Document:

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                                                                 EXHIBIT 10.31.3

                       AMENDMENT NO. 3 TO CREDIT AGREEMENT

            This AMENDMENT NO. 3 TO THE CREDIT AGREEMENT, dated as of November
8, 2004 (this "Amendment"), among DOBSON CELLULAR SYSTEMS, INC., an Oklahoma
corporation (the "Borrower"), DOBSON COMMUNICATIONS CORPORATION, an Oklahoma
corporation (the "Parent"), DOBSON OPERATING CO., L.L.C., an Oklahoma limited
liability company ("DOC"), the Lenders (as defined below) party hereto and the
Administrative Agent (as defined below), amends certain provisions of the Credit
Agreement, dated as of October 23, 2003 and amended by Amendment No. 1, dated as
of March 19, 2004 and Amendment No. 2, dated as of May 7, 2004, (as amended, the
"Credit Agreement"), among the Borrower, the Parent, DOC, the several banks and
other financial institutions or entities from time to time party thereto (the
"Lenders"), LEHMAN COMMERCIAL PAPER INC., as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), LEHMAN BROTHERS INC. and
BEAR, STEARNS & CO. INC., as joint lead arrangers and joint book runners, BEAR
STEARNS CORPORATE LENDING INC. as syndication agent and MORGAN STANLEY SENIOR
FUNDING, INC., as co- arranger and documentation agent.

                              W I T N E S S E T H:

           WHEREAS, the parties to this Amendment are party to the Credit
Agreement. Capitalized terms defined in the Credit Agreement and not otherwise
defined in this Amendment are used herein as therein defined; and

           WHEREAS, the parties hereto have agreed to amend the Credit Agreement
as hereinafter set forth.

           NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:

           SECTION 1.AMENDMENTS AND WAIVER. Effective upon the Effective Date as
defined in Section 3 hereof, the Credit Agreement is hereby amended as follows:

           (A) (I) The following definitions are hereby inserted in Section 1.1
(Defined Terms) of the Credit Agreement, each in the appropriate place to
preserve the alphabetical order of the definitions in such Section 1.1 (and,
where applicable, such definitions shall replace in their entireties the
existing definitions for the corresponding terms in such Section 1.1):

           (i)  "Commitment Fee Rate":  5/8 of 1% per annum.

           (ii) "DOC Interest Coverage Ratio": for any period, the ratio of (a)
      Consolidated EBITDA of DOC for such period to (b) Consolidated Interest
      Expense of DOC for such period; provided, that for the purposes of the
      calculation of Consolidated Interest Expense of DOC pursuant to this
      definition there shall be excluded any interest with respect to
      Indebtedness of DOC and its Subsidiaries which is owed to the Parent or
      any of its Subsidiaries to the extent that such interest is not paid in
      cash.

           (iii)"DOC Leverage Ratio": as at the last day of any period of four
      consecutive fiscal quarters of DOC, the ratio of (a) the aggregate
      principal amount of Consolidated Total Debt of DOC which is secured by a
      first priority Lien on any assets of DOC or its Subsidiaries (including
      Capital Lease Obligations) on such day to (b) Consolidated EBITDA of DOC
      for
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      such period; provided that for purposes of calculating Consolidated
      EBITDA of DOC for any period, (i) the Consolidated EBITDA of any Person
      acquired by DOC or its Subsidiaries during such period shall be included
      on a pro forma basis for such period (assuming the consummation of such
      acquisition occurred on the first day of such period) if the consolidated
      balance sheet of such acquired Person and its consolidated Subsidiaries as
      at the end of the period preceding the acquisition of such Person and the
      related consolidated statements of income and stockholders' equity and of
      cash flows for the period in respect of which Consolidated EBITDA is to be
      calculated (x) have been previously provided to the Administrative Agent
      and the Lenders and (y) either (1) have been reported on without a
      qualification arising out of the scope of the audit by independent
      certified public accountants of nationally recognized standing or (2) have
      been found acceptable by the Administrative Agent and (ii) the
      Consolidated EBITDA of any Person Disposed of by DOC or its Subsidiaries
      during such period shall be excluded for such period (assuming the
      consummation of such Disposition and the repayment of any Indebtedness in
      connection therewith occurred on the first day of such period).

           (iv) "Intercreditor Agreement": the intercreditor agreement, dated as
      of November 8, 2004, by and among the Borrower, each of the other Loan
      Parties, the Administrative Agent, the Collateral Trustee (as defined in
      the 2004 First Lien Indenture) and the Collateral Trustee (as defined in
      the 2004 Second Lien Indenture), as the same may be amended, amended and
      restated, supplemented or otherwise modified from time to time in
      accordance with its terms.

           (v) "1998 Credit Agreements": (i) the Third Amended and Restated
      Credit Agreement, dated as of March 25, 1998, among Dobson Operating
      Company as borrower, Corestates Bank, N.A., as administrative agent,
      Toronto Dominion (Texas), Inc., as documentation agent, Nationsbank of
      Texas, N.A., as syndication agent and the lenders party thereto, (ii) the
      Revolving Credit Agreement, dated as of March 25, 1998, among Dobson
      Cellular Operations Company as borrower, First Union National Bank as
      syndication agent, Toronto Dominion (Texas), Inc. as documentation agent
      and Nationsbank of Texas, N.A., as administrative agent and the lenders
      party thereto, and (iii) the 364-Day Revolving Credit and Term Loan
      Agreement, dated as of March 25, 1998, among Dobson Cellular Operations
      Company as borrower, First Union National Bank as syndication agent,
      Toronto Dominion (Texas), Inc., as documentation agent, Nationsbank of
      Texas, N.A., as administrative agent and the lenders party thereto.

           (vi) "Parent Interest Coverage Ratio": for any period, the ratio of
      (a) Consolidated EBITDA of the Parent for such period to (b) Consolidated
      Interest Expense of the Parent for such period; provided, that for the
      purposes of the calculation of Consolidated Interest Expense of the Parent
      pursuant to this definition there shall be excluded any interest with
      respect to Indebtedness of DOC and its Subsidiaries which is owed to the
      Parent or any of its Subsidiaries to the extent that such interest is not
      paid in cash.

           (vii) "Revolving Credit Termination Date": October 23, 2008 (or such
      earlier date on which the Loans become due and payable pursuant to Section
      9).

           (viii) "Tower Asset Sale" a Disposition of any telecommunications
      tower (including any equipment, real property interests and fixtures which
      are appurtenant and integral to such tower).

                                       2
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           (ix) "2004 First Lien Indenture": the indenture, dated as of November
      8, 2004, entered into by the Borrower and the Collateral Trustee party
      thereto in connection with the issuance of the 2004 First Lien Notes,
      together with all instruments and other agreements entered into by the
      Borrower and the other Loan Parties in connection therewith, as the same
      may be amended, supplemented or otherwise modified from time to time.

           (x) "2004 First Lien Notes": (a) the 8-3/8% Fixed Rate Notes due 2011
      in a principal amount up to $250,000,000 and (b) the Floating Rate Notes
      due 2011 in a principal amount up to $250,000,000, in each case issued by
      the Borrower and guaranteed by Parent, DOC and certain of the Borrower's
      Subsidiaries, pursuant to the 2004 First Lien Indenture.

            (xi) "2004 Notes": (a) the 2004 First Lien Notes and (b) the 2004
      Second Lien Notes.

           (xii)"2004 Second Lien Indenture": the indenture, dated as of
      November 8, 2004, entered into by the Borrower and the Collateral Trustee
      party thereto in connection with the issuance of the 2004 Second Lien
      Notes, together with all instruments and other agreements entered into by
      the Borrower and the other Loan Parties in connection therewith, as the
      same may be amended, supplemented or otherwise modified from time to time.

           (xiii) "2004 Second Lien Notes": the 9-7/8% Fixed Rate Notes due 2012
      in a principal amount up to $325,000,000 issued by the Borrower and
      guaranteed by Parent, DOC and certain of the Borrower's Subsidiaries,
      pursuant to the 2004 Second Lien Indenture.

           (xiv) "Triggering Event" means the occurrence of any Default, other
      than a Default resulting from the breach of any representation or warranty
      set forth in Section 4; provided, however, that any Default which results
      solely from the breach of any financial covenant set forth in Sections 7
      and 8 shall not be deemed to be a "Triggering Event" to the extent that,
      with respect to a Restricted Payment to be made pursuant to Section
      7.6(c)(ii), the Borrower provides a certificate which is reasonably
      satisfactory to the Administrative Agent demonstrating that, pursuant to
      the 1998 Credit Agreements, a "Triggering Event" (as respectively defined
      therein) would not have occurred with respect to the financial covenants
      respectively set forth in the 1998 Credit Agreements (prepared on the
      assumption that all such financial covenants are in effect at the time of
      determination, with such adjustments thereto as are reasonably acceptable
      to the Administrative Agent to give effect to such assumption), each of
      the foregoing to be determined on a pro forma basis after giving effect to
      the applicable Restricted Payment to be made pursuant to Section
      7.6(c)(ii).

           (II) (i) The definition of Change of Control in Section 1.1 (Defined
Terms) of the Credit Agreement is hereby amended by deleting, in each place
where it appears in such definition, the parenthetical "(except Liens created
pursuant to the Guarantee and Collateral Agreement)" and replacing it in each
case with the following:

           (except Liens created pursuant to the Guarantee and Collateral
      Agreement and, in accordance with the Intercreditor Agreement, Liens
      securing the 2004 Notes)

                (ii) the definition of Parent Preferred Stock in Section 1.1
      (Defined Terms) of the Credit Agreement is hereby amended by inserting
      immediately at the end thereof the following:

                                       3
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           and any other preferred stock of the Parent that refinances or
      replaces any of the forgoing, to the extent the principal amount thereof
      is not increased and the terms thereof are not materially less favorable
      to the Loan Parties and the Lenders than the terms of the preferred stock
      so refinanced or replaced.

           (III) Any defined term contained in Section 1.1 (Defined Terms) of
the Credit Agreement shall be deemed deleted to the extent that it is no longer
used in the other provisions of the Credit Agreement, after giving effect to the
repayment of the Term Loans and the provisions of this Agreement.

           (B) Section 2.12(b) (Mandatory Prepayments) of the Credit Agreement
shall be deleted in its entirety and replaced with the following:

            (b) Unless the Required Prepayment Lenders shall otherwise agree,
      subject to the Intercreditor Agreement, if on any date DOC or any of its
      Subsidiaries shall receive Net Cash Proceeds from any Asset Sale, Purchase
      Price Refund or Recovery Event then, unless a Reinvestment Notice shall be
      delivered in respect thereof (which may be delivered, and pursuant to
      which any such reinvestment may be made, only if no Default or Event of
      Default has occurred which is continuing) within 20 days following the
      date of receipt by DOC or any of its Subsidiaries of such Net Cash
      Proceeds, the Loans shall be prepaid by an amount equal to the amount of
      such Net Cash Proceeds, as set forth in Section 2.12(d); provided however
      that, (i) subject to the Intercreditor Agreement, on each Reinvestment
      Prepayment Date the Loans shall be prepaid by an amount equal to the
      Reinvestment Prepayment Amount with respect to the relevant Reinvestment
      Event, as set forth in Section 2.12(d); (ii) to the extent that such Net
      Cash Proceeds represent proceeds of Primary Collateral (as defined in the
      Intercreditor Agreement), the amount of Loans prepaid as a result of the
      receipt thereof under this Section shall be equal to the amount necessary
      to cause the Lenders and the holders of the other First Lien Obligations
      (as defined in the Intercreditor Agreement with respect to such Primary
      Collateral) to share in such Net Cash Proceeds on a pro rata basis to the
      extent required by the 2004 First Lien Indenture, as in effect on the date
      hereof; and (iii) to the extent that such Net Cash Proceeds are
      attributable to a Tower Asset Sale then such Net Cash Proceeds shall not
      be required to be applied in mandatory prepayment of the Loans pursuant to
      this Section unless a Default or an Event of Default shall have occurred
      and be continuing at the time such Net Cash Proceeds are received by DOC
      or its Subsidiaries. The provisions of this Section do not constitute a
      consent to the consummation of any Disposition not permitted by Section
      7.5.

           (C) Section 2.12(c) (Mandatory Prepayments) of the Credit Agreement
shall be deleted in its entirety.

            (D) Section 6.10 (Additional Collateral, Etc.) of the Credit
Agreement shall be amended by inserting immediately after clause (e) thereof,
the following new clause (f)

           (f) The foregoing requirements of this Section 6.10 (including the
      provision of additional Collateral) shall be subject to the terms and
      conditions of the Intercreditor Agreement.

           (E) Section 6.11 (Further Assurances) of the Credit Agreement shall
be amended by replacing the word "From" in the first line thereof with the text
"Subject to the provisions of the Intercreditor Agreement, from".

                                       4
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           (F) Section 7.1(a) (DOC Leverage Ratio) of the Credit Agreement shall
be deleted in its entirety and replaced with the following:

           (a) DOC Leverage Ratio. Permit, on any date on which there are
      Revolving Extensions of Credit outstanding, the DOC Leverage Ratio for the
      last day of the four consecutive fiscal quarters of DOC most recently
      ended before such date to be less than the ratio set forth opposite the
      last day of such four fiscal quarters below:

<TABLE>
<CAPTION>
           Fiscal Quarter Ended           DOC Leverage Ratio
           --------------------           ------------------
<S>                                       <C>
           September 30, 2004                   3.85:1
           December 31, 2004                    3.85:1
           March 31, 2005                       3.85:1
           June 30, 2005                        3.85:1
           September 30, 2005                   3.85:1
           December 31, 2005                    3.85:1
           March 31, 2006                       3.75:1
           June 30, 2006                        3.65:1
           September 30, 2006                   3.65:1
           December 31, 2006                    3.65:1
           March 31, 2007                       3.50:1
           June 30, 2007                        3.50:1
           September 30, 2007                   3.50:1
           December 31, 2007                    3.25:1
           March 31, 2008                       3.25:1
           June 30, 2008                        3.00:1
           September 30, 2008 and               3.00:1
           each fiscal quarter
           ended thereafter
</TABLE>

           (G) Section 7.1(b) (Parent Leverage Ratio) of the Credit Agreement
shall be deleted in its entirety.

