Document:

bsdm8k20100503ex4-1.htm

    
      

      

    

    Exhibit 4.1

     

    FORM
OF WARRANT

     

    BSD
MEDICAL CORPORATION

     

    WARRANT
TO PURCHASE COMMON STOCK

     

    Warrant
No.:

    Date of
Issuance:  May ___, 2010 (“Issuance Date”)

     

    BSD
Medical Corporation, a Delaware corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, _________________, the registered holder hereof or its
permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or
times on or after the six (6) month and one (1) day anniversary of the Issuance
Date (the “Initial Exercise
Date”), but not after 11:59 p.m., New York time, on the Expiration Date
(as defined below), ______________ (subject to adjustment as provided herein)
fully paid and nonassessable shares of Common Stock (as defined below) (the
“Warrant
Shares”).  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in
Section 16.  This Warrant is one of the Warrants to Purchase
Common Stock (the “SPA
Warrants”) issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of May 3, 2010, by and among the Company and
the investors (the “Buyers”) referred to therein
(the “Securities Purchase
Agreement”).

     

    1     
        EXERCISE OF
WARRANT.

     

    (a)           Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the Initial
Exercise Date, in whole or in part, by delivery (whether via facsimile or
otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant.  Within one (1) Trading
Day following an exercise of this Warrant as aforesaid, the Holder shall deliver
payment to the Company of an amount equal to the Exercise Price in effect on the
date of such exercise multiplied by the number of Warrant Shares as to which
this Warrant was so exercised (the “Aggregate Exercise Price”) in
cash or via wire transfer of immediately available funds if the Holder did not
notify the Company in such Exercise Notice that such exercise was made pursuant
to a Cashless Exercise (as defined in Section 1(d)).  The Holder
shall not be required to deliver the original of this Warrant in order to effect
an exercise hereunder.  Execution and delivery of an Exercise Notice
with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original of this Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant
Shares.  Execution and delivery of an Exercise Notice for all of the
then-remaining Warrant Shares shall have the same effect as
cancellation of the original of this Warrant after delivery of the Warrant
Shares in accordance with the terms hereof.  On or before the first
(1st) Trading Day following the date on which the Company has received an
Exercise Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of such Exercise Notice to the Holder and the Company’s
transfer agent (the “Transfer
Agent”).  On or before the third (3rd) Trading Day following
the date on which the Company has received such Exercise Notice, the Company
shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit/ Withdrawal at Custodian system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at the Holder’s
instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in
each case, sent by reputable overnight courier to the address as specified in
the applicable Exercise Notice, a certificate, registered in the Company’s share
register in the name of the Holder or its designee (as indicated in the
applicable Exercise Notice), for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise.  Upon delivery of an
Exercise Notice, the Holder shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date such Warrant Shares are
credited to the Holder’s DTC account or the date of delivery of the certificates
evidencing such Warrant Shares (as the case may be).  If this Warrant
is submitted in connection with any exercise pursuant to this Section 1(a)
and the number of Warrant Shares represented by this Warrant submitted for
exercise is greater than the number of Warrant Shares being acquired upon an
exercise, then, at the request of the Holder, the Company shall as soon as
practicable and in no event later than three (3) Business Days after any
exercise and at its own expense, issue and deliver to the Holder (or its
designee) a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised.  No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the nearest whole
number.  The Company shall pay any and all taxes which may be payable
with respect to the issuance and delivery of Warrant Shares upon exercise of
this Warrant.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           Exercise
Price.  For purposes of this Warrant, “Exercise Price” means $1.94,
subject to adjustment as provided herein.

     

    (c)           Company’s Failure to Timely
Deliver Securities.  If the Company shall fail, for any reason
or for no reason, to issue to the Holder within three (3) Trading Days after
receipt of the applicable Exercise Notice, a certificate for the number of
shares of Common Stock to which the Holder is entitled and register such shares
of Common Stock on the Company’s share register or to credit the Holder’s
balance account with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder’s exercise of this Warrant (as the case may
be), then, in addition to all other remedies available to the Holder, the
Company shall pay in cash to the Holder on each day after such third
(3rd)]Trading Day that the issuance of such shares of Common Stock is not timely
effected an amount equal to 1% of the product of (A) the aggregate number of
shares of Common Stock not issued to the Holder on a timely basis and to which
the Holder is
entitled and (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the last possible date on which the Company could have
issued such shares of Common Stock to the Holder without violating
Section 1(a).  In addition to the foregoing, if within three (3)
Trading Days after the Company’s receipt of the applicable Exercise Notice, the
Company shall fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company’s share register or credit the
Holder’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder’s exercise hereunder (as the case
may be), and if on or after such third (3rd) Trading Day the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company, then, in
addition to all other remedies available to the Holder, the Company shall,
within three (3) Business Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder’s exercise hereunder (as the case may be)
(and to issue such shares of Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such shares of Common Stock or credit the Holder’s balance account
with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash
to the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock times (B) the Closing
Sale Price of the Common Stock on the Trading Day immediately preceding the date
of the applicable Exercise Notice.

    
      
         

      

      
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    (d)           Cashless
Exercise.  Notwithstanding anything contained herein to the
contrary (other than Section 1(f) below), if at the time of exercise hereof
a registration statement is not effective (or the prospectus contained therein
is not available for use) for the issuance by the Company to the Holder of all
of the Warrant Shares, then the Holder may, in its sole discretion, exercise
this Warrant in whole or in part and, in lieu of making the cash payment
otherwise contemplated to be made to the Company upon such exercise in payment
of the Aggregate Exercise Price, elect instead to receive upon such exercise the
“Net Number” of shares
of Common Stock determined according to the following formula (a “Cashless
Exercise”):

     

    Net  
Number   =   (A   x 
 B)   -   (A   x 
 C)

    B

     

    For
purposes of the foregoing formula:

     

    A= the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B= as
applicable:  (i) the Closing Sale Price of the Common Stock on the
Trading Day immediately preceding the date of the applicable Exercise Notice if
such Exercise Notice is (1) both executed and delivered pursuant to
Section 1(a) hereof on a day that is not a Trading Day or (2) both executed
and delivered pursuant to Section 1(a)
hereof on a Trading Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal
securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as
of the time of the Holder’s execution of the applicable Exercise Notice if such
Exercise Notice is executed during regular trading hours on a Trading Day and is
delivered within two (2) hours thereafter pursuant to Section 1(a) hereof
and (iii) the Closing Sale Price of the Common Stock on the date of the
applicable Exercise Notice if the date of such Exercise Notice is a Trading Day
and such Exercise Notice is both executed and delivered pursuant to
Section 1(a) hereof after the close of regular trading hours on such
Trading Day.

     

    C= the Exercise Price then in effect for the applicable Warrant
Shares at the time of such exercise.

    
      
         

      

      
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    (e)           Disputes.   In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 13.

     

    (f)           Limitations on
Exercises.  Notwithstanding anything to the contrary contained
in this Warrant, this Warrant shall not be exercisable by the Holder hereof to
the extent (but only to the extent) that the Holder or any of its affiliates
would beneficially own in excess of 4.9% (the “Maximum Percentage”) of the
Common Stock.  To the extent the above limitation applies, the
determination of whether this Warrant shall be exercisable (vis-à-vis other
convertible, exercisable or exchangeable securities owned by the Holder or any
of its affiliates) and of which such securities shall be exercisable (as among
all such securities owned by the Holder) shall, subject to such Maximum
Percentage limitation, be determined on the basis of the first submission to the
Company for conversion, exercise or exchange (as the case may be).  No
prior inability to exercise this Warrant pursuant to this paragraph shall have
any effect on the applicability of the provisions of this paragraph with respect
to any subsequent determination of exercisability.  For the purposes
of this paragraph, beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of percentage
ownership) shall be determined in accordance with Section 13(d) of the 1934
Act (as defined in the Securities Purchase Agreement) and the rules and
regulations promulgated thereunder.  The provisions of this paragraph
shall be implemented in a manner otherwise than in strict conformity with the
terms of this paragraph to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation.  The limitations contained in this paragraph shall apply
to a successor Holder of this Warrant.  The holders of Common Stock
shall be third party beneficiaries of this paragraph and the Company may not
waive this paragraph without the consent of holders of a majority of its Common
Stock.  For any reason at any time, upon the written or oral request
of the Holder, the Company shall within one (1) Business Day confirm orally and
in writing to the Holder the number of shares of Common Stock then outstanding,
including by virtue of any prior conversion or exercise of convertible or
exercisable securities into Common Stock, including, without limitation,
pursuant to this Warrant or securities issued pursuant to the Securities
Purchase Agreement.

    
      
         

      

      
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    (g)           Insufficient Authorized
Shares.  The Company shall at all times keep reserved for
issuance under this Warrant a number of shares of Common Stock as shall be
necessary to satisfy the Company’s obligation to issue shares of Common Stock
hereunder (without regard to any limitation otherwise contained herein with
respect to the number of shares of Common Stock that may be acquirable upon
exercise of this Warrant).  If, notwithstanding the foregoing, and not
in limitation thereof, at any time while any of the SPA Warrants remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon exercise of the SPA Warrants at least a number of shares of Common
Stock equal to the number of shares of Common Stock as shall from time to time
be necessary to effect the exercise of all of the SPA Warrants then outstanding
(the “Required Reserve
Amount”) (an “Authorized
Share Failure”), then the Company shall immediately take all action
necessary to increase the Company’s authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount
for all the SPA Warrants then outstanding.  Without limiting the
generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its stockholders for the approval of an increase in the
number of authorized shares of Common Stock.  In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such
proposal.

     

    2           
  ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  While this Warrant is outstanding,
the Exercise Price and number of Warrant Shares issuable upon exercise of
this Warrant are subject to adjustment from time to time as set forth in this
Section 2.

     

    (a)           Stock Dividends and
Splits.  Without limiting any provision of Section 4, if
the Company, at any time on or after the date of the Securities Purchase
Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock,
(ii) subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its then outstanding shares of Common Stock
into a larger number of shares or (iii) combines (by combination, reverse
stock split or otherwise) one or more classes of its then outstanding shares of
Common Stock into a smaller number of shares, then in each such case the
Exercise Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event.  Any adjustment made
pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this paragraph shall become effective immediately
after the effective date of such subdivision or combination.  If any
event requiring an adjustment under this paragraph occurs during the period that
an Exercise Price is calculated hereunder, then the calculation of such Exercise
Price shall be adjusted appropriately to reflect such event.

