Document:

Employment Agreement between the Registrant and Donald L. Drakeman

 Exhibit 10.1 
  
 EMPLOYMENT AGREEMENT 
  
 This Employment Agreement (the “Agreement”) is entered into this 5th day of January, 2004 (the “Effective Date”), between
Donald L. Drakeman (the “Executive”) and Medarex, Inc. (the “Company”) (collectively, the Executive and the Company shall be referred to as the “Parties”). In consideration of the mutual promises and agreements
contained herein, the Parties agree as follows: 
  
 1.
Purpose. The Company desires to avail itself of the services of the Executive as its President and Chief Executive Officer, and the Executive desires to provide such services in accordance with the terms of this Agreement. The Parties agree that
the duties and obligations expected of the Executive and of the Company are as set forth in this Agreement. 
  
 2. Effective Date and Term. This Agreement shall be effective, and its term (the “Term”) shall commence as of the Effective Date.
The Term shall continue through and until January 4, 2007 (the “Initial Term”), unless terminated sooner as provided by this Agreement or extended by the Parties. The Term shall be automatically renewed for successive periods of one year
each (each, a “Renewal Term”), unless either Party gives to the other written notice of intent not to renew at least ninety (90) days prior to the expiration of the Initial Term or any Renewal Term. This Agreement supersedes in its
entirety that Employment Agreement between the Company and the Executive dated May 20, 1991, as amended on June 4, 1991, October 2, 1995 and November 7, 1997. 
  

3. Compensation. 
  
 A. Salary. During the Term the Company shall pay or cause to be paid to the Executive, in bi-weekly installments, a salary
of $760,000 per annum or such greater amount as may from time to time be determined by the Board of Directors (the “Board”) of the Company (the “Base Salary”). The Base Salary shall be reviewed annually by the Board and, if
appropriate, may be increased. The Board may also pay the Executive such bonuses as it deems appropriate. Notwithstanding the foregoing, no increase in Base Salary or bonus shall be paid to the Executive unless and until approved by a committee of
the Board, a majority of which is comprised of Directors who are not employees of the Company. 
  
 B. Expenses. The Company shall reimburse the Executive, within thirty days of voucher, the amount of all travel, hotel,
entertainment and other expenses (properly vouched) reasonably incurred by the Executive in furtherance of his duties under this Agreement. 
  
 C. Benefits. 
  
 (1) Vacation. The Executive shall be entitled to twenty (20) business days of vacation each year. The Executive shall be
entitled to carry any unused vacation days over to the next calendar year. However, in no event will Executive’s accrued but unused vacation exceed 40 days. 
  
 (2) Holidays. The Executive shall be entitled to all holidays generally provided to other
employees of the Company. 
  

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 (3) Life Insurance. During the Term, the Company shall, upon proof of
insurability, purchase, or cause to be purchased, a policy or policies insuring the life of the Executive payable to the Executive’s designated beneficiary(s) at least equal to that life insurance generally provided to other executive employees
of the Company. 
  
 (4) Medical
Insurance. During the Term, the Company shall acquire and pay for, or reimburse the Executive for, hospitalization, dental, major medical, or other health insurance for the benefit of the Executive and his dependents at least equal to that
generally provided other executive employees under the Company’s group health insurance plan(s). 
  
 (5) Sick Leave/Disability. During any period in which the Executive is absent from work as a result of personal injury,
sickness or other disability, the Board may, by majority vote, appoint an Acting President and Chief Executive Officer to serve for the duration of the Executive’s absence. The Company shall, while such period continues or for 180 days,
whichever is a shorter period, pay the Executive his full Base Salary. The Executive will also be entitled to additional disability benefits at least equal to that which is generally provided to other executive employees after the Effective Date.

  
 (6) Directors’ and
Officers’ Liability Insurance. During the Term, the Company shall acquire and pay for, or reimburse the Executive for, directors’ and officers’ liability insurance for the benefit of the Executive at least equal to that generally
provided to other executive officers of the Company. 
  
 (7) Other Benefits. The Executive shall be entitled to participate in any equity incentive, pension, retirement or other qualified plans adopted by the Company for the benefit of its employees, including, but not limited to,
the Company’s stock option plans and the Company’s tax-qualified 401(k) cash or deferred compensation plan. During the Term, notwithstanding any travel policies of the Company, the Executive shall be entitled to travel first class on all
plane flights. 
  
 4. Duties of the Executive.

  
 A. Duties. During the Term, the
Executive shall be President and Chief Executive Officer of the Company, shall perform such duties as the Company may reasonably require and shall use his best efforts to carry into effect the directions of the Board of Directors of the Company.

  
 B. Representation. During the
Term, the Executive shall well and faithfully serve the Company and use his best efforts to promote the interests of the Company. The Executive shall at all times give the Company the full benefit of his knowledge, expertise, technical skill and
ingenuity in the performance of his duties and exercise of his powers and authority as President and Chief Executive Officer. In particular (but without limiting the generality thereof), the Executive shall give to the Board of Directors of the
Company such information regarding the affairs of the Company as the Board of Directors shall require and at all times conform to the reasonable instructions or directions of the Board of Directors. 
  

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 C. Time Devoted by Executive. The Executive agrees to devote substantially
all his time and attention during business hours and such additional time and attention as may reasonably be required to perform his duties hereunder. It shall not be a violation of this Agreement for the Executive to (a) serve on corporate, civic
or charitable boards or committees, (b) deliver lectures, fulfill speaking engagements or teach at educational institutions, (c) manage personal investments, or (d) engage in activities permitted by the policies of the Company or as specifically
permitted by the Company, so long as such activities do not significantly interfere with the full time performance of the Executive’s responsibilities in accordance with this Agreement. It is expressly understood and agreed that to the extent
any such activities have been conducted by the Executive prior to the Term, the continued conduct of such activities (or the conduct of activities similar in nature and scope) during the Term shall not thereafter be deemed to interfere with the
performance of the Executive’s responsibilities to the Company. 
  
 5. Restrictions on the Executive. 
  
 A. Non-Disclosure of Confidential Information. All information learned or developed by the Executive during the course of his employment by the Company will be deemed “Confidential Information”
under the terms of this Agreement. Examples of Confidential Information include, but are not limited to, business, scientific and technical information owned or controlled by the Company, including the Company’s business plans and strategies;
business operations and systems; information concerning employees, customers, partners and/or licensees; patent applications; trade secrets; inventions; ideas; procedures; formulations; processes; formulae; data and all other information of any
nature whatsoever which relate to the Company’s business, science, technology and/or products. In addition, Confidential Information shall include, but not be limited to, all information which the Company may receive from third parties. The
Executive will not disclose to any person at any time or use in any way, except as directed by the Company, either during or after the employment of the Executive by the Company, any Confidential Information. The foregoing restrictions shall not
apply to information which is or becomes part of the public domain though no act or failure to act by the Executive. 
  
 In addition to the foregoing, in the process of the Executive’s employment with the Company, or thereafter, under no condition is the
Executive to use or disclose to the Company, or incorporate or use in any of his work for the Company, any confidential information imparted to the Executive or with which he may have come into contact while in the employ of his former employer(s).

  
 B. Inventions. The term
“Invention” means any invention, discovery, improvement, apparatus, implement, process, compound, composition or formula, whether or not patentable, conceived or reduced to practice, in whole or in part, by the Executive (alone, or jointly
with others) during any term of his employment by the Company and twelve (12) months thereafter which directly or indirectly relates to the business, science, technology or products of the Company and/or any Confidential Information. The Executive
will keep, on behalf of the Company, complete, accurate, and authentic accounts, notes, data, and records (“Records”) of each and every Invention, which Records will, at all times, be the property of the Company. The Executive will comply
with the directions of the Company with respect to the manner and form 

  

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of keeping or surrendering Records and will surrender to the Company all Records at the end of the Executive’s term of employment by the Company.