           (H) Section 7.1(c) (Parent Interest Coverage Ratio) of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

           (c) DOC Interest Coverage Ratio. Permit, on any date on which there
      are Revolving Extensions of Credit outstanding, the DOC Interest Coverage
      Ratio for the last day of the four consecutive fiscal quarters of DOC most
      recently ended before such date to be less than the ratio set forth
      opposite the last day of such four fiscal quarters below:

<TABLE>
<CAPTION>
                                                 DOC
           Fiscal Quarter Ended        Interest Coverage Ratio
           --------------------        -----------------------
<S>                                    <C>
           September 30, 2004                   2.00:1
           December 31, 2004                    2.00:1
           March 31, 2005                       2.00:1
           June 30, 2005                        2.00:1
           September 30, 2005                   2.00:1
           December 31, 2005                    2.00:1
</TABLE>

                                       5
<PAGE>
<TABLE>
<S>                                             <C>
           March 31, 2006                       2.00:1
           June 30, 2006                        2.00:1
           September 30, 2006                   2.00:1
           December 31, 2006                    2.00:1
           March 31, 2007                       2.00:1
           June 30, 2007                        2.15:1
           September 30, 2007                   2.25:1
           December 31, 2007                    2.25:1
           March 31, 2008                       2.35:1
           June 30, 2008                        2.45:1
           September 30, 2008 and               2.50:1
           each fiscal quarter
           ended thereafter
</TABLE>

           (I) Section 7.1(d) (DOC Fixed Charge Coverage Ratio) of the Credit
Agreement shall be deleted in its entirety.

           (J) Section 7.1(e) (Limitation on Capital Expenditures) of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

                (e) Limitation on Capital Expenditures. Make or commit to make
      any Capital Expenditure, except Capital Expenditures of DOC and its
      Subsidiaries in the ordinary course of business not exceeding in any
      fiscal year of DOC, an amount equal to the sum of (w) $150,000,000, (x)
      33.33% of the amount of increase (if any) of Consolidated EBITDA of DOC
      for the preceding fiscal year compared to the previous fiscal year
      thereto, (y) the amount of cash capital contributions made by the Parent
      to DOC or any of its Subsidiaries during such fiscal year for the purpose
      of making Capital Expenditures in such fiscal year and (z) the amount of
      any Supplemental Capital Expenditures permitted to be made during such
      fiscal year in connection with a Permitted Acquisition; provided that (A)
      100% of any such amount referred to above, if not so expended in cash in
      the fiscal year for which it is permitted, may be carried over for
      expenditure in the next succeeding fiscal year only and (B) Capital
      Expenditures made during any fiscal year shall be deemed made, first, in
      respect of amounts permitted for such fiscal year as provided above and
      second, in respect of amounts carried over from the prior fiscal year
      pursuant to clause (A) above.

           (K) Section 7.2 (Limitation on Indebtedness) of the Credit Agreement
shall be amended by (x) inserting in clause (d) thereof, immediately after the
words "or extensions thereof", the words "or of any other Indebtedness incurred
in accordance with the provisions of this Agreement", and (y) deleting the "and"
at the end of clause (k) thereof, replacing the period at the end of clause (l)
thereof with the a semicolon and inserting new clauses (m) and (n) at the end
thereof to read in their entireties as follows:

                (m) Indebtedness of any Loan Party arising from sales and
           leasebacks of Tower Assets in an aggregate principal amount not to
           exceed $75,000,000; and

                (n) Indebtedness of any Loan Party outstanding pursuant to the
           2004 First Lien Indenture, the 2004 Second Lien Indenture and the
           2004 Notes issued thereunder.

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           (L) Section 7.3 (Limitation on Liens) of the Credit Agreement shall
be amended by deleting the "and" at the end of clause (j) thereof, replacing the
period at the end of clause (k) thereof with the text "; and" and inserting a
new clause (l) at the end thereof to read in its entirety as follows:

                (l) Subject to the provisions set forth in the Intercreditor
           Agreement, (x) Liens created pursuant to the 2004 First Lien
           Indenture and the security documents from time to time delivered in
           respect thereof, to secure any obligations arising under the 2004
           First Lien Notes, and (y) Liens created pursuant to the 2004 Second
           Lien Indenture and the security documents from time to time delivered
           in respect thereof, to secure any obligations arising under the 2004
           Second Lien Notes.

           (M) Section 7.5 (Limitation on Disposition of Property) of the Credit
Agreement shall be amended by deleting the "and" at the end of clause (f)
thereof, replacing the period at the end of clause (g) thereof with the text ";
and" and inserting a new clause (h) at the end thereof to read in its entirety
as follows:

                (h) provided that no Default has occurred and is continuing or
      would result therefrom, any Tower Asset Sale on arms length terms for not
      less than the Fair Market Value.

           (N) Section 7.5(e) (Limitation on Disposition of Property) of the
Credit Agreement shall be deleted in its entirety and replaced with the
following:

                (e) Dispositions of assets which are Permitted Asset Swaps,
      having a Fair Market Value not to exceed in aggregate (i) $350,000,000 in
      any fiscal year of DOC (provided that the Maryland/Michigan Swap shall be
      deemed consummated in the fiscal year of DOC ended December 31, 2003 for
      the purposes of the foregoing dollar limitation) and (ii) $700,000,000
      during the term of this Agreement; provided that in calculating the Fair
      Market Value with respect to each Permitted Asset Swap pursuant to this
      Section 7.5(e), there shall be subtracted from such amount of Fair Market
      Value the amount of any cash consideration received pursuant to such
      Permitted Asset Swap to the extent that such cash consideration exceeds
      30% of the total consideration received pursuant to such Permitted Asset
      Swap (such subtracted amount to be in the amount of such excess);

           (O) Section 7.6(c) (Limitation on Restricted Payments) of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

                (c) (i) so long as no Default shall have occurred and be
      continuing or would result therefrom (determined on a pro forma basis
      after giving effect thereto), the Borrower may pay dividends or make loans
      to DOC and DOC may pay dividends to the Parent: (1) to pay corporate
      overhead expenses incurred in the ordinary course of business (which have
      been allocated to DOC and its Subsidiaries, and are in amounts, in
      accordance with Section 8.7); (2) to pay Taxes which are then due and
      payable by the Parent and DOC as part of a consolidated group pursuant to
      the Tax Sharing Agreement (except any such Taxes which are attributable to
      Subsidiaries of the Parent other than DOC and its Subsidiaries); (3) to
      pay regularly scheduled interest payments which are due and payable with
      respect to the Parent Notes; (4) to pay regularly scheduled dividends
      which are then due and payable with respect to the Parent Preferred Stock
      (to the extent required, or elected by the Parent, to be paid in cash);
      and (5) for any other purpose; provided that, with respect to any such
      Restricted

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      Payment made pursuant to this clause (5), the amount of Liquidity
      immediately before and after giving effect thereto, shall not be less than
      $10,000,000; and

                     (ii) so long as no Triggering Event shall have occurred and
      be continuing or would result therefrom, the Borrower may declare and make
      Restricted Payments, pay dividends or make loans to DOC and DOC may
      declare and make Restricted Payments, pay dividends to the Parent to pay
      regularly-scheduled cash distributions or cash interest payments on each
      series of Parent Preferred Stock and the related exchange debentures, if
      any. If any Triggering Event has occurred and is continuing, the Borrower
      and DOC may only declare and make such Restricted Payments, dividends or
      loans in accordance with the following terms, conditions, and limitations:
      (1) the amount of any such Restricted Payment (when aggregated with the
      amounts of all other Restricted Payments, dividends, loans and investments
      for such purposes from all other Subsidiaries of the Parent) shall not
      exceed (A) amounts then required to make any cash payment of dividends on
      the Parent Preferred Stock or interest on the related exchange debentures,
      if issued, which cash payments are past due, by reason of such Triggering
      Event and (B) the next regularly scheduled cash payment of the dividend on
      the Parent Preferred Stock or interest on the exchange debenture, if
      issued; provided, that the restrictions in this clause (1) shall terminate
      on the date which 180 days following the date of notice by the
      Administrative Agent to the Borrower of the existence of the applicable
      Triggering Event (or from the date of such notice of the earliest such
      Triggering Event, if more than one exists); (2) such Triggering Event is
      not a Default set forth in Sections 9(a), 9(f) or 9(m); and (3) the Loans
      and other Obligations shall not have been accelerated pursuant to Section
      9.

           (P) Section 7.7(e) (Limitation on Investments) of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

                (e) Permitted Acquisitions, the Purchase Price of which shall
      not exceed (i) with respect to any Permitted Acquisitions which are
      Permitted Asset Swaps, in aggregate, (x) $350,000,000 in any fiscal year
      of DOC (provided that the Maryland/Michigan Swap shall be deemed
      consummated in the fiscal year of DOC ended December 31, 2003 for the
      purposes of the foregoing dollar limitation) and (y) $700,000,000 during
      the term of this Agreement and (ii) with respect to all other Permitted
      Acquisitions, (x) $60,000,000 individually, (y) $125,000,000 in aggregate
      in any fiscal year of DOC and (z) $475,000,000 in aggregate during the
      term of this Agreement; provided that any Permitted Acquisition financed
      with (A) the proceeds of a capital contribution made by the Parent to DOC
      and its Subsidiaries for the purposes of consummating such Permitted
      Acquisition (and so applied within 90 days of the Parent making such
      capital contribution) or (B) the cash portion of the consideration
      received pursuant to a Permitted Asset Swap or any other Disposition of
      Cellular/PCS Assets (to the extent that such cash is used within 12 months
      of receipt by DOC, the Borrower or any Subsidiary Guarantor in
      consummating a Permitted Acquisition of Cellular/PCS Assets), shall not be
      subject to the foregoing dollar limitations set forth in this clause (e);
      and

           (Q) Section 7.8(a) (Limitation on Optional Payments and Modifications
of Debt Instruments, etc.) of the Credit Agreement shall be amended by
inserting, immediately after the words "long-term indebtedness of the Parent or
its Subsidiaries" the following text: "(including the 2004 Second Lien Notes but
excluding the 2004 First Lien Notes)".

            (R) Section 7.8(b) (Limitation on Optional Payments and
Modifications of Debt Instruments, etc.) of the Credit Agreement shall be
amended by inserting, immediately after the words

                                       8
<PAGE>
"long-term indebtedness of the Parent or its Subsidiaries" the following text:
"(including the 2004 Notes)".

           (S) Section 7.10 (Limitation on Sales and Leasebacks) of the Credit
Agreement shall be amended by inserting at the end of such Section the
following:

               other than sales and leasebacks with respect to Tower Assets to
      the extent permitted by the other provisions of this Agreement.

           (T) Section 7.12 (Limitation on Negative Pledge Clauses) of the
Credit Agreement shall be amended by replacing the "and" at the end of clause
(b) thereof with a comma, replacing the period at the end of clause (c) thereof
with the text " and" and inserting a new clause (d) at the end thereof to read
in its entirety as follows:

                (d)  the 2004 First Lien Indenture and the 2004 Second Lien
                     Indenture.

           (U) Section 7.13 (Limitation on Restrictions on Subsidiary
Distributions) of the Credit Agreement shall be amended by replacing the "and"
at the end of clause (i) thereof with a comma, replacing the period at the end
of clause (ii) thereof with the text " and" and inserting a new clause (iii) at
the end thereof to read in its entirety as follows:

                (iii)any restrictions with respect to a Subsidiary imposed
      pursuant to the 2004 First Lien Indenture, the 2004 Second Lien Indenture
      and the 2004 Notes.

           (V) Section 8.1 (Limitation on Indebtedness) of the Credit Agreement
shall be deleted in its entirety and replaced with the following:

                Limitation on Indebtedness. Create, incur, assume or suffer to
      exist any Indebtedness, except (i) Indebtedness existing on the Closing
      Date set forth on Schedule 8.1 and any refinancings, refundings, renewals
      or extensions thereof or of any other Indebtedness incurred in accordance
      with the provisions of this Agreement (without any increase in the
      principal amount thereof outstanding at the time of such refinancing,
      refunding, renewal or extension, or any shortening of the maturity of any
      principal amount thereof (except where such shorter maturity is not
      earlier than the date which is six months following to the Revolving
      Credit Termination Date) and otherwise on terms not materially less
      favorable to the Parent and the Lenders than under the refinanced,
      refunded, renewed or extended Indebtedness); (ii) Indebtedness (including
      Capital Lease Obligations) secured by Liens permitted by Section 8.2(g) in
      an aggregate principal amount not to exceed $20,000,000 at any one time
      outstanding; (iii) additional unsecured Indebtedness (x) on terms which
      are not materially less favorable to the Parent and the Lenders than those
      contained in the New Parent Notes Indenture and (y) the aggregate amount
      of which shall not exceed $200,000,000; provided, that upon the incurrence
      of any such Indebtedness pursuant to this clause (y), the Parent Interest
      Coverage Ratio for the four fiscal quarter period of the Parent most
      recently ended prior to the date of such Incurrence shall be at least 1.15
      to 1 (determined on a pro forma basis giving effect to the incurrence of
      such Indebtedness on the first day of such period); (iv) its Guarantee
      Obligations pursuant to the Guarantee and Collateral Agreement; and (v)
      Guarantee Obligations with respect to any other Indebtedness of Borrower
      or any Subsidiary Guarantor which is permitted to be incurred by Section
      7.2.

                                       9
<PAGE>
           (W) Section 8.2 (Liens) of the Credit Agreement shall be amended by
replacing the "and" at the end of clause (f) thereof with a comma, replacing the
comma at the end of clause (g) thereof with the text " and" and inserting a new
clause (h) at the end thereof to read in its entirety as follows:

           (h) Subject to the provisions set forth in the Intercreditor
Agreement, (x) Liens created pursuant to the 2004 First Lien Indenture and the
security documents from time to time delivered in respect thereof, to secure any
obligations arising under the 2004 First Lien Notes, and (y) Liens created
pursuant to the 2004 Second Lien Indenture and the security documents from time
to time delivered in respect thereof, to secure any obligations arising under
the 2004 Second Lien Notes.

           (X) Section 8.3 (Limitation on Restricted Payments and Investments)
of the Credit Agreement shall be deleted in its entirety.

           (Y) Section 8.4 (Limitation on Optional Payments and Modifications of
Debt Instruments) of the Credit Agreement shall be deleted in its entirety.

           (Z) Section 8.5 (Limitation on Negative Pledge Clauses) of the Credit
Agreement shall be amended by replacing the "and" at the end of clause (b)
thereof with a comma, replacing the period at the end of clause (c) thereof with
the text " and" and inserting a new clause (d) at the end thereof to read in its
entirety as follows:

                (d) the 2004 First Lien Indenture, the 2004 Second Lien
      Indenture and the 2004 Notes.

           (AA) Section 8.10 (Holding Company Status) of the Credit Agreement
shall be deleted in its entirety.

           (BB) Section 10.1 (Appointment) of the Credit Agreement shall be
amended by inserting the text "In addition, each Lender irrevocably authorizes
each Agent, in such capacity, to execute the Intercreditor Agreement on its
behalf." immediately after the text "together with such other powers as are
reasonably incidental thereto." in the 6th line thereof.

           (CC) Section 11.15 (Release of Collateral and Guarantee Obligations)
of the Credit Agreement shall be amended by replacing the word "Notwithstanding"
in the first line of clauses (a) and (b) thereof with the text "Subject to the
provisions of the Intercreditor Agreement, notwithstanding".

