Document:

exv10w51

Exhibit 10.51

SUBSCRIPTION AGREEMENT

FOR SECURITIES

OF

ARTES MEDICAL, INC.

SEPTEMBER [___], 2008

 

 

SUBSCRIPTION AGREEMENT

     THIS SUBSCRIPTION AGREEMENT (the “Agreement”) is made and entered into as of September [___],
2008, by and between Artes Medical, Inc., a Delaware corporation (the “Company”), and the person or
entity listed on the signature page hereof (“Investor”).

RECITALS

     A. The Company and Investor are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

     B. Investor wishes to purchase, and the Company wishes to sell, upon the terms and conditions
stated in this Agreement, that aggregate number of (i) shares of common stock, par value $0.001 per
share (“Common Stock”), of the Company, set forth below Investor’s name on the signature page of
this Agreement (which aggregate amount for all investors in this offering (the “Offering”) together
shall be [                    ] shares of Common Stock and shall be collectively referred to herein as the
“Shares”) and (ii) warrants, in substantially the form attached hereto as Exhibit A (the
“Warrants”), to acquire up to that number of additional shares of Common Stock equal to 50% of the
number of Shares purchased by Investor (rounded up to the nearest whole share).

     C. The Company has engaged Empire Asset Management Company as its exclusive placement agent
(the “Placement Agent”) for the Offering on a “reasonable efforts, no minimum” basis.

     D. In connection with the Offering, the Company will agree to provide certain registration
rights (the “Registration Rights”) as set forth in Section 4 of this Agreement with respect to the
Shares and Warrant Shares under the Securities Act and the rules and regulations promulgated
thereunder and applicable state securities laws.

     In consideration of the above recitals and the mutual covenants made herein, and for other
good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
Company and Investor hereby agree as follows:

SECTION 1.

DEFINITIONS

     In addition to the terms defined elsewhere in this Agreement, for all purposes of this
Agreement, the following terms shall have the meanings indicated in this Section 1:

     “Agreement” has the meaning set forth in the Preamble.

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     “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.

     “Closing” means the closing of the purchase and sale of the Shares and the Warrants pursuant
to this Agreement.

     “Closing Date” means the Trading Day when all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all of the conditions set forth in Section 6
hereof are satisfied, or such other date as the parties may agree.

     “Common Stock” has the meaning set forth in the Recitals, and also includes any securities
into which the Common Stock may be hereafter reclassified or changed.

     “Common Stock Equivalents” means any securities of the Company or its 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” has the meaning set forth in the Preamble.

     “Company Permits” has the meaning set forth in Section 3.2(i).

     “Default Event” has the meaning set forth in Section 4.5.

     “Dilutive Issuance” has the meaning set forth in Section 5.2(a).

     “Discussion Time” means the period commencing from the time that Investor first received a
term sheet or any other document from the Company or other person setting forth the material terms
of the transactions contemplated hereunder until the date hereof.

     “Equity Securities” means (i) Common Stock and (ii) Common Stock Equivalents.

     “Event Date” has the meaning set forth in Section 4.5.

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

     “Exempt Issuance” means (i) any Equity Securities issued or issuable pursuant to options,
warrants or other rights issued or issuable to employees, officers or directors of, or consultants
or advisors to the Company or any subsidiary, pursuant to equity incentive plans or other employee
benefit arrangements; (ii) any Equity Securities issued or issuable pursuant to any rights or
agreements, options, warrants or convertible securities outstanding as of the Closing Date; (iii)
any Equity Securities issued or issuable for consideration other than cash pursuant to a merger,
consolidation, strategic alliance, acquisition or similar business combination; (iv) any Equity
Securities issued or issuable in connection with any stock split, stock dividend or
recapitalization
by the Company; (v) any Equity Securities issued or issuable pursuant to any equipment loan or
leasing arrangement, real property leasing arrangement, or

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debt financing from a bank or similar
financial or lending institution; (vi) any Equity Securities issued or issuable in connection with
strategic transactions involving the Company and other entities, including joint ventures,
manufacturing, marketing or distribution arrangements or technology transfer or development
arrangements; and (vii) any Equity Securities issued or issuable to the Placement Agent or its
affiliates.

     “Holding Period” has the meaning set fort in Section 4.5.

     “Investor” has the meaning set forth in the Preamble.

     “Intellectual Property” means the Company’s and each of its Subsidiaries’ patents, patent
applications, provisional patents, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses, formulae, mask works, customer lists, internet
domain names, know-how and other intellectual property, including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems, procedures or
registrations or applications relating to the same.

     “Investment Summary” means the Investment Summary, dated September 17, 2008, with respect to
the Offering.

     “Issuable Maximum” has the meaning set forth in Section 5.2(b).

     “Liens” means any mortgage, lien, title claim, assignment, encumbrance, security interest,
adverse claim, contract of sale, restriction on use or transfer or other defect of title of any
kind.

     “Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities,
results of operations, condition (financial or otherwise), business, or prospects of the Company
and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its
obligations under this Agreement; provided, however, a “Material Adverse Effect” with respect to
Company shall not include any of the following or any combination of the following: (i) any event,
change, condition, effect or circumstance that results from or is attributable to the announcement,
pendency or consummation of this Agreement or the transactions contemplated hereby; (ii) any change
in the market price or trading volume of Company’s common stock after the date hereof; or (iii) any
event, change, condition, effect or circumstance resulting primarily from changes in general
economic, regulatory or political conditions, conditions in the United States or worldwide capital
markets, any act of terrorism, or any outbreak or continuation of hostilities or war, except to the
extent that any such event, change, condition, effect or circumstance has a disproportionately
adverse effect on Company as compared to other comparable businesses.

     “New Purchase Price” has the meaning set forth in Section 5.2(a).

     “Notice of Acceptance” has the meaning set forth in Section 5.1(d).

     “Offer” has the meaning set forth in Section 5.1(b).

     “Offer Notice” has the meaning set forth in Section 5.1(b).

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     “Offer Period” has the meaning set forth in Section 5.1(d).

     “Offered Securities” has the meaning set forth in Section 5.1(b).

     “Offering” has the meaning set forth in the Preamble.

     “Participation Right Period” has the meaning set forth in Section 5.1.

     “Permitted Transferee” has the meaning set forth in Section 7.3.

     “Placement Agent” has the meaning set forth in the Recitals.

     “Principal Trading Market” means the Trading Market on which the Common Stock is primarily
listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date,
shall be the Nasdaq Global Market.

     “Purchase Price” means $[                    1] per share of Common Stock.

     “Refused Securities” has the meaning set forth in Section 5.1(e).

     “Registrable Securities” means all shares of Common Stock of the Company issued to Investor
under this Agreement, including all shares of Common Stock issued to Investor upon exercise of the
Warrants, excluding in all cases, however, all Registrable Securities sold pursuant to Rule 144 and
any shares of capital stock issued or issuable from time to time (with any adjustments) in
replacement of, in exchange for or otherwise in respect of the Shares or the Warrant Shares.

     “Registration Rights” has the meaning set forth in the Recitals.

     “Regulation D” has the meaning set forth in the Recitals.

     “Rule 144” means Rule 144 promulgated by the SEC 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 SEC
having substantially the same effect as such Rule.

     “Rule 145” means Rule 145 promulgated by the SEC 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 SEC
having substantially the same effect as such Rule.

     “Schedule of Exceptions” has the meaning set forth in Section 3.2.

     “SEC Documents” means the Company’s annual report on Form 10-K (excluding exhibits) for the
fiscal year ended December 31, 2007, as filed with the SEC on March 14, 2008,
and the Amendment No. 1 to the Company’s annual report on Form 10-K/A for the fiscal year ended
December 31, 2007 (excluding exhibits), as filed with the SEC on April 22, 2008; and (ii)

 

			
	1	 	Final Agreement shall include actual Purchase Price
which shall be equal to the consolidated closing bid price of the Common Stock
on the Nasdaq Global Market immediately preceding the Closing, plus $0.0625.

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the
Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2008 (excluding exhibits),
as filed with the SEC on August 11, 2008.

     “SEC Filings” means the SEC Documents, along with all other reports, schedules, forms,
statements and other documents that the Company is required to file with the SEC pursuant to the
reporting requirements of the Exchange Act.

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

     “Securities Act” has the meaning set forth in the Recitals.

     “Shares” has the meaning set forth in the Recitals.

     “Stockholder Approval” has the meaning set forth in Section 5.2(c).

     “Subscription Amount” means the aggregate amount to be paid for the Shares and the Warrants
purchased hereunder as indicated on Investor’s signature page to this Agreement next to the heading
“Aggregate Purchase Price (Subscription Amount).”

     “Subsequent Placement” has the meaning set forth in Section 5.1(a).

     “Subsidiaries” shall mean any corporation or other entity or organization, whether
incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or
other ownership interest.

     “Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its
Principal Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices); provided , that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.

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

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

     “Violation” means (i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary to

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make the statements
therein not misleading; or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state securities law in
connection with the offering covered by such registration statement.

     “Warrants” has the meaning set forth in the Recitals.

     “Warrant Shares” means the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants.

SECTION 2.