  
 Each Invention will be the sole and exclusive
property of the Company. The Executive will, at the request of the Company, make application in due form for United States letters patent and foreign letters patent (each, a “Patent”) on any Invention and execute any necessary documents in
connection with the Patents. The Executive will assign and transfer to the Company all right, title, and interest of the Executive in any Patents or Patent applications. The Executive agrees to cooperate with any actions necessary to continue, renew
or retain the Patents. The Company will bear the entire expense of applying for and obtaining the Patents. 
  
 For one year after the termination of the term of the Executive’s employment by the Company, the Executive will not file any
applications for Patents on any Invention other than those filed at the request of and on behalf of the Company. 
  
 The Executive, as a condition of his employment, hereby represents that, to the best of his knowledge, there is not as of the date of this
Agreement any agreement or obligation outstanding with or to any of his former employers or other party, which would restrict, limit or in any way prohibit all or any portion of his work or employment, nor is there in his possession any confidential
information used by any of his former employers or any other party (except as may have been revealed in generally available publications or otherwise made publicly available). 
  
 C. Non-Competition; Non-Solicitation. 
  
 (1) Non-Competition. During the Term, without
the consent of the Conflicts Committee of the Board of Directors, the Executive may not directly or indirectly engage in, or have any interest in, any business (whether as employee, officer, director, agent, a five percent (5%) or greater security
holder, creditor, consultant, or otherwise) that competes directly with the business of the Company (as such business may exist during the Term). 
  
 (2) Non-Solicitation of Orders. During the Term, and thereafter as specifically provided in Subsection 6.B.(2) or 6.D.(2),
the Executive shall not, whether for himself or on behalf of any other person or company, directly or indirectly, solicit orders for the creation of antibodies in transgenic animals from any person or company, who at any time within the year prior
to the end of the Term was a licensee, collaborator or customer of the Company. 
  
 (3) Non-Solicitation of Employees. During the Term, and thereafter as specifically provided in Subsection 6.B.(2) or
6.D.(2), the Executive shall not, directly or indirectly induce or solicit any other employee of the Company to terminate his or her employment with the Company for the purpose of joining another company in which the Executive has an interest
(whether as an employee, officer, director, agent, a five percent (5%) or greater security holder, creditor, consultant, or otherwise). 
  
 D. Breach. The Executive acknowledges that there may be circumstances in which his breach of any covenant set forth in this
Section 5. could cause harm to the Company which may not be compensable by monetary damages alone, and which could potentially entitle the Company to injunctive relief. However, by acknowledging this possibility, the Employee is 

  

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not agreeing to waive his right to require the Company to meet its evidentiary burdens as required by law in any cause of action brought by the Company
seeking such injunctive relief. 
  
 6. Termination.

  
 A. Non-Renewal. The provisions
of this Subsection 6.A apply if the Term is not renewed pursuant to the provisions of Section 2. 
  
 (1) If the Company has given notice of non-renewal, the Company shall pay the Executive his then existing Base Salary and continue
Executive’s benefits enumerated in Subsections 3.C.(3), 3.C.(4) and 3.C.(6) hereof (to the extent permitted by the Company’s insurance carriers) for one year commencing with the day following the final day of the Term; provided,
however, that this obligation shall be mitigated by earned income and benefits actually received by or for the account of the Executive from alternative employment during such one year period. In addition, notwithstanding any provisions of
the stock option plan or stock option agreement pursuant to which any stock options were granted, the Executive shall be entitled to exercise any of Executive’s stock options vested as of the final day of the Term until eighteen months from the
final day of the Term or the expiration of the stated period of the option, whichever period is the shorter. 
  
 (2) At the conclusion of the Term, all other Company obligations to the Executive as to salary and benefits shall cease.

  
 (3) If the Executive has given notice
of non-renewal, all Company obligations to the Executive as to salary and benefits shall cease at the conclusion of the Term. 
  
 B. Termination for Cause by the Company. 
  
 (1) This Agreement and the Term may be terminated “for cause” by the Company pursuant to
the provisions of this Subsection 6.B. If the Board determines that “cause” exists for termination of the Executive’s employment, written notice thereof must be given to the Executive describing the state of affairs or facts deemed by
the Board to constitute such cause. The Executive shall have forty-five (45) days after receipt of such notice to cure the reason constituting cause and if he does so, the Term shall not be terminated for the cause specified in the notice. During
such forty-five (45) day period, the Term shall continue and the Executive shall continue to receive his full Base Salary, expenses and benefits pursuant to this Agreement. If such cause is not cured to the Board’s reasonable satisfaction
within such forty-five (45) day period, the Executive may then be immediately terminated by a majority vote of the Board excluding the Executive if the Executive is then a member of the Board. For purposes of this Agreement, the words “for
cause” or “cause” shall be limited to actions on the part of the Executive which constitute gross negligence or willful misconduct in the performance or non-performance of the Executive’s duties or a material breach of this
Agreement by the Executive so long as such material breach is not caused by the Company. The duties, powers and authority of the Executive may also, on a majority vote of the Board excluding the Executive if the Executive is then a member of the
Board, be suspended for a reasonable period of time, but with a continuation of the Executive’s full Base Salary, expenses and benefits pursuant to this Agreement, while a determination is made as to whether cause for termination exists.

  

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 (2) In the event the Term is terminated by the Company for cause, the provisions
of Subsections 5.C.(2) and 5.C.(3) shall continue to apply for one year after the conclusion of the Term. 
  
 (3) In the event the Term is terminated by the Company for cause, the Executive’s entire right to salary and benefits
hereunder (with the exception of salary and benefits accrued prior to termination) shall cease upon such termination. 
  
 C. Termination Without Cause by the Company or for Good Reason by the Executive. 
  
 (1) The Company shall have the right to terminate the
Term without cause on ninety (90) days written notice to the Executive. 
  
 (2) The Executive shall have the right to terminate the Term for good reason on thirty (30) days written notice to the Company. For purposes of this Agreement, the words “for good reason” or
“good reason” shall be limited to the following actions by the Company without the Executive’s express written consent: (a) the assignment to the Executive of any duties or responsibilities that results in a material diminution in the
Executive’s position or function; provided, however, that a change in the Executive’s title or reporting relationships shall not provide the basis for a termination with good reason; (b) a relocation of the
Executive’s business office to a location more than fifty (50) miles from the location at which the Executive performs duties as of the Effective Date, except for required travel by the Executive on the Company’s business to an extent
substantially consistent with the Executive’s business travel obligations as of the Effective Date; or (c) a material breach by the Company of any provision of this Agreement or any other material agreement between the Executive and the Company
concerning the terms and conditions of the Executive’s employment. Such a termination by the Executive for good reason shall not be considered a resignation pursuant to Subsection 6.D.(1). 
  
 (3) In the event the Term is terminated pursuant to
Subsection 6.C.(1) or 6.C.(2), the Company shall pay the Executive his then existing Base Salary and continue Executive’s benefits enumerated in Subsections 3.C.(3), 3.C.(4) and 3.C.(6) hereof (to the extent permitted by the Company’s
insurance carriers) for two years commencing with the day following the effective date of the termination of the Term. In addition, notwithstanding any provisions of the stock option plan or stock option agreement pursuant to which any stock options
were granted, the Executive shall be entitled to exercise any of Executive’s stock options vested as of the final day of the Term until eighteen months from the final day of the Term or the expiration of the stated period of the option,
whichever period is the shorter. 
  