     

    (b)           Number of Warrant
Shares.  Simultaneously with any adjustment to the Exercise
Price pursuant to paragraph (a) of this Section 2, the number of Warrant
Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment (without regard to
any limitations on exercise contained herein).

    
      
         

      

      
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    (c)           Calculations.  All
calculations under this Section 2 shall be made by rounding to the nearest
cent or the nearest 1/100th of a share, as applicable.  The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

     

    3           
  RIGHTS
UPON DISTRIBUTION OF ASSETS.  While this Warrant is
outstanding, in addition to any adjustments pursuant to Section 2
above, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or options by way
of a dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distributions would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in such
Distribution to such extent (or the beneficial ownership of any such shares of
Common Stock as a result of such Distribution to such extent) and such
Distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).

     

    4       
      PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

     

    (a)           Purchase
Rights.  While
this Warrant is outstanding, in addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof, including without
limitation, the Maximum Percentage) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of shares of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights (provided, however, to the extent that the Holder’s right to participate
in any such Purchase Right would result in the Holder exceeding the Maximum
Percentage, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to
such extent) and such Purchase Right to such extent shall be held in abeyance
for the Holder until such time, if ever, as its right thereto would not result
in the Holder exceeding the Maximum Percentage).

    
      
         

      

      
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    (b)           Fundamental
Transactions.   While this Warrant is outstanding,
the Company shall not enter into or be party to a Fundamental Transaction
unless the Successor Entity assumes in writing all of the obligations of the
Company under this Warrant and the other Transaction Documents (as defined in
the Securities Purchase Agreement) in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance
satisfactory to the Holder and approved by the Holder prior to such Fundamental
Transaction, including (except in the event of a Fundamental Transaction in
which neither the Successor Entity nor its Parent Entity has any securities that
are publicly traded) agreements to deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, which is exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and with an exercise price
which applies the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common Stock pursuant to
such Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental
Transaction).  Upon the consummation of each Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and
after the date of the applicable Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.

     

    (c)           Black Scholes
Value.  Notwithstanding the foregoing and the provisions of
Section 4(b) above, in the event of a Fundamental Transaction (including,
without limitation, a Fundamental Transaction that occurs prior to the Initial
Exercise Date), if the Holder has not exercised this Warrant in full prior to
the consummation of such Fundamental Transaction, at the request of the Holder
delivered before the ninetieth (90th) day after the consummation of such
Fundamental Transaction, the Company or the Successor Entity (as the case may
be) shall purchase this Warrant from the Holder on the date of such request by
paying to the Holder cash in an amount equal to the Black Scholes
Value.

     

    (d)           Application.  The
provisions of this Section 4 shall apply similarly and equally to
successive Fundamental Transactions and shall be applied as if this Warrant (and
any such subsequent warrants) were fully exercisable and without regard to any
limitations on the exercise of this Warrant (provided that the Holder shall
continue to be entitled to the benefit of the Maximum Percentage, applied
however with respect to shares of capital stock registered under the 1934 Act
and thereafter receivable upon exercise of this Warrant (or any such other
warrant)).

    
      
         

      

      
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    5        
     NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder.  Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall take all such actions as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this Warrant,
and (iii) shall, so long as any of the SPA Warrants are outstanding, take
all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, the maximum number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).

     

    6       
      WARRANT HOLDER NOT DEEMED A
STOCKHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in its capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in its capacity as the Holder of
this Warrant, any of the rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant.   In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

     

    7       
      REISSUANCE OF
WARRANTS.

     

    (a)           Transfer of
Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the
number of Warrant Shares not being transferred.

     

    (b)           Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant
(as to which a written certification and the indemnification contemplated below
shall suffice as such evidence), and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.

    
      
         

      

      
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    (c)           Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 7(d)) representing in the aggregate
the right to purchase the number of Warrant Shares then underlying this Warrant,
and each such new Warrant will represent the right to purchase such portion of
such Warrant Shares as is designated by the Holder at the time of such
surrender; provided, however, no warrants for fractional shares of Common Stock
shall be given.

     

    (d)           Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the
Holder which, when added to the number of shares of Common Stock underlying the
other new Warrants issued in connection with such issuance, does not exceed the
number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date, and (iv) shall have the same rights and conditions as
this Warrant.

     

    8
             NOTICES.   Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 8(f) of the
Securities Purchase Agreement.  The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefor.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon each
adjustment of the Exercise Price and the number of Warrant Shares, setting forth
in reasonable detail, and certifying, the calculation of such adjustment(s) and
(ii) at least fifteen (15) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the shares of Common Stock, (B) with respect to any
grants, issuances or sales of any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property to all holders of shares
of Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder and (iii) at least ten (10)
Trading Days prior to the consummation of any Fundamental
Transaction.  To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of its subsidiaries, the Company shall simultaneously file such notice
with the SEC (as defined in the Securities Purchase Agreement) pursuant to a
Current Report on Form 8-K.  It is expressly understood and
agreed that the time of execution specified by the Holder in each Exercise
Notice shall be definitive and may not be disputed or challenged by the
Company.

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    9    
         AMENDMENT AND
WAIVER.   Except as otherwise provided herein, the
provisions of this Warrant (other than Section 1(f)) may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Holder.  The Holder shall be entitled, at its option,
to the benefit of any amendment to any of the other SPA Warrants.  No
waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party.

     

    10            SEVERABILITY.  If
any provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    11     
      GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     

    12    
       CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any Person as
the drafter hereof.   The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.  Terms used in this Warrant but
defined in the other Transaction Documents shall have the meanings ascribed to
such terms on the Closing Date (as defined in the Securities Purchase Agreement)
in such other Transaction Documents unless otherwise consented to in writing by
the Holder.

     

    13       
    DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price, the Closing Sale Price, the Bid Price or fair market
value or the arithmetic calculation of the Warrant Shares (as the case may be),
the Company or the Holder (as the case may be) shall submit the disputed
determinations or arithmetic calculations (as the case may be) via facsimile
(i) within two (2) Business Days after receipt of the applicable notice
giving rise to such dispute to the Company or the Holder (as the case may be) or
(ii) if no notice gave rise to such dispute, at any time after the Holder
learned of the circumstances giving rise to such dispute.  If the
Holder and the Company are unable to agree upon such determination or
calculation (as the case may be) of the Exercise Price, the Closing Sale Price,
the Bid Price or fair market value or the number of Warrant Shares (as the case
may be) within three (3) Business Days of such disputed determination or
arithmetic calculation being submitted to the Company or the
Holder (as the case may be), then the Company shall, within two (2) Business
Days submit via facsimile (a) the disputed determination of the Exercise
Price, the Closing Sale Price, the Bid Price or fair market value (as the case
may be) to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the
Warrant Shares to the Company’s independent, outside accountant.  The
Company shall cause at its expense the investment bank or the accountant (as the
case may be) to perform the determinations or calculations (as the case may be)
and notify the Company and the Holder of the results no later than ten (10)
Business Days from the time it receives such disputed determinations or
calculations (as the case may be).  Such investment bank’s or
accountant’s determination or calculation (as the case may be) shall be binding
upon all parties absent demonstrable error.

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    14 
          REMEDIES, CHARACTERIZATION,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant.  The Company covenants to the Holder that there shall be
no characterization concerning this instrument other than as expressly provided
herein.  Amounts set forth or provided for herein with respect to
payments, exercises and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof).  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.  The Company shall provide all information and documentation
to the Holder that is requested by the Holder to enable the Holder to confirm
the Company’s compliance with the terms and conditions of this Warrant
(including, without limitation, compliance with Section 2
hereof).  The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

     

    15       
    TRANSFER.  This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company.

     

    16      
     CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)           “Bid Price” means, for any
security as of the particular time of determination, the bid price for such
security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg as of
such time of determination, or if the foregoing does not apply, the bid price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg as of such time of determination, or,
if no bid price is reported for such security by Bloomberg as of such time of
determination, the average of the bid prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.) as of such time of determination.  If
the Bid Price cannot be calculated for a security as of the particular time of
determination on any of the foregoing bases, the Bid Price of such security as
of such time of determination shall be the fair market value as mutually
determined by the Company and the Holder.  If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in
Section 13.  All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    (b)           “Black Scholes Value” means the
value of the unexercised portion of this Warrant that remained on the date of
the Holder’s request pursuant to Section 4(c) calculated using the Black Scholes
Option Pricing Model obtained from the “OV” function on Bloomberg as of the
applicable date of determination and for purposes of such calculation utilizing
(i) an underlying price per share equal to (1) if the stockholders of the
Company do not receive consideration in the applicable Fundamental Transaction,
the highest Closing Sale Price of the Common Stock during the period beginning
on the Trading Day immediately preceding the announcement of the applicable
Fundamental Transaction and ending on the Trading Day immediately following the
consummation of the applicable Fundamental Transaction or (2) the sum of the
price per share being offered in cash in the applicable Fundamental Transaction
(if any) plus the value of the non-cash consideration being offered in the
applicable Fundamental Transaction (if any) (as applicable), (ii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of the date of consummation of the applicable
Fundamental Transaction and (iii) an expected volatility equal to the greater of
100% and the 100 day volatility obtained from the HVT function on Bloomberg as
of the Trading Day immediately following the public announcement of the
applicable Fundamental Transaction.

     

    (c)           “Bloomberg” means Bloomberg,
L.P.

     

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

     

    (e)           “Closing Sale Price” means, for
any security as of any date, the last closing trade price for such security on
the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price, then the last trade price of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
trade price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing does not apply, the last trade price of such security in the
over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
last trade price is reported for such security by Bloomberg, the average of the
ask prices of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Sale Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder.  If the Company and the Holder are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved in accordance with the procedures in
Section 13.  All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    (f)           “Common Stock” means
(i) the Company’s shares of common stock, $0.001 par value per share, and
(ii) any capital stock into which such common stock shall have been changed
or any share capital resulting from a reclassification of such common
stock.

     

    (g)           “Convertible Securities” means
any stock or other security (other than Options) that is at any time and under
any circumstances, directly or indirectly, convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire, any
shares of Common Stock.

     

    (h)           “Eligible Market” means The New
York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq
Capital Market or the Principal Market.

     

    (i)           “Expiration Date” means the
date that is the fifth (5th) anniversary of the Initial Exercise Date or, if
such date falls on a day other than a Business Day or on which trading does not
take place on the Principal Market (a “Holiday”), the next date that is not a
Holiday.