PURCHASE AND SALE

     2.1 Purchase and Sale of Securities. Subject to the terms and conditions hereof, the
Company hereby agrees to issue and sell to Investor, and Investor hereby agrees to purchase from
the Company, at the Closing the number of Shares equal to the quotient resulting from dividing (a)
the Subscription Amount by (b) the Purchase Price, rounded down to the nearest whole Share. In
addition, Investor shall receive a Warrant to acquire up to that number of additional shares of
Common Stock equal to 50% of the number of Shares purchased by Investor (rounded up to the nearest
whole share). The Warrants shall have an exercise price equal to $[                    ]2 per Warrant
Share.

     2.2 Closing. The Closing of the purchase and sale of the Shares and Warrants shall
take place at the offices of the Company at 5870 Pacific Center Boulevard, San Diego, California
92121 at 9:00 a.m., Pacific Time, on the Closing Date or at such other locations or remotely by
facsimile transmission or other electronic means as the parties may mutually agree.

     2.3 Form of Payment. Unless otherwise agreed to by the Company and Investor, on or
prior to the Business Day immediately prior to the Closing Date, Investor shall wire its
Subscription Amount, in United States dollars and in immediately available funds as follows:

	 	 	 
	Bank:

	 	Signature Bank
	Address:

	 	261 Madison Avenue, New York, New York 10016
	ABA #:

	 	[____]
	Account Name:

	 	Signature Bank, as Escrow Agent to Artes Medical, Inc.

     2.4 Delivery. Unless otherwise agreed to by the Company and Investor, on the Closing
Date (a) the Company shall irrevocably instruct the Transfer Agent to deliver to each
Investor one or more stock certificates, free and clear of all restrictive and other legends
(except as expressly provided in Section 3 hereof), evidencing the number of Shares Investor is
purchasing as is set forth on Investor’s signature page to this Agreement next to the heading
“Number of Shares to be Acquired,” within three (3) Business Days after the Closing and (b) the
Company shall issue to Investor a Warrant pursuant to which Investor shall have the right to

 

			
	2	 	Final Agreement shall include actual exercise price
which shall be equal to the consolidated closing bid price of the Common Stock
on the Nasdaq Global Market immediately preceding the Closing.

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acquire such number of Warrant Shares as is set forth on Investor’s signature page to this
Agreement next to the heading “Warrants Issued,” duly executed on behalf of the Company and
registered in the name of Investor.

SECTION 3.

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of Investor. Investor represents and warrants to
the Company that:

          (a) Authorization. This Agreement constitutes the valid and legally binding
obligation of Investor, enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights
generally and equitable remedies, and except as indemnity provisions in the enforcement of Section
4 of this Agreement (relating to the Registration Rights) may be limited by law, and Investor has
full legal capacity, power and authority to enter into and be bound by this Agreement.

          (b) Purchase for Own Account for Investment. Investor is purchasing the Securities
for investment purposes only and not with a view to, or for sale in connection with, a distribution
of the Securities within the meaning of the Securities Act. Investor 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 arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting Investor’s right to
sell the Securities pursuant to a registration statement or otherwise in compliance with applicable
federal and state securities laws) in violation of the Securities Act or any applicable state
securities law. Investor is acquiring the Securities hereunder in the ordinary course of its
business. Investor does not have any agreement or understanding, directly or indirectly, with any
person to distribute any of the Securities.

          (c) Access to Information. Investor has had an opportunity to ask questions of the
Company’s representatives concerning the Company, its present and prospective business, assets,
liabilities and financial condition that Investor reasonably considers important in making the
decision to purchase the Securities. Neither such information nor any other investigation
conducted by Investor or any of its representatives shall modify, amend or otherwise affect
Investor’s right to rely on the Company’s representations and warranties contained in this
Agreement. Investor acknowledges that it has received and reviewed the Investment Summary.
Investor acknowledges receipt of copies of the SEC Documents.

          (d)  Understanding of Risks. Investor is fully aware of: (i) the highly speculative
nature of the investment in the Securities; (ii) the financial hazards involved; (iii) the
lack of liquidity of the Securities and the restrictions on the transferability of the
Securities (e.g., that Investor may not be able to sell or dispose of the Securities); (iv) the tax
consequences of investment in the Securities and (v) the risks described in the Investment Summary,
as well as in the SEC Documents, under the heading “Risk Factors.”

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          (e) Investor’s Qualifications. Investor is an “accredited” investor as defined under
Rule 501 of Regulation D promulgated under the Securities Act. Investor acknowledges that the
purchase of the Securities is a speculative investment and that it can bear the economic risk and
complete loss of its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.

          (f) Compliance with Securities Laws. Investor understands and acknowledges that, in
reliance upon the representations and warranties made by Investor herein, the sale of the
Securities to Investor will not be registered with the SEC under the Securities Act or qualified
under any state securities laws, but instead are being issued under an exemption or exemptions from
the registration and qualification requirements of the Securities Act or applicable state
securities laws which impose certain restrictions on Investor’s ability to transfer the Securities.

          (g) Restrictions on Transfer. Investor understands that Investor may not transfer any
of the Securities unless such Securities are registered under the Securities Act unless, in the
reasonable opinion of counsel to the Company, exemptions from such registration and qualification
requirements are available. Investor understands that only the Company may file a registration
statement with the SEC. Investor has also been advised that exemptions from registration and
qualification may not be available or may not permit Investor to transfer all or any of the
Securities in the amounts or at the times proposed by Investor.

          (h) Rule 144. In addition, Investor has been advised that Rule 144, which permits
certain limited sales of unregistered securities, is not presently available with respect to the
Shares and the Warrants, and, if issued, the Warrant Shares, solely due to the holding periods
required thereunder and, in any event, requires that the Shares and the Warrants, and, if issued,
the Warrant Shares, be held for a minimum of six months, and in certain cases one year, after they
have been purchased and paid for (within the meaning of Rule 144), before they may be resold under
Rule 144. Investor understands that Rule 144 may indefinitely restrict transfer of the Shares and
the Warrants, and, if issued, the Warrant Shares, if Investor is an “affiliate” of the Company and
“current public information” about the Company (as defined in Rule 144) is not publicly available.

          (i)  Legends and Stop-Transfer Orders. Investor understands that certificates or
other instruments representing any of the Securities acquired by Investor may bear legends
substantially similar to the following, in addition to any other legends required by federal or
state laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE

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AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS UNLESS SOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT.

     In order to ensure and enforce compliance with the restrictions imposed by applicable law and
those referred to in the foregoing legend, or elsewhere herein, the Company may issue appropriate
“stop transfer” instructions to its transfer agent, if any, with respect to any certificate or
other instrument representing the Securities, or if the Company transfers its own securities, it
may make appropriate notations to the same effect in the Company’s records. Any legend endorsed on
a certificate pursuant to this subsection (i) and the related stop transfer instructions with
respect to such securities shall be removed, and the Company shall issue a certificate without such
legend to the holder thereof, if such securities are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is available, if such
legend may be properly removed under the terms of Rule 144 promulgated under the Securities Act or
if such holder provides the Company with an opinion of counsel for such holder, reasonably
satisfactory to legal counsel for the Company, to the effect that a sale, transfer or assignment of
such securities may be made without registration.

          (j) No General Solicitation. Investor did not learn of the investment in the
Securities as a result of any public advertising or general solicitation.

          (k) Brokers and Finders. Investor has not employed any broker or finder or incurred
any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with the Transaction Documents.
Investor acknowledges that it is aware that the Company will be required to pay compensation to the
Placement Agent as described in the Schedule of Exceptions.

     3.2 Representations and Warranties of the Company. The Company hereby represents and
warrants to Investor that, except as set forth in this Section, or on the Schedule of Exceptions
attached hereto as Exhibit B (the “Schedule of Exceptions”), with any disclosure thereon
being deemed disclosure for all purposes and all relevant subsections hereof, which exceptions will
be deemed to be representations and warranties as if made hereunder:

          (a) Organization and Good Standing. The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable). The Company has all necessary
corporate power and authority to own, lease, use and operate its properties and to carry
on its business as now being conducted and presently proposed to be conducted. All
Subsidiaries are set forth on Schedule 3.2(a). The Company and each of its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in each jurisdiction in
which its ownership or leasing of assets, or the conduct of its business, makes such qualification

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necessary, except where the failure to be so qualified or in good standing could not reasonably be
expected to have a Material Adverse Effect.

          (b)  Requisite Power and Authorization. The Company has all necessary corporate power
and authority to execute and deliver this Agreement, to issue the Shares and the Warrants and to
carry out the provisions of this Agreement. All corporate action on the part of the Company
required for the lawful execution and delivery of this Agreement, issuance and delivery of the
Shares and the Warrants and the performance by the Company of its obligations hereunder has been
taken. Upon execution and delivery, this Agreement constitutes valid and binding obligations of
the Company enforceable in accordance with their respective terms, except as enforcement may be
limited by insolvency and similar laws affecting the enforcement of creditors’ rights generally and
equitable remedies, and except as the indemnity provisions of Section 4 of this Agreement (relating
to registration rights) may be limited by law. The Shares, when issued in compliance with the
provisions of this Agreement, and the Warrant Shares, if issued, when issued in compliance with the
provisions of the Warrants, will be duly authorized and validly issued, fully paid, non-assessable,
subject to no lien, claim or encumbrance and issued in compliance with federal securities laws and
applicable state securities laws. No stockholder of the Company or other person has any
preemptive, anti-dilution, “poison-pill” or similar right with respect to the Shares and the
Warrants and, if issued, the Warrant Shares. The Company has reserved such number of shares of its
Common Stock necessary for issuance of the Shares and the Warrant Shares.