 D.
Resignation by the Executive. 
  
 (1) The Executive shall have the right to terminate the Term, by way of resignation, upon ninety (90) days’ written notice to the Company. A termination by the Executive for good reason pursuant to Subsection 6.C.(2) shall not
be considered a resignation pursuant to this Subsection 6.D.(1). 
  

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 (2) In the event the Term is terminated pursuant to Subsection 6.D.(1), the
provisions of Subsections 5.C.(2) and
 5.C.(3) shall continue to apply for one year after the conclusion of the Term. 
  
 (3) In the event the Term is terminated pursuant to Subsection 6.D.(1), the Executive’s entire right to salary and benefits
hereunder shall cease at the effective date of the termination of the Term. 
  
 E. Termination Upon Change in Control. 
  
 (1) For the purposes of this Agreement, a “Change in Control” shall mean any of the following events: 
  
 (a) An acquisition (other than directly from the
Company) of any voting securities of the Company (the “Voting Securities”) other than in a “Non-Control Acquisition” (as defined below) by any “Person” (as the term “person” is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, (the “1934 Act”)) which results in such Person first attaining “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
fifty-one percent (51%) or more of the combined voting power of the Company’s then outstanding Voting Securities. For purposes of the foregoing, a “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or
a trust forming a part thereof) maintained by (x) the Company or (y) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a
“Subsidiary”), or (ii) the Company or any Subsidiary. 
  
 (b) The individuals who, as of the date of this Agreement, were members of the Board (the “Incumbent Board”) cease for any reason to constitute at least 66 2/3% of the Board; provided, however, that if the election, or a nomination for election by the Company’s shareholders, of any new director
was approved by a vote of at least 66 2/3% of the Incumbent Board, such new director shall be considered as a
member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election
Contest” (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of the proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy Contest; or 
  
 (c) The consummation of a transaction approved by the Company’s shareholders and involving: (1) a merger, consolidation or
reorganization in which the Company is a constituent corporation, unless (i) the shareholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly immediately following such merger,
consolidation or reorganization, at least sixty-six and two-thirds percent (66 2/3%) of the combined voting power
of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the voting securities immediately
before such merger, consolidation or reorganization, (ii) the individuals who were 

  

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members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at
least 66 2/3% of the members of the board of directors of the Surviving Corporation, and (iii) no Person other
than (w) the Company, (x) any Subsidiary, (y) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Subsidiary, or 
(z) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifty-one percent (51%) or more of the then outstanding Voting Securities, has Beneficial Ownership of fifty-one percent (51%) or more of the combined voting power of the Surviving
Corporation’s then outstanding voting securities (a transaction described in clauses (i) and (ii) shall herein be referred to as a “Non-Control Transaction”); (2) a complete liquidation or dissolution of the Company; or (3) an
agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). 
  
 (d) Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because
the level of Beneficial Ownership held by any Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding Voting Securities as a result of a repurchase or other acquisition of Voting Securities by the
Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition, the
Subject Person becomes the Beneficial Owner of any additional Voting Securities which, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding Voting Securities Beneficially Owned by the
Subject Person over the designated percentage threshold, then a Change in Control shall occur. 
  
 (2) The Executive shall have the right to terminate this Agreement, for any reason, on thirty (30) days’ written notice to the
Company in the event of a Change in Control; provided, however, that such termination right must be exercised by the Executive within one year following such Change in Control. Any termination of the Term by the Company within one year
following a Change in Control shall be deemed a termination by the Executive pursuant to the preceding sentence. 
  
 (3) In the event the Term is terminated by the Executive pursuant to Subsection 6.E.(2) for any reason, the Company shall provide
the Executive the following benefits: 
  
 (a)
Amount: In addition to all compensation for services rendered by Executive to the Company up to the date of termination, the Company shall pay to Executive, no later than the date of such termination, a single lump-sum payment in an
amount equal to (i) thirty-six times Executive’s highest monthly base compensation paid hereunder during the preceding twenty-four month period, plus (ii) three times the Executive’s average annual bonus received by the Executive during
the preceding twenty-four month period. 
  
 (b) Benefits: In addition to the payment described above, the Company shall continue to provide to Executive all benefits provided under Subsections 3.C.(3), 

  

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3.C.(4) and 3.C.(6) hereof (to the extent permitted by the Company’s insurance carriers) for a period of twenty-four months after termination.

  
 (c) Acceleration of Options:
All of the Executive’s outstanding options and/or equity awards shall become fully and immediately vested to the extent not already so provided under the terms of such options and equity awards. Notwithstanding any provisions of the stock
option plan or stock option agreement pursuant to which any stock options subject to the preceding sentence were granted, the Executive shall be entitled to exercise such options until three years from the date of termination of employment or the
expiration of the stated period of the option, whichever period is the shorter. 
  
 (d) Golden Parachute Payment Provisions: If any payment or benefit the Executive would receive pursuant to a Change in
Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this
sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment
that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment
taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless the
Executive elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the effective date of the event that triggers the Payment): reduction of cash payments;
cancellation of accelerated vesting of stock options or equity awards; reduction of employee benefits. In the event that acceleration of vesting of stock option or equity award compensation is to be reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of the Executive’s stock options or equity awards unless the Executive elects in writing a different order for cancellation. 
  
 The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective
date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall
appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. 
  
 The accounting firm engaged to make the determinations
hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the Executive within fifteen (15) calendar days after the date on which the Executive’s right to a Payment is triggered (if requested
at that time by the Company or the Executive) or such other time as requested by the Company or the Executive. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after 

  

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the application of the Reduced Amount, it shall furnish the Company and the Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and the Executive. 
  
 F. Termination for Disability. 
  
 (1) Should the Executive be absent from work as a
result of personal injury, sickness or other disability as provided for in Subsection 3.C.(5) for any continuous period of time exceeding one hundred eighty (180) days, the Term may be terminated by the Company, upon written notice given to the
Executive, because of the Executive’s disability. 
  
 (2) In the event the Term is terminated pursuant to Subsection 6.F.(1), then, following such Termination, the Executive shall continue to be entitled to benefits pursuant to Subsections 3.C.(3), 3.C.(4) and 3.C.(6) hereof (to the
extent permitted by the Company’s insurance carriers) for one hundred eighty (180) days after the conclusion of the Term. In addition, notwithstanding any provisions of the stock option plan or stock option agreement pursuant to which any stock
options were granted, the Executive shall be entitled to exercise any of Executive’s stock options vested as of the final day of the Term until eighteen months from the final day of the Term or the expiration of the stated period of the option,
whichever period is the shorter. 
  
 G.
Termination Upon Death. If not earlier terminated, the Term shall terminate upon the death of the Executive and the Company shall have no further obligation to the Executive or his estate except to pay the Executive’s estate any Base
Salary accrued but remaining unpaid prior to his death, any expenses accrued but remaining unpaid prior to his death, and any benefits accrued but remaining unpaid prior to his death. In addition, the Company shall continue for the benefit of
Executive’s dependents Executive’s benefits enumerated in Subsections 3.C.(4) and 3.C.(6) hereof (to the extent permitted by the Company’s insurance carriers) for two years commencing with the day following Executive’s death. In
addition, notwithstanding any provisions of the stock option plan or stock option agreement pursuant to which any stock options were granted, the Executive shall be entitled to exercise any of Executive’s stock options vested as of the final
day of the Term until eighteen months from the final day of the Term or the expiration of the stated period of the option, whichever period is the shorter. 
  