           (DD) Any Default or Event of Default, which arises solely from the
issuance of the 2004 Notes and the granting of Liens (in accordance with the
Intercreditor Agreement) with respect thereto immediately prior to the
occurrence of the Effective Date, is hereby waived as of the Effective Date.

            SECTION 2.PREPAYMENT OF TERM LOANS AND REDUCTION OF REVOLVING CREDIT
COMMITMENTS.

           (A) Pursuant to Section 2.11 (Optional Prepayments) of the Credit
Agreement, by its execution of this Amendment, the Borrower hereby gives
irrevocable notice to the Administrative Agent that it shall prepay the
aggregate amount of the Term Loans in full on the Effective Date.

                                       10
<PAGE>
           (B) Pursuant to Section 2.10 (Termination or Reduction of Revolving
Credit Commitments) of the Credit Agreement, by its execution of this Amendment,
the Borrower hereby gives irrevocable notice to the Administrative Agent that,
effective on the Effective Date, the aggregate amount of Revolving Credit
Commitments shall be permanently reduced to $75,000,000 (such reduction to be
made ratably among the Revolving Credit Commitments of each Lender).

           SECTION 3.CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective when each of the following conditions precedent have been satisfied
(the "Effective Date") or duly waived by the Administrative Agent:

           (A) Documents: The Administrative Agent shall have received in each
case in form and substance satisfactory to the Administrative Agent:

                (i) this Amendment, executed and delivered by the Borrower, the
      Parent, DOC and those Lenders constituting the Required Lenders upon
      giving effect to this Amendment or, as to any of such Lenders, evidence
      satisfactory to the Administrative Agent that such Lender has executed
      this Amendment;

                (ii) the Consent of Grantors in the form attached hereto,
      executed and delivered by each Grantor;

                (iii)copies of the 2004 First Lien Indenture and the 2004 Second
      Lien Indenture and all security and other documents executed and delivered
      by the Borrower and the Guarantors in respect thereof;

                (iv) the Intercreditor Agreement, executed and delivered by the
      Borrower, each other Loan Party party thereto, the Administrative Agent,
      the Collateral Trustee (as defined in the 2004 First Lien Notes) and the
      Collateral Trustee (as defined in the 2004 Second Lien Indenture); and

                (v) a legal opinion of counsel to the Loan Parties in form and
      substance reasonably satisfactory to the Administrative Agent.

           (B) Transactions: The Borrower shall have received not less than
$825,000,000 in aggregate principal amount of gross proceeds from the issuance
of the 2004 Notes, which shall have been immediately applied, to the extent
necessary, in repayment to the Lenders of the aggregate principal amount of the
Term Loans and the Revolving Extensions of Credit in full, together with all
accrued unpaid interest with respect thereto.

           (C)  Fees and Expenses.

                (i) the Borrower shall have paid to the Administrative Agent,
      for the account of each Lender that has delivered a signature page to this
      Amendment duly executed by it to the Administrative Agent or its counsel
      by not later than 5.00 pm (New York time) on November 8, 2004, an
      amendment fee equal to 0.50% of such Lender's Revolving Credit Commitments
      as of the Effective Date (calculated after giving effect to the reduction
      of the Revolving Credit Commitments pursuant to Section 2(B) above); and

                                       11
<PAGE>
                (ii) the Borrower shall have paid to the Administrative Agent
      all accrued and invoiced expenses payable pursuant to Section 11.5
      (Payment of Expenses) of the Credit Agreement.

           SECTION 4. REPRESENTATIONS AND WARRANTIES. Each of the Borrower and
DOC hereby represents and warrants that each of the representations and
warranties made by it in the Credit Agreement, as amended hereby, and the other
Loan Documents to which it is a party or by which it is bound, shall be true and
correct in all material respects on and as of the date hereof (other than
representations and warranties in any such Loan Document which expressly speak
as of a specific date, which shall have been true and correct in all material
respects as of such specific date) and no Default or Event of Default has
occurred and is continuing as of the date hereof.

           SECTION 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Signature
pages may be detached from multiple separate counterparts and attached to a
single counterpart so that all signature pages are attached to the same
document. Delivery of an executed counterpart by telecopy shall be effective as
delivery of a manually executed counterpart of this Amendment.

           SECTION 6. CONSTRUCTION WITH THE LOAN DOCUMENTS; MISCELLANEOUS. On
and after satisfaction of the conditions set forth in Section 2 hereof, each
reference in the Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein," or words of like import, and each reference in the other Loan
Documents to the Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby, and this Amendment and the Credit Agreement shall
be read together and construed as a single instrument. The table of contents,
signature pages and list of Exhibits and Schedules of the Credit Agreement shall
be modified, and all provisions relating solely to the Term Loans shall be
deemed deleted upon the payment in full of the Term Loans together with all
other Obligations with respect thereto, in each case to reflect the changes made
in this Amendment as of the Effective Date. Except as expressly amended hereby
or specifically waived above, all of the terms and provisions of the Credit
Agreement and all other Loan Documents are and shall remain in full force and
effect and are hereby ratified and confirmed. The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of the Lenders, the Issuing
Lender, the Arrangers, the Administrative Agent or any other Agent under any of
the Loan Documents, nor constitute a waiver or amendment of any other provision
of any of the Loan Documents or for any purpose except as expressly set forth
herein. Each Required Lender hereby authorizes and instructs the Administrative
Agent to enter into the Intercreditor Agreement and agrees that, in the event of
any conflict between any provision of the Intercreditor Agreement and any
provisions of the Collateral Documents, such provision of Intercreditor
Agreement shall, to the extent of such conflict, control. This Amendment and the
Intercreditor Agreement are each a Loan Document.

            SECTION 7. GOVERNING LAW. This Amendment is governed by the law of
the State of New York.

                            [Signature Pages Follow]

                                       12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

                                    DOBSON CELLULAR SYSTEMS, INC.,
                                    as Borrower

                                    By:
                                         --------------------------
                                         Name:
                                         Title:

                                    DOBSON OPERATING CO., L.L.C.

                                    By:
                                         --------------------------
                                         Name:
                                         Title:

                                    DOBSON COMMUNICATIONS CORPORATION

                                    By:
                                         --------------------------
                                         Name:
                                         Title:

                                    LEHMAN COMMERCIAL PAPER INC.,
                                    as Administrative Agent, Swingline Lender
                                    and a Lender

                                    By:
                                         --------------------------
                                         Name:
                                         Title:
<PAGE>
                                    [insert Lender name]

                                    By:
                                         --------------------------
                                         Name:
                                         Title:
<PAGE>
                               CONSENT OF GRANTORS

                                    Dated as of             , 2004
                                                -----------

           Each of the undersigned, as a Grantor under the Guarantee and
Collateral Agreement dated as of October 23, 2003 (the "Guarantee and Collateral
Agreement"), in favor of Lehman Commercial Paper Inc., as Administrative Agent
under the Credit Agreement referred to in the foregoing Amendment No. 3, hereby
consents to such Amendment and hereby confirms and agrees that notwithstanding
the effectiveness of such Amendment, the Guarantee and Collateral Agreement is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects, except that, on and after the effectiveness of such
Amendment, each reference in the Guarantee and Collateral Agreement to the
"Credit Agreement", "thereunder", "thereof" or words of like import shall mean
and be a reference to the Credit Agreement, as amended by such Amendment.

                                    DOBSON CELLULAR SYSTEMS, INC.,
                                    as Borrower and a Subsidiary Grantor

                                    By:
                                         --------------------------
                                         Name:
                                         Title:

                                    DOBSON OPERATING CO., L.L.C.,
                                    as a Guarantor and Subsidiary Grantor

                                    By:
                                         --------------------------
                                         Name:
                                         Title:

                                    DOBSON COMMUNICATIONS CORPORATION,
                                    as Parent and a Grantor

                                    By:
                                         --------------------------
                                         Name:
                                         Title:

                                    DOC LEASE CO., LLC,
                                    as a Guarantor and Subsidiary Grantor

                                    By:
                                         --------------------------
                                         Name:
                                         Title:exv10w1

 

EXHIBIT 10.1

Securities Purchase Agreement

Medwave, Inc.

435 Newbury Street

Danvers, Massachusetts 01923

The undersigned (the “Investor”) hereby confirms its agreement with you as follows:

1. This Securities Purchase Agreement is made as of the date set forth below between Medwave,
Inc., a Delaware corporation (the “Company”), and the Investor.

2. The Company has authorized the sale and issuance of an aggregate of (i) 1,300,000
shares (the “Shares”) of the common stock of the Company, $.01 par value per share (the “Common
Stock”), and (ii) Additional Investment Rights (in the form attached hereto as Exhibit D) (the
“Additional Investment Rights”) to purchase up to 575,000 additional shares of Common Stock (the
“AIR Shares”) on the terms and subject to the conditions contained therein, to certain investors in
a private placement (the “Offering”).

3. The Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor (i) _________ Shares and (ii) ________
Additional Investment Rights, for a purchase price of $4.00 per Share, or an aggregate purchase
price of $_______ (the “Purchase Price”), subject to the Terms and Conditions for Purchase of
Shares attached hereto as Annex I and incorporated herein by reference as if fully set forth
herein. Unless otherwise requested by the Investor in Exhibit A, certificates representing the
Shares and the Additional Investment Rights purchased by the Investor will be registered in the
Investor’s name and address as set forth below.

4. The Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the Company or its
affiliates, (b) neither it, nor any group of which it is a member or to which it is related,
beneficially owns (including the right to acquire or vote) any securities of the Company and (c) it
has no direct or indirect affiliation or association with any National Association of Securities
Dealers, Inc. (“NASD”) member. Exceptions:

(If no exceptions, write
“none.” If left blank, response will be deemed to be
“none.”)

 

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

	 	 	 	 	 
	 	 	Dated as of: February 10, 2005
	 
	 	 	 	 
	 	 	 
	 	 	[Investor Name]
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	 Name:
	

	 	 	 	 Title:

	 	 	 	 	 
	

	 	Address:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	

	 	Facsimile:	 	 
	

	 	 	 	 

AGREED AND ACCEPTED:

Medwave, Inc.

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	
  Name:
	 	 
	

	 	  Title:	 	 

 

Annex I

Terms and Conditions for Purchase of Shares and Additional Investment Rights

1. Agreement to Sell and Purchase the Shares and the Additional Investment Rights;
Subscription Date.

     1.1 Purchase and Sale. At the Closing (as defined in Section 2), the Company will
sell to the Investor, and the Investor will purchase from the Company, upon the terms and subject
to the conditions set forth herein, and at the Purchase Price, the number of Shares and Additional
Investment Rights described in paragraph 3 of the Securities Purchase Agreement attached hereto
(collectively with this Annex I and the other exhibits attached hereto, this “Agreement”).

     1.2 Other Investors. As part of the Offering, the Company proposes to enter into
Securities Purchase Agreements in the same form as this Agreement with certain other investors (the
“Other Investors”), and the Company expects to complete sales of Shares and Additional Investment
Rights to them. The Investor and the Other Investors are sometimes collectively referred to herein
as the “Investors,” and this Agreement and the Securities Purchase Agreements executed by the Other
Investors are sometimes collectively referred to herein as the “Agreements.” The Company may
accept executed Agreements from Investors for the purchase of Shares and Additional Investment
Rights commencing upon the date on which the Company provides the Investors with the proposed
purchase price per Share and related Additional Investment Right and concluding upon the date (the
“Subscription Date”) on which the Company has notified Adams Harkness, Inc. (in its capacity as
placement agent for the Shares, the “Placement Agent”) in writing that it will no longer accept
Agreements for the purchase of Shares in the Offering, but in no event shall the Subscription Date
be later than February 10, 2005. Each Investor must complete a Securities Purchase Agreement, a
Stock Certificate Questionnaire (in the form attached as Exhibit A hereto) and an Investor
Questionnaire (in the form attached as Exhibit B hereto) in order to purchase Shares and Additional
Investment Rights in the Offering.

     1.3 Placement Agent Fee. The Investor acknowledges that the Company intends to pay
to the Placement Agent a fee in respect of the sale of Shares and Additional Investment Rights to
the Investor.

     2. Delivery of the Shares and Additional Investment Rights at Closing. The completion of
the purchase and sale of the Shares and the Additional Investment Rights (the “Closing”) shall
occur on a date specified by the Company and the Placement Agent (the “Closing Date”), which date
shall not be later than February 11, 2005 (the “Outside Date”), and of which the Investors will be
notified in advance by the Placement Agent. At the Closing, the Company shall deliver to the
Investor (i) one or more stock certificates representing the number of Shares set forth in
paragraph 3 of the Securities Purchase Agreement and (ii) an Additional Investment Right for the
number of Additional Investment Rights set forth in paragraph 3 of the Securities Purchase
Agreement, each such certificate and Additional Investment Right to be registered in the name of
the Investor or, if so indicated on the Stock Certificate Questionnaire attached hereto as Exhibit
A, in the name of a nominee designated by the Investor. In exchange for the delivery of the stock
certificates representing such Shares and the Additional Investment Rights, the Investor shall
deliver the Purchase Price to the Company by wire transfer of immediately available funds pursuant
to the Company’s written instructions. On the Closing Date, the Company shall cause counsel to the
Company to deliver to the Investors a legal opinion, dated the Closing Date, substantially in the
form attached hereto as Exhibit C (the “Legal Opinion”).

1

 

     The Company’s obligation to issue and sell the Shares and the Additional Investment
Rights to the Investor shall be subject to the following conditions, any one or more of which may
be waived by the Company: (a) prior receipt by the Company of an executed copy of this Agreement;
(b) completion of purchases and sales of Shares and the Additional Investment Rights under the
Agreements with the Other Investors; (c) the accuracy of the representations and warranties made by
the Investor in this Agreement and the fulfillment of the obligations of the Investor to be
fulfilled by it under this Agreement on or prior to the Closing; and (d) the absence of any order,
writ, injunction, judgment or decree that questions the validity of the Agreements or the
Additional Investment Rights or the right of the Company or the Investor to enter into such
Agreements or, in the case of the Company, the Additional Investment Rights or to consummate the
transactions contemplated hereby and thereby.