          (c) SEC Documents. The Company has furnished the SEC Documents to Investor with the
Investment Summary. The Company has filed all of its SEC Filings for the two year period preceding
the date hereof. As of their respective filing dates, or such later date on which such reports
were amended, the SEC Filings complied in all material respects with the requirements of the
Exchange Act. The SEC Filings as of their respective dates, or such later date on which such
reports were amended, when issued did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The financial
statements included in the SEC Filings comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC with respect
thereto. Except as may be indicated in the notes to the financial statements included in the SEC
Filings or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, such
financial statements have been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial position of the Company and any
subsidiaries at the dates thereof and the consolidated results of their operations and consolidated
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal,
recurring adjustments). The shares of Common Stock are currently listed on the Nasdaq Global
Market. The Company has not received notice (written or oral) from Nasdaq to the effect that the
Company is not in compliance with the continued listing and maintenance requirements of such
Trading Market.

          (d) Capital Stock. The authorized capital stock of the Company consists of
200,000,000 shares of Common Stock, par value of $0.001 per share, and 10,000,000 shares of
Preferred Stock, par value of $0.001 per share. As of September 15, 2008, there were

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16,514,163
shares of Common Stock issued and outstanding and there was no issued and outstanding Preferred
Stock. All outstanding shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable. As of September 15, 2008, none of the authorized Common Stock is
reserved for issuance, other than (a) 3,145,099 shares of Common Stock reserved for future issuance
pursuant to options granted and outstanding under the Company’s stock option plans, (b) 1,930,451
shares of Common Stock reserved for future issuance pursuant to options and awards which may be
granted under the Company’s stock option plans, and (c) 3,580,603 shares of Common Stock reserved
for future issuance pursuant to outstanding warrants. Except as set forth above, the Company has
no outstanding securities convertible into or exchangeable for Common Stock and no contracts,
rights, options or warrants to purchase or otherwise acquire Common Stock or securities convertible
into or exchangeable for Common Stock.

          (e) No Conflicts. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated hereby (including,
without limitation, the issuance and reservation for issuance of the Warrant Shares) will not: (i)
conflict with or result in a violation of any provision of the Company’s certificate of
incorporation or bylaws or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, except for possible violations, conflicts or
defaults as could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which the Company or its securities are subject) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except for any violations that could not reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in default
(and no event has occurred which with notice or lapse of time or both could put the Company or any
of its Subsidiaries in default) under, and, to the knowledge of the Company, neither the Company
nor any of its Subsidiaries has taken any action or failed to take any action that would give to
others any rights of termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any
property or assets of the Company or any of its Subsidiaries is bound or affected, except for
possible defaults as could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Neither the Company nor its Subsidiaries is in violation of any law, rule
ordinance or regulation of any governmental entity, except for possible violations which could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except
as required under federal securities laws and any applicable state securities laws, rules or
regulations, by the terms of this Agreement, or by any applicable Trading Market, the Company is
not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court,
governmental agency, regulatory agency, self regulatory organization or stock market or any
third party in order for it to execute, deliver or perform any of its obligations under this
Agreement or the Warrants in accordance with the terms hereof or thereof or to issue and sell the
Shares and Warrants in accordance with the terms

11

 

hereof and to issue the Warrant Shares upon
exercise of the Warrants in accordance with the terms thereof.

          (f) No Material Adverse Change. Since the date of the latest financial statements
included in the SEC Documents, except as set forth in the SEC Documents or the Schedule of
Exceptions, there has not been:

               (i) any changes in the assets, liabilities, financial condition, prospects or operations of
the Company from that reflected in the financial statements except changes in the ordinary course
of business which have not been, either in any individual case or in the aggregate, materially
adverse to the Company and its subsidiaries taken as a whole;

               (ii) any material change, except in the ordinary course of business, in the contingent
obligations of the Company whether by way of guarantee, endorsement, indemnity, warranty or
otherwise; or

               (iii) any damage, destruction or loss, whether or not covered by insurance, materially and
adversely affecting the properties or business of the Company.

          (g) Litigation. Except as described in the SEC Documents, there is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending, or, to the Company’s knowledge, threatened or
contemplated, against the Company or any of its Subsidiaries, or against any officer, director or
employee of the Company or any such Subsidiary in connection with such person’s employment
therewith that, individually or in the aggregate, could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or government agency or
instrumentality which could reasonably be expected to have a Material Adverse Effect.

          (h) Intellectual Property The Company owns valid title, free and clear of any Liens,
or possesses the requisite valid and current licenses or rights, free and clear of any Liens, to
use all Intellectual Property in connection with the conduct its business as now operated (and, to
the best of the Company’s knowledge, as presently contemplated to be operated in the future). There
is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s
knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to
any Intellectual Property necessary to enable it to conduct its business as now operated (and, to
the best of the Company’s knowledge, as presently contemplated to be operated in the future). To
the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended
products, services and processes do not infringe on any Intellectual Property or other rights held
by any person, and the Company is unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company has not received any notice of infringement of, or conflict with,
the asserted rights of others with respect to the Intellectual
Property. The Company and each of its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their Intellectual Property.

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          (i) Permits; Compliance. The Company and each of its Subsidiaries is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders issued by the appropriate federal, state local or
foreign regulatory authorities necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to possess such franchises,
grants, authorization, licenses, permits, easements, variances, exemptions, consents, certificates,
approvals or orders could not reasonably be expected to have a Material Adverse Effect
(collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the
Company Permits, except for any such conflicts, defaults or violations which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse Effect.

          (j) Certain Transactions. Except as set forth in the SEC Filings, to the knowledge of
the Company there are no loans, leases, royalty agreements or other transactions between: (i) the
Company or any of its Subsidiaries or any of their respective customers or suppliers, and (ii) any
officer, employee, consultant or director of the Company or any person owning five percent (5%) or
more of the capital stock of the Company or five percent (5%) or more of the ownership interests of
the Company or any of its Subsidiaries or any member of the immediate family of such officer,
employee, consultant, director, stockholder or owner or any corporation or other entity controlled
by such officer, employee, consultant, director, stockholder or owner, or a member of the immediate
family of such officer, employee, consultant, director, stockholder or owner.

          (k) No General Solicitation. Assuming the accuracy of Investor’s representations and
warranties set forth in Section 3.1, to the knowledge of the Company neither the Company nor any
person participating on the Company’s behalf in the transactions contemplated hereby has conducted
any “general solicitation,” as such term is defined in Regulation D.

          (l) No Integrated Offering. Assuming the accuracy of Investor’s representations and
warranties set forth in Section 3.1, to the knowledge of the Company 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 in any security or solicited any offers to buy any security under circumstances
that would require registration under the Securities Act of the issuance of the Securities to
Investor or that would cause this Offering to be integrated with any prior offering by the Company
for purposes of any stockholder approval provisions applicable to the Company or its securities.

          (m) No Brokers. Except as set forth in Schedule 3.2(m), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other person with
respect to the transactions contemplated by the Transaction Documents. To the knowledge of the
Company, Investor shall have no obligation with respect to any fees or with respect to any

13

 

claims
made by or on behalf of other persons for fees of a type contemplated herein that may be due in
connection with the transactions contemplated by the Transaction Documents.

          (n) Internal Controls. The Company is in material compliance with the provisions of
the Sarbanes-Oxley Act of 2002 currently applicable to the Company.

          (o) FCPA Matters. Neither the Company, nor any of its Subsidiaries, nor, to the
knowledge of the Company, any director, officer, agent, employee or other person acting on behalf
of the Company or any Subsidiary has, in the course of his or her actions for, or on behalf of, the
Company: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate funds, (iii) violated or
is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or
(iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic governmental or private official or person.

          (p) Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the Placement Agent
promptly after such filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to be taken on or prior to the Closing Date to
qualify the Securities for sale to Investor in the applicable closing pursuant to this Agreement
under applicable securities or “blue sky” laws of the states of the United States (or to obtain an
exemption from such qualification), and shall provide evidence of any such action so taken to the
Placement Agent on or prior to the Closing Date.

SECTION 4.

REGISTRATION RIGHTS

     4.1 Company Registration. If (but without any obligation to do so) the Company
proposes to register any of its stock or other securities under the Securities Act, whether for its
own account or for the account of another stockholder (other than a registration relating solely to
the sale of securities to participants in a Company stock plan for employees, consultants or
directors on Form S-8, a registration relating to a corporate reorganization or other transaction
under Rule 145, the Company shall, at such time, promptly give Investor written notice of such
registration. Upon the written request of Investor given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 9(f), the Company shall, subject to the
provisions of this Section 4, use commercially reasonable efforts to cause to be registered under
the Securities Act all of the Registrable Securities that Investor has requested to be registered.

          (a) The Company shall have the right to terminate or withdraw any registration initiated by it
under this Section 4 prior to the effectiveness of such registration whether or not Investor has
elected to include securities in such registration.

