Document:

exv4w2

 

Exhibit 4.2

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE
TO AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

WARRANT TO PURCHASE

66,667 SHARES OF SERIES A PREFERRED STOCK OF

OCULUS INNOVATIVE SCIENCES, INC.

(Void after December 31, 2014)

     This certifies that VENTURE LENDING & LEASING III, LLC, a Delaware limited liability company,
or assigns (the “Holder”), for value received, is entitled to purchase from OCULUS INNOVATIVE
SCIENCES, INC., a California corporation (the “Company”), 66,667 fully paid and nonassessable
shares of the Company’s Series A Preferred Stock (“Preferred Stock”) for cash at a price of $1.50
per share (the “Stock Purchase Price”) at any time or from time to time up to and including 5:00
p.m. (Pacific time) on December 31, 2014 (the “Expiration pate”), upon surrender to the Company at
its principal office at 1129 North McDowell Blvd., Petaluma, California 94954. (or at such other
location as the Company may advise Holder in writing) of this Warrant properly endorsed with the
Form of Subscription attached hereto duly filled in and signed and upon payment in cash or by check
of the aggregate Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof The Stock Purchase Price and the
number of shares purchasable hereunder are subject to adjustment as provided in Section 4 of this
Warrant.

     This Warrant is subject to the following terms and conditions:

     1. Exercise: Issuance of Certificates: Payment for Shares.

          (a) Unless an election is made pursuant to clause (b) of this Section 1, this Warrant shall be
exercisable at the option of the Holder, at any time or from time to time, on or before the
Expiration Date for all or any portion of the shares of Preferred Stock (but not for a fraction of
a share) which may be purchased hereunder for the Stock Purchase Price multiplied by the number of
shares to be purchased. In the event, however, that pursuant to the Company’s Articles of
Incorporation, as amended, an event causing automatic conversion of the Company’s Preferred Stock
shall have occurred prior to the exercise of this Warrant, in whole or in part, then this Warrant
shall be exercisable for the number of shares of Common Stock of the Company into which the
Preferred Stock not purchased upon any prior exercise of this Warrant would have been so converted
(and, where the context requires, reference to “Preferred Stock” shall be deemed to be or include
such Common Stock, as may be appropriate). The Company agrees that the shares of Preferred Stock
purchased under this Warrant shall be and are deemed to be issued

 

 

to the Holder hereof as the record owner of such shares as of the close of business on the
date on which the form of subscription shall have been delivered and payment made for such shares.
Subject to the provisions of Section 2, certificates for the shares of Preferred Stock so
purchased, together with any other securities or property to which the Holder hereof is entitled
upon such exercise, shall be delivered to the Holder hereof by the Company at the Company’s expense
within a reasonable time after the rights represented by this Warrant have been so exercised.
Except as provided in clause (b) of this Section 1, in case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the shares purchasable under
this Warrant surrendered upon such purchase to the Holder hereof within a reasonable time. Each
stock certificate so delivered shall be in such denominations of Preferred Stock as may be
requested by the Holder hereof and shall be registered in the name of such Holder or such other
name as shall be designated by such Holder, subject to the limitations contained in Section 2.

          (b) The Holder, in lieu of exercising this Warrant by the cash payment of the Stock Purchase
Price pursuant to clause (a) of this Section I, may elect, at any time on or before the Expiration
Date, to surrender this Warrant and receive that number of shares of Preferred Stock equal to the
quotient of: (i) the difference between (A) the Per Share Price (as hereinafter defined) of the
Preferred Stock, less (B) the Stock Purchase Price then in effect, multiplied by the number of
shares of Preferred Stock the Holder would otherwise have been entitled to purchase hereunder
pursuant to clause (a) of this Section 1 (or such lesser number of shares as the Holder may
designate in the case of a partial exercise of this Warrant); over (ii) the Per Share Price.
Election to exercise under this section (b) may be made by delivering a signed form of subscription
to the Company via facsimile, to be followed by delivery of this Warrant.

