law or
otherwise, acquire any right, title or interest in or to any confidential or proprietary
information described in Section 5(a) above or Development, the Executive hereby assigns to
the Company all such intellectual property or proprietary rights. The Executive shall, both during
the term of this Agreement and for two years thereafter, upon the Company’s request, promptly
execute and deliver to the Company all such assignments, certificates and instruments, and shall
promptly perform such other

5

 

acts as the Company may from time to time in its reasonable discretion deem necessary or
desirable to evidence, establish, maintain, perfect, enforce or defend the Company’s rights in
Developments and in the proprietary information, inventions, copyrights, and trademarks otherwise
described in this Section 5.

     6. Termination.

          (a) By the Executive. The Executive may resign his employment at any time, for Good
Reason (defined below) or without Good Reason, upon thirty days written notice to the Company.
Upon receipt of written notice from the Executive of his voluntary resignation of employment, the
Company may immediately terminate the Executive’s employment with the Company (which shall be
deemed for all purposes an immediate voluntary resignation by the Executive, and not a termination
by the Company) and require no further services from the Executive. The term “Good Reason”
means (i) any material breach by the Company of any provision of this Agreement, after the
Executive has given the Company thirty days written notice of such breach and the Company has not
during such period cured the alleged breach, (ii) a reduction in the Executive’s Base Salary
without the Executive’s consent, or (iii) the Company’s failure to continue any benefit or
compensation plan in which the Executive is participating (other than an equal reduction in such
benefits for all similarly-situated executives of the Company).

          (b) By the Company. The Company may terminate the Executive’s employment for any
reason, at any time, upon written notice to the Executive, provided that the Company shall pay the
Executive the amounts and benefits as set forth in Section 6(d) or Section 6(e)
below, as applicable. The Company shall have the right to terminate the Executive’s employment
with the Company under this Agreement with or without Cause. As used in this Agreement, the term
“Cause” shall mean the Executive’s:

               (i) material fraud, embezzlement, theft or other act or omission involving material
dishonesty, or a crime of moral turpitude, in each case relating to the Company’s business, or
constituting information known within the Company’s industry or among the Company’s employees;

               (ii) intentional or reckless failure to abide in any material respect with reasonable rules
and regulations governing the transaction of business of the Company as the Company may from time
to time adopt or approve;

               (iii) failure to perform material duties or to follow material directions of the Board;

               (iv) intentional misappropriation of any corporate opportunity, or otherwise intentionally
obtaining personal profit from any material transaction that is adverse to the interests of the
Company or to the benefits to which the Company is entitled;

               (v) indictment for a felony (provided, however, that indictment for a felony
involving only the use of a motor vehicle that does not cause material personal injury to any
person shall not constitute Cause under this item (v)); or

               (vi) intentional or reckless conduct by the Executive that subjects the Company or any direct
or indirect subsidiary, parent or other affiliated entity, to loss of any required license, permit
or similar governmental authorization that is material to the Company’s or such entity’s business.

          (c) By Death or Disability. The Executive’s employment shall be terminated under

6

 

this Agreement in the event of the Executive’s death or Disability. For purposes of this
Agreement, “Disability” means that for a period of at least 120 days during any twelve
consecutive month period on account of a mental or physical condition, the Executive is unable to
perform the essential functions of his job for the Company, with or without reasonable
accommodation, as determined in good faith by the Company, based upon medical reports or other
evidence satisfactory to the Company.

          (d) Obligations Where no Severance is Required. In the event that the Company
terminates the Executive’s employment under this Agreement for Cause, the Executive’s employment
terminates due to his death or Disability, or the Executive terminates his employment hereunder
(other than for Good Reason), then in each such case the Company shall have no further obligation
to the Executive under this Agreement except to pay his Base Salary earned through the date of
termination of employment with the Company and a lump sum payment for any accrued and earned, but
unused, vacation shall be paid to Executive on or before the next regularly scheduled pay day after
the effective date of the termination; provided, however, that if the Executive’s
date of termination occurs after the end of the Company’s fiscal year, but before payment of any
applicable Annual Bonus actually earned by the Executive for such completed fiscal year, then the
Company also shall pay such earned Annual Bonus in accordance with Section 6(e)(iii).