     

    (j)           “Fundamental Transaction” means
that (i) the Company or any of its Subsidiaries shall, directly or
indirectly, in one or more related transactions, (1) consolidate or merge
with or into (whether or not the Company or any of its Subsidiaries is the
surviving corporation) another Person, or (2) sell, lease, license, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company or any of its Subsidiaries to another
Person, or (3) allow another Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the outstanding shares
of Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (4) consummate a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock of the Company
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify the Common Stock, or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d)
of the 1934 Act and the rules and regulations promulgated thereunder) is or
shall become the “beneficial owner” (as defined in Rule 13d-3 under the
1934 Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Voting Stock of the
Company.

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    (k)           “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    (l)    
       “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

     

    (m)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a government or any
department or agency thereof.

     

    (n)           “Principal Market” means the
Nasdaq Global Market.

     

    (o)           “Successor Entity” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.

     

    (p)           “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the
Holder.

     

    (q)           “Voting Stock” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    
      (r)           “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.).  If VWAP cannot be
calculated for such security on such date on any of the foregoing bases, the
VWAP of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder.  If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in
Section 13.  All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

    

     

    [signature page
follows]

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.

     

    
      	 
      	
               

              BSD
      MEDICAL CORPORATION

               

               

               

            
	 
      	
              By:                                                                                      
      

            
	 
      	
              Name:

            
	 
      	
              Title:

            

    

     

     

    
 

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    EXHIBIT A

     

    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

     

    BSD
MEDICAL CORPORATION

     

    The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”) of BSD Medical Corporation, a
Delaware corporation (the “Company”), evidenced by Warrant to Purchase Common
Stock No. _______ (the “Warrant”).  Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

     

    1.           Form of Exercise
Price.  The Holder intends that payment of the Exercise Price
shall be made as:

    
      	 
      	 
      
	
              ____________

            	
              a
      “Cash Exercise” with respect to _________________ Warrant Shares;
      and/or

            
	 
      	 
      
	
              ____________

            	
              a
      “Cashless Exercise” with respect to _______________ Warrant
      Shares.

            
	 
      	 
      

    

    In the
event that the Holder has elected a Cashless Exercise with respect to some or
all of the Warrant Shares to be issued pursuant hereto, the Holder hereby
represents and warrants that (i) this Exercise Notice was executed by the
Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if
applicable, the Bid Price as of such time of execution of this Exercise Notice
was $________.

     

    2.           Payment of Exercise
Price.  In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

     

    3.           Delivery of Warrant
Shares.   The Company shall deliver to Holder, or its
designee or agent as specified below, __________ Warrant Shares in accordance
with the terms of the Warrant.  Delivery shall be made to Holder, or
for its benefit, to the following address:

    

      
        	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

      

    

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

    Date:  _______________
__, ______

     

    

    _______________________________________

    Name of
Registered Holder

     

     

    By:  
___________________________________                                                               

    Name:

    Title:

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

     

    The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _________, 20__, from the
Company and acknowledged and agreed to by _______________.

     

    
      	 
      	
              BSD
      MEDICAL CORPORATION

               

               

               

            
	 
      	
              By:  
      ______________________________________

            
	 
      	
              Name:

            
	 
      	
              Title:

            

    

    

     

     

    
      -19-bsdm8k20100503ex10-1.htm

    
      

      

    

    Exhibit
10.1

    
 

    SECURITIES
PURCHASE AGREEMENT

     

    This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of May
3, 2010, is by and among BSD Medical Corporation, a Delaware corporation with
offices located at 2188 West 2200 South, Salt Lake City, Utah 84119
(the “Company”),
and each of the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer”
and collectively, the “Buyers”).

    

    RECITALS

     

    A.           The
Company and each Buyer desire to enter into this transaction to purchase the
Common Shares (as defined below) set forth herein pursuant to a currently
effective shelf registration statement on Form S-3, which has at least 2,878,290
unallocated shares of common stock, $0.001 par value per share, of the Company
(the “Common Stock”)
registered thereunder (Registration Number 333-162080) (the “Registration Statement”),
which Registration Statement has been declared effective in accordance with the
Securities Act of 1933, as amended (the “1933 Act”), by the United
States Securities and Exchange Commission (the “SEC”).

     

    B.    
       Each Buyer wishes to purchase, and the
Company wishes to sell, upon the terms stated in this Agreement, (i) the
aggregate number of shares of Common Stock set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers (which aggregate amount for all Buyers
shall be 1,644,737 shares of Common Stock and shall collectively be referred to
herein as the “Common
Shares”) and (ii) a warrant to initially acquire up to that number of
shares of Common Stock set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers, in the form attached hereto as Exhibit
A (the “Warrants”) (as exercised,
collectively, the “Warrant
Shares”).

     

    C.    
       The Common Shares, the Warrants and
the Warrant Shares are collectively referred to herein as the “Securities.”

     

    AGREEMENT

     

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

     

    
      	
              1.

            	
              PURCHASE
      AND SALE OF COMMON SHARES AND
WARRANTS.

            

    

     

    
      (a)          
Common Shares and
Warrants. The
Company shall issue and sell to each Buyer, and each Buyer severally, but not
jointly, shall purchase from the Company on the Closing Date (as defined below),
the number of Common Shares, as is set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers, along with a Warrant to
initially acquire up to that number of Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers.

    

     

    
      (b)          
Closing. The
closing (the “Closing”)
of the purchase of the Common Shares and the Warrants by the Buyers shall occur
at the offices of Greenberg Traurig, LLP, 77 W. Wacker Drive, Suite 3100,
Chicago, Illinois 60601. The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York time, on the third (3rd)
Trading Day (as defined in the Warrants)
after the date hereof (or such earlier date as is mutually agreed to by the
Company and each Buyer). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain
closed.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)           Purchase
Price. The
aggregate purchase price for the Common Shares and the Warrants to be purchased
by each Buyer (the “Purchase
Price”) shall be the amount set forth opposite such Buyer’s name in
column (5) on the Schedule of Buyers.

     

    (d)           Form of Payment;
Deliveries. On the
Closing Date, (i) each Buyer shall pay its respective Purchase Price to the
Company for the Common Shares and the Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions, (less, in the case of
Cranshire (as defined below), the amounts withheld pursuant to Section 4(g)) and
(ii) the Company shall (A) cause OTC Stock Transfer, Inc. (together with
any subsequent transfer agent, the “Transfer Agent”) through the
Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, to credit such aggregate number of Common Shares
that such Buyer is purchasing as is set forth opposite such Buyer’s name in
column (3) of the Schedule of Buyers to such Buyer’s or its designee’s balance
account with DTC through its Deposit/Withdrawal at Custodian system, (B) deliver
to each Buyer a Warrant pursuant to which such Buyer shall have the right to
initially acquire up to the number of Warrant Shares as is set forth opposite
such Buyer’s name in column (4) of the Schedule of Buyers and (C) deliver to
such Buyer the other documents, instruments and certificates set forth in
Section 6.

     

    
      	
              2.

            	
              BUYER’S
      REPRESENTATIONS AND WARRANTIES.

            

    

     

    Each
Buyer, severally and not jointly, represents and warrants to the Company with
respect to only itself that:

     

    (a)           Organization;
Authority. Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to
carry out its obligations hereunder and thereunder.

     

    (b)           Validity;
Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and constitutes the legal, valid
and binding obligations of such Buyer enforceable against such Buyer in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

     

    (c)           No
Conflicts.  The
execution, delivery and performance by such Buyer of this Agreement and the
consummation by such Buyer of the transactions contemplated hereby will not (i)
result in a violation of the organizational documents of such Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which such Buyer is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

    
      
         

      

      
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    (d)           Certain Trading
Activities.  Such Buyer has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Buyer,
engaged in any transactions in the securities of the Company (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing as of the time that such Buyer was
first contacted by the Placement Agent (as defined below) regarding the specific
investment in the Company contemplated by this Agreement and ending immediately
prior to the execution of this Agreement by such Buyer. “Short Sales” means all “short
sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934
Act (as defined below) (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

     

    
      	
              3.

            	
              REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

            

    

     

    The
Company represents and warrants to each of the Buyers that:

     

    (a)       
    Organization and
Qualification. Each of
the Company and each of its Subsidiaries are entities duly organized and validly
existing and in good standing under the laws of the jurisdiction in which they
are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted and as
presently proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any Subsidiary, individually or taken
as a whole, (ii) the transactions contemplated hereby or in any of the other
Transaction Documents or (iii) the authority or ability of the Company to
perform any of its obligations under any of the Transaction Documents. The
Company has no Subsidiaries. “Subsidiaries” means any Person
in which the Company, directly or indirectly, (I) owns any of the outstanding
capital stock or holds any equity or similar interest of such Person or (II)
controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

    

    (b)           Authorization; Enforcement;
Validity. The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement and the other Transaction Documents and to
issue the Securities in accordance with the terms hereof and
thereof.  The execution and delivery of this Agreement and the other
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Common Shares, the issuance of the Warrants and the reservation
for issuance and issuance of the Warrant Shares issuable upon exercise of the
Warrants) have been duly authorized by the Company’s board of directors and
(other than the filing with the SEC of the prospectus supplement required by the
Registration Statement
pursuant to Rule 424(b) under the 1933 Act (the “Prospectus Supplement”)
supplementing the base prospectus forming part of the Registration Statement
(the “Prospectus”) and
any other filings as may be required by any state securities agencies) no
further filing, consent or authorization is required by the Company, its board
of directors or its stockholders or other governing body. This Agreement has
been, and the other Transaction Documents will be prior to the Closing, duly
executed and delivered by the Company, and each constitutes the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law. “Transaction Documents” means,
collectively, this Agreement, the Warrants, the Irrevocable Transfer Agent
Instructions (as defined below) and each of the other agreements and instruments
entered into or delivered by any of the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time.