          (b) In connection with any offering involving an underwriting of shares of the Company’s
capital stock, the Company shall not be required under this Section 4 to include any of Investor’s
securities in such underwriting unless they accept the terms of the underwriting as

14

 

agreed upon
between the Company and the underwriters selected by it and enter into an underwriting agreement in
customary form with an underwriter or underwriters selected by the Company, and then only in such
quantity as the underwriters determine in their sole discretion will not jeopardize the success of
the offering by the Company. If the total amount of securities, including Registrable Securities,
requested by stockholders of the Company to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine in their sole discretion
is compatible with the success of the offering, then the Company shall be required to include in
the offering only that number of such securities, including Registrable Securities, that the
underwriters determine in their sole discretion will not jeopardize the success of the offering
(the securities so included to be allocated first, to the Company, and second, pro rata among the
selling stockholders of the Company according to the total amount of securities held by such
selling stockholders entitled to be included therein pursuant to registration rights held by such
selling stockholders or in such other proportions as shall mutually be agreed to by such selling
stockholders). For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that is a partnership or corporation, the partners, retired partners and
stockholders of such selling stockholder, or the estates and family members of any such partners
and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed
to be a single “selling stockholder,” and any pro rata reduction with respect to such “selling
stockholder” shall be based upon the aggregate amount of Registrable Securities owned by all such
related entities and individuals.

     4.2 Furnish Information. It will be a condition precedent to the obligations of the
Company to take any action pursuant to Section 4.1 hereof that Investor will furnish to the Company
such information regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as will be required to effect the registration of their
Registrable Securities. Investor covenants that it will promptly notify the Company of any changes
in the information set forth in the registration statement regarding Investor or Investor’s “Plan
of Distribution.”

     4.3 Indemnification. In the event any Registrable Securities are included in a
registration statement under Section 4.1 hereof:

          (a) To the extent permitted by law, the Company will indemnify and hold harmless Investor, the
partners, stockholders, officers and directors of Investor, any underwriter (as defined in the
Securities Act) for Investor and each person, if any, who controls Investor or underwriter within
the meaning of the Securities Act or the Exchange Act against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon a Violation, and the Company will
reimburse Investor, partner, stockholder, officer or director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 4.3(a) will not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will not be unreasonably

15

 

withheld), nor will the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished expressly for use in
connection with such registration by Investor or partner, stockholder, officer, director,
underwriter or controlling person of Investor.

          (b) To the extent permitted by law, Investor will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities Act, any underwriter
and any other investor purchasing shares of Common Stock and warrants to purchase shares of Common
Stock at the Closing that is selling securities under such registration statement or any of such
other investor’s partners, directors, officers, stockholders or any person who controls such
investor within the meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such director, officer,
controlling person, underwriter or other such investor, partner or director, officer, stockholder
or controlling person of such other investor may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation that arises solely as
a result of written information furnished by Investor expressly for use in connection with such
registration; and Investor will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other investor, partner,
officer, director, stockholder or controlling person of such other investor in connection with
investigating or defending any such loss, claim, damage, liability or action: provided, however,
that the indemnity agreement contained in this Section 4.3(b) will not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such settlement is effected
without the consent of Investor, which consent will not be unreasonably withheld; and provided
further, that the total amounts payable in indemnity by Investor under this Section 4.3(b) in
respect of any Violation will not exceed the aggregate proceeds received by Investor upon the sale
of the Registrable Securities.

          (c) Promptly after receipt by an indemnified party under this Section 4.3 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this Section 4.3,
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party will have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying
party, if (i) representation of such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such proceeding or (ii) the
indemnifying party shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to the indemnified party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such action will relieve
such indemnifying party of liability, but only to

16

 

the extent that the failure to give notice
shall materially adversely affect the indemnifying party in the defense of such claim.

          (d) If the indemnification provided for in Sections 4.3(a) or 4.3(b) hereof shall be
unavailable to hold harmless an indemnified party in respect of any liability under the Securities
Act, then, and in each such case, the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the indemnified party
on the other in connection with the statement or omission that resulted in such loss, liability,
claim, damage or expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided that in no event shall any
contribution under this subsection (v) by Investor exceed the dollar amount of the proceeds (net of
all expenses paid by such holder in connection with any claim relating to this Section 4.3)
received by it upon the sale of the Registrable Securities giving rise to such contribution. No
person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity that was not guilty of
such fraudulent misrepresentation.

          (e) The obligations of the Company and Investor under this Section 4.3 will survive the
completion of any offering of Registrable Securities in a registration statement, and otherwise.

     4.4 Rule 144 Reporting. With a view to making available the benefits of certain rules
and regulations of the SEC which may at any time permit the sale of the Registrable Securities to
the public without registration, while a public market exists for the Common Stock of the Company,
the Company will:

          (a) Make and keep public information available, as those terms are understood and defined in
Rule 144, at all times while Registrable Securities are outstanding;

          (b) Use its best efforts to file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act (at any time it is
subject to such reporting requirements); and

          (c) So long as Investor owns any Registrable Securities, furnish to Investor forthwith upon
request a written statement by Investor to the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act (at any time it is subject
to the reporting requirements of the Exchange Act), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as Investor may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Investor to sell any such securities without registration (at any time the Company is
subject to the reporting requirements of the Exchange Act).

17

 

     4.5 Expenses. All fees and expenses incident to the performance of or compliance with
this Section 4 by the Company shall be borne by the Company whether or not any Registrable
Securities are sold by Investor pursuant to a registration statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect to filings required
to be made with the Trading Market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws, (ii) printing expenses, (iii)
messenger, telephone and delivery expenses, and (iv) fees and disbursements of counsel and
independent public accountants for the Company, (v) fees and disbursements of one counsel to
Investors not to exceed $5,000 and (vi) filing fees and counsel fees of the Placement Agent
(counsel fees not to exceed $5,000) if a determination is made that a NASD Rule 2710 filing is
required to be made with respect to such registration statement.

     4.6 Default Event. If at any time during the period beginning on the six month
anniversary of the Closing Date and ending on such date that all Registrable Securities held by
Investor may be resold under Rule 144(b)(1)(i) without the requirements of paragraph (c)(1) of Rule
144 applying to such sale or otherwise without restriction or limitation pursuant to Rule 144 (the
“Holding Period”), if the Company shall fail for any reason to satisfy the current public
information requirements under Rule 144(c) (a “Default Event”) causing Investor to be unable to
utilize Rule 144 for resales of Registrable Securities for a period of ten (10) consecutive
calendar days (the date on which such 10-day period is exceeded being referred to as an “Event
Date”), then the Company shall pay to Investor an amount in cash, as partial liquidated damages and
not as a penalty, equal to two percent (2.0%) of the aggregated Purchase Price paid by Investor
pursuant to this Agreement (and cash exercise price actually paid by Investor with respect to
Warrants) for any Registrable Securities then held by Investor for each thirty (30) calendar day
period following the applicable Event Date (prorated for any period of less than thirty calendar
days) until the applicable Default Event is cured; provided, that the Company shall not incur
liquidated damages under this Section 4.6 if such Default Event occurs after the expiration of the
Holding Period; provided, further, that notwithstanding anything to the contrary in this Agreement,
the Company shall not incur liquidated damages under this Section 4.6 in excess of eight percent
(8%) of the aggregate Purchase Price paid by Investor pursuant to this Agreement for any Shares
then held by Investor. Payments of such amounts pursuant to this Section 4.6 shall be made in
immediately available funds within five (5) business days after the end of each period that gives
rise to such obligation, provided that if any such period extends for more than thirty (30) days
payments shall be made at the end of each thirty-day period.

SECTION 5.

OTHER AGREEMENTS

     5.1 Participation in Future Financings.

          (a) Until the sixth (6) month anniversary of the Closing Date, the Company will not, directly
or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
any of its Equity Securities (any such offer, sale, grant or disposition being referred to as
a “Subsequent Placement”), unless the Company shall have first complied with this Section 5.1.

18

 

          (b) The Company shall deliver to Investor a written notice (the “Offer Notice”) of any
proposed or intended issuance or sale or exchange (the “Offer”) of the securities being offered
(the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (i) identify and
describe the Offered Securities, (ii) describe the price and other material terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be
issued, sold or exchanged, and (iii) offer to issue and sell to or exchange with Investor up to
Investor’s pro rata percentage of the Offered Securities.

          (c) For purposes of this Section 5.1, Investor’s pro rata percentage is equal to the ratio of
(i) the number of shares of the Company’s Common Stock (including all shares of Common Stock
issuable or issued upon exercise of outstanding warrants or options) held by Investor immediately
prior to the issuance of the Offered Securities to (ii) the total number of outstanding shares of
Common Stock (including all shares of Common Stock issued or issuable upon conversion of all
convertible securities of the Company or upon the exercise of any outstanding warrants or options
to purchase Company securities) immediately prior to the issuance of the Offered Securities.

          (d) To accept an Offer, in whole or in part, Investor must deliver a written notice to the
Company prior to the end of the tenth (10th) Trading Day after Investor’s receipt of the Offer
Notice (the “Offer Period”), setting forth the portion of Investor’s pro rata percentage that
Investor elects to purchase (the “Notice of Acceptance”).

          (e) The Company shall have twenty (20) Trading Days from the expiration of the Offer Period
above to offer, issue, sell or exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by Investor (the “Refused Securities”), but only upon terms
and conditions that are not more favorable to the acquiring person or persons or less favorable to
the Company than those set forth in the Offer Notice.

          (f) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, Investor shall acquire from the Company, and the Company shall issue to Investor, the
number or amount of Offered Securities specified in the Notices of Acceptance upon the terms and
conditions specified in the Offer. The purchase by Investor of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and Investor of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form and substance to
Investor and its counsel and compliance with applicable federal and state securities laws. 