          (e) Severance Obligations. In the event the Company terminates the Executive’s
employment without Cause, or Executive resigns for Good Reason, the Company’s obligations to the
Executive shall be limited to the following:

               (i) Earned Salary. The Company shall pay Executive any Base Salary earned through the
date of termination of employment with the Company and a lump sum payment for any accrued and
earned, but unused, vacation; provided, however, that if the Executive’s date of
termination occurs after the end of the Company’s fiscal year, but before payment of any applicable
Annual Bonus actually earned by the Executive for such completed fiscal year, then the Company also
shall pay such earned Annual Bonus in accordance with Section 6(e)(iii).

               (ii) Severance.

                    (A) Payment Terms. Subject to the last sentence of Section 6(f) below, if the
Company terminates Executive’s employment without Cause or the Executive resigns for Good Reason
prior to the expiration of the Initial Term of this Agreement, the Company shall pay Executive
severance payments (“Severance”) in an amount equal to the total amount remaining to be
paid under the terms of this Agreement, after taking into consideration the amount of salary and
benefits previously paid to the Executive as of the date of termination of employment, reduced by
any required payroll and tax withholdings. The Severance shall be payable in twelve equal
installments on the first pay day of each month, beginning on the first pay day of the month
following the month in which Executive’s Employment is terminated, provided that Executive has not
revoked the Separation Agreement and Release.

                    (B) Forfeiture Upon Breach. If the Executive is eligible to receive severance
payments under this Section 6(e)(ii), then in the event the Executive violates any of the
provisions of Section 4 or Section 5 above, all remaining payments shall be
forfeited and the Company shall be entitled to reimbursement from the Executive for any and all
severance payments previously made to Executive during the period of such violation. If Executive
or anyone acting on his behalf brings a claim against the Company seeking to declare any term of
this Agreement void or unenforceable, including Section 4 and Section 5 of this
Agreement, and if one or more material terms of this Agreement are ruled by a court or arbitrator
to be void or unenforceable or subject to reduction or modification, then the Company shall be
entitled to (i) refuse to make any severance payments, or any additional severance

7

 

payments, described in Section 6(e) of this Agreement; (ii) recover from Executive all
Severance payments, as described in Section 6(e), already paid to Executive; and (iii)
recover its attorneys’ fees incurred in defending such action and seeking recovery of such amounts.

                    (C) Acknowledgement. The Executive acknowledges and agrees that the severance
compensation provided for in this Section 6(e)(ii) is fair and reasonable and is the result
of negotiation between the parties.

               (iii) Completed Fiscal Year Earned Annual Bonus. If the Executive’s employment
terminates after the end of a full fiscal year but prior to the payment of any Annual Bonus
actually earned for such full fiscal year, the Company will pay such earned Annual Bonus as
promptly as reasonably practicable after the completion of the audit for such fiscal year, and in
any event not later than the payment of annual bonuses (if any) payable to other senior executive
officers of the Company pursuant to the same or any substantially similar bonus program.

          (f) Sole Remedy; Release. The applicable payments provided in this Section 6
shall be the sole remedy for any claim the Executive may have arising out of termination of the
Executive’s employment by the Company or the termination of this Agreement. Notwithstanding any
provision of this Agreement to the contrary, the Company shall not be obligated to make any payment
under Section 6(e)(ii) unless the Executive timely executes and delivers to the Company The
Separation Agreement and Release, a copy of which is attached hereto, marked as Exhibit “A”, and
incorporated herein by reference for all purposes.