 H. COBRA. If the Company continues benefits for Executive and his dependents pursuant to Subsection 6.A, 6.C, 6.E, 6.F or
6.G, Executive and his dependents, as applicable, shall, upon the request of the Company, be required to elect to receive such continued coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), and any analogous state law, and the Company’s provision of such continued coverage for all purposes shall be considered continuation coverage under COBRA and any analogous state law. In the event Executive is required to
make an election pursuant to the preceding sentence, the Company will reimburse the Executive for his COBRA and any analogous state law costs incurred during the periods set forth in Subsection 6.A, 6.C, 6.E, 6.F or 6.G, as applicable, unless and
until Executive becomes a full-time employee of another entity. 
  

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 7. Miscellaneous. 
  
 A. Notice. Any notice to be given hereunder shall either be delivered personally and/or sent
by first class certified mail and regular mail. The address for service on the Company shall be its registered office, and the address for service on the Executive shall be his last known place of residence. A notice shall be deemed to have been
served as follows: 
  
 (1) if personally
delivered, at the time of delivery; and/or 
  
 (2) if posted, at the expiration of 48 hours (10 days if international) after the envelope containing the same was delivered into the custody of the postal authorities. 
  
 B. Disability. The Company acknowledges its obligations under state and federal law to provide
reasonable accommodations to the Executive in the event of a disability, and nothing in this Agreement is intended to relieve the Company of that responsibility. 
  
 C. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, personal representatives, successors and assigns, provided that neither Party shall assign any of its rights or privileges hereunder without the prior written consent of the other Party except that the
Company may assign its rights hereunder to a successor in ownership of all or substantially all the assets of the Company. 
  
 D. Severability. Should any part or provision of this Agreement be held unenforceable by a court of competent jurisdiction,
the validity of the remaining parts or provisions shall not be affected by such holding, unless such enforceability substantially impairs the benefit of the remaining portions of the Agreement. 
  
 E. Waiver. No failure or delay on the part of
either Party in the exercise of any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or privilege preclude other or further exercise thereof or of any other right of
privilege. 
  
 F. Captions. The
captions used in this Agreement are for convenience only and are not to be used in interpreting the obligations of the Parties under this Agreement. 
  
 G. Choice of Law. The validity, construction and performance of this Agreement and the transactions to which it relates
shall be governed by the laws of the State of New Jersey, without regard to choice of laws provisions, and the Company and the Executive irrevocably consent to the exclusive jurisdiction and venue of the federal and state courts located within New
Jersey, and courts with appellate jurisdiction therefrom, in connection with any matter based upon or arising out of this Agreement. 
  
 H. Entire Agreement. This Agreement embodies the entire understanding of the Parties as it relates to the subject matter
contained herein and as such, supersedes any prior agreement or understanding between the Parties relating to the terms of employment of the Executive. No amendment or modification of this Agreement shall be valid or binding upon the Parties unless
in writing executed by the Parties. 
  

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 In Witness Whereof, the parties hereto have caused this Agreement to be duly executed as of the
day and year first written above. 
  

	 MEDAREX, INC.

		
	 By:
	 	/s/ Irwin Lerner
	 	 	

	 	 	 Irwin Lerner
 Chairman of the
Compensation and
 Organization Committee of the
 Board of
Directors of Medarex, Inc.

	
	 /s/ Donald L. Drakeman
  

	 Donald L. Drakeman

  

 12SECURITIES PURCHASE AGREEMENT

 EXHIBIT 4.1 
  

SECURITIES PURCHASE AGREEMENT 
  
 This Securities Purchase Agreement (this “Agreement”) is dated as of December 17, 2003, among PainCare Holdings, Inc., a Florida
corporation (the “Company”), and the purchasers identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”). 
  
 WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully described in this Agreement. 
  
 NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees as follows: 
  
 ARTICLE I 
 DEFINITIONS 
  
 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not
otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings indicated in this Section 1.1: 
  
 “Action” shall have the meaning ascribed to such term in Section 3.1(j). 
  
 “Affiliate” means any Person that, directly
or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. 
  
 “Capital Shares” means the Common Stock and
any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of earnings and assets of the Company. 
  
 “Capital Shares Equivalents” means any securities, rights or obligations that are
convertible into or exchangeable for or give any right to subscribe for or purchase, directly or indirectly, any Capital Shares of the Company or any warrants, options or other rights to subscribe for or purchase, directly or indirectly, Capital
Shares or any such convertible or exchangeable securities. 
  
 “Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1. 
  
 “Closing Date” means the Trading Day when all of the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions 

  

 
precedent to the Purchasers’ obligations to pay the Subscription Amount have been satisfied or waived. 
  
 “Commission” means the Securities and
Exchange Commission. 
  
 “Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any securities into which such common stock shall hereinafter have been reclassified into. 
  
 “Company Counsel” means Phillips Nizer LLP. 
  
 “Debentures” means, the 7.5% Convertible
Debentures due three years from their date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A. 
  
 “Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1 hereof. 
  
 “Effective Date” means the date that the
initial Registration Statement filed by the Company pursuant to the Registration Rights Agreement is first declared effective by the Commission. 
  
 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 “FW” means Feldman Weinstein LLP with
offices at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002. 
  
 “GAAP” shall have the meaning ascribed to such term in Section 3.1(h) hereof. 
  
 “Liens” shall have the meaning ascribed to such term in Section 3.1(a) hereof. 
  
 “Losses” means any and all losses, claims,
damages, liabilities, settlement costs and expenses, including without limitation costs of preparation and reasonable attorneys’ fees. 
  
 “Market Price” shall mean the average of the VWAPs for each of the 10 Trading Days immediately prior to the date hereof.

  
 “Material Adverse Effect”
shall have the meaning assigned to such term in Section 3.1(b) hereof. 
  
 “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind. 
  
 “PPM Offering” shall have the meaning ascribed to such term in Section 4.13 hereof. 
  

 “Principal Market” means initially the American Stock Exchange and shall
also include the NASDAQ Small-Cap Market, New York Stock Exchange, or the NASDAQ National Market, whichever is at the time the principal trading exchange or market for the Common Stock, based upon share volume. 
  
 “Proceeding” means an action, claim, suit,
investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 
  
 “Registration Rights Agreement” means the Registration Rights Agreement, dated the Closing Date, among the Company and
the Purchasers, in the form of Exhibit B. 
  
 “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the
Registration Rights Agreement. 
  
 “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e) hereof. 
  
 “Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise or conversion in full of all Warrants and Debentures (including Underlying Shares issuable as payment of interest),
ignoring any conversion or exercise limits set forth therein, and assuming that the Set Price is at all times on and after the date of determination the then Set Price on the Trading Day immediately prior to the date of determination. 
  
 “Rule 144” means Rule 144 promulgated by
the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 
  
 “SEC Reports” shall have the meaning
ascribed to such term in Section 3.1(h) hereof. 
  
 “Securities” means the Debentures, the Warrants and the Underlying Shares. 
  
 “Securities Act” means the Securities Act of 1933, as amended. 
  
 “Set Price” shall have the meaning ascribed
to such term in the Debentures. 
  