    
      
         

      

      
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    (c)   
        Issuance of Securities;
Registration Statement. The
issuance of the Common Shares and the Warrants are duly authorized and, upon
issuance in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, taxes, liens, charges and other encumbrances with respect to the
issue thereof. As of the Closing, the Company shall have reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
upon exercise of the Warrants (without taking into account any limitations on
the exercise of the Warrants set forth therein). The issuance of the Warrant
Shares is duly authorized, and upon exercise in accordance with the Warrants,
the Warrant Shares, when issued, will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities has been registered under the 1933
Act, the Securities are being issued pursuant to the Registration Statement and
all of the Securities are freely transferable and freely tradable by each of the
Buyers without restriction. The Registration Statement is effective and
available for the issuance of the Securities thereunder and the Company has not
received any notice that the SEC has issued or intends to issue a stop-order
with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened in writing to do so.
The “Plan of Distribution” section under the Registration Statement permits the
issuance and sale of the Securities hereunder and as contemplated by the other
Transaction Documents. Upon receipt of the Securities, each of the Buyers will
have good and marketable title to the Securities. The Registration Statement and
any prospectus included therein, including the Prospectus and the Prospectus
Supplement, complied in all material respects with the requirements of the 1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder and all other applicable laws and regulations. At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at each deemed effective date thereof pursuant to Rule
430B(f)(2) of the 1933 Act, the Registration Statement and any amendments
thereto complied and will comply in all material respects with the requirements
of the 1933 Act and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
and the Prospectus and any amendments or supplements thereto (including, without
limitation the Prospectus Supplement), at the time the Prospectus or any
amendment or supplement thereto was issued and at the Closing Date, complied and
will comply in all material respects with the requirements of the 1933 Act and
did not and will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.  The Company meets all of the requirements for the use of
Form S-3 under the 1933 Act for the offering and sale of the Securities
contemplated by this Agreement and the other Transaction Documents, and the SEC
has not notified the Company of any objection to the use of the form of the
Registration Statement pursuant to Rule 401(g)(1) under the 1933 Act. The
Registration Statement meets the requirements set forth in Rule 415(a)(1)(x)
under the 1933 Act. At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the 1933 Act) relating to any
of the Securities, the Company was not and is not an “Ineligible Issuer” (as
defined in Rule 405 under the 1933 Act). The Company (i) has not distributed any
offering material in connection with the offering and sale of any of the
Securities and (ii) until no Buyer holds any of the Securities, shall not
distribute any offering material in connection with the offering and sale of any
of the Securities to, or by, any of the Buyers, in each case, other than the
Registration Statement, the Prospectus or the Prospectus Supplement. The Company
has made all filings required to be made with the Financial Industry Regulatory
Authority in connection with the offering and sale of the
Securities.

    
      
         

      

      
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    (d)           No
Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Common Shares, the
Warrants and Warrant Shares and the reservation for issuance of the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation (as
defined below) (including, without limitation, any certificates of designation
contained therein) or other organizational documents of the Company or any of
its Subsidiaries, any capital stock of the Company, or Bylaws (as defined
below), (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, federal
and state securities laws and regulations and the rules and regulations of the
Nasdaq Global Market (the “Principal Market”)) 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, in the case
of clause (ii) or (iii) above, to the extent such violations that could not
reasonably be expected to have a Material Adverse Effect.

     

    (e)        
   Consents.  The
Company is not required to obtain any consent from, authorization or order of,
or make any filing (other than the filing of a notification of listing of
additional shares with the Principal Market) or registration with (other than
the filing with the SEC of the Prospectus Supplement and any other filings as
may be required by any state securities agencies), any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case, in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required
to obtain at or prior to the Closing have been obtained or effected on or prior
to the Closing Date, and neither the Company nor any of its Subsidiaries are
aware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings
contemplated by the Transaction Documents. The Company is not in violation of
the requirements of the Principal Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future.

    
      
         

      

      
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    (f)     
      Acknowledgment Regarding
Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an “affiliate” (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule thereto)
(collectively, “Rule
144”)) of the Company or any of its Subsidiaries or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the “1934
Act”)). The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company or any of its Subsidiaries (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer or
any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities.  The Company
further represents to each Buyer that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.

     

    (g)           Placement Agent’s
Fees. The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for Persons engaged
by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. Other than Roth Capital Partners, LLC (the
“Placement Agent”),
neither the Company nor any of its Subsidiaries has engaged any placement agent
or other agent in connection with the sale of the Securities.

     

    (h)           No Integrated
Offering. None of
the Company, its Subsidiaries or any of their affiliates, nor any Person acting
on their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to require approval of stockholders
of the Company under any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated. Except for the transactions contemplated in the securities purchase
agreement, dated February 11, 2010, between the Company and the Buyers (the
“Prior Purchase
Agreement”), none of the Company, its Subsidiaries, their affiliates nor
any Person acting on their behalf will take any action or steps that would cause
the offering of any of the Securities to be integrated with other
offerings.

     

    (i)      
     Dilutive
Effect. The
Company understands and acknowledges that the number of Warrant Shares may
increase in certain circumstances. The Company further acknowledges that its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement
and the Warrants is absolute and unconditional, regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.

    
      
         

      

      
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    (j)            Application of Takeover
Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Articles
of Incorporation, Bylaws or other organizational documents or the laws of the
jurisdiction of its incorporation or otherwise which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of shares of Common Stock or a change in
control of the Company or any of its Subsidiaries.

     

    (k)    
       SEC Documents; Financial
Statements. During
the two (2) years prior to the date hereof, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company
has delivered to the Buyers or their respective representatives true, correct
and complete copies of each of the SEC Documents not available on the EDGAR
system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as in effect as of the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements therein not misleading, in the light of the circumstance
under which they are or were made.

    
      
         

      

      
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    (l)       
    Absence of Certain
Changes. Since
the date of the Company’s most recent audited financial statements contained in
a Form 10-K, except as disclosed in the SEC Documents
filed subsequent thereto, there has been no material adverse change and no
material adverse development in the business, assets, liabilities, properties,
operations (including results thereof), condition (financial or otherwise) or
prospects of the Company or any of its Subsidiaries. Since the date of the
Company’s most recent audited financial statements contained in a Form 10-K,
neither the Company nor any of its Subsidiaries has (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, outside of
the ordinary course of business or (iii) made any material capital expenditures,
individually or in the aggregate. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any law or
statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing will not be, Insolvent (as defined below). For purposes of this
Section 3(l), “Insolvent” means, (I) with
respect to the Company and its Subsidiaries, on a consolidated basis, (i) the
present fair saleable value of the Company’s and its Subsidiaries’ assets is
less than the amount required to pay the Company’s and its Subsidiaries’ total
Indebtedness (as defined below), (ii) the Company and its Subsidiaries are
unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company and its Subsidiaries intend to incur or believe that they will incur
debts that would be beyond their ability to pay as such debts mature; and (II)
with respect to the Company and each Subsidiary, individually, (i) the present
fair saleable value of the Company’s or such Subsidiary’s (as the case may be)
assets is less than the amount required to pay its respective total
Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable
to pay its respective debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company or such Subsidiary (as the case may be) intends to incur or believes
that it will incur debts that would be beyond its respective ability to pay as
such debts mature. Neither the Company nor any of its Subsidiaries has engaged
in any business or in any transaction, and is not about to engage in any
business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital.

     

    (m)           No Undisclosed Events,
Liabilities, Developments or Circumstances. No
event, liability, development or circumstance has occurred or exists, or is
reasonably expected to exist or occur with respect to the Company, any of its
Subsidiaries or their respective business, properties, liabilities, prospects,
operations (including results thereof) or condition (financial or otherwise)
that (i) would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced, (ii) could have a material adverse effect on
any Buyer’s investment hereunder or (iii) could have a Material Adverse
Effect.

    
      
         

      

      
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    (n)           Conduct of Business;
Regulatory Permits. Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Articles of Incorporation, any certificate of designation,
preferences or rights of any other outstanding series of preferred stock of the
Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws,
respectively. Neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that could reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2007, (i) the Common Stock has been listed or
designated for quotation on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or, except
as disclosed in the SEC Documents, the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and each
of its Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

     

    (o)           Foreign Corrupt
Practices.  Neither
the Company nor any of its Subsidiaries nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (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 unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

     

    (p)           Sarbanes-Oxley
Act. The
Company and each Subsidiary is in compliance with all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.

     

    (q)           Transactions With
Affiliates. Except
as disclosed in the SEC Documents, none of the officers, directors or employees
of the Company or any of its Subsidiaries is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer, director or
employee has a substantial interest or is an employee, officer, director,
trustee or partner.

    
      
         

      

      
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    (r)       
    Equity
Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of (i)
40,000,000 shares of Common Stock, of which 23,215,772 are issued and
outstanding and 3,394,641 shares are reserved for issuance pursuant to
securities (other than the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 10,000,000 shares of preferred
stock, of which none are issued and outstanding. 24,331 shares of
Common Stock are held in treasury.  All of such outstanding shares are
duly authorized and have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. 8,515,060 shares of the Company’s issued and
outstanding Common Stock on the date hereof are owned by Persons who are
“affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the
assumption that only officers, directors and holders of at least 10% of the
Company’s issued and outstanding Common Stock are “affiliates” without conceding
that any such Persons are “affiliates” for purposes of federal securities laws)
of the Company or any of its Subsidiaries. To the Company’s knowledge, except as
set forth in the SEC Documents, no Person owns 10% or more of the Company’s
issued and outstanding shares of Common Stock (calculated based on the
assumption that all Convertible Securities (as defined below), whether or not
presently exercisable or convertible, have been fully exercised or
converted (as the case may be) taking account of any limitations on
exercise or conversion (including “blockers”) contained therein without
conceding that such identified Person is a 10% stockholder for purposes of
federal securities laws). (i) None of the Company’s or any Subsidiary’s capital
stock is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company or any Subsidiary; (ii)
except pursuant to the Fourth Amended and Restated 1998 Director Stock Plan of
the Company and the Third Amended and Restated 1998 Stock Incentive Plan of the
Company that are each disclosed in the SEC Documents (collectively, the “Company Stock Plans”) and except for
warrants previously issued to the Buyers pursuant to the Prior Purchase
Agreement, there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any amounts filed in connection with the Company or any
of its Subsidiaries; (v) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to this Agreement and the
Prior Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement other than
the Company Stock Plans; and (ix) neither the Company nor any of its
Subsidiaries have any liabilities or obligations required to be disclosed in the
SEC Documents which are not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company’s or its Subsidiaries’ respective
businesses and which, individually or in the aggregate, do not or could not have
a Material Adverse Effect. The Company has furnished to the Buyers true, correct
and complete copies of the Company’s Certificate of Incorporation, as amended
and as in effect on the date hereof (the “Articles of Incorporation”), and the
Company’s
bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect
thereto.