     The Investor’s obligation to purchase the Shares and the Additional Investment Rights shall be
subject to the following conditions, any one or more of which may be waived by the Investor: (a)
the completion of purchases and sales under the Agreements with the Other Investors for an
aggregate purchase price of not less than five million two hundred thousand dollars ($5,200,000);
(b) the delivery at Closing of the Legal Opinion to the Investor by counsel to the Company; (c) the
accuracy of the representations and warranties made by the Company in this Agreement on the date
hereof and, if different, on the Closing Date; (d) the fulfillment of the obligations of the
Company to be fulfilled by it under this Agreement on or prior to the Closing; (e) the absence of
any order, writ, injunction, judgment or decree that questions the validity of the Agreements or
the Additional Investment Rights or the right of the Company or the Investor to enter into such
Agreements or, in the case of the Company, the Additional Investment Rights or to consummate the
transactions contemplated hereby and thereby; and (f) the delivery to the Investor by the Secretary
or Assistant Secretary of the Company of a certificate stating that the conditions specified in
this paragraph have been fulfilled. In the event that the Closing does not occur on or before the
Outside Date as a result of the Company’s failure to satisfy any of the conditions set forth above
(and such condition has not been waived by the Investor), the Company shall return any and all
funds paid hereunder to the Investor no later than one Business Day following the Outside Date and
the Investors shall have no further obligations hereunder. For purposes of this Agreement,
“Business Day” shall mean any day other than a Saturday, Sunday or other day on which the New York
Stock Exchange or commercial banks located in Boston, Massachusetts are permitted or required by
law to close.

     3. Representations, Warranties and Covenants of the Company. The Company hereby represents
and warrants to, and covenants with, the Investor as of the date hereof and the Closing Date, as
follows:

     3.1 Organization. The Company is duly incorporated and validly existing in good
standing under the laws of the State of Delaware. The Company has full corporate power and
authority to own, operate and occupy its properties and to conduct its business as presently
conducted and is registered or qualified to do business and in good standing in each jurisdiction
in which it owns or leases property or transacts business and where the failure to be so qualified
would have a material adverse effect upon the business, properties, assets, operations, results of
operations, or condition (financial or otherwise) of the Company or on the transactions
contemplated hereby and the other agreements and instruments entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its obligations under the
Agreements and the Additional Investment Rights in all material respects (“Material Adverse
Effect”), and no proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

2

 

The Company has no “subsidiaries” (as defined in Rule 405 under the Securities Act of 1933, as
amended (the “Securities Act”)).

     3.2 Due Authorization. The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Agreements and the Additional Investment
Rights. The execution and delivery of the Agreements and the Additional Investment Rights, and the
consummation by the Company of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action and no further action on the part of the Company or
its Board of Directors or stockholders is required. The Agreements and the Additional Investment
Rights have been validly executed and delivered by the Company and constitute legal, valid and
binding obligations of the Company enforceable against the Company in accordance with their terms,
except to the extent (i) rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, (ii) such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and (iii) such enforceability may be subject
to general principles of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

     3.3 Non-Contravention. The execution and delivery of the Agreements and the
Additional Investment Rights, the issuance and sale of the Shares and the Additional Investment
Rights to be sold by the Company under the Agreements, the fulfillment of the terms of the
Agreements and the Additional Investment Rights (including, without limitation, the obligation to
deliver AIR Shares upon exercise of the Additional Rights) and the consummation of the transactions
contemplated hereby and thereby will not (A) result in a conflict with or constitute a violation
of, or default (with the passage of time or otherwise) under, (i) any bond, debenture, note or
other evidence of indebtedness, or any material lease, contract, indenture, mortgage, deed
of trust, loan agreement, joint venture or other agreement or instrument to which the Company is a
party or by which the Company or its properties are bound, (ii) the Certificate of Incorporation,
by-laws or other organizational documents of the Company, as amended, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority binding upon the Company or its properties or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of
the material properties or assets of the Company or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture, note or any other
evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company is a party or by which it is bound or to which any of the
property or assets of the Company is subject. No consent, approval, authorization or other order
of, or registration, qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of the Agreements and the
Additional Investment Rights by the Company, the valid issuance or sale of the Shares and the
Additional Investment Rights by the Company pursuant to the Agreements and the valid issuance of
the AIR Shares by the Company pursuant to the Additional Investment Rights, other than such as have
been made or obtained, and except for any filings required to be made under federal or state
securities laws.

     3.4 Capitalization. The outstanding capital stock of the Company as of September
30, 2004 is as described in the Company’s Annual Report on Form 10-K for the year ended September
30, 2004. The Company has not issued any capital stock since September 30, 2004 other than through
the exercise of outstanding warrants or stock options. The Shares and the Additional Investment
Rights to be sold pursuant to the Agreements have been duly authorized, and when issued and paid
for in accordance with the terms of the Agreements, will be duly and validly issued, fully paid and
nonassessable, subject to no lien, claim or encumbrance (except for any such lien, claim or
encumbrance created, directly or indirectly, by the Investor). The Company shall, so long as any
of the Additional Investment Rights are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock,

3

 

solely for the purpose of effecting the exercise of the Additional Investment Rights, 100% of
the number of shares of Common Stock issuable upon exercise of the Additional Investment Rights.
Upon exercise in accordance with the Additional Investment Rights, the AIR Shares will be duly and
validly issued, fully paid and nonassessable, subject to no lien, claim or encumbrance (except for
any such lien, claim or encumbrance created, directly or indirectly, by the Investor). Assuming
the accuracy of the Investor’s representations hereunder, the issuance by the Company of the
Shares, the Additional Investment Rights and the AIR Shares is exempt from registration under the
Securities Act. The outstanding shares of capital stock of the Company have been duly and validly
issued and are fully paid and nonassessable, have been issued in compliance with the registration
requirements of federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities. Except as set forth
in Note 7 to the financial statements filed with the Company’s most recent Annual Report on Form
10-K, there are no outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable or exercisable for, any
unissued shares of capital stock or other equity interest in the Company, or any contract,
commitment, agreement, understanding or arrangement of any kind to which the Company is a party and
providing for the issuance or sale of any capital stock of the Company, any such convertible,
exchangeable or exercisable securities or any such rights, warrants or options. Without limiting
the foregoing, (i) no preemptive right, co-sale right, registration right, right of first refusal
or other similar right exists with respect to the issuance and sale of the Shares, the Additional
Investment Rights and the AIR Shares, except as provided in the Agreements and (ii) provided that
no Investor owns, together with purchases made hereunder, more than 15% of the Common Stock, no
securities or instruments containing anti-dilution or similar provisions will be triggered by the
issuance of the Shares, the Additional Investment Rights and the AIR Shares. There are no
shareholders agreements, voting agreements or other similar agreements with respect to the Common
Stock to which the Company is a party.

     3.5 Legal Proceedings. There is no material legal or governmental proceeding
pending, or to the knowledge of the Company, threatened in writing, to which the Company is a party
or of which the business or property of the Company is subject that is required to be disclosed and
that is not so disclosed in the SEC Reports (as defined in Section 4.9). The Company is not
subject to any injunction, judgment, decree or order of any court, regulatory body, administrative
agency or other government body.

     3.6 No Violations. The Company is not in violation of its Certificate of
Incorporation, bylaws or other organizational documents, as amended, or in violation of any law,
administrative regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company, which violation, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect, and the Company is not in default (and there
exists no condition which, with the passage of time or otherwise, would constitute a default) in
the performance of any bond, debenture, note or any other evidence of indebtedness or any
indenture, mortgage, deed of trust or any other material agreement or instrument to which the
Company is a party or by which the Company or its properties are bound, which default is reasonably
likely to have a Material Adverse Effect.

     3.7 Governmental Permits, Etc. The Company has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local government or
governmental agency, department or body that are currently necessary for the operation of the
business of the Company as currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations is not reasonably likely to have a
Material Adverse Effect.

     3.8 Intellectual Property.

          (a) Except for matters which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect, (i) the Company has ownership of, or a license or other
legal

4

 

right to use, all patents, copyrights, trade secrets, trademarks, customer lists, designs,
manufacturing or other processes, computer software, systems, data compilation, research results or
other proprietary rights used in the business of the Company (collectively, “Intellectual
Property”) and (ii) all of the Intellectual Property owned by the Company consisting of patents,
registered trademarks and registered copyrights have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of Copyrights or the
corresponding offices of other jurisdictions and have been maintained and renewed in accordance
with all applicable provisions of law and administrative regulations in the United States and/or
such other jurisdictions.

          (b) Except for matters which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect, all material licenses or other material agreements under
which (i) the Company employs rights in Intellectual Property, or (ii) the Company has granted
rights to others in Intellectual Property owned or licensed by the Company are in full force and
effect, and there is no default by the Company with respect thereto.

          (c) The Company believes that it has taken all steps reasonably required in
accordance with sound business practice and business judgment to establish and preserve the
ownership of all material Intellectual Property owned by the Company.

          (d) Except for matters which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect, to the knowledge of the Company, (i) the present
business, activities and products of the Company do not infringe any intellectual property of any
other person; (ii) the Company is not making unauthorized use of any confidential information or
trade secrets of any person; and (iii) the activities of any of the employees of the Company,
acting on behalf of the Company do not violate any agreements or arrangements related to
confidential information or trade secrets of third parties.

          (e) No proceedings are pending, or to the knowledge of the Company, threatened in
writing, which challenge the rights of the Company to the use of Intellectual Property, except for
matters which are not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.

     3.9 Financial Statements. The financial statements of the Company and the related
notes contained in the SEC Reports present fairly and accurately in all material respects the
financial position of the Company as of the dates therein indicated, and the results of its
operations, cash flows and the changes in shareholders’ equity for the periods therein specified,
subject, in the case of unaudited financial statements for interim periods, to normal year-end
audit adjustments. As of their respective dates, such financial statements complied as to form in
all material respects with applicable accounting requirements and the published rules and
regulations of the SEC (as defined in Section 6.1(c)) with respect thereto. Such financial
statements (including the related notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis at the times and throughout the periods therein
specified, except that unaudited financial statements may not contain all footnotes required by
generally accepted accounting principles.

     3.10 No Material Adverse Change. Except as disclosed in Schedule 3.10, since
September 30, 2004, there has not been (i) an event, circumstance or change that has had a Material
Adverse Effect, (ii) any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company, or (iii) any loss or damage (whether or not insured) to the physical property
of the Company which has had a Material Adverse Effect.

     3.11 Nasdaq Compliance. The Common Stock is registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is quoted on the Nasdaq

5

 

SmallCap Market (the “Nasdaq Stock Market”), and the Company has taken no action intended to,
terminate the registration of the Common Stock under the Exchange Act or delisting the Common Stock
from the Nasdaq Stock Market. Assuming the accuracy of the Investor’s representations hereunder,
the issuance of the Shares, the Additional Investment Rights and the AIR Shares does not require
shareholder approval, including, without limitation, pursuant to Nasdaq Marketplace Rule 4350(i).

     3.12 Reporting Status. The Company has timely (including extensions permitted
pursuant to the Exchange Act Rule 12b-25) made all filings required under the Exchange Act during
the twelve (12) months preceding the date of this Agreement, and all of those documents complied in
all material respects with the SEC’s requirements as of their respective filing dates, and the
information contained therein as of the respective dates thereof did not contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under which they were made
not misleading. The Company is currently eligible to register the resale of Common Stock by the
Investors pursuant to a registration statement on Form S-3 under the Securities Act (the
“Registration Statement”).

     3.13 No Manipulation; Disclosure of Information. The Company has not taken and will
not take any action designed to or that might reasonably be expected to cause or result in an
unlawful manipulation of the price of the Common Stock to facilitate the sale or resale of the
Shares.

     3.14 Accountants. BDO Seidman, LLP, who expressed their opinion with respect to the
consolidated financial statements to be incorporated by reference from the Company’s Annual Report
on Form 10-K for the year ended September 30, 2004 into the Registration Statement and the
prospectus which forms a part thereof (the “Prospectus”), have advised the Company that they are,
and to the knowledge of the Company they are, independent accountants as required by the Securities
Act and the rules and regulations promulgated thereunder.

     3.15 Contracts. Except for matters which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect and those contracts that are substantially or
fully performed or expired by their terms, the contracts listed as exhibits to or described in the
SEC Reports that are material to the Company and all amendments thereto, are in full force and
effect on the date hereof, and neither the Company nor, to the Company’s knowledge, any other party
to such contracts is in breach of or default under any of such contracts.

     3.16 Taxes. Except for matters which are not, individually or in the aggregate,
reasonably likely have a Material Adverse Effect, the Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened
in writing against the Company.

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

     3.18 Investment Company. The Company is not an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within
the meaning of the Investment Company Act of 1940, as amended, and will not be deemed an
“investment company” as a result of the transactions contemplated by the Agreements.

6

 

     3.19 Insurance. The Company maintains insurance of the types and in the amounts
that the Company reasonably believes is adequate for its businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.

     3.20 Offering Prohibitions. Neither the Company nor any person acting on its behalf
or at its direction has in the past or will in the future take any action to sell, offer for sale
or solicit offers to buy any securities of the Company which would bring the offer or sale of the
Shares and the Additional Investment Rights as contemplated by this Agreement within the provisions
of Section 5 of the Securities Act. Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D of the Securities Act) in connection with the sale
of the Shares and the Additional Investment Rights. 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 an Investor or its investment advisor) relating to or arising out of the
transactions contemplated by the Agreements. The Company shall pay, and hold the Investor harmless
against, any liability, loss or expense (including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any claims relating to placement agent fees,
financial advisory fees or brokers’ commissions. Other than the Placement Agent, the Company has
not engaged any placement agent or other agent in connection with the sale of the Shares and the
Additional Investment Rights.

     3.21 Listing. The Company shall promptly secure the listing of all Shares and the
AIR Shares on the Nasdaq Stock Market and comply with all requirements of the NASD with respect to
the issuance of the Shares and the AIR Shares and the listing thereof on the Nasdaq Stock Market.
The Company shall pay all fees and expenses in connection with satisfying its obligations under
this Section 3.21.

     3.22 Related Party Transactions. To the knowledge of the Company, no transaction
has occurred between or among the Company or any of its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that with the passage of time will be
required to be disclosed pursuant to Section 13, 14 or 15(d) of the Exchange Act that has not been
disclosed in the SEC Reports.

     3.23 Books and Records. The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of,
and the operations of, the Company. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances 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 accordance with generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act) that are
designed to ensure that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange 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 in to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange 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.

7

 

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

     3.25 Sarbanes-Oxley Act. The Company is in compliance with all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are applicable to the Company as of the date
hereof, and all applicable rules and regulations promulgated by the SEC thereunder that are
applicable to the Company as of the date hereof, except where such noncompliance would not have,
individually or in the aggregate, a Material Adverse Effect.

     3.26 Disclosure. The Company confirms that neither it nor any other person acting
on its behalf has provided the Investor or its agents with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information. The Company
understands and confirms that the Investor will rely on the foregoing representations in effecting
transactions in securities of the Company. No event or circumstance has occurred or information
exists with respect to the Company or its business, properties, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure (as opposed to
voluntary public disclosure) or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company’s reports filed under the
Exchange Act are being incorporated into an effective registration statement filed by the Company
under the Securities Act). The Company acknowledges and agrees that the Investor is not making or
has not made any representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 4.