          (g) The restrictions contained in this Section 5.1 shall not apply in connection with any
Exempt Issuance.

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     5.2 Anti-Dilution Adjustment.

          (a) In the event that prior to the one year anniversary of the Closing Date the Company shall
complete one or more Subsequent Placements at an effective price per share less than the Purchase
Price (such lower price, the “New Purchase Price” and such issuances collectively, a “Dilutive
Issuance”), as adjusted hereunder (if the holder of the Equity Securities so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Purchase Price, such issuance shall be deemed to
have occurred for less than the Purchase Price on such date of the Dilutive Issuance), then the
Purchase Price shall be deemed to be equal to the New Purchase Price and the Company shall issue to
Investor without receipt of additional consideration from Investor an additional number of shares
of Common Stock equal to (i) such number of shares determined by dividing the aggregate Purchase
Price paid by Investor by the New Purchase Price, less (ii) the number of Shares previously
issued to Investor. Notwithstanding the foregoing, no adjustments shall be made, paid or issued
under this Section 5.2 in respect of Exempt Issuances.

          (b) Notwithstanding anything to the contrary in Section 5.2(a), if the Company has not
obtained Stockholder Approval (as defined below), then the Company may not issue as a result of the
adjustment of the Purchase Price in connection with a Dilutive Issuance a number of shares of
Common Stock, which, when aggregated with any shares of Common Stock issued in the Offering
pursuant to the Subscription Agreements, would exceed 19.99% of the number of shares of Common
Stock outstanding on the Trading Day immediately preceding the Closing Date (such number of shares,
the “Issuable Maximum”). If on any adjustment of the Purchase Price in connection with a Dilutive
Issuance, the number of shares of Common Stock issuable to Investor would exceed the Issuable
Maximum and the Company shall not have previously obtained Stockholder Approval (as defined below),
then the Company shall issue to Investor such number of shares of Common Stock equal to such
Investor’s pro-portion of the Issuable Maximum and, with respect to the remainder of the aggregate
number of shares of Common Stock issuable upon the adjustment of the Purchase Price in connection
with a Dilutive Issuance, the Company shall be prohibited from issuing such shares of Common Stock
until and unless Stockholder Approval has been obtained.

          (c) Notwithstanding anything to the contrary in Section 5.2(a), if the Company has not
obtained such approval as may be required by the applicable rules and regulations of the Nasdaq
Global Market (or any successor entity) from the stockholders of the Company with respect to the
transactions contemplated by the Transaction Documents, including the issuance of all of the
Warrant Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date
(“Stockholder Approval”), then the Purchase Price shall not be adjusted as provided in Section
5.2(a).

     5.3 Short Sales and Confidentiality After The Date Hereof. Investor covenants that
neither it nor any affiliates acting on its behalf or pursuant to any understanding with it will
execute any short sales of shares of Common Stock during the period after the Discussion Time

20

 

and
ending at the time that the transactions contemplated by this Agreement are first publicly
disclosed by the Company. Investor covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company, Investor will maintain the
confidentiality of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Investor understands and acknowledges that the SEC
currently takes the position that coverage of short sales of shares of Common Stock “against the
box” prior to the effective date of a registration statement with respect to the Securities is a
violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A,
of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the
Office of Chief Counsel, Division of Corporation Finance.

SECTION 6.

CONDITIONS PRECEDENT TO CLOSING

     6.1 Conditions to Obligations of Investor. The obligation of Investor to purchase the
Shares and the Warrants at the Closing is subject to the fulfillment on or prior to the Closing
Date of the following conditions, any of which may be waived by Investor:

          (a) Representations and Warranties Correct; Performance of Obligations. The
representations and warranties made by the Company contained herein shall be true and correct in
all material respects (except for those representations and warranties which are qualified as to
materiality, in which case such representations and warranties shall be true and correct in all
respects) as of the date when made and as of the Closing Date, as though made on and as of such
date, except for such representations and warranties that speak as of a specific date, and the
Company shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions herein required to be performed, satisfied or complied with by it at or
prior to the Closing.

          (b) Consents and Waivers. The Company shall have obtained any and all consents
(including all governmental or regulatory consents, approvals or authorizations required in
connection with the valid execution and delivery of this Agreement), permits and waivers necessary
or appropriate for consummation of the transactions contemplated by this Agreement.

          (c) Judgments. No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or
by any governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated in this Agreement.

          (d) Stop Orders. No stop order or suspension of trading shall have been imposed by
the SEC or any other governmental or regulatory body with respect to public trading in the Common
Stock.

          (e) CEO/CFO Certificate. The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial Officer,

21

 

dated as of the Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (c) and (d) above.

          (f) Secretary Certificate. The Company shall have delivered a Certificate, executed
on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions
adopted by the Board of Directors of the Company approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the Securities, certifying the
current versions of the Articles of Incorporation and Bylaws of the Company and certifying as to
the signatures and authority of persons signing the Transaction Documents and related documents on
behalf of the Company.

          (g) Opinion of Company’s Counsel. Investor shall have received from DLA Piper LLP
(US), counsel to the Company, an opinion dated the Closing Date and in substantially the form
attached hereto as Exhibit C.

     6.2 Conditions to Obligations of the Company. The obligation of the Company to sell
and issue the Shares and the Warrants to Investor at the Closing is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any of which may be waived by the
Company:

          (a) Representations and Warranties; Performance of Obligations. The representations
and warranties made by Investor contained herein shall be true and correct in all material respects
(except for those representations and warranties which are qualified as to materiality, in which
case such representations and warranties shall be true and correct in all respects) as of the date
when made and as of the Closing Date, as though made on and as of such date, except for such
representations and warranties that speak as of a specific date, and Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
herein required to be performed, satisfied or complied with by it at or prior to the Closing.

          (b) Consents and Waivers. The Company shall have obtained any and all consents
(including all governmental or regulatory consents, approvals or authorizations required in
connection with the valid execution and delivery of this Agreement), permits and waivers necessary
or appropriate for consummation of the transactions contemplated by this Agreement.

          (c) Payment of Purchase Price. Investor shall have wired its Subscription Amount, in
United States dollars and in immediately available funds, to Signature Bank in accordance with
Section 2.3.

SECTION 7.

MISCELLANEOUS

     7.1 Governing Law. This Agreement will be governed by and construed in accordance
with the internal laws of the State of New York applicable to contracts made among residents of,
and wholly to be performed within, the State of New York, without regard to principles of conflict
of laws or choice of laws. The parties hereto irrevocably submit to the exclusive
jurisdiction of the United States District Court for the Southern District of New York,

22

 

or, if
jurisdiction in such court is lacking, the Supreme Court of the State of New York, New York County,
in respect of any dispute or matter arising out of or connected with this Agreement.

     7.2 Further Instruments. From time to time, each party hereto will execute and
deliver such instruments and documents as may be reasonably necessary to carry out the purposes and
intent of this Agreement.

     7.3 Successors; No Other Beneficiaries. This Agreement will be binding upon and will
inure to the benefit of the executors, administrators, legal representatives, heirs, successors,
and assigns of the parties hereto; provided, however, that (i) rights of Investor hereunder may be
transferred only in connection with (and to the transferee of) Common Stock of the Company
purchased by Investor hereunder, but the Company may prohibit such transfer of rights if the
transfer to a particular transferee would not, in the good faith judgment of the Company’s Board of
Directors, be in the Company’s best interests, and (ii) any transferee of any shares of stock of
the Company affected by this Agreement to whom rights are so transferred (a “Permitted Transferee”)
will be required, as a condition precedent to acquiring such shares, to agree in writing to be
bound by all the terms and conditions of this Agreement applicable to such Permitted Transferee’s
transferor, and (iii) upon and after such transfer the Permitted Transferee will be deemed to be an
Investor for purposes of this Agreement. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

     7.4 Counterparts; Facsimile. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which together will constitute
one and the same instrument. This Agreement will be effective following the parties signatory
hereto upon such counterpart signature by all initial parties hereto. 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.

     7.5 Entire Agreement. This Agreement, including and incorporating the Schedule of
Exceptions and all Exhibits attached hereto and referred to herein, constitutes and contains the
entire agreement and understanding of the parties regarding the subject matter of this Agreement
and supersedes in its entirety any and all prior negotiations, correspondence, understandings and
agreements among the parties respecting the subject matter hereof.

     7.6 Notices. Any notice required to be given or delivered to the Company under the
terms of this Agreement shall be addressed to the Senior Vice President and Secretary of the
Company at its principal corporate offices. Any notice required to be given or delivered to
Investor shall be addressed to Investor at the address indicated on the signature page hereto or to
such other address as such party may designate in writing from time to time to the Company. Unless
otherwise provided, notice required or permitted to be given to a party pursuant to the provisions
of this Agreement will be in writing and will be effective and deemed given under this
Agreement on the earliest of (i) the date of personal delivery, or (ii) the date of delivery
by

23

 

facsimile, or (iii) the business day after deposit with a nationally-recognized courier or
overnight service, including Federal Express or Express Mail, for United States deliveries or three
(3) business days after such deposit for deliveries outside of the United States, or (iv) three (3)
business days after deposit in the United States mail by registered or certified mail for United
States deliveries. All notices not delivered personally or by facsimile will be sent with postage
and other charges prepaid and properly addressed to the party to be notified at the address set
forth on the signature page, or at such other address as such party may designate by ten (10) days’
advance written notice to the other parties hereto. All notices for delivery outside the United
States will be sent by facsimile, or by nationally recognized courier or overnight service,
including Express Mail. Any notice given hereunder to more than one person will be deemed to have
been given, for purposes of counting time periods hereunder, on the date given to the last party
required to be given such notice.