    
      
         

      

      
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    (s)           Indebtedness and Other
Contracts. Neither
the Company nor any of its Subsidiaries (i) except as disclosed in the SEC
Documents, has any outstanding Indebtedness (as defined below), (ii) is a party
to any contract, agreement or instrument, the violation of which, or default
under which, by the other party(ies) to such contract, agreement or instrument
could reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of, or in default under, any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (t)           Absence of
Litigation. Except
as disclosed in the SEC Documents, there is no action, suit, proceeding, inquiry
or investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its
Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’
officers or directors which is outside of the ordinary course of business or
individually or in the aggregate material to the Company or any of its
Subsidiaries. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the SEC involving the Company,
any of its Subsidiaries or any current of former director or officer of the
Company or any of its Subsidiaries. The SEC has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company under the 1933 Act or the 1934 Act, including, without limitation,
the Registration Statement.

     

    
      
         

      

      
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    (u)           Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such Subsidiary has any reason to believe
that it will be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.

     

    (v)           Employee
Relations.  Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company believes that its and
its Subsidiaries’ relations with their respective employees are
good.  No executive officer (as defined in Rule 501(f) promulgated
under the 1933 Act) or other key employee of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary. No executive
officer or other key employee of the Company or any of its Subsidiaries is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other
key employee (as the case may be) does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

     

    (w)           Title. The
Company and its Subsidiaries have good and marketable title in fee simple to all
real property, and have good and marketable title to all personal property,
owned by them which is material to the business of the Company and its
Subsidiaries, in each case, free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or any of its
Subsidiaries.

    
      
         

      

      
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    (x)          
 Intellectual Property
Rights. The
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, original works, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted. None of the Company’s or its Subsidiaries’
Intellectual Property Rights have expired, terminated or been abandoned, or are
expected to expire, terminate or be abandoned, within three years from the date
of this Agreement, except where the expiration, termination or abandonment,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. The Company has no knowledge of any infringement
by the Company or any of its Subsidiaries of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company or any of its Subsidiaries, being threatened, against
the Company or any of its Subsidiaries regarding their Intellectual Property
Rights. The Company is not aware of any facts or circumstances which might give
rise to any of the foregoing infringements or claims, actions or proceedings.
The Company and each of its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual
Property Rights.

     

    (y)           Environmental
Laws. The
Company and its Subsidiaries (i) are in compliance with all Environmental Laws
(as defined below), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.  The term
“Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.

     

    (z)          
 Subsidiary
Rights. The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

     

    (aa)         Tax
Status. The
Company and each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company and its Subsidiaries know of no basis for any such
claim. The Company is not operated in such a manner as to qualify as a passive
foreign investment company, as defined in Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.

    
      
         

      

      
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    (bb)         Internal Accounting and
Disclosure Controls. The
Company and each of its Subsidiaries maintains internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is
effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, including that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that
are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. Neither the Company nor any of its Subsidiaries has received any
notice or correspondence from any accountant or other Person relating to any
potential material weakness or significant deficiency in any part of the
internal controls over financial reporting of the Company or any of its
Subsidiaries.

     

    (cc)      
   Off
Balance Sheet Arrangements. There
is no transaction, arrangement, or other relationship between the Company or any
of its Subsidiaries and an unconsolidated or other off balance sheet entity that
is required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

     

    (dd)          Investment Company
Status. The
Company is not, and upon consummation of the sale of the Securities will not be,
an “investment company,” an affiliate of an “investment company,” a company
controlled by an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company” as such terms
are defined in the Investment Company Act of  1940, as
amended.

     

    (ee)          Acknowledgement Regarding
Buyers’ Trading Activity. It is
understood and acknowledged by the Company that (i) following the public
disclosure of the transactions contemplated by the Transaction Documents, in
accordance with the terms thereof, none of the Buyers have been asked by the
Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the
Company or any of its Subsidiaries, to desist from effecting any transactions in
or with respect to (including, without limitation, purchasing or selling, long
and/or short) any securities of the Company, or “derivative” securities based on
securities issued by the Company or to
hold the Securities for any specified term; (ii) any Buyer, and counterparties
in “derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Stock which was
established prior to such Buyer’s knowledge of the transactions contemplated by
the Transaction Documents; and (iii) each Buyer shall not be deemed to have any
affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) one or
more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value and/or number of the Warrant
Shares deliverable with respect to the Securities are being determined and (b)
such hedging and/or trading activities, if any, can reduce the value of the
existing stockholders’ equity interest in the Company both at and after the time
the hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement or any other Transaction Document or any
of the documents executed in connection herewith or
therewith.

    
      
         

      

      
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    (ff)           Manipulation of
Price. Neither
the Company nor any of its Subsidiaries has, and, to the knowledge of the
Company, no Person acting on their behalf has, directly or indirectly, (i) taken
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company or any of its Subsidiaries to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities (other than the Placement Agent), or (iii) paid or agreed to pay to
any Person any compensation for soliciting another to purchase any other
securities of the Company or any of its Subsidiaries.

     

    (gg)         U.S. Real Property Holding
Corporation. Neither
the Company nor any of its Subsidiaries is, or has ever been, and so long as any
of the Securities are held by any of the Buyers, shall become, a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company and each Subsidiary shall so
certify upon any Buyer’s request.

     

    (hh)         Registration
Eligibility. The Company is eligible to register the issuance and sale of
the Securities to the Buyers using Form S-3 promulgated under the 1933
Act.

     

    (ii)           Transfer Taxes. On
the Closing Date, all stock transfer or other taxes (other than income or
similar taxes) which are required to be paid in connection with the issuance and
sale of the Securities to be sold to each Buyer hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with.

     

    (jj)           Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by
the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates
exercises a controlling influence over the management or policies of a bank or
any entity that is subject to the BHCA and to regulation by the Federal
Reserve.

    
      
         

      

      
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    (kk)   
      Registration
Rights.  No holder of securities of the Company has rights to
the registration of any securities of the Company because of the filing of the
Registration Statement or the issuance of the Securities hereunder that could
expose the Company to material liability or any Buyer to any liability or that
could impair the Company’s ability to consummate the issuance and sale of the
Securities in the manner, and at the times, contemplated hereby, which rights
have not been waived by the holder thereof as of the date hereof.

     

    (ll)       
    Public Utility Holding
Act.  None of the Company nor any of its Subsidiaries is a
“holding company,” or an “affiliate” of a “holding company,” as such terms are
defined in the Public Utility Holding Act of 2005.

     

    (mm)        Federal Power
Act.  None of the Company nor any of its Subsidiaries is
subject to regulation as a “public utility” under the Federal Power Act, as
amended.

     

    (nn)         FDA. As to each
product subject to the jurisdiction of the U.S. Food and Drug Administration
(the “FDA”) (whether
under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder or otherwise) that is manufactured, packaged, labeled, tested,
distributed, sold, and/or marketed by the Company or any of its Subsidiaries
(each such product is referred to herein as a “Product”), such Product is
being manufactured, packaged, labeled, tested, distributed, sold and/or marketed
by the Company or such Subsidiary (as the case may be) in compliance with all
applicable requirements under all applicable laws, rules and regulations
(including, without limitation, laws, rules and regulations relating to
registration, investigational use, pre-market clearance, licensure, or
application approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling, advertising, record
keeping and filing of reports), except where the failure to be in compliance
with any applicable laws, rules and regulations would not have a Material
Adverse Effect.  There is no pending, completed or, to the Company’s
knowledge, threatened, action (including, without limitation, any lawsuit,
arbitration, or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its Subsidiaries, and
none of the Company or any of its Subsidiaries has received any notice, warning
letter or other communication from the FDA or any other governmental entity,
including, without limitation, a notice, warning letter or other communication
that (i) contests the pre-market clearance, licensure, registration, or approval
of, the uses of, the distribution of, the manufacturing or packaging of, the
testing of, the sale of, or the labeling and promotion of any Product, (ii)
withdraws its approval of, requests the recall, suspension, or seizure of, or
withdraws or orders the withdrawal of advertising or sales promotional materials
relating to, any Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries. The properties,
business and operations of the Company subject to the jurisdiction of the FDA
have been and are being conducted in all material respects in accordance with
all applicable laws, rules and regulations of the FDA. Neither the Company nor
any of its Subsidiaries has been informed by the FDA that the FDA will prohibit
the marketing, sale, license or use in the United States of any product proposed
to be developed, produced
or marketed by the Company or any of its Subsidiaries, except where any such
prohibitions would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

    
      
         

      

      
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    (oo)          Disclosure.  The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf of
the Company or any of its Subsidiaries is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each material press
release issued by the Company or any of its Subsidiaries during the twelve (12)
months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.  No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, liabilities, prospects, operations (including results
thereof) or conditions (financial or otherwise), which, under applicable law,
rule or regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

     

    
      	
              4.

            	
              COVENANTS.

            

    

     

    (a)           Maintenance of Registration
Statement  For
so long as any of the Warrants remain outstanding, the Company shall use its
reasonable best efforts to maintain the effectiveness of the Registration
Statement for the issuance thereunder of the Warrant Shares, provided that, if
at any time while the Warrants are outstanding the Company shall be ineligible
to utilize Form S-3 (or any successor form) for the purpose of issuance of the
Warrant Shares, the Company shall promptly amend the Registration Statement on
such other form as may be necessary to maintain the effectiveness of the
Registration Statement for this purpose. If at any time following the date
hereof the Registration Statement is not effective or is not otherwise available
for the issuance of the Securities or any prospectus contained therein is not
available for use, the Company shall immediately notify the holders of the
Securities in writing that the Registration Statement is not then effective or a
prospectus contained therein is not available for use and thereafter shall
promptly notify such holders when the Registration Statement is effective again
and available for the issuance of the Securities or such prospectus is again
available for use.

     

    (b)           Prospectus Supplement and
Blue Sky. Immediately prior to execution of this Agreement, the Company
shall have delivered, and as soon as practicable after execution of this
Agreement the Company shall file, the Prospectus Supplement with respect to the
Securities as required
under, and in conformity with, the 1933 Act, including Rule 424(b) thereunder.
If required, the Company, on or before the Closing Date, shall take such action
as the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to, qualify the Securities for sale to the Buyers at the
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
Buyers on or prior to the Closing Date. Without limiting any other obligation of
the Company under this Agreement, the Company shall timely make all filings and
reports relating to the offer and sale of the Securities required under all
applicable securities laws (including, without limitation, all applicable
federal securities laws and all applicable “Blue Sky” laws), and the Company
shall comply with all applicable federal, state and local laws, statutes, rules,
regulations and the like relating to the offering and sale of the Securities to
the Buyers.

    
      
         

      

      
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    (c)           Reporting
Status. Until
the date on which no Warrants are outstanding (the “Reporting Period”), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would no longer require or otherwise permit such
termination.