4. Representations, Warranties and Covenants of the Investor.

     4.1 Investor Knowledge and Status. The Investor represents and warrants to, and
covenants with, the Company that: (i) the Investor is an “accredited investor” as defined in
Regulation D under the Securities Act, is knowledgeable, sophisticated and experienced in making,
and is qualified to make decisions with respect to, investments in securities presenting an
investment decision similar to that involved in the purchase of the Shares and the Additional
Investment Rights, and has requested, received, reviewed and considered all information it deemed
relevant in making an informed decision to purchase the Shares and the Additional Investment
Rights; (ii) the Investor understands that the Shares and the Additional Investment Rights are
“restricted securities” and have not been registered under the Securities Act and is acquiring the
number of Shares and Additional Investment Rights set forth in paragraph 3 of the Securities
Purchase Agreement in the ordinary course of its business and for its own account for investment
only, has no present intention of distributing any of such Shares or Additional Investment Rights
and has no arrangement or understanding with any other persons regarding the distribution of such
Shares and Additional Investment Rights (provided, however, that by making the representations
herein, the Investor does not agree to hold any of the Shares for any minimum or other specific
term and reserves the right to dispose of the Shares or AIR Shares at any time in accordance with
or pursuant to an effective registration statement or an exemption under the Securities Act); (iii)
the Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares, the Additional Investment Rights or the AIR Shares except in compliance with the Securities
Act, applicable state securities laws and the respective rules and regulations promulgated
thereunder; (iv) the Investor has answered all questions in paragraph 4 of the Securities Purchase
Agreement and the Investor Questionnaire attached hereto as Exhibit B for use

8

 

in preparation of the Registration Statement and the answers thereto are true and correct as
of the date hereof and will be true and correct as of the Closing Date; (v) the Investor will
notify the Company promptly of any change in any of such information until such time as the
Investor has sold all of its Shares and AIR Shares or until the Company is no longer required to
keep the Registration Statement effective; and (vi) the Investor has, in connection with its
decision to purchase the number of Shares and the Additional Investment Rights set forth in
paragraph 3 of the Securities Purchase Agreement, relied only upon the representations and
warranties of the Company contained herein and the information contained in the SEC Reports. The
Investor understands that the issuance of the Shares and the Additional Investment Rights to the
Investor has not been registered under the Securities Act, or registered or qualified under any
state securities law, in reliance on specific exemptions therefrom, which exemptions may depend
upon, among other things, the representations made by the Investor in this Agreement. No person
(including without limitation the Placement Agent) is authorized by the Company to provide any
representation that is inconsistent with or in addition to those contained herein or in the SEC
Reports, and the Investor acknowledges that it has not received or relied on any such
representations.

     4.2 Power and Authority. The Investor represents and warrants to the Company that
(i) the Investor has full right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this Agreement constitutes a valid
and binding obligation of the Investor enforceable against the Investor in accordance with its
terms, except to the extent (a) rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, (b) such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and (c) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

     4.3 Short Position. The Investor has not, prior to the Closing Date, established
any hedge or other position in the Common Stock that is outstanding on the Closing Date and that is
designed to or could reasonably be expected to lead to or result in a disposition by the Investor
or any other person or entity. For purposes hereof, a “hedge or other position” would include,
without limitation, effecting any short sale or having in effect any short position (whether or not
such sale or position is against the box and regardless of when such position was entered into) or
any purchase, sale or grant of any right (including, without limitation, any put or call option)
with respect to the Common Stock or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of its value from the
Common Stock.

     4.4 No Investment, Tax or Legal Advice. The Investor understands that nothing in
the SEC Reports, this Agreement, or any other materials presented to the Investor in connection
with the purchase and sale of the Shares constitutes legal, tax or investment advice. The Investor
has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of Shares and the Additional Investment
Rights.

     4.5 Acknowledgments Regarding Placement Agent. The Investor acknowledges that the
Placement Agent has acted solely as placement agent for the Company in connection with the Offering
of the Shares and the Additional Investment Rights by the Company, and that the Placement Agent has
made no representation or warranty whatsoever with respect to the accuracy or completeness of
information, data or other related disclosure material that has been provided to the Investor. The
Investor further acknowledges that in making its decision to enter into this Agreement and purchase
the Shares and the Additional Investment Rights, it has relied on its own examination of the
Company and the terms of, and consequences of holding, the Shares and the AIR Shares. The Investor
further acknowledges that the provisions of this Section 4.5 are for the benefit of, and may be
enforced by, the Placement Agent.

9

 

     4.6 Deemed Disposition. The Investor will not, prior to the date the Registration
Statement becomes effective, enter into any transaction, including any hedging transaction, that
constitutes a deemed disposition of any of the Shares or AIR Shares, that will be covered with
Shares or AIR Shares registered pursuant to the Registration Statement.

     4.7 SEC Reports. The Investor has received and reviewed copies of the Company’s
Annual Report on Form 10-K for the year ended September 30, 2004 (and any amendments thereto filed
at least two (2) Business Days prior to the date hereof), the Company’s Proxy Statement for its
2005 Annual Meeting of Shareholders, the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004 and for the quarter ended December 31, 2004 (and any amendments thereto filed
at least two Business Days prior to the date hereof) or any of the Company’s Current Reports on
Form 8-K filed since January 1, 2004 and at least two (2) Business Days prior to the date hereof
(collectively, the “SEC Reports”),

5. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement or by the Placement Agent, all covenants,
agreements, representations and warranties made by the Company and the Investor herein shall
survive the execution of this Agreement, the delivery to the Investor of the Shares and the
Additional Investment Rights being purchased and the payment therefor and the exercise of the
Additional Investment Rights.

6. Registration of the Shares and the AIR Shares; Compliance with the Securities Act.

     6.1 Registration Procedures and Expenses. The Company shall:

          (a) subject to receipt of necessary information from the Investors, prepare and file
with the Securities and Exchange Commission (“SEC”), within fifteen (15) Business Days after the
Closing Date (the “Required Filing Date”), a Registration Statement on Form S-3 to enable the
resale of the Shares and the AIR Shares by the Investors from time to time;

          (b) use its best efforts, subject to receipt of necessary information from the
Investors, to cause the Registration Statement to become effective as soon as practicable, but in
no event later than ninety (90) days after the Registration Statement is filed by the Company, or
one hundred and twenty (120) days in the event the SEC reviews such filing (the “Required
Effectiveness Date”). If the Registration Statement has not been filed by the Required Filing Date
or become effective by the Required Effectiveness Date, the Company shall, on the Business Day
immediately following such date, and each 30th day thereafter, or such shorter period as
may be applicable, until such registration statement is filed or effective, as applicable, make a
payment to the Investor as partial compensation for such delay (the “Late Registration Payments”)
equal to one percent (1%) of the Purchase Price paid for the Shares and the related Additional
Investment Rights purchased by the Investor and not previously sold by the Investor until the
Registration Statement is filed or effective, as applicable; provided, however, that in no event
shall the payments made pursuant to this paragraph (b), if any, exceed in the aggregate eight
percent (8%) of the Purchase Price. Late Registration Payments will be prorated on a daily basis
during each 30 day period and will be paid to the Investor by wire transfer or check within five
(5) Business Days after the earlier of the end of each 30 day period, or such shorter period as may
be applicable, following the Required Filing Date or Required Effectiveness Date, as applicable;

          (c) use its best efforts to prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement current and effective for a period ending on the earlier of (i) the date on
which the Investor may sell Shares and AIR Shares, if purchased, pursuant to paragraph (k) of Rule
144 under the

10

 

Securities Act or any successor rule (“Rule 144”) or (ii) such time as all Shares and AIR
Shares, if purchased, have been sold pursuant to a registration statement or Rule 144, and to
notify each Investor promptly upon the Registration Statement and each post-effective amendment
thereto, being declared effective by the SEC;

          (d) submit to the SEC, within three (3) Business Days after the Company learns that
no review of the Registration Statement will be made by the staff of the SEC or that the staff of
the SEC has no further comments on the Registration Statement, as the case may be, a request for
acceleration of effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request;

          (e) keep the Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the Shares and the AIR
Shares, if purchased, covered by such Registration Statement without restriction pursuant to Rule
144(k) (or successor thereto) promulgated under the Securities Act or (ii) the date on which the
Investors shall have sold all the Shares and the AIR Shares, if purchased, covered by such
Registration Statement;

          (f) ensure that the Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading;

          (g) furnish to the Investor such number of copies of the Registration Statement and
the Prospectus (including supplemental prospectuses) as the Investor may reasonably request, in
order to facilitate the public sale or other disposition of all or any of the Shares and the AIR
Shares by the Investor;

          (h) file documents required of the Company for normal blue sky clearance in states
specified in writing by the Investor; provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in which it is not now
so qualified or has not so consented;

          (i) bear all expenses (other than underwriting discounts and commissions, if any) in
connection with the procedures in paragraph (a) through (h) of this Section 6.1 and the
registration of the Shares and the AIR Shares pursuant to the Registration Statement;

          (j) advise the Investors, promptly after it shall receive notice or obtain knowledge
of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the
Registration Statement or of the initiation of any proceeding for that purpose; and it will
promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should be issued; and

          (k) with a view to making available to the Investor the benefits of Rule 144 and any
other rule or regulation of the SEC that may at any time permit the Investor to sell Shares and AIR
Shares to the public without registration, the Company covenants and agrees to use its commercially
reasonable efforts to: (i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) such date as all of the Investor’s
Shares and AIR Shares may be resold pursuant to Rule 144(k) or any other rule of similar effect or
(B) such date as all of the Investor’s Shares shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the Securities Act and
under the Exchange Act; and (iii) furnish to the Investor

11

 

upon request, as long as the Investor owns any Shares or any AIR Shares, (A) a written
statement by the Company that it has complied with the reporting requirements of the Securities Act
and the Exchange Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in
order to avail the Investor of any rule or regulation of the SEC that permits the selling of any
such Shares or AIR Shares without registration.

     It shall be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 6.1 that the Investor shall furnish to the Company such information
regarding itself, the Shares to be sold by Investor, and the intended method of disposition of such
securities as shall be required to effect the registration of the Shares and the AIR Shares.

     The Company understands that the Investor disclaims being an underwriter, but acknowledges
that a determination by the SEC that the Investor is deemed an underwriter shall not relieve the
Company of any obligations it has hereunder.

     6.2 Transfer or Resale; Suspension.

          (a) The Investor understands that except as provided herein: (i) the Shares, the
Additional Investment Rights and the AIR Shares have not been and are not being registered under
the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) the Investor shall have delivered to
the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the effect
that such securities to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) the Investor provides the Company with
reasonable assurance that such securities can be sold, assigned or transferred pursuant to Rule
144; (ii) any sale of the securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of securities
under circumstances in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as the term is defined in the Securities Act) may require compliance with
some other exemption under the Securities Act or the rules and regulations of the SEC thereunder,
and (iii) neither the Company nor any other person is under an obligation to register the
securities under the Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

          (b) The Investor understands that the certificates or other instruments representing
the Shares, the Additional Investment Rights and, until such time as the resale of the Shares and
the AIR Shares have been registered under the Securities Act as contemplated herein, shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of such stock
certificates):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

12

 

          (c) Except in the event that paragraph (d) below applies, the Company shall: (i) if
deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective
amendment to the Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements therein
not misleading, and so that, as thereafter delivered to purchasers of the Shares and the AIR Shares
being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading; (ii) provide the
Investor copies of any documents filed pursuant to Section 6.2(c)(i); and (iii) upon request,
inform each Investor who so requests that the Company has complied with its obligations in Section
6.2(c)(i) (or that, if the Company has filed a post-effective amendment to the Registration
Statement which has not yet been declared effective, the Company will notify the Investor to that
effect, will use its best efforts to secure the effectiveness of such post-effective amendment as
promptly as possible and will promptly notify the Investor pursuant to Section 6.2(c)(i) hereof
when the amendment has become effective).

          (d) Subject to paragraph (e) below, in the event: (i) of any request by the SEC or
any other federal or state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption from
qualification of any of the Shares or the AIR Shares for sale in any jurisdiction or the
initiation of any proceeding for such purpose; or (iv) of any event or circumstance which
necessitates the making of any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall promptly deliver a certificate in writing to the Investor (the
“Suspension Notice”) to the effect of the foregoing and, upon receipt of such Suspension Notice,
the Investor will refrain from selling any Shares or AIR Shares pursuant to the Registration
Statement (a “Suspension”) until the Investors are advised in writing by the Company that the
current Prospectus may be used, and has received copies of any additional or supplemental filings
that are incorporated or deemed incorporated by reference in any such Prospectus. In the event of
any Suspension, the Company will use its reasonable best efforts to cause the use of the Prospectus
so suspended to be resumed as soon as reasonably practicable after delivery of a Suspension Notice
to the Investors. In addition to and without limiting any other remedies (including, without
limitation, at law or at equity) available to the Investor, the Investor shall be entitled to
specific performance in the event that the Company fails to comply with the provisions of this
Section 6.2(d).

          (e) Notwithstanding the foregoing paragraphs of this Section 6.2, the Company shall
use its commercially reasonable efforts to ensure that (i) a Suspension shall not exceed thirty
(30) days individually, and (ii) no more than two (2) Suspensions shall occur during any twelve
month period (each Suspension that satisfies the foregoing criteria being referred to herein as a
“Qualifying Suspension”).

          (f) If a Suspension is not then in effect, the Investor may sell Shares and AIR
Shares under the Registration Statement, provided that it complies with any applicable prospectus
delivery

13

 

requirements. Upon receipt of a request therefor, the Company will provide an adequate number
of current Prospectuses to the Investor and to any other parties requiring such Prospectuses.

          (g) The legend set forth in Section 6.2(b) shall be removed and the Company shall
issue a certificate without such legend or any other legend to the holder of the Shares, the
Additional Investment Rights or the AIR Shares upon which it is stamped, if (a) such securities are
registered for resale under the Securities Act and such registration statement is effective, (ii)
in connection with a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such sale,
assignment or transfer of such securities may be made without registration under the applicable
requirements of the Securities Act, or (iii) such holder provides the Company with reasonable
assurance that such securities can be sold, assigned or transferred pursuant to Rule 144(k). The
Company agrees that it shall, immediately prior to the Registration Statement being declared
effective, deliver to its transfer agent an opinion letter of counsel, opining that at any time the
Registration Statement is effective, the transfer agent shall be authorized to issue, in connection
with the sale of the Shares or the AIR Shares , certificates representing such Shares or AIR Shares
without restrictive legend, provided the Shares or AIR Shares are to be sold pursuant to the
Prospectus contained in the Registration Statement and the such Investor acknowledges its
obligation to comply with applicable prospectus delivery requirements. Upon receipt of such
opinion, the Company shall cause the transfer agent to confirm, for the benefit of the Investor,
that no further opinion of counsel is required at the time of transfer in order to issue such
Shares or AIR Shares without restrictive legend. Following the effective date of the Registration
Statement or at such earlier time as a legend is no longer required for the Shares or the AIR
Shares, the Company will use its commercially reasonable best efforts following the delivery by the
Investor to the Company or the Company’s transfer agent of a legended certificate representing the
Shares and the AIR Shares, deliver or cause to be delivered to the Investor or at the Investor’s
direction a certificate representing such Shares and AIR Shares that is free from all restrictive
and other legends.