 “Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Principal Market (or any successor entity) from the shareholders of the Company with respect to the transactions
contemplated by the Transaction Documents, including the issuance of all of the Underlying Shares and shares of Common Stock issuable upon exercise of the Warrants in excess of 19.9% of the Company’s issued and outstanding Common Stock on the
Closing Date. 
  

 “Subscription Amount” means, as to each Purchaser, the aggregate amount
to be paid for Debentures and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount”, in United States Dollars and in immediately
available funds. 
  
 “Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) attached hereto. 
  
 “Trading Day” means any day during which the Principal Market shall be open for business. 
  
 “Transaction Documents” means this
Agreement, the Debentures, the Warrants, the Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder. 
  
 “Underlying Shares” means the shares of Common Stock issuable upon conversion of the
Debentures and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of interest on the Debentures. 
  
 “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Principal Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Principal Market on which the Common Stock is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then listed or quoted on a Principal Market and if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported prior to the day in question; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers and reasonably acceptable to the
Company. 
  
 “Warrants” means
collectively the Common Stock purchase warrants, in the form of Exhibit C delivered to the Purchasers at the Closing in accordance with Section 2.2 hereof. 
  
 “Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

  
 ARTICLE II 
 PURCHASE AND SALE 
  
 2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, 

  

 
the Company agrees to sell, and each Purchaser agrees to purchase in the aggregate, severally and not jointly, up to $10,000,000 principal amount of the
Debentures. Each Purchaser shall deliver to the Company via wire transfer or a certified check immediately available funds equal to their Subscription Amount and the Company shall deliver to each Purchaser their respective Debenture and Warrants as
determined pursuant to Section 2.2(a)(ii) and the other items set forth in Section 2.2 issuable at the Closing. Upon satisfaction of the conditions set forth in Section 2.2, the Closing shall occur at the offices of FW, or such other location as the
parties shall mutually agree. 
  
 2.2 Conditions to
Closing. 
  
 (a) At or prior to the Closing,
unless otherwise indicated below, the Company shall deliver or cause to be delivered to each Purchaser the following: 
  
 (i) within 3 Trading Days of the Closing Date, a Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
registered in the name of such Purchaser; 
  
 (ii) Within 3 Trading Days of the Closing Date, (x) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 15% of such Purchaser’s Subscription Amount divided by the Market
Price, with a term of 4 years and an exercise price equal to 115% of the Market Price, subject to adjustment therein and (y) a Warrant to purchase up to a number of shares of Common Stock equal to 15% of such Purchaser’s Subscription Amount
divided by the Market Price, with a term of 4 years and an exercise price equal to 120% of the Market Price, subject to adjustment therein; 
  
 (iii) the legal opinion of Company Counsel, in the form of Exhibit D attached hereto, addressed to the Purchasers; 
  
 (iv) the Registration Rights Agreement duly executed by the
Company in the form of Exhibit B attached hereto; 
  
 (v) the written voting agreements of all of the officers, directors and shareholders holding more than 10% of the issued and outstanding shares of Common Stock on the date hereof to vote all Common Stock owned by each
of such officers, directors and shareholders as of the record date for the annual meeting of shareholders of the Company in favor of Shareholder Approval amounting to, in the aggregate, at least 40% of the issued and outstanding Common Stock; and

  
 (vi) this Agreement, duly executed by the
Company. 
  
 (b) At or prior to the Closing, each
Purchaser shall deliver or cause to be delivered to the Company the following: 
  
 (i) such Purchaser’s Subscription Amount; 
  

 (ii) this Agreement, duly executed by such Purchaser; and 
  
 (iii) the Registration Rights Agreement duly executed by
such Purchaser. 
  
 (c) All representations and
warranties of the other party contained herein shall remain true and correct as of the Closing Date and all covenants of the other party shall have been performed if due prior to such date. 
  
 (d) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on the Principal
Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities, nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Purchasers, makes it impracticable or inadvisable to purchase the Debentures at the Closing. 
  
 ARTICLE III 
 REPRESENTATIONS AND WARRANTIES 
  
 3.1 Representations and Warranties of the Company. Except as set forth under the corresponding section of the disclosure schedules delivered to the Purchasers concurrently herewith (the “Disclosure
Schedules”) which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to each Purchaser. 
  
 (a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any lien, charge, security interest, encumbrance, right of first refusal or other restriction
(collectively, “Liens”), and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries shall be disregarded. 
  
 (b) Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the material provisions of its respective certificate or 

  

 
articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and
is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate: (i) adversely affect the legality, validity or enforceability of any Transaction Document, (ii) have or result in or be reasonably likely to have or result in a material
adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company’s ability to perform fully on a timely
basis its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”). 
  
 (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder or thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company other than Required Approvals. Each of the Transaction Documents has
been (or upon delivery will be) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and general principles of equity. 
  
 (d) No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) subject to obtaining the Required Approvals, conflict with, or constitute a default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule or
regulation, or (iv) to the best of the Company’s knowledge, result in an order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or result
in a Material Adverse Effect. 
  

 (e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filings required under Section 4.7, (ii) the filing with the Commission of the Registration Statement, (iii) the notice and/or application(s) to each
applicable Principal Market for the issuance and sale of the Debentures and Warrants and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, (iv) the filing of Form D with the Commission and applicable
Blue Sky filings and (v) Shareholder Approval (collectively, the “Required Approvals”). 

 
 (f) Issuance of the Securities. The Securities are
duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof. The Company has not, and to the knowledge of the Company, no Affiliate of the Company has sold, offered
for sale or solicited offers to buy or otherwise negotiated in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Principal Market. 
  
 (g) Capitalization. The number of shares and type of
all authorized, issued and outstanding capital stock of the Company is set forth in the Disclosure Schedules attached hereto. No securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common
Stock. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under such securities. 
  
 (h) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a 

  

 
valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. The Company has identified and made
available to the Purchasers a copy of all SEC Reports filed within the 10 days preceding the date hereof. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. 
  
 (i) Material Changes. Since the date of the latest
audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports: (i) there has been no event, occurrence or development that has had or that could result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock option or similar plans. 
  
 (j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which: (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor to the best of the Company’s knowledge, any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. The Company does not have pending before the Commission any request for confidential treatment of
information. There has not been, 

  

 
and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or to the best of the
Company’s knowledge, any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act. 
  
 (k)
Compliance. To the best of the Company’s knowledge, neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has
been in violation of any statute, rule or regulation of any governmental authority, except in each case as could not, individually or in the aggregate, have or result in a Material Adverse Effect. 
  
 (l) Labor Relations. No material labor dispute exists
or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company. 
  
 (m) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material
Permit. 
  
 (n) Title to Assets. The
Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them
that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held under valid, subsisting and enforceable leases of which the Company and the Subsidiaries
are, to the best of the Company’s knowledge, in compliance. 
  
 (o) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses
and other similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the 

  

 
“Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the
Intellectual Property Rights. 
  
 (p)
Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the
Subsidiaries are engaged. To the best of Company’s knowledge, such insurance contracts and policies are accurate and complete. Neither the Company nor any Subsidiary has any reason to believe it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost. 
  
 (q) Transactions With Affiliates and Employees. Except as required to be set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 
  
 (r) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the Company and designed such disclosures controls and procedures to ensure that material information relating to the Company, including its subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company’s Form 10-K or 10-Q, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures as of the end of the period ending September 30, 2003 (such date, the “Evaluation Date”). The Company presented in the Form 10-Q for the quarter ended September 30, 2003 the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal 

  

 
control over financial reporting or, the Company’s knowledge, in other factors that could significantly affect the Company’s internal control over
financial reporting. 
  