     7. Breaches And Remedies. In the event of a breach or a threatened breach by the
Executive of this Agreement, the Company shall be entitled to a temporary restraining order and
injunctive relief restraining the Executive from the commission of any breach, and (if the Company
obtains such relief) to recover the Company’s attorneys’ fees, costs and expenses related to the
breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from
pursuing any other remedies available to it for any breach or threatened breach, including, without
limitation, the recovery of money damages, attorneys’ fees, and costs. The Executive and the
Company shall construe each of the restrictions in this Agreement as independent of any other
provisions in this Agreement, and the existence of any claim or cause of action, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the enforcement of this
Agreement. The Executive acknowledges and agrees that in the event that the Executive violates
Section 4 or Section 5 hereof, in addition to any other rights or remedies to which
it may be entitled under law or this Agreement, the Company shall, except as prohibited by
applicable law, cease making any severance or other payments hereunder, shall be entitled to
reimbursement from the Executive for any and all severance payments previously made to the
Executive under this Agreement during the period of such violation and shall be entitled to enforce
the provisions of Section 4 or Section 5 by injunction or other equitable relief,
without having to prove irreparable harm or inadequacy of money damages.

     8. Dispute Resolution. Any dispute, controversy or claim arising out of or in
relation to or in connection with this Agreement, including without limitation any dispute as to
the construction, validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such dispute, controversy
or claim, including a claim for indemnification under this Section 8, to arbitration.
Notwithstanding the provisions of this Section 8 to the contrary, the Company shall be
entitled to seek injunctive or other emergency relief in a court of law to enforce the provisions
of Section 4 or Section 5.

          (a) Arbitrator. The arbitration shall be heard and determined by one arbitrator, who
shall be impartial and who shall be selected by mutual agreement of the parties. If the parties
cannot

8

 

agree upon an arbitrator, then they shall submit the dispute to the American Arbitration
Association, which shall appoint an impartial arbitrator to preside over the arbitration.

          (b) Proceedings. Unless otherwise expressly agreed in writing by the parties to the
arbitration proceedings:

               (i) The arbitration proceedings shall be held in Tarrant County, Texas, at a site chosen by
mutual agreement of the parties, or if the parties cannot reach agreement on a location within
thirty (30) days of the appointment of the arbitrator, then at a site chosen by the arbitrator;

               (ii) The arbitrator shall be and remain at all times wholly independent and impartial;

               (iii) The arbitration proceedings shall be conducted in accordance with the Employment Dispute
Rules of the American Arbitration Association, as amended from time to time;

               (iv) Any procedural issues not determined under the arbitral rules selected pursuant to item
(iii) above shall be determined by the laws of the state of Texas, unless such laws would refer the
matter to another jurisdiction;

               (v) The costs of the arbitration proceedings (including attorneys’ fees and costs) shall be
borne in the manner determined by the arbitrator;

               (vi) The decision of the arbitrator shall be reduced to writing; final and binding without the
right of appeal; the sole and exclusive remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrator; made and promptly paid in United States dollars free of any
deduction or offset; and any costs or fees incident to enforcing the award shall, to the maximum
extent permitted by law, be charged against the party resisting such enforcement;

               (vii) The award shall include interest from the date of any breach or violation of this
Agreement, as determined by the arbitral award, and from the date of the award until paid in full,
at 6% per annum; and

               (viii) Judgment upon the award may be entered in any court having jurisdiction over the person
or the assets of the party owing the judgment or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may be.

          (c) Acknowledgment of Parties. Each party acknowledges that such party has
voluntarily and knowingly entered into an agreement to arbitrate under this Section 8 by
executing this Agreement.

     9. Miscellaneous Provisions.

          (a) Successors of the Company. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such succession had taken place.
As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which executes and delivers the Agreement
provided for in this

9

 

Section 9 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

          (b) No Assignment or Delegation by the Executive. The Executive may not assign his
rights or delegate his duties or obligations hereunder.