     6.3 Indemnification. For the purpose of this Section 6.3:

          (a) the term “Selling Shareholder” shall mean the Investor, the directors, officers,
partners, members, employees, agents, representatives of, and each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act;

          (b) the term “Registration Statement” shall include any final Prospectus, exhibit,
supplement or amendment included in or relating to, and any document incorporated by reference in,
the Registration Statement (or deemed to be a part thereof) referred to in Section 6.1; and

          (c) the term “untrue statement” shall mean any untrue statement or alleged untrue
statement, or any omission or alleged omission to state in the Registration Statement or the
Prospectus a material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus), in the light of the circumstances under which they were
made not misleading.

          (d) (i) The Company agrees to indemnify and hold harmless each Selling Shareholder
from and against any losses, claims, damages or liabilities to which such Selling Shareholder may
become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (a) any
untrue statement of a material fact contained in the Registration Statement or the Prospectus; (b)
any inaccuracy in the representations and warranties of the Company contained in the Agreement or
the failure of the Company to perform its obligations hereunder; or (c) any breach by the Company
of any of its representations and warranties in this Agreement or the failure by the Company to
comply with any

14

 

agreement or covenant contained in this Agreement or to fulfill any undertaking included in
the Registration Statement, and the Company will reimburse such Selling Shareholder for any
reasonable legal expense or other actual accountable out of pocket expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or claim; provided,
however, that the Company shall not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, an untrue statement made in such Registration
Statement or the Prospectus in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Shareholder specifically for use in preparation of
the Registration Statement, or any inaccuracy in representations made by such Selling Shareholder
in the Investor Questionnaire or the failure of such Selling Shareholder to comply with its
covenants and agreements contained in Sections 4.1, 4.2, 4.3, 4.6 or 6.2 hereof or any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the
Selling Shareholder prior to the pertinent sale or sales by the Selling Shareholder.

               (ii) The Investor agrees to indemnify and hold harmless the Company (and each person,
if any, who controls the Company within the meaning of Section 15 of the Securities Act, each
officer of the Company who signs the Registration Statement and each director of the Company) from
and against any losses, claims, damages or liabilities to which the Company (or any such officer,
director or controlling person) may become subject (under the Securities Act or otherwise), insofar
as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, any untrue statement of a material fact contained in the Registration
Statement or the Prospectus if, and only if, such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Investor specifically for use
in preparation of the Registration Statement, and the Investor will reimburse the Company (or such
officer, director or controlling person), as the case may be, for any reasonable legal expense or
other actual accountable out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim. The obligation to indemnify (including
any reimbursement obligation) shall be limited to the net amount of the proceeds received by the
Investor from the sale of the Shares and the AIR Shares pursuant to the Registration Statement.

               (iii) Promptly after receipt by any indemnified person of a notice of a claim or the
beginning of any action in respect of which indemnity is to be sought against an indemnifying
person pursuant to this Section 6.3, such indemnified person shall notify the indemnifying person
in writing of such claim or of the commencement of such action, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to any indemnified
party under this Section 6.3 (except to the extent that such omission materially and adversely
affects the indemnifying party’s ability to defend such action) or from any liability otherwise
than under this Section 6.3. Subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying person shall be entitled to
participate therein, and, to the extent that it shall elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall
be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of its election to
assume the defense thereof (unless it has failed to assume the defense thereof and appoint counsel
reasonably satisfactory to the indemnified party), such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the reasonable opinion of counsel to the
indemnified person, for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled
to retain its own counsel at the expense of such indemnifying person; provided, however, that no
indemnifying person shall be responsible for the fees and expenses of more than one separate
counsel (together with

15

 

appropriate local counsel) for all indemnified parties. In no event shall any indemnifying
person be liable in respect of any amounts paid in settlement of any action unless the indemnifying
person shall have approved the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying person shall, without the prior written consent of the
indemnified person, effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could reasonably have been a party and indemnification could
have been sought hereunder by such indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability on claims that are the subject
matter of such proceeding.

               (iv)  If the indemnification provided for in this Section 6.3 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (d)(i) or (d)(ii) above in
respect of any losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Investor on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an untrue statement,
whether the untrue statement relates to information supplied by the Company on the one hand or the
Investor on the other and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and the Investor agree that
it would not be just and equitable if contribution pursuant to this subsection (d) were determined
by pro rata allocation (even if the Investors were treated as one entity for such purpose) or by
any other method of allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this subsection (d), the Investor shall not be required
to contribute any amount in excess of the net amount of the proceeds received by the Investor from
the sale of the Shares and the AIR Shares pursuant to the Registration Statement. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Investor’s obligation in this subsection to contribute is several with the
Other Investors in proportion to their sales of Shares and AIR Shares to which such loss relates
and not joint.

               The parties to this Agreement hereby acknowledge that they are sophisticated business persons
who were represented by counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 6.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 6.3 fairly allocate the
risks in light of the ability of the parties to investigate the Company and its business in order
to assure that adequate disclosure is made in the Registration Statement as required by the
Securities Act and the Exchange Act.

     6.4 Termination of Conditions and Obligations. The conditions precedent imposed by
Section 4 or this Section 6 upon the transferability of the Shares and the AIR Shares shall cease
and terminate as to any particular number of the Shares or AIR Shares when such Shares and AIR
Shares shall have been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition set forth in the Registration
Statement covering such Shares and AIR Shares or at such time as an opinion of counsel satisfactory
to the Company shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.

16

 

     6.5 Information Available. So long as the Registration Statement is effective
covering the resale of Shares and the AIR Shares owned by the Investor, the Company will furnish
(or, to the extent such information is available electronically through the Company’s filings with
the SEC, the Company will make available) to the Investor:

          (a) as soon as practicable after it is available, one copy of (i) its Annual Report
to Shareholders (which Annual Report shall contain financial statements audited in accordance with
generally accepted accounting principles by a national firm of certified public accountants) and
(ii) if not included in substance in the Annual Report to Shareholders, its Annual Report on Form
10-K (the foregoing, in each case, excluding exhibits);

          (b) upon the reasonable request of the Investor, all exhibits excluded by the
parenthetical to subparagraph (a)(ii) of this Section 6.5 as filed with the SEC and all other
information that is made available to shareholders; and

          (c) upon the reasonable request of the Investor, an adequate number of copies of the
Prospectuses to supply to any other party requiring such Prospectuses; and the Company, upon the
reasonable request of the Investor, will meet with the Investor or a representative thereof at the
Company’s headquarters during the Company’s normal business hours to discuss all information
relevant for disclosure in the Registration Statement covering the Shares and the AIR Shares and
will otherwise reasonably cooperate with the Investor conducting an investigation for the purpose
of reducing or eliminating the Investor’s exposure to liability under the Securities Act, including
the reasonable production of information at the Company’s headquarters; provided, that the Company
shall not be required to disclose any confidential information to or meet at its headquarters with
the Investor until and unless the Investor shall have entered into a confidentiality agreement in
form and substance reasonably satisfactory to the Company with the Company with respect thereto.

     6.6 Public Statements. The Company shall, on or before 8:30 a.m., New York City
Time, on first Business Day after the date of this Agreement, issue a press release (the “Press
Release”) reasonably acceptable to the Investor disclosing all material terms of the transactions
contemplated hereby. On or before 8:30 a.m., New York City Time, on the Business Day following the
Closing Date, the Company shall file a Current Report on Form 8-K describing the terms of the
transactions contemplated by the Agreements in the form required by the Exchange Act, and attaching
the form of the Agreements and the Additional Investment Rights as exhibits to such filing
(including all attachments). The Company will not issue an public statement, press release or any
other public disclosure listing the Investor as one of the purchasers of the Shares and the
Additional Investment Rights without the Investor’s prior written consent, except as may be
required by applicable law or rules of the Nasdaq stock market or any exchange on which the
Company’s securities are listed.

     6.7 Additional Issuances of Securities.

          (a) For purposes of this Section 6.7, the following definitions shall apply.

“Common Stock Equivalents” means, collectively, Options and Convertible Securities.

17

 

“Convertible Securities” means any stock or securities (other than Options) convertible into or
exercisable or exchangeable for Common Stock.

“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.

          (b) From the date hereof until the date that is twenty (20) Business Days following the
effective date of the Registration Statement the Company will not, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or
any option to purchase or other disposition of) any of its equity or equity equivalent securities,
including without limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or exchangeable or
exercisable for Common Stock or Common Stock Equivalents (any such offer, sale, grant, disposition
or announcement being referred to as a “Subsequent Placement”). In addition, the Company will not,
for a period of six (6) months following the Closing Date, offer for sale or sell any securities
unless such offer or sale does not jeopardize the availability of exemptions from the registration
and qualification requirements under applicable securities laws and stockholder approval
regulations of any regulatory authority with respect to the Offering.

          (c) From the date hereof until the date that is the twelve month anniversary of the
effective date of the Registration Statement, the Company will not, directly or indirectly, effect
any Subsequent Placement unless the Company shall have first notified the Investor of its intention
to effect a Subsequent Placement and, if the Investor indicates its interest in participating in
such Subsequent Placement the Company shall first comply with the provisions of Section 6.7(d) and
6.7(e). If the Investor indicates it does not wish to participate in a Subsequent Placement, the
Company need not comply with Section 6.7(d) or 6.7(e) with respect to such Investor.

          (d) Prior to Closing of any Subsequent Placement, the Company shall deliver to each
Investor who has indicated a desire to participate in the Subsequent Placement a written notice
(the “Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice
shall (x) identify and describe the Offered Securities; (y) 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, and (z) offer to issue and sell to or exchange with such Investors
an additional 50% of the Offered Securities, with such additional securities allocated among such
Investors (a) based on such Investor’s pro rata portion of the aggregate Shares purchased under the
Agreements (the “Basic Amount”), and (b) with respect to each Investor that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of
other Investors as such Investor shall indicate it will purchase or acquire should the other
Investors subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

          (e) To accept an Offer, an Investor must deliver a written notice to the Company
prior to the end of the fifth (5th) Business Day after such Investor’s receipt of the Offer Notice
(the

18

 

“Offer Period”), setting forth such Investor’s irrevocable intention to purchase such
Investor’s Basic Amount and, if such Investor shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Investor elects to purchase (in either case, the
“Notice of Acceptance”). If the Basic Amounts subscribed for by all Investors are less than the
total of all of the Basic Amounts, then each Investor 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, that if the
Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each
Investor 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 Investor bears
to total Basic Amount of all Investors that have subscribed for Undersubscription Amounts, subject
to rounding by the Company to the extent it deems reasonably necessary. The purchase and sale
shall be on identical terms as the Subsequent Placement and the closing of such additional sale
shall occur not later than ten (10) Business Days after the closing of the sale of the Subsequent
Placement.

          (f) The restrictions contained in Sections 6.7(b) and 6.7(c) shall not apply (1) in
connection with any employee benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company’s securities may be issued to any employee, officer,
director or consultant for services provided to the Company, or pursuant to the exercise of an
securities of the Company issues thereunder; (2) pursuant to a bona fide firm commitment
underwritten public offering with an underwriter which generates gross proceeds to the Company in
excess of $20,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under
the Securities Act and “equity lines”); (3) upon conversion of any Options or Convertible
Securities that are outstanding on the day immediately preceding the date hereof, provided, that
the price and number of shares issuable under such Options or Convertible Securities are not
amended, modified or changed on or after the Closing Date; or (4) in connection with any bona fide
strategic transaction or acquisition by the Company, whether through an acquisition for stock or a
merger, of any business, assets or technologies the primary purpose of which is not to raise equity
capital. The foregoing provisions shall not prevent the Company from filing a “shelf” registration
statement pursuant to Rule 415 under the Securities Act, but the foregoing provisions shall apply
to any sale of securities by the Company thereunder.

7. Notices. All notices, requests, consents and other communications hereunder shall be
in writing, shall be delivered (A) if within the United States, by first-class registered or
certified airmail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if from outside the United States, by International Federal Express (or
comparable service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, upon the Business Day received, (ii) if delivered by
nationally recognized overnight carrier, one (1) Business Day after timely delivery to such
carrier, (iii) if delivered by International Federal Express (or comparable service), two (2)
Business Days after timely delivery to such carrier, (iv) if delivered by facsimile, upon electric
confirmation of receipt and shall be addressed as follows, or to such other address or addresses as
may have been furnished in writing by a party to another party pursuant to this paragraph:

          (a) if to the Company, to:

Medwave, Inc.

435 Newbury Street

Danvers, MA 01923

Attention: Timothy O’Malley, President and CEO

Telephone: (978) 762-8999

Facsimile: (978) 762-8908

19

 

with a copy to:

Goodwin
Procter LLP

Exchange Place

Boston, MA 02109

Attention: Raymond C. Zemlin, PC

Telephone: (617) 570-1512

Facsimile: (617) 523-1231

          (b) if to the Investor, at its address on the signature page to the Securities
Purchase Agreement.

8. Amendments; Waiver. This Agreement may not be modified or amended except pursuant to
an instrument in writing signed by the Company and the Investor. Any waiver of a provision of this
Agreement must be in writing and executed by the party against whom enforcement of such waiver is
sought.

9. Headings. The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this Agreement.

10. Entire Agreement; Severability. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties, both oral and
written relating to the subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way be affected or
impaired thereby.

11. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without giving effect to the principles of
conflicts of law.

12. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.

13. Independent Nature of Investor’s Obligations and Rights.
The obligations of the
Investor under the Agreement is several and not joint with the obligations of any Other Investor,
and the Investor shall not be responsible in any way for the performance of the obligations of any
Other Investor under the Agreements. Nothing contained herein or in any other Agreement, and no
action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of entity, or create
a presumption that the Investors are in any way acting in concert or as a group with respect to
such obligations or the transactions contemplated by the Agreements and the Company acknowledges
that the Investors are not acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Agreements. The Investor confirms that it has independently
participated in the negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Investor 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
Agreements, and it shall not be necessary for any Other Investor to be joined as an additional
party in any proceeding for such purpose.

20

 

EXHIBIT A

Medwave, Inc.

STOCK CERTIFICATE QUESTIONNAIRE

     Pursuant to Section 4 of the Agreement, please provide us with the following information:

	 	 	 	 	 
	1.

	 	The exact name in which your Shares and Additional Investment
Rights are to be registered (this is the name that will appear on your
stock certificate(s)). You may use a nominee name if appropriate:
	 	                                        
	 
	 	 	 	 
	2.