 (s)
Solvency/Indebtedness. Based on the financial condition of the Company as of the Closing Date: (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as
proposed to be conducted for the next twelve months including its capital needs taking into account the particular capital requirements for the next twelve months of the business conducted by the Company, and projected capital requirements and
capital availability thereof (including proceeds of the Debentures); and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date. The SEC Reports set forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has binding contractual commitments. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations, whether or not the same are or should be reflected in the Company’s balance sheet or the notes thereto, except guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of business, and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor
any Subsidiary is in default with respect to any Indebtedness. 
  
 (t) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this Agreement, and the Company has not taken any action that would cause any Purchaser to be liable for any such fees or commissions. The Company agrees that the Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on behalf of any Person for fees of the type contemplated by this Section with the transactions contemplated by this Agreement. 
  
 (u) Private Placement. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections 3.2(b)-(f), the offer, issuance and sale of the Securities to the Purchasers as contemplated hereby are exempt from the registration requirements of the Securities Act. The
issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Principal Market, except that 

  

 
Shareholder Approval is required for the Company to issue in excess of 4,727,941 shares of Common Stock under the Transaction Documents. 
  
 (v) Listing and Maintenance Requirements. The Company
has not, in the 12 months preceding the date hereof, received notice from any Principal Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements
of such Principal Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. 
  
 (w) Registration Rights. The Company has not granted
or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied. 
  
 (x) Application of Takeover Protections. The Company
and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover
provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities. 
  
 (y) Seniority. As of the Closing Date, no
indebtedness of the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior
only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby). 
  
 (z) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers
or their agents or counsel with any information that constitutes or might constitute material, nonpublic information. The Company understands and confirms that the Purchasers will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company with respect to
the representations and warranties made herein are true and correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2 hereof. 
  

 (aa) Tax Status. The Company and each of its Subsidiaries has made or filed all
federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal, statue or local tax. None of the Company’s tax returns is presently being audited by any taxing authority. 
  
 (bb) Acknowledgment Regarding Purchasers’ Purchase
of Securities. The Company acknowledges and agrees that the Purchasers are acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by any Purchaser or any of their respective
representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to
each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives. 
  
 (cc) No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor,
to the knowledge of the Company, any of its directors or officers (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to the sale of the Debentures or
the Warrants, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Debentures, the Underlying Shares or the Warrants under the Securities Act or
made any “directed selling efforts” as defined in Rule 902 of Regulation S. 
  
 (dd) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers. 
  
 (ee) Form S-3 Eligibility. The Company is eligible to
register the resale of the Underlying Shares for resale by the Purchaser on Form S-3 promulgated under the Securities Act. 
  

 (ff) No Integrated Offering. To the best of the Company’s knowledge, neither
the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act or which could violate any applicable shareholder approval provisions, including, without limitation, under the rules and regulations
of the Principal Market. 
  
 3.2 Representations and Warranties
of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants to the Company as follows: 
  
 (a) Organization; Authority. Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder.
The purchase by such Purchaser of the Securities hereunder has been duly authorized by all necessary action on the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other
equitable remedies. 
  
 (b) Investment
Intent. Such Purchaser is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Purchaser’s right, subject
to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Purchaser to hold Securities for any period of time. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities. 
  
 (c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and at the date
hereof it is, and on each date on which it exercises any Warrants or converts any Debentures it will be, an “accredited investor” as defined in Rule 501(a) under the Securities Act. Such Purchaser has not been formed solely for the purpose
of acquiring the Securities. Such Purchaser is not a registered broker-dealer under Section 15 of the Exchange Act. 
  
 (d) Experience of such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge,
sophistication and experience in business 

  

 
and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. 
  
 (e) General Solicitation. Such Purchaser is not
purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or
any other general solicitation or general advertisement. 
  
 (f) Principal Market Representations. Such Purchaser represents that no director, officer or general partner of the Purchaser, beneficial owner of 10 percent or more of any class of its equity securities, any
promoter of the Purchaser presently connected with it in any capacity: 
  
 (i) has been convicted within 10 years prior to the date hereof of any felony or misdemeanor in connection with the purchase or sale of any security, involving the making of a false filing with the Commission, or
arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser; 
  
 (ii) is subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily enjoining or
restraining, or is subject to any order, judgment, or decree of any court of competent jurisdiction, entered within 5 years prior to the filing of such offering statement, permanently enjoining or restraining such person from engaging in or
continuing any conduct or practice in connection with the purchase or sale of any security, involving the making of a false filing with the Commission, or arising out of the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, or investment adviser; 
  
 (iii) is subject to an order of the Commission entered pursuant to section 15(b), 15B(a), or 15B(c) of the Exchange Act, or section 203(e) or (f) of the Investment Advisers Act of 1940 [15, U.S.C. 80b-1 et seq.]; 
  
 (iv) is suspended or expelled from membership in, or
suspended or barred from association with a member of, a national securities exchange registered under section 6 of the Exchange Act or a national securities association registered under section 15A of the Exchange Act for any act or omission to act
constituting conduct inconsistent with just and equitable principles of trade; or 
  
 (iv) is subject to a United States Postal Service false representation order entered under 39 U.S.C. § 3005 within 5 years prior to
the filing of the offering statement required by § 230.252, or is subject to a restraining order or preliminary injunction entered under 39 U.S.C. § 3007 with respect to conduct alleged to have violated 39 U.S.C. § 3005. 

 

 Within 30 days of the Closing Date, in the event that the Company is notified in writing
by the Principal Market that it rejects the Company’s additional shares listing application directly as a result of a breach of a Purchaser’s representation in Section 3.2(f), the Company will have the right to rescind such
Purchaser’s part of this transaction (and such Purchaser only) and shall have 60 days to refund such Purchaser its Subscription Amount. 
  
 ARTICLE IV 
 OTHER AGREEMENTS OF THE
PARTIES 
  
 4.1 Transfer Restrictions. 
  
 (a) The Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement. 
  
 (b) Each Purchaser agrees to the imprinting, so long as is required by this Section 4.1(b), of the following legend on any certificate evidencing Securities: 
  
 [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 
  
 The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in 

  

 
Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith; provided that upon any
foreclosure of pledged securities, the pledgee shall take such securities subject to the terms and conditions of this Agreement. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder. 
  
 (c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set
forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Underlying Shares pursuant to
Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the
staff of the Commission); provided, however, in connection with the issuance of the Underlying Shares, each Purchaser, severally and not jointly with the other Purchasers, hereby agrees to adhere to and abide by all prospectus delivery
requirements under the Securities Act and rules and regulations of the Commission. The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after the Effective Date if required by the Company’s
transfer agent to effect the removal of the legend hereunder. If all or any portion of a Debenture or Warrant is converted or exercised (as applicable) at a time when there is an effective registration statement to cover the resale of the Underlying
Shares, or if such Underlying Shares may be sold under Rule 144(k) or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations thereof) then such Underlying Shares shall be
issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than five Trading Days following the delivery by a Purchaser to the
Company of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such fifth Trading Day, the “Legend Removal Date”, deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this
Section. 
  
 (d) In addition to such
Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as liquidated damages and not as a penalty, for each $5,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are
submitted to the Company’s transfer agent) delivered for removal of the restrictive legend and subject to this Section 4.1(c), $25 per Trading Day (increasing 

  

 
to $50 per Trading Day 3 Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such
Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. 
  
 4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including without limitation its obligation to issue
the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company. 
  