     

    (d)           Use of
Proceeds. The
Company shall use the net proceeds from the sale of the Securities hereunder
solely for general working capital purposes, and none of such proceeds shall be
used, directly or indirectly, for: (i) the satisfaction of any debt of the
Company or any of its Subsidiaries (other than payment of trade payables
incurred after the date hereof in the ordinary course of the Company’s business
and consistent with prior practices), (ii) the redemption of any securities of
the Company or (iii) the settlement of any outstanding litigation.

     

    (e)           Financial
Information. The
Company agrees to send the following to each Buyer during the Reporting Period
(i) unless the following are filed with the SEC through EDGAR and are available
to the public through the EDGAR system, within one (1) Business Day after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance
sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries
and (iii) copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.

     

    (f)     
      Listing. The
Company shall promptly secure the listing or designation for quotation (as the
case may be) of all of the Common Shares and Warrant Shares upon each national
securities exchange and automated quotation system, if any, upon which the
Common Stock is then listed or designated for quotation (as the case may be)
(subject to official notice of issuance) (but in no event later than the Closing
Date) and shall maintain such listing or designation for quotation (as the case
may be) of all the shares of Common Stock from time to time issuable under the
terms of the Transaction Documents on such national securities exchange or
automated quotation system. The Company shall maintain the Common Stock’s
listing or designation for quotation (as the case may be) on the Principal
Market, The New York Stock Exchange, the NYSE Amex, the Nasdaq Capital Market or
the Nasdaq Global Select Market (each, an
“Eligible Market”).
Neither the Company nor any of its Subsidiaries shall take any action which
could be reasonably expected to result in the delisting or suspension of the
Common Stock on an Eligible Market. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section
4(f).

    
      
         

      

      
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    (g)           Fees.  The
Company shall reimburse Cranshire Capital, L.P. (“Cranshire”) or its designee(s)
for all costs and expenses incurred by it or its affiliates in connection with
the transactions contemplated by the Transaction Documents (including, without
limitation, all legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence and regulatory filings in connection
therewith) in a non-accountable amount equal to $5,000, which amount shall be
withheld by Cranshire from its Purchase Price at the Closing or paid by the
Company upon termination of this Agreement on demand by Cranshire so long as
such termination did not occur as a result of a material breach by Cranshire of
any of its obligations hereunder (as the case may be). The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby (including,
without limitation, any fees payable to the Placement Agent, who is the
Company’s sole placement agent in connection with the transactions contemplated
by this Agreement). The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys’ fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment. Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to the Buyers.

     

    (h)           Pledge of
Securities.
Notwithstanding anything to the contrary contained in this Agreement, the
Company acknowledges and agrees that the Securities may be pledged by a Buyer in
connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and no Buyer effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document. The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Securities
may reasonably request in connection with a pledge of the Securities to such
pledgee by a Buyer.

     

    (i)           Disclosure of Transactions
and Other Material Information. The
Company shall, on or before 9:30 a.m. (but in no event prior to 9:15 a.m.),
New York time, on the date of this Agreement, issue a press release (the “Press Release”) reasonably
acceptable to the Buyers disclosing all the material terms of the transactions
contemplated by the Transaction Documents. On or before 9:30 a.m. (but in
no event prior to 9:15 a.m.), New York time, on the date of this Agreement, the
Company shall file a Current Report on Form 8-K describing all the material
terms of the transactions contemplated by the Transaction Documents in the form
required by the 1934 Act and attaching all the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement) and the form of Warrants) (including all attachments, the “8-K Filing”). From and after
the issuance of the Press Release, the Company shall have disclosed all
material, non-public information (if any) delivered to any of the Buyers by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents.
The Company shall not, and the Company shall cause each of its Subsidiaries and
each of its and their respective officers, directors, employees and agents, not
to, provide any Buyer with any material, non-public information regarding the
Company or any of its Subsidiaries from and after the issuance of the Press
Release without the express prior written consent of such Buyer. In the event of
a breach of any of the foregoing covenants or any of the covenants contained in
Section 4(n) by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents (as determined in the
reasonable good faith judgment of such Buyer), in addition to any other remedy
provided herein or in the Transaction Documents, such Buyer shall have the right
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public information without the
prior approval by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents, for any such
disclosure. Subject to the foregoing, neither the Company, its Subsidiaries nor
any Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, the Company
shall be entitled, without the prior approval of any Buyer, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) each Buyer shall be consulted by the Company in connection with
any such press release or other public disclosure prior to its release). Without
the prior written consent of the applicable Buyer, the Company shall not (and
shall cause each of its Subsidiaries and affiliates to not) disclose the name of
such Buyer in any filing (other than in the Transaction Documents filed as
exhibits to the 8-K Filing), announcement, release or
otherwise.

    
      
         

      

      
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    (j)           Additional Issuance of
Securities. The
Company agrees that for the period commencing on the date hereof and ending on
the date immediately following the thirty (30) Trading Day anniversary of the
Closing Date (provided that such period shall be extended by the number of days
during such period and any extension thereof contemplated by this proviso on
which the Registration Statement is not effective or any prospectus contained
therein is not available for use) (the “Restricted Period”), neither the Company
nor any of its Subsidiaries shall directly or indirectly issue, offer, sell,
grant any option or right to purchase, or otherwise dispose of (or announce any
issuance, offer, sale, grant of any option or right to purchase or other
disposition of) any equity security or any equity-linked or related security
(including, without limitation, any “equity security” (as that term is defined
under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as
defined below), any debt, any preferred stock or any purchase rights) (any such
issuance, offer, sale, grant, disposition or announcement (whether occurring
during the Restricted Period or at any time thereafter) is referred to as a
“Subsequent Placement”).
Notwithstanding the foregoing, the immediately preceding sentence in this
Section 4(j) shall not apply (i) in respect of the issuance of (A) shares of
Common Stock or standard options to purchase Common Stock to directors, officers
or employees of the Company in their capacity as such pursuant to an Approved
Share Plan (as defined below), provided that (1) all such issuances (taking into
account the shares of Common Stock issuable upon exercise of such options) after
the date hereof pursuant to this clause (A) do not, in the aggregate, exceed
more than 5% of the Common Stock issued and outstanding immediately prior to the
date hereof and (2) the exercise price of any such options is not lowered, none
of such options are amended to increase the number of shares issuable thereunder
and none of the terms or conditions of any such options are otherwise materially
changed in any manner that adversely affects any of the Buyers;
(B) shares of Common Stock issued upon the conversion or exercise of Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) issued prior to
the date hereof, provided that the conversion price of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) is not lowered,
none of such Convertible Securities (other than standard options to purchase
Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (A) above) are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) are otherwise
materially changed in any manner that adversely affects any of the Buyers; (C)
the Common Shares; and (D) the Warrants; and (E) the Warrant Shares (each of the
foregoing in clauses (A) through (E), collectively the “Excluded Securities”) and (ii)
during any time period (but only during the time period) in which (1) during
Regular Trading Hours (as defined below) on a Trading Day, the Bid Price (as
defined in the Warrants) of the Common Stock is greater than or equal to the
Trigger Price or (2) at all times other than during Regular Trading Hours on a
Trading Day, the most recent Closing Sale Price (as defined in the Warrants) of
the Common Stock is greater than or equal to the Trigger Price (as applicable).
“Approved Share Plan”
means any employee benefit plan which has been approved by the board of
directors of the Company prior to or subsequent to the date hereof pursuant to
which shares of Common Stock and standard options to purchase Common Stock may
be issued to any employee, officer or director for services provided to the
Company in their capacity as such. “Convertible Securities” means
any capital stock or other security of the Company or any of its Subsidiaries
that is at any time and under any circumstances directly or indirectly
convertible into, exercisable or exchangeable for, or which otherwise entitles
the holder thereof to acquire, any capital stock or other security of the
Company (including, without limitation, Common Stock) or any of its
Subsidiaries. “Trigger
Price” means $2.50 per share (as adjusted for stock splits, stock
combinations and other similar transactions occurring after the date hereof).
“Regular Trading Hours”
means “regular trading hours” (as that term is defined in Rule 600(b)(64) of
Regulation NMS promulgated under the federal securities laws).

    
      
         

      

      
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    (k)           Reservation of
Shares. So long
as any of the Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, the maximum number of shares of Common Stock issuable upon exercise of
all the Warrants (without regard to any limitations on the exercise of the
Warrants set forth therein).

     

    (l) 
          Conduct of
Business.  The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.

     

    (m)           Variable Rate
Transaction. Until none of the Warrants are outstanding, the Company and
each Subsidiary shall be prohibited from effecting or entering into an agreement
to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company or any Subsidiary (i) issues or sells
any Convertible Securities either (A) at a conversion, exercise or exchange rate
or other price that is based upon and/or varies with the trading prices of, or
quotations for, the shares of Common Stock at any time after the initial
issuance of such Convertible Securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such Convertible Securities or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock, other than pursuant to a
customary “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit) whereby the
Company or any Subsidiary may sell securities at a future determined price
(other than standard and customary “preemptive” or “participation” rights). Each
Buyer shall be entitled to obtain injunctive relief against the Company and its
Subsidiaries to preclude any such issuance, which remedy shall be in addition to
any right to collect damages.

     

    
      
        
        

      

      
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    (n)           Participation Right.
From the date hereof until the twelve (12) month anniversary of the Closing
Date, neither the Company nor any of its Subsidiaries shall, directly or
indirectly, effect any Subsequent Placement unless the Company shall have first
complied with this Section 4(n).  The Company acknowledges and agrees
that the right set forth in this Section 4(n) is a right granted by the Company,
separately, to each Buyer. From the date hereof, Section 4(n) of the Prior
Purchase Agreement will no longer be in effect and this Section 4(n) supersedes
Section 4(n) of the Prior Purchase Agreement.

     

    (i)           The
Company shall deliver to such Buyer via facsimile or via e-mail to the e-mail
address provided in writing by such Buyer to the Company an irrevocable 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 (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons (if known)
to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyer in
accordance with the terms of the Offer 100% of the Offered Securities, provided
that the number of Offered Securities which such Buyer shall have the right to
subscribe for under this Section 4(n) shall be (a) based on such Buyer’s pro
rata portion of the aggregate number of Common Shares purchased hereunder by all
Buyers (the “Basic
Amount”), and (b) with respect to each Buyer that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase
or acquire should the other Buyers subscribe for less than their Basic Amounts
(the “Undersubscription
Amount”).