	 	If a nominee name is listed in response to item 1 above, the
relationship between the Investor and such nominee:
	 	                                        
	 
	 	 	 	 
	3.

	 	The mailing address of the registered holder listed in response to
item 1 above:
	 	                                        
	 
	 	 	 	 
	4.

	 	The Social Security Number or Tax Identification Number of the
registered holder listed in the response to item 1 above:
	 	                                        

A-1

 

EXHIBIT B

Medwave, Inc.

INVESTOR QUESTIONNAIRE

(All information will be treated confidentially)

To: Medwave, Inc.,

     The undersigned hereby acknowledges the following:

     This Investor Questionnaire (“Questionnaire”) must be completed by each potential investor in
connection with the offer and sale of the shares of the common stock, par value $.01 per share (the
“Shares”), of Medwave, Inc. (the “Company”). The Shares and the Additional Investment Rights are
being offered and sold by the Company without registration under the Securities Act of 1933, as
amended (the “Securities Act”), and the securities laws of certain states, in reliance on the
exemptions contained in Section 4 of the Securities Act and on Regulation D promulgated thereunder
and in reliance on similar exemptions under applicable state laws. The Company must determine that
a potential investor meets certain suitability requirements before offering or selling Shares and
Additional Investment Rights to such investor. The purpose of this Questionnaire is to assure the
Company that each investor will meet the applicable suitability requirements. The information
supplied by the undersigned will be used in determining whether the undersigned meets such
criteria, and reliance upon the private offering exemption from registration is based in part on
the information herein supplied.

     This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy
any security. The undersigned’s answers will be kept strictly confidential. However, by signing
this Questionnaire the undersigned will be authorizing the Company to provide a completed copy of
this Questionnaire to such parties as the Company deems appropriate in order to ensure that the
offer and sale of the Shares and the Additional Investment Rights will not result in a violation of
the Securities Act or the securities laws of any state and that the undersigned otherwise satisfies
the suitability standards applicable to purchasers of the Shares and the Additional Investment
Rights. All potential investors must answer all applicable questions and complete, date and sign
this Questionnaire. The undersigned shall print or type its responses and attach additional sheets
of paper if necessary to complete its answers to any item.

A. Background Information

Name:

Business Address:

(Number and Street)

	 	 	 	 	 
	

	(City)
	 	(State)
	 	(Zip Code)

Telephone Number: (       )

Residence Address: 

(Number and Street)

B-1

 

	 	 	 	 	 
	

	(City)
	 	(State)
	 	(Zip Code)

Telephone Number: (       )

If an individual:

	 	 	 	 	 	 	 	 	 	 	 
	Age:

	 	 	 	Citizenship:
	 	 	 	Where registered to vote:	 	 
	

	 	

	 	 	 	

	 	 	 	

If a corporation, partnership, limited liability company, trust or other entity:

Type of entity:

	 	 	 	 	 	 	 
	State of formation:
	 	

	 	Date of formation:	 	

Social Security or Taxpayer
Identification No. 

Send all correspondence to (check one):                     Residence Address                                         Business Address

B. Status as Accredited Investor

The undersigned is an “accredited investor” as such term is defined in Regulation D under the
Securities Act, because at the time of the sale of the Shares the undersigned falls within one or
more of the following categories (Please initial one or more, as applicable):

___(1) a bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that act; a Small Business
Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its political subdivisions
for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an
employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if
the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which
is either a bank, savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with the investment decisions made solely by persons that are accredited
investors;1

___(2) a private business development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940;

	1	 	As used in this Questionnaire, the term
“net worth” means the excess of total assets over total
liabilities. In computing net worth for the purpose of subsection (4), the
principal residence of the investor must be valued at cost, including cost of
improvements, or at recently appraised value by a professional appraiser. In
determining income, the investor should add to the investor’s adjusted
gross income any amounts attributable to tax exempt income received, losses
claimed as a limited partner in any limited partnership, deductions claimed for
depreciation, contributions to an IRA or KEOGH retirement plan, alimony
payments, and any amount by which income from long-term capital gains has been
reduced in arriving at adjusted gross income.

B-2

 

___(3) an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986,
corporation, Massachusetts or similar business trust, or partnership, not formed for the specific
purpose of acquiring the Shares offered, with total assets in excess of $5,000,000;

___(4) a natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of such person’s purchase of the Shares exceeds $1,000,000;

___(5) a natural person who had an individual income in excess of $200,000 in each of the two
most recent years or joint income with that person’s spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the current year;

___(6) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the Shares offered, whose purchase is directed by a sophisticated person as described
in Rule 506(b)(2)(ii) of Regulation D; and

___(7) an entity in which all of the equity owners are accredited investors (as defined above).

C. Representations

The undersigned hereby represents and warrants to the Company as follows:

     1. Any purchase of the Shares and the Additional Investment Rights would be solely for
the account of the undersigned and not for the account of any other person or with a view to any
resale, fractionalization, division, or distribution thereof.

     2. The information contained herein is complete and accurate and may be relied upon by
the Company, and the undersigned will notify the Company immediately of any material change in any
of such information occurring prior to the closing, if any, with respect to the purchase of Shares
and Additional Investment Rights by the undersigned or any co-purchaser.

     3. There are no suits, pending litigation, or claims against the undersigned that could
materially affect the net worth of the undersigned as reported in this Questionnaire.

     4. The undersigned acknowledges that there may occasionally be times when the Company,
determines that it must suspend the use of the Prospectus forming a part of the Registration
Statement (as such terms are defined in the Securities Purchase Agreement to which this
Questionnaire is attached) until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the Securities and Exchange Commission or until the
Company has amended or supplemented such Prospectus. The undersigned is aware that, in such event,
the Shares and the AIR Shares will not be subject to ready liquidation, and that any Shares and AIR
Shares purchased by the undersigned would have to be held during such suspension. The overall
commitment of the undersigned to investments which are not readily marketable is not excessive in
view of the undersigned’s net worth and financial circumstances, and any purchase of the Shares and
the Additional Investment Rights will not cause such

B-3

 

commitment to become excessive. The undersigned is able to bear the economic risk of an investment
in the Shares and the Additional Investment Rights.

     5. The following is a list of all states and other jurisdictions in which blue sky or similar
clearance will be required in connection with the undersigned’s purchase of the Shares and the
Additional Investment rights:

___________________________________________

___________________________________________

___________________________________________

The undersigned agrees to notify the Company in writing of any additional states or other
jurisdictions in which blue sky or similar clearance will be required in connection with the
undersigned’s purchase of the Shares and the Additional Investment Rights.

B-4

 

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this ___day of ___,
2005, and declares under oath that it is truthful and correct.

	 	 	 	 	 	 	 
	 	 	Print Name
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	 	
	 	 
	 	 	Signature
	 
	 	 	 	 	 	 
	 	 	Title:
	

	 	 	 	
	 	 
	

	 	 	 	(required for any purchaser that is a
corporation, partnership, trust or other
entity)	 	 

B-5

 

Draft February 10, 2005

EXHIBIT C

FORM OF LEGAL OPINION

February ____, 2005

To:

Ladies and Gentlemen:

          We have acted as counsel for Medwave, Inc., a Delaware corporation (the “Company”), in
connection with the issuance of 1,300,000 shares (the “Shares”) of the Company’s Common Stock, $.01
par value per share (the “Common Stock”), and Additional Investment Rights (the “Additional
Investment Rights”) to purchase up to an additional 575,000 shares of Common Stock (the “AIR
Shares”) pursuant to those certain Securities Purchase Agreements, dated as of February ___, 2005,
including the annex and exhibits thereto (collectively, the “Agreement”), each between the Company
and the Investors named therein. This opinion is being delivered to you pursuant to Section 2 of
the Agreement. Capitalized terms used herein are as defined in the Agreement unless otherwise
specifically provided herein.

          We have examined such documents and have reviewed such questions of law as we have considered
necessary or appropriate for the purpose of this opinion.

          As to matters of fact material to our opinion, we have relied, without independent
verification, on the representations and warranties contained in the Agreement and on certificates
of officers of the Company and public officials.

          Our opinions expressed below as to certain factual matters are qualified as being limited as
“known to us” or by other words to the same or similar effect. Such words, as used herein, mean
the information known to the attorneys in this firm who have represented the Company in connection
with the matters addressed herein. In rendering such opinions, we have not conducted any
independent investigation or consulted with other attorneys in our firm with respect to the matters
covered by the Agreement. No inference as to our knowledge with respect to such matters should be
drawn from the fact of our representation of the Company.

          Based on the foregoing, we are of the opinion that:

     1. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with the corporate power to
conduct any lawful business activity. The Company has the corporate power to
execute, deliver and perform the Agreement including, without limitation, the
issuance and sale of the Shares.

 

 

     2. The Agreement and the Additional Investment Rights have been duly authorized
by all requisite corporate action, executed and delivered by the Company. The
Agreement and the Additional Investment Rights each constitutes the valid and
binding obligation of the Company enforceable in accordance with its terms.

     3. The Shares and the Additional Investment Rights have been duly authorized
and, upon issuance, delivery and payment therefor as described in the Agreement,
will be validly issued, fully paid and nonassessable. The AIR Shares have been duly
authorized and, upon issuance, delivery and payment therefor in accordance with the
Additional Investment Rights, will be validly issued, fully paid and nonassessable.
The AIR Shares have been duly and validly authorized and reserved for issuance by
all proper corporate action.

     4. As of the date hereof, the authorized capital stock of the Company consists
of 50,000,000 shares of common stock.

     5. The execution, delivery and performance of the Agreement and the issuance
and sale of the Shares, the Additional Investment Rights and the AIR Shares in
accordance with the Agreement and the Additional Investment Rights will not: (a)
violate or conflict with, or result in a breach of or default under, the Certificate
of Incorporation or by-laws of the Company, (b) violate or conflict with, or
constitute a default under any material agreement or instrument (limited, with your
consent, to agreements and instruments filed by the Company with the Securities and
Exchange Commission under the Exchange Act and applicable rules and regulations) to
which the Company is a party, or (c) violate any law of the United States or the
Commonwealth of Massachusetts, any rule or regulation of any governmental authority
or regulatory body of the United States or the Commonwealth of Massachusetts, or any
judgment, order or decree known to us and applicable to the Company of any court,
governmental authority or arbitrator.

     6. No consent, approval, authorization or order of, and no notice to or filing
with, any governmental agency or body or any court is required to be obtained or
made by the Company for the issue and sale of the Shares pursuant to the Agreement,
except such as have been obtained or made and such as may be required under the
federal securities laws or the Blue Sky laws of the various states.

     7. Assuming the representations made by the Investors and the Company set forth
in the Agreement and the exhibits thereto are true and correct and subject to the
Placement Agent’s compliance with applicable securities laws and regulations
(including, without limitation, the requirements of Regulation D under the
Securities Act), the offer, sale, issuance and delivery of the Shares, the
Additional Investment Rights and the AIR Shares to the Investors, in the manner
contemplated by the Agreement and the Additional Investment Rights, as the case may
be, is exempt from the registration requirements of the Securities Act, it

 

 

     being understood that no opinion is expressed as to any subsequent resale of
such securities.

     The opinions set forth above are subject to the following qualifications and
exceptions:

     (a) Our opinion in paragraph 2 above is subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of general
application affecting creditors’ rights.

     (b) Our opinion in paragraph 2 above is subject to the effect of general
principles of equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing, and other similar doctrines affecting
the enforceability of agreements generally (regardless of whether considered in a
proceeding in equity or at law).

     (c) Our opinion in paragraph 2 above, insofar as it relates to indemnification
provisions, is subject to the effect of federal and state securities laws and public
policy relating thereto.

     (d) We express no opinion as to the compliance or the effect of noncompliance
by the Investors with any state or federal laws or regulations applicable to the
Investors in connection with the transactions described in the Agreement or the
payment obligations of the Company under Sections 6.1(b) and 6.3(d) of the Agreement
if the payment obligations are construed as unreasonable in relation to actual
damages or disproportionate to actual damages suffered by the Investor.

          Members of our firm are admitted to the bar in The Commonwealth of Massachusetts and we
express no opinion as to the laws of any other jurisdiction except the laws of the Commonwealth of
Massachusetts, the General Corporation Law of the State of Delaware and the federal laws of the
United States of America. To the extent that the laws of any other jurisdiction govern the
agreements or transactions as to which we are opining herein, we have assumed, with your
permission, at your direction and without investigation or inquiry that such laws are identical to
those of The Commonwealth of Massachusetts, and we are expressing no opinion herein as to whether
such assumption is reasonable or correct.

          The foregoing opinions are being furnished to you solely for your benefit and may not be
relied upon by any other person without our prior written consent.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	GOODWIN PROCTER llp

 

 

EXHIBIT D

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (II) AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION OR
QUALIFICATION UNDER SAID ACT OR (III) SUCH TRANSFER BEING MADE PURSUANT TO RULE 144 UNDER SAID ACT.

MEDWAVE, INC.

ADDITIONAL INVESTMENT RIGHT

Additional Investment Right No.: ___

Number of Shares: ___

Date of Issuance: February ___, 2005 (“Issuance Date”)

Medwave, Inc., a Delaware corporation (the “Company”), hereby certifies that, for value received,
the receipt and sufficiency of which are hereby acknowledged, [INSERT NAME OF INVESTOR] 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, at any time or times on
or after the date hereof, but not after 11:59 p.m., New York City time, on the Expiration Date (as
defined below), ___(___) fully paid nonassessable shares of Common Stock (as
defined below) (the “Additional Investment Right Shares”). Except as otherwise defined herein,
capitalized terms in this Additional Investment Right shall have the meanings set forth in Section
15. This Additional Investment Right (including all Additional Investment Rights issued in
exchange, transfer or replacement hereof, the “Additional Investment Rights”) is one of the
Additional Investment Rights (the “SPA Additional Investment Rights”) issued pursuant to Section 1
of those certain Securities Purchase Agreements, dated as of February ___, 2005 (the “Initial
Issuance Date”), between the Company and the investors (the “Purchasers”) referred to therein (the
“Securities Purchase Agreements”).