 4.3 Furnishing of Information. As long as any Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. Upon the request of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with the preceding sentence. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. 
  
 4.4 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Principal Market. 
  
 4.5 Reservation and Listing of
Securities. 
  
 (a) The Company shall
maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents. 
  
 (b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors of the Company shall use commercially reasonable efforts to 

  

 
amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date. 
  
 (c) The Company shall, if applicable: (i) in the time and manner required by the Principal Market, prepare and file with such Principal
Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all commercially reasonable steps necessary to cause such shares of Common
Stock to be approved for listing on the Principal Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing, and (iv) take all commercially reasonable steps necessary to maintain the listing of such Common Stock
on any date at least equal to the Required Minimum on such date on such Principal Market or another Principal Market. In addition, the Company shall hold a special meeting of shareholders (which may also be the annual meeting of shareholders) at the
earliest practical date, but in no event later than March 31, 2004, for the purpose of obtaining Shareholder Approval, with the recommendation of the Company’s Board of Directors that such proposal be approved, and the Company shall solicit
proxies from its shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal. 
  
 4.6 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Debentures. No additional legal opinion or
other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Debentures. Subject to compliance by the Purchasers with the Notice of Exercise or Notice of Conversion as the case may be, the Company
shall honor exercises of the Warrants and conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents. 
  
 4.7 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the date of this Agreement, issue a press release or file a Current Report on Form 8-K reasonably acceptable to each Purchaser disclosing all material terms of the transactions contemplated hereby. The
Company and the Purchasers shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby and neither the Company nor any Purchaser shall issue any such press release or otherwise make any such
public statement (i) without the prior consent of the Company, with respect to any press release of any Purchaser, and (ii) without the prior consent of each Purchaser with respect to any press release of the Company, which consent in each case
shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing,
other than in any registration statement filed pursuant to the Registration Rights Agreement and filings related thereto, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Principal Market, without the prior written consent of such Purchaser, except to the extent such disclosure is required by law or Principal Market 

  

 
regulations, in which case the Company shall provide each Purchaser with prior notice of such disclosure. 
  
 4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the
Company. 
  
 4.9 Use of Proceeds. The Company shall use the
net proceeds from the sale of the Securities hereunder to make acquisitions and capital investments and for working capital purposes and not for the satisfaction of any portion of the Company’s debt (other than payment of trade payables,
capital lease obligations, and accrued expenses in the ordinary course of the Company’s business and prior practices), to redeem any Company equity or equity-equivalent securities or to settle any outstanding litigation. 
  
 4.10 Reimbursement. If any Purchaser becomes involved in any capacity
in any Proceeding by or against any Person who is a stockholder of the Company, solely as a result of such Purchaser’s acquisition of the Securities under this Agreement and without causation by any other activity, obligation, condition or
liability on the part of, or pertaining to such Purchaser and not to the purchase of Securities pursuant to this Agreement, the Company will reimburse such Purchaser, to the extent such reimbursement is not provided for in Section 4.11, for its
reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations (and limitations thereon) of
the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have
any liability to the Company or any Person asserting claims on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement except to the extent any covenant or warranty owing to the Company is breached.

  
 4.11 Indemnification. The Company will indemnify and
hold the Purchasers and their directors, officers, shareholders, partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to: (a) any misrepresentation,
breach or inaccuracy, or any allegation by a third party that, if true, would constitute a breach or inaccuracy, of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction
Documents; or (b) any cause of action, suit or claim brought or made against such 

  

 
Purchaser Party and arising solely out of or solely resulting from the execution, delivery, performance or enforcement of this Agreement or any of the other
Transaction Documents and without causation by any other activity, obligation, condition or liability pertaining to such Purchaser and not to the transactions contemplated by this Agreement. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. 
  
 4.12 Shareholders Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company or any other Person that any Purchaser is an “Acquiring Person” under the plan or in any way could be deemed to trigger the provisions of such plan by virtue
of receiving Securities under the Transaction Documents. 
  
 4.13
Future Financings. From the date hereof until 60 days after the Effective Date, other than as contemplated by this Agreement, neither the Company nor any Subsidiary shall issue or sell any Capital Shares or Capital Shares Equivalents.
Notwithstanding anything herein to the contrary, the 60 day period set forth in this Section 4.13 shall be extended for the number of Trading Days during such period in which (y) trading in the Common Stock is suspended by any Principal Market, or
(z) following the Effective Date, the Registration Statement is not effective or the prospectus included in the Registration Statement may not be used by the Purchasers for the resale of the Underlying Shares. Notwithstanding anything to the
contrary herein, this Section 4.13 shall not apply to the following (a) the granting or issuance of shares of Common Stock or options to employees, officers and directors of the Company pursuant to any stock option plan or employee incentive plan or
agreement duly adopted or approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) the exercise of a Debenture
or any other security issued by the Company in connection with the offer and sale of this Company’s securities pursuant to this Agreement, or (c) the exercise of or conversion of any Capital Shares Equivalents issued and outstanding on the date
hereof, provided that such securities have not been amended since the date hereof, or (d) the issuance of Capital Shares or Capital Shares Equivalents in connection with acquisitions, strategic investments or strategic partnering arrangements, the
primary purpose of which is not to raise capital, or (e) the issuance of investment units pursuant to that certain private placement memorandum of the Company dated April 28, 2003, not to exceed $1,400,000 in the aggregate (the “PPM
Offering”). Additionally, in additional to the limitations set forth herein, from the date hereof until such time as the Purchasers no longer hold any of the Securities, other than the issuance of Capital Shares or Capital Shares
Equivalents as part of the consideration paid for an acquisition, the Company shall be prohibited from effecting or enter into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction” or an
“MFN Transaction” (each as defined below). The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security
or upon the occurrence of specified or contingent events directly or 

  

 
indirectly related to the business of the Company or the market for the Common Stock (but not including customary anti-dilution protection). The term
“MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms more favorable than those granted to the Purchasers. In addition, unless Shareholder Approval has been obtained and deemed effective in accordance with Section 4.5(c), the Company shall not make
any issuance whatsoever of Capital Shares or Capital Shares Equivalents which would cause any adjustment of the Set Price (other than pursuant to Section 4(c)(ii) of the Debentures) to the extent the holders of Debentures would not be permitted,
pursuant to Section 4(a)(ii)(B) of the Debenture, to convert their respective outstanding Debentures and exercise their respective Warrants in full, ignoring for such purposes any conversion or exercise limitations therein. 
  