          (c) Notice. For the purposes of this Agreement, notices and all other communications
provide for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this Agreement, or to such
other in writing in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

          (d) Amendment; Waiver. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by the
Executive and such individual as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth expressly in this
Agreement.

          (e) Invalid Provisions. Should any portion of this Agreement be adjudged or held to
be invalid, unenforceable or void, such holding shall not have the effect of invalidating or
voiding the remainder of this Agreement and the parties hereby agree that the portion so held
invalid, unenforceable or void shall, if possible, be deemed amended or reduced in scope, or
otherwise be stricken from this Agreement to the extent required for the purposes of validity and
enforcement thereof.

          (f) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.

          (g) Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Texas.

          (h) Headings. The headings contained in this Agreement are for reference only and
shall not affect the meaning or interpretation of any provision of this Agreement.

          (i) Prior Agreements. This Agreement supersedes in all respects all prior employment
agreements between the parties, whether written or oral.

          (j) Captions and Gender; Mutual Drafting. The use of captions and Section headings
herein is for purposes of convenience only and shall not affect the interpretation or substance of
any provisions contained herein. Similarly, the use of the masculine gender with respect to
pronouns in this Agreement is for purposes of convenience and includes either sex who may be a
signatory. Each party has substantially participated in the preparation and drafting of this
Agreement and there shall be no presumption against any party by virtue of any party’s preparation
of any provision of this Agreement.

          (k) Survival. The covenants and provisions set forth in Sections 4, 5, 6, 7, 8 and 9
of this Agreement shall survive the termination of the Executive’s employment, and/or termination
of this Agreement, in accordance with their respective terms.

10

 

     IN WITNESS WHEREOF, the parties hereto have signed this Agreement effective as of the 1st day
of August, 2007.

	 	 	 	 	 
	 	TRIAD FINANCIAL CORPORATION,

a California corporation

 	 
	 	By:  	/s/ Daniel D. Leonard
 	 
	 	 	Name:  	Daniel D. Leonard 	 
	 	 	Title:  	President, Chief Executive Officer 	 

	 	 	 	 	 
	 	 	 
	 	/s/ Chris A. Goodman
 	 
	 	Chris A. Goodman 	 
	 	 	 

11

 

	 	 	 	 	 

EXHIBIT A

FORM OF SEPARATION AGREEMENT AND RELEASE

12

 

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (“Agreement”) is entered into by Triad Financial
Corporation (“Triad”) and Chris A. Goodman, (the “Executive”). Triad and Executive
are referred to as the “Parties.” Because the Parties desire to enter into an agreement
that amicably resolves the employment relationship between them and any disputes that now or may
exist between them concerning Executive’s hiring, employment and termination from Triad including
disputes regarding Executive’s compensation or benefits, the Parties are entering into this
Agreement. Defined terms in this Agreement have the same meaning as defined in the Amended and
Restated Employment Agreement between Triad and Executive, dated as of August 1, 2007
(“Employment Agreement”).

     1. End of Executive’s Employment. Executive’s last day of employment with Triad will be
________ (which is designated the “Separation Date”). All benefits and severance to be
paid to Executive are set forth in Section 6(d) and (e) of the Employment
Agreement. Except as stated in this Agreement and the Employment Agreement, or as required by law,
all other benefits and pay which relate to Executive’s employment with Triad shall cease as of the
Separation Date.

     2. Executive’s Participation in Company Benefit Plans. Following his termination of
employment, Executive shall not be entitled to any additional payments or future grants under any
benefit plan or bonus or incentive program established by Triad or any of its affiliates. Any
vested interest held by Executive in Triad’s 401(k) and any other plans in which Executive
participates shall be distributed in accordance with the terms of the plan and applicable law.
Executive’s right to exercise vested options or grants after his termination of employment will be
determined according to the provisions of his Employment Agreement and the applicable equity
incentive plans and agreements governing the options or grants for stock in Triad, Triad Holdings,
Inc. or their affiliates (the “Option Documents”). Executive agrees that the release in
Paragraph 4 below, except as provided therein, covers any claims he might have regarding his
bonuses, stock options or grants and any other benefits he may or may not have received during his
employment with Triad. In addition, after the Separation Date, Executive and his dependents shall
have the right to choose extension of applicable medical insurance coverage pursuant to COBRA.
Triad shall provide Executive under separate cover at his home address, information necessary and
as required by law to facilitate the transfer or rollover of his 401(k) account and information
regarding COBRA election.