     7.7 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of the Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the Company and the
investors in the Offering holding or having the right to acquire at least a majority of the
Securities on a fully-diluted basis. Any amendment or waiver effected in accordance with this
Section 7.7 will be binding upon the Company, Investor, and their permitted transferees and
assignees. Notwithstanding the foregoing, the Company may, at any time prior to the Closing,
modify the anti-dilution provisions contained in this Subscription Agreement and the Warrants to
comply with Nasdaq Rule 4350 without first providing notice or obtaining prior consent of Investor.

     7.8 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provisions will be excluded from this Agreement to the
extent unenforceable and the balance of such provisions, and of this Agreement, will be interpreted
as if such provision or part and hereof were so excluded and will be enforceable in accordance with
its terms.

     7.9 Expenses. The Company and Investor will bear its own costs and expenses incurred
on its behalf with respect to the Agreement and the transactions contemplated hereby, including
fees of legal counsel.

     7.10 Representation. Investor has been represented by its own separate legal counsel
in their review and negotiation of this Agreement and the Warrants. For reasons of administrative
convenience only, Investor and its counsel have the option to communicate with the Company through
Littman Krooks LLP, who is serving as counsel to the Placement Agent only.

[Remainder of page left intentionally blank]

24

 

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

INVESTOR

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Shares Subscribed:                                         	 	 
	 	 	 	 	 	 	 
	(Print Name of Individual or Entity)	 	Share Purchase Price:                                         	 	 
	 	 	 	 	Aggregate Purchase
Price (Subscription Amount):                                                             
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 

(Signature)
	 	 	 	 

(Signature of Co-Investor)
	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 	 	 	 	(Co-Investor)	 	 
	 
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Social Security No./ Tax ID No.:                     	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	COMPANY	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ARTES MEDICAL, INC.	 	Shares Issued:                                                             	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Warrants Issued:                                         	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 

	 	5870 Pacific Center Boulevard,	 	 	 	 	 	 
	 

	 	San Diego, California 92121exv10w52

Exhibit 10.52

Empire Asset Management Company

2 Rector Street, 15th Floor

New York, NY 10006

September 17, 2008

Artes Medical, Inc. 
5870 Pacific
Center Blvd. 
San Diego, CA 92121

Attn: Christopher J. Reinhard,

          Executive Chairman of the Board of Directors

Re:     Placement Agent Agreement

Gentlemen:

     The undersigned, Artes Medical, Inc., a Delaware corporation (the “Company”), desires to offer
for sale (the “Offering”) to certain “accredited investors” (each, an “Investor” and, collectively,
the “Investors”) through Empire Asset Management Company (“Empire” or the “Placement Agent”) up to
an aggregate of 3,300,000 shares (each, a “Share” and collectively, the “Shares”) of the Company’s
common stock, par value 0.0001 per Share (the “Common Stock”) at an offering price equal to a 10%
discount to the average closing price of the Common Stock for the five trading days preceding the
closing. For each Share purchased, an investor in the Offering will receive a warrant (each, a
“Warrant” and collectively, the “Warrants”) to purchase 1/2 Share (rounded up to the nearest whole
share) for a period of five (5) years commencing six months from the date of issuance, at a
purchase price equal to the consolidated closing bid price of the Common Stock immediately
preceding the date of any closing. The Shares and Warrants are hereinafter collectively referred to
as the “Securities.”

     The offering of the Securities will be made by the Company solely pursuant to certain
Subscription Agreements which are included as an exhibit to an Investment Summary prepared by the
Company. “Investment Summary” as used in this Agreement means the Company’s Confidential Investment
Summary dated September 17, 2008, inclusive of all exhibits and schedules thereto, and all
amendments, supplements and appendices thereto. Unless otherwise defined, each term used in this
Agreement will have the same meaning as set forth in the Subscription Agreements.

     1. Agreement to Act as Placement Agent. The Company hereby appoints Empire to act as its exclusive placement
agent in connection with the Offering. Empire hereby agrees, as agent of the Company, to solicit offers to purchase the Securities
on a “reasonable efforts” basis upon the terms and conditions set forth in the Investment Summary. The Offering
will commence on the date of the Investment Summary and continuing until September 26, 2008, unless
extended by the Company and the Placement Agent for an additional ninety (90) days or terminated
earlier as provided herein (the

 

 

Empire Asset Management Company

September 17, 2008

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“Offering Period”). The date on which the Offering shall terminate shall be referred to as the
“Termination Date.” Prior to the Termination Date, the Company shall not, without the prior written
consent of the Placement Agent, solicit or accept offers to purchase the Securities (other than
pursuant to the exercise of options or warrants to purchase shares of Common Stock that are
outstanding at the date hereof) otherwise than through the Placement Agent in accordance herewith.

     2. Representations and Warranties of the Company. The Company represents and warrants to the
Placement Agent as follows:

          (a) The Investment Summary has been diligently prepared by the Company, in conformity with all
applicable laws, and is in compliance with Regulation D as promulgated under Section 4(2) of the
Act (“Regulation D”), the Act and the requirements of all other rules and regulations (the
“Regulations”) of the Securities and Exchange Commission (the “SEC”) relating to offerings of the
type contemplated by the Offering, and the applicable securities laws and the rules and regulations
of those jurisdictions wherein the Placement Agent notifies the Company the Securities are to be
offered and sold. With respect to actions taken by the Company, the Securities will be offered and
sold pursuant to the registration exemption provided by Regulation D and Section 4(2) and/or
Section 4(6) of the Act as a transaction not involving a public offering and the requirements of
any other applicable state securities laws and the respective rules and regulations thereunder in
those jurisdictions in which the Placement Agent notifies the Company that the Securities are being
offered for sale. The Company has not taken nor will it take any action which conflicts with the
conditions and requirements of, or which would make unavailable with respect to the Offering, the
exemption(s) from registration available pursuant to Regulation D or Section 4(2) and/or Section
4(6) of the Act, and knows of no reason why any such exemption would be otherwise unavailable to
it. The Company has not been subject to any order, judgment or decree of any court of competent
jurisdiction temporarily, preliminarily or permanently enjoining it for failing to comply with
Section 503 of Regulation D.

          (b) The Investment Summary does not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None of the statements,
documents, certificates or other items prepared or supplied by the Company with respect to the
transactions contemplated hereby contains an untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained therein not misleading in light of the
circumstances in which they were made. Through disclosures made by the Company to
representatives of the Placement Agent, the Company has disclosed to the Placement Agent and
its counsel all facts of which the Company is aware which materially and adversely affects or could
reasonably be expected to materially and adversely affect the business prospects, financial
condition, operations, property or affairs of the Company.

 

 

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September 17, 2008

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          (c) Except as set forth in the Schedule of Exceptions and set forth in the Investment Summary,
the Company is not obligated to pay, and has not obligated the Placement Agent to pay, a finder’s
or origination fee in connection with the Offering to anyone other than the Placement Agent and
hereby agrees to indemnify the Placement Agent from any such claim made by any other person. The
Company has not offered for sale or solicited offers to purchase the Securities except for
negotiations with the Placement Agent. Except as set forth in the Schedule of Exceptions and set
forth in the Investment Summary, no other person has any right to participate in any offer, sale or
distribution of the Company’s securities to which the Placement Agent’s rights, described herein,
shall apply.

          (d) Immediately prior to the Closing, the Agent’s Warrants (as defined in Section 3(e) hereof)
will have been duly authorized. No holder of any of the Agent’s Warrants will be subject to
personal liability solely by reason of being such a holder. None of the Agent’s Warrants are
subject to preemptive or similar rights of any stockholder or security holder of the Company or an
adjustment under the antidilution or exercise rights of any holders of any outstanding shares of
capital stock, options, warrants or other rights to acquire any securities of the Company.
Immediately prior to the Closing, a sufficient number of authorized but unissued shares of Common
Stock will have been reserved for issuance upon the exercise of the Agent’s Warrants.

          (e) The Company has all requisite corporate power and authority to (i) enter into and perform
its obligations under this Agreement and (ii) issue, sell and deliver the Securities and the
Agent’s Warrants. This Agreement has been duly authorized, executed and delivered and constitutes
valid and binding obligations of the Company, enforceable against the Company in accordance with
its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect related to laws
affecting creditors’ rights generally, including the effect of statutory and other laws regarding
fraudulent conveyances and preferential transfers, and except that no representation is made herein
regarding the enforceability of the Company’s obligations to provide indemnification and
contribution remedies under the securities laws and (ii) subject to the limitations imposed by
general equitable principles (regardless of whether such enforceability is considered in a
proceeding at law or in equity).

          (f) For the benefit of the Placement Agent, the Company hereby incorporates by reference all
of its representations and warranties as set forth in Section 3.2 of the Subscription Agreement
with the same force and effect as if specifically set forth herein.