 4.14 Participation in Future Financing. From the date hereof until a
Purchaser holds in the aggregate less than 25% of the original principal amount of Debentures purchased hereunder, the Company shall not effect a financing of its Capital Shares or Capital Shares Equivalents (a “Subsequent
Financing”) unless (i) the Company delivers to each such Purchaser a written notice at least 5 Trading Days prior to the closing of such Subsequent Financing (the “Subsequent Financing Notice”) of its intention to effect
such Subsequent Financing, which Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder, the Person with whom such Subsequent Financing
is proposed to be effected, and attached to which shall be a term sheet or similar document relating thereto and (ii) such Purchaser shall not have notified the Company by 6:30 p.m. (New York City time) on the fifth (5th) Trading Day after its receipt of the Subsequent Financing Notice of its willingness to provide (or to cause its designee to
provide), subject to completion of mutually acceptable documentation, all or part of the proceeds to be raised in such Subsequent Financing on the same terms set forth in the Subsequent Financing Notice. If one or more Purchasers shall fail to so
notify the Company of their willingness to participate in the Subsequent Financing, the Company may effect the remaining portion of such Subsequent Financing on the terms and to the Persons set forth in the Subsequent Financing Notice; provided that
the Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of first refusal set forth above in this Section 4.14, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 60 Trading Days after the date of the initial Subsequent Financing Notice with the Person identified in the Subsequent Financing
Notice. In the event the Company receives responses to Subsequent Financing Notices from Purchasers seeking to purchase more than the proceeds to be raised in such Subsequent Financing, each such Purchaser shall have the right to purchase their Pro
Rata Portion (as defined below) of the Capital Shares or Capital Shares Equivalents to be issued in such Subsequent Financing. For purposes of a Subsequent Financing, “Pro Rata Portion” is the ratio of (x) the principal amount of
Debentures purchased by a Purchaser exercising its right to participate in such Subsequent Financing and (y) the sum of the aggregate principal amount of Debentures issued hereunder to participating Purchasers exercising their rights to participate
in such Subsequent Financing. Notwithstanding anything to the contrary herein, this Section 4.14 shall not apply to the following (a) the granting of options to employees, officers and directors of the Company pursuant to any stock option plan duly
adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee 

  

 
of non-employee directors established for such purpose, or (b) the exercise of the Debenture or any other security issued by the Company in connection with
the offer and sale of this Company’s securities pursuant to this Agreement, or (c) the exercise of or conversion of any Capital Shares Equivalents issued and outstanding on the Original Issue Date, provided such securities have not been amended
since the date hereof, or (d) the issuance of Capital Shares or Capital Shares Equivalents in connection with acquisitions, strategic investments or strategic partnering arrangements, the primary purpose of which is not to raise capital or
subsequent exercise of any such Capital Shares Equivalents, (e) or in connection with the PPM Offering. 
  
 4.15 Equal Treatment of Purchasers. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended to treat for the Company the Debenture holders as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise. 
  
 4.16. No
Net Short Position. The Purchasers agree, severally and not jointly, that they will not enter into any Short Sales (as hereinafter defined) from the period commencing on the date hereof and ending on the date that all of the Debentures held by
such Purchaser have been converted. For purposes of this Section 4.16, a “Short Sale” by any Purchaser shall mean a sale of Common Stock by such Purchaser that is marked as a short sale and that is made at a time when there is no
equivalent offsetting long position in Common Stock held by such Purchaser. For purposes of determining whether there is an equivalent offsetting long position in Common Stock held by the Purchaser, Underlying Shares that have not yet been converted
pursuant to the Debentures or exercised pursuant to the Warrants shall be deemed to be held long by the Purchaser, and the amount of shares of Common Stock held in a long position shall be the number of Underlying Shares issuable pursuant to the
Debentures and Warrants assuming such Purchaser converted all the outstanding principal amount of the Debentures (ignoring any conversion limitations included therein) and all shares of Common Stock underlying the Warrants (ignoring any exercise
limitations included therein) held by such Purchaser on such date, plus any shares of Common Stock otherwise then held by such Purchaser. 
  
 ARTICLE V 
 MISCELLANEOUS

  
 5.1 Termination. This Agreement may be terminated
by any Purchaser, by written notice to the other parties, if the Closing has not been consummated on or before December 31, 2003; provided that no such termination will affect the right of any party to sue for any breach by the other party (or
parties). 
  
 5.2 Fees and Expenses. At the Closing, the
Company has agreed to reimburse Midsummer Capital LLC (“Midsummer”) up to $40,000 for its legal fees and expenses (less the sum of $15,000, prior receipt of which is acknowledged by Midsummer) and such funds shall be wired per the
instructions of Midsummer. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, 

  

 
accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of any Securities. 
  
 5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits
and schedules. 
  
 5.4 Notices. Any and all notices or
other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified on the signature page attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day and an electronic confirmation of delivery is received by the sender, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) three Trading Days
following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses for such notices and communications are those set
forth on the signature pages hereof, or such other address as may be designated in writing hereafter, in the same manner, by such Person. 
  
 5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right. 
  
 5.6
Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 
  
 5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers. Any Purchaser may assign its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities. 
  
 5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, 

  

 
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.11. 
  
 5.9 Governing Law; Venue; Waiver of Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The parties hereby waive all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding. 
  
 5.10
Survival. The representations and warranties contained herein shall survive the Closing and the delivery, exercise and/or conversion of the Securities, as applicable for the applicable statue of limitations. 
  
 5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof. 
  
 5.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in
any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

  

 5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the
periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions
and rights; provided, however, in the case of a rescission of a conversion of a Debenture or exercise of a Warrant, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or
exercise notice. 
  
 5.14 Replacement of Securities. If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. 
  
 5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be
adequate. Without limiting the generality of the foregoing, the Company expressly agrees that its breach of the next to last sentence of Section 4.13 would cause each Purchaser irreparable harm, and consents to granting of injunctive relieve by any
court having jurisdiction to preclude any such issuance of securities. 
  
 5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 
  
 5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any
manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be
brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the
Company under the Transaction 

  

 
Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum
Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal
balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election. 
  
 5.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any Transaction
Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights
arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction Documents. For reasons of administrative convenience only, Purchasers and their respective counsel have chosen to communicate with the Company through FW. FW does not
represent all of the Purchasers but only Midsummer. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the
Purchasers. 
  
 5.19 Liquidated Damages. The Company’s
obligations to pay any liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such liquidated damages or other amounts are due and payable shall have been canceled. 
  
 (Signature Pages Follow) 
  

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

			
	PAINCARE HOLDINGS, INC.
		
	By:	 	 
	 	 	

	 Name:
	 	 
	 Title:
	 	 

  

			
	 Address for Notice:

		
	Attn:	 	 
	 Tel:
	 	 
	 Fax:
	 	 

  
 With a copy to: 
  

			
		
	Attn:	 	 
	 Tel:
	 	 
	 Fax:
	 	 

  
 [REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK 
 SIGNATURE PAGE FOR PURCHASER FOLLOWS] 
  

 [PURCHASER’S SIGNATURE PAGE - PRZ] 
  
 IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above. 
  

									
	MIDSUMMER INVESTMENT, LTD.	 	 	 	 	 	 Address for Notice:
 c/o Midsummer
Capital, LLC
 485 Madison Avenue, 23rd Floor
 New York, New York 10022
 Tel: (212)
584-2140
 Fax: (212) 584-2142
 Attn: Scott
Kaufman

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	 	 	 	 	 	 	 
	 	 	
	 	 	 	 	 
	 Name:
 Title:
	 	 	 	 	 	 	 

  

									
	 Subscription Amount: $
 Warrant
Shares:
	 	 	 	 	 	 With a copy to:
 (which shall not constitute
notice)
 Feldman Weinstein LLP
 420 Lexington Avenue

New York, NY 10170
 Attn: Robert F. Charron
 Tel: (212) 869-7000
 Fax: (212) 997-4242

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 

  

 [PURCHASERS SIGNATURE PAGE –PRZ] 
  

									
	ISLANDIA, L.P.	 	 	 	 	 	 c/o John Lang, Inc.
 485 Madison Avenue
23rd Floor
 New York,
New York 10022
 Tel: (212) 584-2100
 Fax: (212)
584-2199

	 	 	 	 	 	 
	By:	 	 	 	 	 	 	 
	 	 	
	 	 	 	 	 
	 	 	 Name:
	 	 	 	 	 
	 	 	 Title:
	 	 	 	 	 

  
 Subscription Amount: $ 
 Warrant Shares:

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