1. EXERCISE OF ADDITIONAL INVESTMENT RIGHT.

          a. Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Additional Investment Right
may be exercised by the Holder on any day, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s
election to

 

 

exercise this Additional Investment Right, (ii) payment to the Company of an amount equal to
the applicable Exercise Price multiplied by the number of Additional Investment Right Shares as to
which this Additional Investment Right is being exercised (the “Aggregate Exercise Price”) in cash
or wire transfer of immediately available funds. The date the Exercise Notice and the Aggregate
Exercise Price are delivered to the Company (as determined in accordance with the notice provisions
hereof) is an “Exercise Date.” The Holder shall not be required to deliver the original
Additional Investment Right in order to effect an exercise hereunder. Execution and delivery of
the Exercise Notice with respect to less than all of the Additional Investment Right Shares shall
have the same effect as cancellation of the original Additional Investment Right and issuance of a
new Additional Investment Right evidencing the right to purchase the remaining number of Additional
Investment Right Shares. On or before the third Business Day following the Exercise Date, the
Company shall (X) issue and deliver to the address as specified in the Exercise Notice, a
certificate, registered in the name of the Holder or its designee, for the number of shares of
Common Stock to which the Holder is entitled pursuant to such exercise, or (Y) provided that the
Company’s transfer agent (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
Agent Commission system. On the Exercise Date, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Additional Investment Right Shares with respect
to which this Additional Investment Right has been exercised, irrespective of the date of delivery
of the certificates evidencing such Additional Investment Right Shares. Upon surrender of this
Additional Investment Right to the Company following one or more partial exercises, the Company
shall as soon as practicable and in no event later than three (3) Business Days after receipt of
the Additional Investment Right and at its own expense, issue a new Additional Investment Right (in
accordance with Section 7(d)) representing the right to purchase the number of Additional
Investment Right Shares purchasable immediately prior to such exercise under this Additional
Investment Right, less the number of Additional Investment Right Shares with respect to which this
Additional Investment Right is exercised. No fractional shares of Common Stock are to be issued
upon the exercise of this Additional Investment Right, 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 Additional Investment
Right Shares upon exercise of this Additional Investment Right.

          b. Exercise Price. For purposes of this Additional Investment Right, “Exercise Price”
means $4.00, subject to adjustment as provided herein.

          c. Company’s Failure to Timely Deliver Shares. If within three (3) trading days in the
case of a DWAC issuance or five (5) trading days in the case of the issuance of a physical
certificate, in each case after the Company’s receipt of the facsimile copy of a 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, as
applicable, for the number of shares of Common Stock to which the Holder is entitled upon such
holder’s exercise hereunder, and if on or after such date 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 (a “Buy-In”), then the Company shall, within three 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 (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 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 Bid Price on the date of exercise.

          d. Absolute and Unconditional Obligation. The Company’s obligations to issue and
deliver Additional Investment Right Shares in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the holder to enforce the same, the
recovery of any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the holder
or any other Person of any obligation to the Company or any violation or alleged violation of law
by the holder or any other Person. Nothing herein shall limit the Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity, including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing Additional Investment Right Shares upon exercise of the
Additional Investment Right as required pursuant to the terms hereof.

          e. Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Additional Investment Right Shares, the Company shall promptly
issue to the Holder the number of Additional Investment Right Shares that are not disputed and
resolve such dispute in accordance with Section 12.

          f. Limitations on Exercises. The Company shall not effect the exercise of this
Additional Investment Right, and no Person (as defined below) who is the Holder shall have the
right to exercise this Additional Investment Right, to the extent that after giving effect to such
exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of
9.99% of the shares of the Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Additional Investment Right with respect to which the
determination of such sentence is being made, but shall exclude shares of Common Stock which would
be issuable upon (i) exercise of the remaining, unexercised portion of this Additional Investment
Right beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company beneficially owned by
such Person and its affiliates (including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance

 

 

with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this
Additional Investment Right, in determining the number of outstanding shares of Common Stock a
holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-Q, Form 10-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the
Company shall within one Business Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company by the Holder and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.

     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF ADDITIONAL INVESTMENT RIGHT SHARES. The
Exercise Price and the number of Additional Investment Right Shares shall be adjusted from time to
time as follows:

          a. Adjustment upon Subdivision or Combination of Common Stock. If the Company at any
time after the date of issuance of this Additional Investment Right subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of Additional Investment Right
Shares will be proportionately increased. If the Company at any time after the date of issuance of
this Additional Investment Right combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will be proportionately increased
and the number of Additional Investment Right Shares will be proportionately decreased. Any
adjustment under this Section 2(a) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

          b. Other Events. If any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of Additional Investment Right Shares so as to protect the rights of
the Holder; provided that no such adjustment pursuant to this Section 2(b) will increase the
Exercise Price or decrease the number of Additional Investment Right Shares as otherwise determined
pursuant to this Section 2.

     3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders 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 or other similar transaction) (a “Distribution”), at any
time after the issuance of this Additional Investment Right, then, in each such case:

 

 

          a. any Exercise Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution shall
be reduced, effective as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the Common Stock on the trading day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to
one share of Common Stock, and (ii) the denominator shall be the Closing Bid Price of the Common
Stock on the trading day immediately preceding such record date; and

          b. the number of Additional Investment Right Shares shall be increased to a number of shares
equal to the number of shares of Common Stock obtainable immediately prior to the close of business
on the record date fixed for the determination of holders of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding
paragraph (a); provided that in the event that the Distribution is of common stock (“Other Common
Stock”) of a company whose common stock is traded on a national securities exchange or a national
automated quotation system, then the Holder may elect to receive a warrant to purchase Other Common
Stock in lieu of an increase in the number of Additional Investment Right Shares, the terms of
which shall be identical to those of this Additional Investment Right, except that such warrant
shall be exercisable into the number of shares of Other Common Stock that would have been payable
to the Holder pursuant to the Distribution had the holder exercised this Additional Investment
Right immediately prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Additional Investment Right was decreased
with respect to the Distribution pursuant to the terms of the immediately preceding paragraph (a)
and the number of Additional Investment Right Shares calculated in accordance with the first part
of this paragraph (b).

     4. PURCHASE RIGHTS; ORGANIC CHANGE.

          a. Purchase Rights. 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 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 Additional Investment Right (without regard to any limitations on the exercise of
this Additional Investment Right) 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 Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

          b. Organic Change. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company’s assets to another Person
or other transaction, in each case which is effected in such a way that holders of Common Stock are
entitled to receive securities or assets with respect to or in exchange for Common Stock is

 

 

referred to herein as an “Organic Change.” Prior to the consummation of any (i) sale of all
or substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the Person issuing the securities or providing the assets in such Organic
Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance reasonably
satisfactory to the holders of SPA Additional Investment Rights representing at least a majority of
the shares of Common Stock obtainable upon exercise of the SPA Additional Investment Rights then
outstanding) to deliver to the Holder in exchange for this Additional Investment Right, a security
of the Acquiring Entity evidenced by a written instrument substantially similar in form and
substance to this Additional Investment Right and reasonably satisfactory to the Holder (including,
an adjusted exercise price equal to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and exercisable for a corresponding number of shares of Common Stock
acquirable and receivable upon exercise of this Additional Investment Right (without regard to any
limitations on the exercise of this Additional Investment Right), if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation, merger or sale). In the
event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose
common stock or similar equity interest is listed, designated or quoted on a securities exchange or
trading market, the Holder may elect to treat such Person as the Acquiring Entity for purposes of
this Section 4(b). Prior to the consummation of any other Organic Change, the Company shall make
appropriate provision (in form and substance reasonably satisfactory to the holders of SPA
Additional Investment Rights representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Additional Investment Rights then outstanding) to insure that
the Holder thereafter will have the right to acquire and receive in lieu of or in addition to (as
the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon
the exercise of this Additional Investment Right (without regard to any limitations on the exercise
of this Additional Investment Right), such shares of stock, securities or assets that would have
been issued or payable in such Organic Change with respect to or in exchange for the number of
shares of Common Stock which would have been acquirable and receivable upon the exercise of this
Additional Investment Right as of the date of such Organic Change (without regard to any
limitations on the exercise of this Additional Investment Right).

     5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of the Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, 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 Additional
Investment Right, and will at all times in good faith carry out all the provisions of this
Additional Investment Right 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) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this Additional Investment
Right above the Exercise Price then in effect, (ii) will 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 Additional Investment Right, and (iii) will, so
long as any of the SPA Additional Investment Rights are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued

 

 

Common Stock, solely for the purpose of effecting the exercise of the SPA Additional
Investment Rights, 100% of the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of the SPA Additional Investment Rights then outstanding (without
regard to any limitations on exercise).

     6. HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein,
the Holder, solely in such Person’s capacity as the Holder, shall not be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any purpose, nor shall
anything contained in this Additional Investment Right be construed to confer upon the Holder,
solely in such Person’s capacity as a Holder, any of the rights of a shareholder 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 Additional Investment Right Shares which such Person is then entitled to
receive upon the due exercise of this Additional Investment Right. In addition, nothing contained
in this Additional Investment Right shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Additional Investment Right 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 will 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 ADDITIONAL INVESTMENT RIGHTS.

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

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

 

 

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

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

     8. NOTICES. Whenever notice is required to be given under this Additional Investment
Right, unless otherwise provided herein, such notice shall be given in accordance with Section 7 of
the Securities Purchase Agreements. The Company shall provide the Holder with prompt written
notice of all actions taken pursuant to this Additional Investment Right, including in reasonable
detail a description of such action and the reason therefore. Without limiting the generality of
the foregoing, the Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen 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 Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property to holders of Common
Stock or (C) for determining rights to vote with respect to any Organic Change, 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.

     9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Additional Investment Right 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 holders of SPA Additional Investment Rights representing at least a
majority of the shares of Common Stock obtainable upon exercise of the SPA Additional Investment
Rights then outstanding; provided that no such action may

 

 

increase the exercise price of any SPA Additional Investment Right or decrease the number of
shares or class of stock obtainable upon exercise of any SPA Additional Investment Right without
the written consent of the holder of this Additional Investment Right. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the SPA Additional
Investment Rights then outstanding.

     10. GOVERNING LAW. This Additional Investment Right shall be construed and enforced
in accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Additional Investment Right 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.

     11. CONSTRUCTION; HEADINGS. This Additional Investment Right shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed against any person
as the drafter hereof. The headings of this Additional Investment Right are for convenience of
reference and shall not form part of, or affect the interpretation of, this Additional Investment
Right.

     12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Additional Investment Right Shares, the Company
shall submit the disputed determinations or arithmetic calculations via facsimile within two
Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Additional Investment Right Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted to the Holder, then
the Company shall, within two Business Days submit via facsimile (a) the disputed determination of
the Exercise Price to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the Additional Investment
Right 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 and notify the Company and the Holder of the results no later than ten Business Days
from the time it receives the disputed determinations or calculations. Such investment bank’s or
accountant’s determination or calculation, as the case may be, shall be binding upon all parties
absent demonstrable error.

     13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Additional Investment Right shall be cumulative and in addition to all other
remedies available under this Additional Investment Right and the Securities Purchase Agreements,
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 Additional Investment Right. 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 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.

     14. TRANSFER. This Additional Investment Right may be offered for sale, sold,
transferred or assigned only with the express written consent of the Company, except as may
otherwise be required by the Securities Purchase Agreement.

     15. LIMITATIONS ON ISSUANCES. Notwithstanding anything to the contrary in the
Additional Investment Rights or the Securities Purchase Agreements, in no event shall the Company
issue, pursuant to such documents, a number of shares of Common Stock equal to or in excess of 20%
of the number of shares of Common Stock outstanding before the issuance of the shares of Common
Stock under the Securities Purchase Agreements and the Additional Investment Rights or otherwise be
required to take any action that would create the necessity of a stockholder vote under NASD Rule
4350.

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

     a. “Bloomberg” means Bloomberg Financial Markets.

     b. “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.

     c. “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, 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 bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, 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 closing bid price or
last trade price, respectively, 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 do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, 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 Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, 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 pursuant

 

 

to Section 12. All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the applicable calculation
period.

     d. “Common Stock” means (i) the Company’s common stock, par value $.01 per share, and (ii) any
capital stock into which such Common Stock shall have been changed or any capital stock resulting
from a reclassification of such Common Stock.

     “Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.

     g. “Effective Date” means the date on which the Registration Statement (as defined in the
Securities Purchase Agreement) is first declared effective by the SEC.

     “Expiration Date” means the date that is one hundred and eighty (180) days following, but not
including, the Effective Date; provided, however, if, at any time after the Effective Date
and prior to the original Expiration Date the Registration Statement is not effective and available
for the resale of all of the Shares and the AIR Shares (each as defined in the Securities Purchase
Agreements) (including during an Qualifying Suspension (as defined in the Securities Purchase
Agreement)), such original Expiration Date shall automatically be extended by such number of days
after the Effective Date and prior to the original Expiration Date that the Registration Statement
was not effective and available for the resale of all of the Shares and the AIR Shares.

     “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.

     “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.

     “Principal Market” means The Nasdaq SmallCap Market.

[Signature Page Follows]

 

 

     IN WITNESS WHEREOF, the Company has caused this Additional Investment Right to be duly
executed as of the Issuance Date set out above.

	 	 	 
	

	 	MEDWAVE, INC.
	 
	 	 
	

	 	By:
	

	 	

	

	 	Name:
	

	 	

	

	 	Title:
	

	 	

 

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

ADDITIONAL INVESTMENT RIGHT

MEDWAVE, INC.

To: Medwave, Inc.

     The undersigned is the holder of Additional Investment Right No. ___(the “Additional
Investment Right”) issued by Medwave, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined shall have the respective meanings set forth in the
Additional Investment Right.

     1. The Additional Investment Right is currently exercisable to purchase a total of
___Additional Investment Right Shares.

     2. The undersigned holder hereby exercises its right to purchase ___Additional
Investment Right Shares pursuant to the Additional Investment Right.

     3. The holder shall pay the sum of $___to the Company in accordance with the
terms of the Additional Investment Right.

     4. Pursuant to this exercise, the Company shall deliver to the holder ___Additional
Investment Right Shares in accordance with the terms of the Additional Investment Right.

     5. Following this exercise, the Additional Investment Right shall be exercisable to
purchase a total of ___Additional Investment Right Shares.

Please issue the Additional Investment Right Shares in the following name and to the following
address:

	 	 	 
	Issue to:
	 	 
	

	 	

	 	 	 
	Account Number:
	 	 
	

	 	

     (if
electronic book entry transfer)

	 	 	 
	DTC Participant Number:
	 	 
	

	 	

     (if
electronic book entry transfer)

 

 

Date:                                         ,                     

Name of Registered
Holder

	 	 	 
	By:  
	 	 
	

	

	Name:  	 
	

	 	

	Title:
	

	 	

 

 

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Additional Investment Right]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
___the right represented by the within Additional Investment Right to
purchase ___shares of Common Stock of Medwave, Inc. to which the within Additional
Investment Right relates and appoints ___attorney to transfer said right on the books
of Medwave, Inc. with full power of substitution in the premises.

	 	 	 
	Dated:
	 	 
	

	 	

	 	 	 
	

	 	

	

	 	(Signature must conform in all
respects to name of holder as
specified on the face of the Additional Investment Right)
	 
	 	 
	

	 	

	

	 	Address of Transferee
	 
	 	 
	

	 	

	 

	 
	

	 	

In the presence of:

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