    

    
      
        
        

      

      
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    (ii)           To
accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of 2 hours and 30 minutes following (1) receipt
via facsimile or via e-mail in accordance with Section 4(n)(i) by such Buyer of
the applicable Offer Notice and (2) oral confirmation via telephone by the
Company from such Buyer of the receipt by such Buyer via facsimile or via e-mail
(as applicable) of such Offer Notice (and (I) in the case of Cranshire, oral
confirmation via telephone by the Company from Mitchell P. Kopin of the receipt
by Cranshire via facsimile or via e-mail (as applicable) of such Offer Notice
and (II) in the case of Kingsbrook Opportunities Master Fund LP (“Kingsbrook”), oral
confirmation via telephone by the Company from Ari J. Storch of the receipt by
Kingsbrook via facsimile or via e-mail (as applicable) of such Offer Notice)
(the “Offer Period”),
setting forth the portion of such Buyer’s Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of
Acceptance”). If the Basic Amounts subscribed for by all Buyers are less
than the total of all of the Basic Amounts, then such Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), such Buyer who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts,
subject to rounding by the Company to the extent it deems reasonably necessary.
Notwithstanding the foregoing, if the Company desires to modify or amend the
terms and conditions of the Offer prior to the expiration of the Offer Period,
the Company may deliver to each Buyer a new Offer Notice and the Offer Period
shall expire immediately following the end of 2 hours and 30 minutes following
(1) receipt via facsimile or via e-mail in accordance with Section 4(n)(i) by
such Buyer of such new Offer Notice and (2) oral confirmation via telephone by
the Company from such Buyer of the receipt by such Buyer via facsimile or via
e-mail (as applicable) of such new Offer Notice (and (I) in the case of
Cranshire, oral confirmation via telephone by the Company from Mitchell P. Kopin
of the receipt by Cranshire via facsimile or via e-mail (as applicable) of such
new Offer Notice and (II) in the case of Kingsbrook, oral confirmation via
telephone by the Company from Ari J. Storch of the receipt by Kingsbrook via
facsimile or via e-mail (as applicable) of such new Offer Notice). If any Offer
Notice is delivered in accordance with Section 4(n)(i) during the Restricted
Period at any time during Regular Trading Hours on a Trading Day and either the
(x) Bid Price of the Common Stock at the time of such delivery was not greater
than or equal to the Trigger Price or (y) Closing Sale Price of the Common Stock
on the Trading Day of such delivery is not greater than or equal to the Trigger
Price, then (A) the Subsequent Placement contemplated by such Offer Notice shall
be deemed to have been immediately abandoned, (B) such Buyer shall not be deemed
to be in possession of any material, non-public information with respect to the
Company or any of its Subsidiaries and (C) should the Company decide to pursue
such Subsequent Placement with respect to the Offered Securities, the Company
shall provide such Buyer with another Offer Notice in accordance with, and
subject to, the terms of this Section 4(n) and such Buyer will again have the
right of participation set forth in this Section 4(n). If any Offer Notice is
delivered in accordance with Section 4(n)(i) during the Restricted Period at any
time other than during Regular Trading Hours on a Trading Day and the most
recent Closing Sale Price of the Common Stock was not greater than or equal to
the Trigger Price, then (X) the Subsequent Placement contemplated by such Offer
Notice shall be deemed to have been immediately abandoned, (Y) such Buyer shall
not be deemed to be in possession of any material, non-public information with
respect to the Company or any of its Subsidiaries and (Z) should the Company
decide to pursue such Subsequent Placement with respect to the Offered
Securities, the Company shall provide such Buyer with another Offer Notice in
accordance with, and subject to, the terms of this Section 4(n) and such Buyer
will again have the right of participation set forth in this Section
4(n).

    
      
        
        

      

      
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    (iii)          The
Company shall have three (3) days from the expiration of the Offer Period above
(i) 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 a Buyer (the “Refused Securities”) pursuant
to a definitive agreement(s) (the “Subsequent Placement
Agreement”), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.

    

    (iv)          In
the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(n)(iii) above), then such Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified in
its Notice of Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that such Buyer elected to purchase pursuant to
Section 4(n)(ii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section 4(n) prior to such reduction) and
(ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount
of Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 4(n)(i) above.

    

    (v)           Upon
the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, such Buyer shall acquire from the Company, and the Company
shall issue to such Buyer, the number or amount of Offered Securities specified
in its Notice of Acceptance. The purchase by such Buyer of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and such Buyer of a separate purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to such Buyer
and its counsel.

    

    (vi)         Any
Offered Securities not acquired by a Buyer or other Persons in accordance with
this Section 4(n) may not be issued, sold or exchanged until they are again
offered to such  Buyer under the procedures specified in this
Agreement.

    

    (vii)         The
Company and each Buyer agree that if any Buyer elects to participate in the
Offer, neither the Subsequent Placement Agreement with respect to such Offer nor
any other transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provision whereby such Buyer shall
be required to agree to any restrictions on trading as to any securities of the
Company or be required to consent to any amendment to or termination of, or
grant any waiver, release or the like under or in connection with, any agreement
previously entered into with the Company or any instrument received from the
Company.

    

    
      
        
        

      

      
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    (viii)   
    Notwithstanding anything to the contrary in this Section
4(n) and unless otherwise agreed to by such Buyer, the Company shall either
confirm in writing to such Buyer that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention
to issue the Offered Securities, in either case in such a manner such that such
Buyer will not be in possession of any material, non-public information, by the
third (3rd) day
following delivery of the Offer Notice. If by such third (3rd)
day, no public disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of such
transaction has been received by such Buyer, such transaction shall be deemed to
have been abandoned and such Buyer shall not be deemed to be in possession of
any material, non-public information with respect to the Company or any of its
Subsidiaries. Should the Company decide to pursue such transaction with respect
to the Offered Securities, the Company shall provide such Buyer with another
Offer Notice in accordance with, and subject to, the terms of this Section 4(n)
and such Buyer will again have the right of participation set forth in this
Section 4(n). The Company shall not be permitted to deliver more than two Offer
Notices to such Buyer in any sixty (60) day period, except as expressly
contemplated by the last sentence of Section 4(n)(ii).

     

    (ix)         The
restrictions contained in this Section 4(n) shall not apply in connection with
the issuance of (i) any Excluded Securities and (ii) shares of Common Stock or
standard options to purchase Common Stock to directors, officers or employees of
the Company in their capacity as such pursuant to an Approved Share Plan. The
Company shall not circumvent the provisions of this Section 4(n) by providing
terms or conditions to one Buyer that are not provided to all.

     

    (o)           Passive Foreign Investment
Company. The Company shall conduct its business in such a manner as will
ensure that the Company will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.

     

    
      	
              5.

            	
              REGISTER;
      TRANSFER AGENT INSTRUCTIONS;
LEGEND.

            

    

     

    (a)           Register. The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Common Shares and the Warrants in which the
Company shall record the name and address of the Person in whose name the Common
Shares and the
Warrants have been issued (including the name and address of each transferee),
the number of Common Shares held by such Person and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.

     

    
      
        
        

      

      
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    (b)           Transfer Agent
Instructions. The
Company shall issue irrevocable instructions to the Transfer Agent in the form
previously provided to the Company (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares to the applicable
balance accounts at DTC, registered in the name of each Buyer or its respective
nominee(s), for the Common Shares and the Warrant Shares in such amounts as
specified from time to time by each Buyer to the Company upon delivery of the
Common Shares or the exercise of the Warrants (as the case may be). The Company
represents and warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5(b) will be given by the Company
to the Transfer Agent with respect to the Securities, and that the Securities
shall otherwise be freely transferable on the books and records of the Company.
If a Buyer effects a sale, assignment or transfer of the Securities, the Company
shall permit the transfer and shall promptly instruct the Transfer Agent to
issue one or more certificates or credit shares to the applicable balance
accounts at DTC in such name and in such denominations as specified by such
Buyer to effect such sale, transfer or assignment. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to each
Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that each Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being
required.

     

    (c)           Legends.
Certificates and any other instruments evidencing the Securities shall not bear
any restrictive or other legend.

     

    
      	
              6.

            	
              ADDITIONAL
      CLOSING DELIVERIES OF THE COMPANY.

            

    

     

    (a)           Deliveries. The
Company shall deliver to each Buyer on the Closing Date each of the
following:

     

    (i)           The
opinion of Dorsey & Whitney LLP, the
Company’s counsel, dated as of the Closing Date, in the form previously provided
to the Company.

     

    (ii)           A
copy of the Irrevocable Transfer Agent Instructions, in the form previously
provided to the Company, that have been delivered to and acknowledged in writing
by the Transfer Agent.

     

    (iii)          A
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in each such entity’s jurisdiction of formation issued by
the Secretary of State (or comparable office) of such jurisdiction of formation
as of a date within ten (10) days of the Closing Date.

     

    (iv)          A
certificate evidencing the Company’s qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within ten (10) days of the Closing Date.

     

    (v)          A
certified copy of the Articles of Incorporation within ten (10) days of the
Closing Date.

     

    (vi)         A
certificate, in the form previously provided to the Company, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s board of
directors in a form reasonably acceptable to such Buyer, (ii) the Articles of
Incorporation and (iii) the Bylaws, each as in effect at the
Closing.

     

    
      
        
        

      

      
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    (vii)        A
letter from the Transfer Agent certifying the number of shares of Common Stock
outstanding on the Closing Date immediately prior to the Closing.

     

    (viii)       Such
other documents, instruments or certificates relating to the transactions
contemplated by this Agreement as such Buyer or its counsel may reasonably
request.

     

    
      	
              7.

            	
              TERMINATION.

            

    

     

    In the
event that the Closing shall not have occurred with respect to a Buyer within
ten (10) days of the date hereof, then such Buyer shall have the right to
terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided, however, (i) the right to terminate this
Agreement under this Section 7 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been
consummated by such date is the result of such Buyer’s breach of this Agreement
and (ii) the abandonment of the sale and purchase of the Common Shares and the
Warrants shall be applicable only to such Buyer providing such written notice,
provided further that no such termination shall affect any obligation of the
Company under this Agreement to reimburse such Buyer for the expenses described
in Section 4(g) above. Nothing contained in this Section 7 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents.

    

    
      	
              8.

            	
              MISCELLANEOUS.

            

    

     

    (a)           Governing Law; Jurisdiction;
Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (b)           Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page 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 signature page were an original
thereof.