     3. Closing; Fees.

          (a) Closing. Each prospective purchaser of Securities will be required to complete and execute
one original of the Subscription Agreement and the Investor Questionnaire in the forms attached as
Exhibits to the Investment Summary (the “Subscription Documents”). All funds for subscriptions
received from the Offering will

 

 

Empire Asset Management Company

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be promptly forwarded by the Placement Agent of the Company, if received by it, to and deposited
into the escrow account (the “Escrow Account”) established for such purpose with Signature Bank, a
New York State chartered bank, 261 Madison Avenue, New York NY 10016 (the “Escrow Agent”). All such
funds for subscriptions of Securities will be held in the Escrow Account pursuant to the terms of
the Escrow Agreement among the Company, the Placement Agent and the Escrow Agent. The Company will
either accept or reject the Subscription Documents in a timely fashion and at each closing of the
purchase and sale of the Securities (each, a “Closing”) will countersign the Subscription Documents
and provide duplicate copies of such Subscription Documents to the Placement Agent for distribution
to the subscribers. The Company will give notice to the Placement Agent of its acceptance of each
accepted subscription. The Company will return to subscribers incomplete, improperly executed and
rejected subscriptions and give notice thereof to the Placement Agent upon such return. If the
Company and Placement Agent has received and accepted subscriptions for the Securities prior to the
Termination Date and is satisfied that the funds for such Securities have been collected and all of
the conditions set forth elsewhere in this Agreement are fulfilled, a Closing shall be held
promptly with respect to the Securities sold. Thereafter, the remaining Securities will continue to
be offered and sold until the Termination Date. Additional Closings may from time to time be
conducted at times mutually agreeable with respect to additional Securities sold. The final Closing
(the “Final Closing”) shall occur within ten (10) days from the earlier of the Termination Date or
the Company’s acceptance of subscriptions for all Securities offered. Delivery of payment for the
accepted subscriptions for Securities from the funds received in respect of such sales will be made
at each Closing at such place as may be mutually agreed upon between the Company and the Placement
Agent against delivery of the Securities by the Company. If Subscription Documents have not been
received and accepted by the Company on or before the Termination Date, the Offering may be
terminated by the Placement Agent for any reason and no Securities will be sold, and the Escrow
Agent will, at the request of the Placement Agent, cause all
monies received from subscribers for the Securities to be promptly returned to such subscribers
without interest, penalty, expense or deduction.

          (b) Agents Fee. The Company will pay a cash placement fee (the “Agent’s Fee”) to the
Placement Agent at each Closing equal to eight percent (8%) of the aggregate gross proceeds
received by the Company from the sale of all Securities sold in the Offering.

          (c) Agent Warrants. As additional compensation hereunder, at each Closing, the Company will
issue to the Placement Agent or its designees, warrants (the “Agent’s Warrants”) to purchase such
number of shares of Common Stock equal to eight percent (8%) of all the Shares and shares of Common
Stock issuable upon exercise of the Warrants sold in such Closing. The Agent’s Warrants related to
Shares shall have an exercise price equal to the per share price of the Shares sold in the
Offering, and the Agent’s Warrants related to the shares of Common Stock issuable upon exercise of
the Warrants shall have an exercise price equal to the exercise price contained in the Warrants.
The Agent’s Warrants shall be exercisable until the date five (5) years after the six month

 

 

Empire Asset Management Company

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anniversary of the date of issuance. At the Placement Agent’s election, the Company may issued the
Agent’s Warrants all at once at the Final Closing. For the benefit of the Placement Agent, the
Company hereby incorporates by reference the registration rights provisions as set forth in Section
4 of the Subscription Agreement with the same force and effect as if specifically set forth herein.
Other than as specifically set forth herein, the Agent’s Warrants shall contain the same
provisions contained in the Warrants. The Agent’s Warrants and the Agent’s Fee are sometimes
collectively referred to herein as the “Agent’s Compensation.”

          (d) Expenses. The Company shall bear all of its expenses in connection with the Offering.
Whether or not the Offering is successfully completed for any reason, Empire will be entitled, upon
presentation of a written accounting therefor in reasonable detail, to prompt reimbursement of its
actual, out-of-pocket expenses related to the Offering, including but not limited to fees and
expenses of Empire’s legal counsel, travel expenses, and due diligence related expenditures (the
“Agent Expense Reimbursement”); provided,
however, that Empire’s reimbursable expenses shall not
exceed $50,000, and any travel expenses over five hundred dollars ($500) shall be pre-approved by
the Company prior to being incurred. The provisions of this paragraph shall survive the Final
Closing and any termination of the Offering.

          (e) EI Investors Tail. The Company shall also pay and issue to the Placement Agent the
Agent’s Compensation calculated according to the percentages set forth in Sections 3(b) and (c) of
this Agreement, if any person or entity to whom the Placement Agent has introduced (directly or
indirectly) to the Company during the term
of this Agreement (“EI Investors”) makes a private investment in the Company at any time prior to
the date that is twelve (12) months after the termination or expiration of this Agreement
regardless of whether such EI Investor purchased Securities in the Offering. In that regard, the
Placement Agent shall furnish the Company with a list of EI Investors (the “EI Potential Investor
List”) within 15 business days of the Termination Date or the Final Closing, which shall represent
a comprehensive list of EI Investors for purposes of the “tail” provisions of this section. The
Company acknowledges and agrees that the EI Investor Potential List is proprietary to the Placement
Agent and shall be maintained in strict confidence by the Company. As used herein, the term “EI
Investors” includes any party that is an affiliate of the specific party named in the EI Potential
Investor List.

          (f) ROFR Agreement. Upon closing of at least 3,300,000 Shares in the Offering, the Company
hereby grants the Placement Agent a right of first refusal for a period of twelve (12) months from
such Closing to participate as a lead placement agent on any future private placement of the
Company’s securities or as one of the lead managing underwriters on any public offering of the
Company’s securities. It is understood that if a third party broker-dealer (including, without
limitation, JMP Securities or Merriman Curhan Ford) provides the Company with written terms with
respect to a future securities offering (“Written Offering Terms”), the Company shall promptly
present same to the Placement Agent. The Placement Agent shall have ten (10) business days from its
receipt of the Written Offering Terms in which to determine whether or not to accept such offer

 

 

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and, if the Placement Agent refuses, and provided that such financing is consummated (a) with
another placement agent or underwriter upon substantially the same terms and conditions as the
Written Offering Terms and (b) within three months after the end of the aforesaid ten (10) business
day period, this right of first refusal shall thereafter be forfeited and terminated; provided,
however, if the financing is not consummated under the conditions of clauses (a) and (b) above,
then the right of first refusal shall once again be reinstated under the same terms and conditions
set forth in this paragraph. In addition, if Empire elects to act as a financial advisor or
placement agent to the Company for a financing transaction, Empire agrees to discuss with the
Company and Cowen Healthcare Royalty Partners, L.P. (“CHRP”) an opportunity for CHRP to participate
in such financing transaction as provided in Section 8.02 of the Revenue Interest Financing and
Warrant Purchase Agreement, dated January 28, 2008, by and between the Company and CHRP and
provided that Empire receives compensation as provided in Section 3 hereunder with respect to such
investment

     4. Covenants of the Company.

          (a) Company Expenses. The Company shall pay all reasonable expenses incurred in connection
with the preparation and printing of all necessary offering documents and instruments related to
the Offering, the issuance of the Securities
and will also pay the Company’s own expenses for accounting fees, legal fees, escrow account
fees and other costs involved with the Offering, including the printing costs of the Offering
documentation. The Company will provide at its own expense such quantities of the Offering
documentation and other documents and instruments relating to the Offering as the Placement Agent
may reasonably request. Further, as promptly as practicable after the Final Closing Date, the
Company shall prepare, at its own expense, no more than four “velobound volumes” relating to the
Offering and will distribute such volumes to the individuals designated by counsel to the Placement
Agent.

          (b) Blue Sky. The Company will use its commercially reasonable
efforts to qualify the Securities for sale under the securities laws of such
jurisdictions as may be mutually agreed to by the Company and the Placement
Agent, and the Company will make such applications and furnish information as
may be required for such purposes, provided, that the Company will not be
required or obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering or
sale of the Securities.

          The Company or its counsel will provide counsel for the Placement Agent with copies of all
correspondence or other documentation filed with or received from any jurisdiction where the
Securities are to be registered or qualified or offered (including, without limitation, Form D
filing with the SEC). In addition, upon receipt of notification by the Company of the
qualification, registration or exemption of the Securities by an applicable jurisdiction, the
Company will promptly notify counsel for the Placement Agent in writing of such action.

 

 

Empire Asset Management Company

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          In each jurisdiction where the Shares have been registered or qualified or are offered in an
exempt transaction as provided above, the Company will make and file such statements, documents,
materials, and reports as are or may be required to be made or filed by the Company by the laws of
such jurisdiction for so long a period as the Placement Agent may reasonably request.

          The Company will promptly provide to the Placement Agent for delivery to all offerees and
investors and their representatives any additional information, documents and instruments which the
Placement Agent or the Company reasonably deem necessary to comply with the rules, regulations and
judicial and administrative interpretations respecting compliance with such exemptions or
qualifications and registrations in those states where the Securities are to be offered or sold.

          The Company shall place a legend on the certificates representing the Securities issued to
subscribers and the Agent’s Warrants stating that the securities evidenced thereby have not been
registered under the Securities Act or applicable state securities laws, setting forth or referring
to the applicable restrictions on transferability and sale of such securities under the Securities
Act and applicable state laws.