     3. Return of Triad Property. Executive shall promptly return all equipment and property in
his possession which belongs to Triad, including all computer software, computer access codes,
company laptops, personal data assistants, company credit cards, keys, access cards, and all
original and copies of notes, documents, files or programs stored electronically or otherwise, that
relate or refer to Triad, its customers, its financial statements, its business contacts, and
sales. By signing this Agreement, Executive warrants that he has not retained and has returned all
such equipment or property and that should he later discover additional Company equipment or
property, he will promptly notify the Company and return it to the Company.

     4. Executive’s Release. In consideration of the benefits and severance pay described in
Section 6(e) of the Employment Agreement, and the promises, covenants and other valuable
consideration provided by Triad in this Agreement, and subject thereto, Executive releases Triad
and any of its direct or indirect parents, predecessors, successors, subsidiaries, affiliates or
related companies, and their respective officers, directors, shareholders, executives, attorneys,
agents successors and assigns, (collectively referred to as “Releasees,”) from any and all
claims, causes of action, losses, obligations, liabilities, damages, judgments, costs, expenses
(including attorney’s fees) of any kind whatsoever, including, but not limited to, disputes or
claims arising out of Executive’s hiring, employment or

 

 

termination of such employment with Triad, or arising out of any act committed or omitted
during or after the existence of such employment relationship, including any disputes regarding
compensation. This release includes, but is not limited to, all claims, whether arising in
contract or allegations of tort, common law or assertion of federal or state statutory rights,
including, but not limited to, Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the Executive Retirement
Income Security Act, claims for wrongful discharge, breach of express or implied contract or
implied covenant of good faith and fair dealing, as well as any expenses, costs or attorney’s fees.
Furthermore, Executive agrees and hereby relinquishes any right to re-employment with Triad.
However, Executive does not release his right to enforce the terms of this Agreement, or the
obligations to him under the Employment Agreement and Option Documents that by the terms thereof
expressly continue after his employment ends (the “Continuing Obligations”).

Executive hereby expressly agrees that this Agreement shall extend and apply to all
unknown, unsuspected and unanticipated injuries and damages as well as those that are now
disclosed.

In exchange for the Severance benefits described in Section 6(e) of the Employment
Agreement, Executive further agrees never to file a lawsuit asserting any claims that are released
in this Agreement and further agrees not to accept any recoveries or benefits which may be obtained
on his behalf by any other person or agency or in any class action; provided that nothing in this
Agreement shall be construed to prohibit Executive from challenging the validity of this Agreement,
enforcing the Continuing Obligations, filing a charge with the Equal Employment Opportunity
Commission, or participating in any investigation or proceeding conducted by the Equal Employment
Opportunity Commission.

     5. Non-Solicitation Agreement. Executive reaffirms his non-solicitation obligations set forth
in Section 4 of his Employment Agreement; and agrees that nothing in this Agreement shall
cause such obligations to cease.

     6. Not An Admission of Wrongdoing. This Agreement shall not in any way be construed as an
admission by either Party of any acts of wrongdoing, violation of any statute, law or legal or
contractual right.

     7. Voluntary Execution of the Agreement. Executive and Triad represent and agree that they
have had an opportunity to review all aspects of this Agreement, and that they fully understand all
the provisions of the Agreement and are voluntarily entering into this Separation Agreement and the
General Release. Executive further represents that he has not transferred or assigned to any
person or entity any claim involving Triad or any portion thereof or interest therein. To the
extent that Executive has any remaining claims against Triad, such claims are hereby assigned to
Triad.