     

    (c)           Headings;
Gender. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,” “includes,” “include” and words of like import shall be construed
broadly as if followed by the words “without limitation.”  The terms
“herein,” “hereunder,” “hereof” and words of like import refer to this entire
Agreement instead of just the provision in which they are found.

     

    (d)           Severability. If any
provision of this Agreement is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s).

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (e)           Entire Agreement;
Amendments. This
Agreement, the other Transaction Documents and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf solely with respect
to the matters contained herein and therein, and this Agreement, the other
Transaction Documents, the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein contain the entire
understanding of the parties solely with respect to the matters covered herein
and therein; provided, however, nothing contained in this Agreement or any other
Transaction Document shall (or shall be deemed to), except as expressly set
forth in the third sentence of Section 4(n), (i) have any effect on any
agreements any Buyer has entered into with the Company or any of its
Subsidiaries prior to the date hereof with respect to any prior investment made
by such Buyer in the Company or (ii) waive, alter, modify or amend in any
respect any obligations of the Company or any of its Subsidiaries, or any rights
of or benefits to any Buyer or any other Person, in any agreement entered into
prior to the date hereof between or among the Company and/or any of its
Subsidiaries and any Buyer and all such agreements shall continue in full force
and effect. Except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and each of
the Buyers. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, all holders
of Common Shares or all holders of the Warrants (as the case may be). The
Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company, any Subsidiary or otherwise.
As a material inducement for each Buyer to enter into this Agreement, the
Company expressly acknowledges and agrees that (i) no due diligence
investigation conducted by a Buyer or its advisors, if any, or its
representatives shall affect such Buyer’s right to rely on, or modify or qualify
any of, the Company’s representations and warranties contained in this Agreement
or any other Transaction Document, (ii) nothing contained in the Registration
Statement, the Prospectus or the Prospectus Supplement shall affect such Buyer’s
right to rely on, or modify or qualify any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document and
(iii) unless a provision of this Agreement or any other Transaction Document is
expressly preceded by “except as disclosed in the SEC Documents,” nothing
contained in any of the SEC Documents shall affect such Buyer’s right to rely
on, or modify or qualify any of, the Company’s representations and warranties
contained in this Agreement or any other Transaction Document.

     

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

     

    If to the
Company:

     

    BSD
Medical Corporation

    2188 West
2200 South

    Salt Lake
City, Utah 83119

    Telephone: 
(801) 972-5555

    Facsimile: 
(801) 924-7863

    Attention: 
Harold Wolcott

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    \

    With a
copy (for informational purposes only) to:

     

    Dorsey
& Whitney LLP

    136 South
Main Street, Suite 1000

    Salt Lake
City, Utah 84101

    Telephone: 
(801) 933-7360

    Facsimile: 
(801) 933-7373

    Attention: 
Nolan S. Taylor

                        David
F.  Marx

    

    If to the
Transfer Agent:

     

    OTC Stock
Transfer, Inc.

    231 East
2100 South #3

    Salt Lake
City, Utah 84115

    Telephone:
(801) 485-5555

    Facsimile:
(801) 486-0562 

    Attention:  Stephanie
Campbell

    

    If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers,

     

    with a
copy (for informational purposes only) to:

     

    Greenberg
Traurig, LLP

    77 W.
Wacker Drive, Suite 3100

    Chicago,
Illinois 60601

    Telephone:  (312)
456-8400

    Facsimile:  (312)
456-8435

    Attention:  Peter
H. Lieberman, Esq.

                        Todd
A. Mazur, Esq.

     

    or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change, provided
that Greenberg Traurig, LLP shall only be provided copies of notices sent to
Cranshire. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

     

    (g)           Successors and
Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including, as contemplated below, any
assignee of any of the Securities. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of each
of the Buyers, including, without limitation, by way of a Fundamental
Transaction (as defined in the Warrants) (unless the Company is in compliance
with the applicable provisions governing Fundamental Transactions set forth in
the Warrants). A Buyer may assign some or all of its rights hereunder in
connection with any transfer of any of its Securities without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (h)           No Third Party
Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 8(k).

     

    (i)      
     Survival. The
representations, warranties, agreements and covenants shall survive the Closing.
Each Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.

     

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

     

    (k)           Indemnification

    .

    (i)           In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in any of the Transaction Documents, (b) any breach of any covenant,
agreement or obligation of the Company contained in any of the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure properly made by such Buyer pursuant to Section 4(i), or
(iv) the status of such Buyer or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the Transaction Documents.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    (ii)           Promptly
after receipt by an Indemnitee under this Section 8(k) of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against the Company under this Section
8(k), deliver to the Company a written notice of the commencement thereof, and
the Company shall have the right to participate in, and, to the extent the
Company so desires, to assume control of the defense thereof with counsel
mutually satisfactory to the Company and the Indemnitee; provided, however, that
an Indemnitee shall have the right to retain its own counsel with the fees and
expenses of such counsel to be paid by the Company if: (i) the Company has
agreed in writing to pay such fees and expenses; (ii) the Company shall have
failed promptly to assume the defense of such Indemnified Liability and to
employ counsel reasonably satisfactory to such Indemnitee in any such
Indemnified Liability; or (iii) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnitee and the Company (in which case, if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided
further, that in the case of clause (iii) above the Company shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for such Indemnitee. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the Company
all information reasonably available to the Indemnitee which relates to such
action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 8(k), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.

     

    (iii)         The
indemnification required by this Section 8(k) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Liabilities are incurred.

     

    (iv)         The
indemnity agreement contained herein shall be in addition to (A) any cause of
action or similar right of the Indemnitee against the Company or others, and (B)
any liabilities the Company may be subject to pursuant to the law.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    (l)      
      No Strict
Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.

     

    (m)           Remedies.  Each
Buyer and each holder of any Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.

     

    (n)           Withdrawal
Right.
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Transaction Documents, whenever any Buyer exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.

     

    (o)           Payment Set Aside;
Currency. To the
extent that the Company makes a payment or payments to any Buyer hereunder or
pursuant to any of the other Transaction Documents or any of the Buyers enforce
or exercise their rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred. Until the one (1)
year anniversary of the Closing Date, the Company shall not effect any stock
combination, reverse stock split or other similar transaction (or make any
public announcement with respect to any of the foregoing) without the prior
written consent of each of the Buyers. Unless otherwise expressly indicated, all
dollar amounts referred to in this Agreement and the other Transaction Documents
are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted in the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (p)           Independent Nature of
Buyers’ Obligations and Rights.  The
obligations of each Buyer under the Transaction Documents are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document.  Nothing contained herein or in any other
Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as, and the Company
acknowledges that the Buyers do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or
entity with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and the Company acknowledges that the
Buyers are not acting in concert or as a group, and the Company shall not assert
any such claim, with respect to such obligations or the transactions
contemplated by the Transaction Documents. The decision of each Buyer to
purchase Securities pursuant to the Transaction Documents has been made by such
Buyer independently of any other Buyer. Each Buyer acknowledges that no other
Buyer has acted as agent for such Buyer in connection with such Buyer making its
investment hereunder and that no other Buyer will be acting as agent of such
Buyer in connection with monitoring such Buyer’s investment in the Securities or
enforcing its rights under the Transaction Documents. The Company and each Buyer
confirms that each Buyer has independently participated with the Company in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.  The use of a single agreement to
effectuate the purchase and sale of the Securities contemplated hereby was
solely in the control of the Company, not the action or decision of any Buyer,
and was done solely for the convenience of the Company and not because it was
required or requested to do so by any Buyer.  It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Buyer, solely, and
not between the Company and the Buyers collectively and not between and among
the Buyers.

     

    [signature pages
follow]

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

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

     

    

    
      	 	
              COMPANY:

               

            
	 	
              BSD
      MEDICAL CORPORATION

               

               

              By:  /s/ Dennis
      P.
      Gauger                               
      

                     
      Name:    
      Dennis P.
      Gauger              
             

                     
      Title:      Chief Financial
      Officer        
           

            
	 	 
      

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

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

     

    

     

    
      	 
      	
              BUYER:

               

            
	 
      	
              CRANSHIRE
      CAPITAL, L.P.

               

               

              By:           Downsview
      Capital, Inc.

              Its:           General
      Partner

            
	 
      	
               

               

                   
      /s/  Mitchell P. Kopin________________

              By:       Mitchell
      P. Kopin

              Its:        President

            

    

    

     

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

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

     

    

    
      	 
      	
              BUYER:

               

            
	 
      	
              KINGSBROOK
      OPPORTUNITIES MASTER FUND LP

               

              By:  KINGSBROOK
      OPPORTUNITIES GP LLC, its general partner

            
	 
      	
               

               

               

              By:   
      /s/Adam J.
      Chill                                                 
      

                    Adam
      J. Chill, Managing Member

            

    

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    SCHEDULE
OF BUYERS

     

    

    
      	
              (1)

            	 	
              (2)

            	 	
              (3)

            	 	
              (4)

            	 	
              (5)

            	 	
              (6)

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
              
                 

                Buyer

              

            	 	
              
                 

                Address
      and Facsimile Number

              

            	 	
              
                 

                Number
      of

                Common
      Shares

              

            	 	
              
                 

                Number
      of

                Warrant
      Shares

              

            	 	
              
                Purchase
      Price

              

            	 	
              
                Legal
      Representative’s

                Address
      and Facsimile Number

              

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
              Cranshire
      Capital, L.P.

            	 	
              3100
      Dundee Road, Suite 703

              Northbrook,
      Illinois 60062

              Attn:  Mitchell
      P. Kopin

              Telephone:
      (847) 562-9030

              Facsimile:
      (847) 562-9031

               

            	 	
              1,137,572

            	 	
              853,179

            	 	
              $1,729,109.44

            	 	
              Greenberg
      Traurig, LLP

              77
      W. Wacker Drive, Suite 3100

              Chicago,
      Illinois 60601

              Attention:  Peter
      H. Lieberman

                             
          Todd A. Mazur

              Facsimile:
      (312) 456-8435

               

            
	
              Kingsbrook
      Opportunities

              Master
      Fund LP

            	 	
               

              c/o
      Kingsbrook Opportunities GP LLC

              590
      Madison Avenue, 27th
      Floor

              New
      York, New York 10022

              Attn:
      Adam Chill

              Telephone:  (212)
      600-8240

              Facsimile:
      (212) 600-8290

              E-mail:
      investments@kingsbrookpartners.com /

              operations@kingsbrookpartners.com

               

            	 	
              507,165

            	 	
              380,374

            	 	
              $770,890.80

            	 	
              Elected
      Not To Provide

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