          (c) Amendments and Supplements. If, at any time prior o the Final Closing, any event shall
occur which does or may materially affect the Company or as a result of which it might become
necessary to amend or supplement the Investment Summary so that the representations and warranties
herein remain true, or in case it shall, in the opinion of the Placement Agent and its counsel or
counsel to the Company, be necessary to amend or supplement the Investment Summary to comply with
Regulation D or any other applicable securities laws or regulations, the Company will promptly
notify the Placement Agent and shall prepare and furnish to the Placement Agent a reasonable number
of copies of appropriate amendments and/or supplements in form and substance satisfactory to the
Placement Agent and its counsel.

          (d) Use of Proceeds. The net proceeds of the Offering will be used by the Company, as more
fully described in the Investment Summary, for the purposes set forth in the Investment Summary.

          (e) Legal Opinion and Closing Certificates. There shall have been delivered to the Placement
Agent a signed opinion of DLA Piper LLP (US), counsel to the Company (“Company Counsel”), dated as
of each Closing Date, in form and substance reasonably satisfactory to counsel to the Placement
Agent. In addition, the Placement Agent shall be entitled to receive copies of the closing
certificates required to be delivered pursuant to Section 6.1 of the Subscription Agreements.

     5. Due Diligence and Company Cooperation. The Company shall make members of management and
other employees, advisors and agents available to Empire as Empire shall reasonably request. The
Company shall cooperate with the Placement Agent

 

 

Empire Asset Management Company

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in connection with, and shall make available to the Placement Agent, historic, current and
prospective information concerning the business, assets, prospects, operations and financial
condition of the Company and such documents and other information as the Placement Agent shall
reasonably request in connection with the services to be performed by it under this Agreement. The
Company recognizes and confirms that the Placement Agent will use and rely, without investigation
as to accuracy and completeness, on the
documents and information (written and oral) provided by the Company and on information available
from generally recognized public sources in performing the services contemplated by this Agreement
and that the Placement Agent does not assume nor have responsibility for the accuracy or
completeness of such documents or information. Further, the Placement Agent does not assume any
obligation to make any solvency determination or to conduct any appraisal of assets or liabilities
of the Company.

     6. Securities Law Compliance. Each of the Company and the Placement
Agent agrees to conduct the Offering in a manner intended (a) to qualify as a private placement of
the Securities in any jurisdiction in which the Securities are offered and (b) to comply with the
requirements of Rule 506 of Regulation D under the Securities Act. Assuming the accuracy of the
representations and warranties given to the Company by each investor to the extent relevant for
such determination, the Offering will be exempt from the registration requirements of the
Securities Act. In connection with offers made in the U.S. pursuant to Regulation D, the Company
and the Placement Agent agree (i) to limit offers to sell, and solicitations of offers to buy, the
Securities to persons reasonably believed by it to be “accredited investors” within the meaning of
Rule 501(a) under the Securities Act, and (ii) not to engage in any form of general solicitation or
general advertising in connection with the Offering within the meaning of Rule 502 under the
Securities Act.

     7. Termination. The Offering may be terminated by the Placement Agent at any time prior to the
expiration of the Offering Period as contemplated in Section 1 hereof (the “Expiration Date”) in
the event that (a) any of the representations or warranties of the Company contained herein shall
prove to have been false or misleading in any material respect when made or deemed made or (b) the
Company shall have failed to perform any of its material obligations hereunder. This Offering may
be terminated by the Company at any time prior to the Expiration Date in the event that the
Placement Agent shall have failed to perform any of its material obligations hereunder. In the
event of any such termination under this Section 7, the Placement Agent shall be entitled to
receive, in addition to other rights and remedies it may have hereunder, at law or otherwise, an
amount equal to the sum of: (X) all Agent’s Fees earned through the Expiration Date, (Y) any
accountable Agent’s Expense Reimbursement through the Expiration Date; and (Z) all amounts which
may become payable in respect of EI Investors pursuant to Section 3(e) hereof.

 

 

Empire Asset Management Company

September 17, 2008

Page 9 of 12

     8. Miscellaneous.

          (a) Survival. Any termination of the Offering without consummation thereof, or any
termination of this Agreement by the Company or the Placement Agent, shall be without obligation on
the part of any party except that the provisions of Sections 3(d), 3(e), 4(a), 7 and 8 shall
survive such termination.

          (b) Representations, Warranties and Covenants to Survive Delivery. The representations,
warranties, indemnities, agreements, covenants and other statements of the Company contained herein
shall survive the Final Closing, if any, for a period of eighteen months.

          (c) No Other Beneficiaries. This Agreement is intended for the sole and exclusive benefit of
the parties hereto and their respective successors, controlling persons and permitted assigns, and
no other person, firm or corporation shall have any third party beneficiary or other rights
hereunder.

          (d) ARBITRATION, CHOICE OF LAW; COSTS. THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO
ARBITRATION IN ACCORDANCE WITH THE PROVISIONS SET FORTH BELOW AND UNDERSTAND AND AGREE THAT (A)
ARBITRATION IS FINAL AND BINDING ON THE PARTIES, (B) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK
REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY
MORE LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE ARBITRATOR’S AWARD IS NOT REQUIRED TO
INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION
OF RULINGS BY ARBITRATORS IS STRICTLY LIMITED, (E) THE PANEL OF FINANCIAL INDUSTRY REGULATORY
AUTHORITY (“FINRA”) ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE
AFFILIATED WITH THE SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY ARISE BETWEEN THE
PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED BY ARBITRATION PURSUANT TO THE RULES THEN
PERTAINING TO FINRA IN THE CITY OF NEW YORK, STATE OF NEW YORK. JUDGMENT ON ANY AWARD OF ANY SUCH
ARBITRATION MAY BE ENTERED IN THE SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT
HAVING JURISDICTION OVER THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS RENDERED. THE PARTIES
AGREE THAT THE DETERMINATION OF THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. ANY
NOTICE OF SUCH ARBITRATION OR FOR THE CONFIRMATION OF ANY AWARD IN ANY ARBITRATION SHALL BE
SUFFICIENT IF GIVEN IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT. THE PREVAILING PARTY, AS
DETERMINED BY SUCH ARBITRATORS IN AN ARBITRATION

 

 

Empire Asset Management Company

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Page 10 of 12

PROCEEDING SHALL BE ENTITLED TO COLLECT ANY COSTS, DISBURSEMENTS AND REASONABLE ATTORNEY’S FEES
FROM THE OTHER PARTY.

          (e) Notices. All notices, requests, demands and other
communications which are required or may be given hereunder shall be in
writing and shall be deemed to have been duly given (i) when delivered
personally, receipt acknowledged, (ii) five (5) days after being sent by
registered or certified mail, return receipt requested, postage prepaid or
(iii) one (1) business day after being sent via a reputable nationwide
overnight courier service guaranteeing next business day delivery. All notices
shall be made to the parties at the addresses designated above or at such
other or different addresses which a party may subsequently provide with
notice thereof, and to their respective legal counsel, as follows:

If to Empire, to:

Empire Asset Management Company

2 Rector Street, 15th Floor,

New York, NY 10006

Attn: Gregg Zeoli

Fax: (212) 417-8229

With a copy to:

Littman Krooks LLP

655 Third Avenue, 20th Floor

New York, NY 10017

Attn: Steven D. Uslaner, Esq.

or to such other person or address as Empire shall furnish to the Company in writing.

If to the Company, to:

Artes Medical, Inc.

5870 Pacific Center Boulevard

San Diego, California 92121

Attn: Christopher J. Reinhard, Executive Chairman of the Board

Fax: (858) 436-1001

 

 

Empire Asset Management Company

September 17, 2008

Page 11 of 12

with a copy to:

DLA Piper US LLP

4365 Executive Drive, Suite 1100

San Diego, California 92121

Attn: Jeffrey Thacker, Esq.

Fax: (858) 638-5128

or to such other person or address as the Company shall furnish to Empire in writing.

          (f) Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, and all of which taken together shall constitute one and the same
agreement (and all signatures need not appear on anyone 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. This Agreement shall become effective when one or
more counterparts has been signed and delivered by each of the parties hereto.

          (g) Entire Agreement. This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior and contemporaneous
agreements, understandings, documents, negotiations and discussions, whether oral or written, of
the parties hereto, including that certain engagement agreement, dated September 12, 2008, between
the Company and the Placement Agent (the “Engagement Agreement”). Notwithstanding the foregoing,
the provisions set forth in Section 6 of the Engagement Agreement with respect to indemnification
and contribution and in Section 8(e) of the Engagement Agreement with respect to confidentiality
shall continue in full force and effect following the execution of this Agreement.

 

 

Empire Asset Management Company

September 17, 2008

Page 12 of 12

     If you find the foregoing is in accordance with our understanding, kindly sign and return to
us a counterpart hereof, whereupon this instrument along with all counterparts will become a
binding agreement between us.

Dated: September 17, 2008

	 	 	 	 	 
	 	Very truly yours,

ARTES MEDICAL, INC.

 	 
	 	By:  	/s/
Christopher J. Reinhard
 	 
	 	 	Christopher J. Reinhard  	 
	 	 	Executive Chairman of the Board 	 
	 

ACCEPTED AND AGREED TO:

EMPIRE ASSET MANAGEMENT COMPANY

	 	 	 	 	 
	By:

	 	/s/ Gregg Zeoli
 

Gregg Zeoli
	 	 
	 

	 	President & CEO

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