     8. Binding Effect. This Agreement shall be binding upon Triad and upon Executive and his
heirs, administrators, representatives, executors, successors and assigns.

     9. Enforceability. Should any provision of this Agreement be declared or determined to be
illegal or invalid by any government agency or court of competent jurisdiction, the validity of the
remaining parts, terms or provisions of this Agreement shall not be affected and such provisions
shall remain in full force and effect.

     10. Entire Agreement. This Agreement and the Employment Agreement between Triad and Executive
set forth the entire agreement between the parties, and fully supersedes any and all prior
agreements (except the Employment Agreement and the Option Documents), understandings, or
representations between the parties pertaining to Executive’s employment with Triad, the subject
matter of this Agreement or any other term or condition of the relationship between Triad and
Executive.

2

 

Executive represents and acknowledges that in executing this Agreement, he does not rely, and
has not relied, upon any representation(s) by Triad or its agents except as expressly contained in
this Agreement.

     11. Time to Consider. Triad and Executive agree that Executive received this Agreement on
________ and has been told that he has twenty-one (21) days to consider this Agreement prior to
signing. Executive is not required, however, to wait 21 days to execute this Agreement and may
execute this Agreement at any time. Executive agrees that he has been given a sufficient period of
time to review and consider this Agreement before signing it and is encouraged to consult with an
attorney of his choosing before signing this Agreement. Executive understands that the decision to
consult with an attorney is in his sole discretion. Executive understands and agrees that if he
refuses to sign this Agreement, his employment will be immediately terminated and he will not be
entitled to receive any payment pursuant to this Agreement or the Employment Agreement.

     12. Executive’s Right to Revoke the Agreement. Triad and Executive agree that Executive may
revoke this Agreement at any time up to seven (7) days after signing.

     13. Governing Law. This Agreement shall be governed by the laws of the State of Texas without
reference to its choice of law rules.

     14. Counterparts. This Agreement may be executed in counterparts, each of which when executed
and delivered (which deliveries may be by facsimile) shall be deemed an original and all of which
together shall constitute one and the same instrument.

* * * * *

3

 

     I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING AGREEMENT, THAT I UNDERSTAND ALL OF ITS
TERMS, AND THAT I AM ENTERING INTO IT VOLUNTARILY.

	 	 	 	 
	AGREED TO BY:
	 	 
	 
	 	 
	 
	 	 
	 

	 	 
	Name

	 	Date
	 
	 	 
	STATE OF TEXAS

	 	 
	 
	 	 
	COUNTY OF
	 	 
	 

	 	 

     Before me, a Notary Public, on this day personally appeared ________________________,
known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledges
to me that he has executed this Agreement on behalf of himself and his heirs, for the purposes and
consideration therein expressed.

     Given under my hand and seal of office this ____ day of ____________,
________.

	 	 	 	 	 
	 	  

Notary Public in and for the State of Texas 	 
	 

(PERSONALIZED SEAL)

4

 

	 	 	 	 
	TRIAD FINANCIAL CORPORATION
	 	 
	 
	 	 
	BY:

	 	DATE:
	 

	 	 

	         TITLE:
	 	 

	 

	 	 
	STATE OF
	 	 

	 

	 	 
	COUNTY OF
	 	 

	 

	 	 

     Before me, a Notary Public, on this day personally appeared ________________________,
known to me to be the person and officer whose name is subscribed to
the foregoing instrument and acknowledged to me that
the same was the act of ____________________, and that he has executed the same on behalf of said corporation for
the purposes and consideration therein expressed, and in the capacity therein stated.

     Given under my hand and seal of office this ____ day of ____________,
________.

	 	 	 	 	 
	 
	 	 
	 	 
Notary Public in and for

the State of  

 	 

(PERSONALIZED SEAL)

5

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