          (c) For purposes of clause (b) of this Section I, “Per Share Price” means the product of: (1)
the greater of (A) the closing price of the securities issuable upon conversion of the Preferred
Stock, as quoted by NASDAQ or listed on any exchange, whichever is applicable, as published in the
Western Edition of The Wail Street Journal for the trading day immediately prior to
the date of the Holder’s election hereunder or, (B) if applicable at the time of or in connection
with the exercise under clause (b) of this Section I, the gross sales price of one share of the
Company’s Common Stock pursuant to a registered public offering or that amount which stockholders
of the Company will receive for each share of Common Stock pursuant to a merger, reorganization or
sale of assets; and (ii) that number of shares of Common Stock into which each share of Preferred
Stock is convertible. If the securities issuable upon conversion of the Preferred Stock are not
quoted by NASDAQ or listed on an exchange and none of the above clauses apply, the Per Share Price
of the Preferred Stock (or the equivalent number of shares of Common Stock into which such
Preferred Stock is convertible) shall be the price per share which the Board of Directors of the
Company shall determine in good faith.

     2. Limitation on Transfer.

          (a) This Warrant and the Preferred Stock shall not be transferable without the prior written
consent of the Company (which shall not be unreasonably withheld or delayed) and then only after
compliance with the conditions specified in this Section 2, which conditions are intended to insure
compliance with the provisions of the Securities Act. Each holder of this

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Warrant or the Preferred Stock issuable hereunder will cause any proposed transferee of the
Warrant or Preferred Stock to agree to take and hold such securities subject to the provisions and
upon the conditions specified in this Section 2.

          (b) Each certificate representing (i) this Warrant, (ii) the Preferred Stock, (iii) shares of
the Company’s Common Stock issued upon conversion of the Preferred Stock and (iv) any other
securities issued in respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of this Section 2 or unless such
securities have been registered under the Securities Act or sold under Rule 144) be stamped or
otherwise imprinted with a legend substantially in the following form (in addition to any legend
required under applicable state securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN EXEMPTION THEREFROM
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

          (c) The Holder of this Warrant and each person to whom this Warrant is subsequently -
transferred (if permitted hereunder) represents and warrants to the Company (by acceptance of such
transfer) that it will not transfer this Warrant (or securities issuable upon exercise hereof
unless a registration statement under the Securities Act was in effect with respect to such
securities at the time of issuance thereof) except pursuant to (1) an effective registration
statement under the Securities Act, (ii) Rule 144 under the Securities Act (or any other rule under
the Securities Act relating to the disposition of securities), or (iii) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that an exemption from such registration is
available.

     3. Shares to be Fully Paid: Reservation of Shares. The Company covenants and agrees that
all shares of Preferred Stock which may be issued upon the exercise of the rights represented by
this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable
and free from all preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved, for the purpose of issue upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but unissued Preferred
Stock, or other securities and property, when and as required to provide for the exercise of the
rights represented by this Warrant. The Company will take all such action as may be necessary to
assure that such shares of Preferred Stock may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of any domestic securities exchange upon
which the Preferred Stock may be listed. The Company will not take any action which would result
in any
adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i) if the total number of
shares of Preferred Stock issuable after such action

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upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares of Preferred Stock then
issuable upon exercise of all options and upon the conversion of all convertible securities then
outstanding, would exceed the total number of shares of Preferred Stock then authorized by the
Company’s Articles of Incorporation, (ii) if the total number of shares of Common Stock issuable
after such action upon the conversion of all such shares of Preferred Stock together with all
shares of Common Stock then outstanding and then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding would exceed the total number of shares
of Common Stock then authorized by the Company’s Articles of Incorporation or (iii) if the par
value per share of the Preferred Stock would exceed the Stock Purchase Price.

     4. Adjustment of Stock Purchase Price and Number of Shares. The Stock Purchase Price and
the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the occurrence of certain events described in this Section 4. Upon each
adjustment of the Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number of shares obtained
by multiplying the Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Stock Purchase Price resulting from such adjustment

          4.1 Subdivision or Combination of Stock. In case the Company shall at any time
subdivide its outstanding shares of Preferred Stock into a greater number of shares, the Stock
Purchase Price in effect immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Preferred Stock of the Company shall be combined
into a smaller number of shares, the Stock Purchase Price in effect immediately prior to such
combination shall be proportionately increased.

          4.2 Dividends in Preferred Stock, Other Stock, Property, Reclassification. If at any
time or from time to time the holders of Preferred Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,

          (a) Preferred Stock, or any shares of stock or other securities whether or not such securities
are at any time directly or indirectly convertible into or exchangeable for Preferred Stock, or any
rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or

          (b) any cash paid or payable otherwise than as a cash dividend, or

          (c) Preferred Stock or other or additional stock or other securities or property (including
cash) by way of spin off, split-up, reclassification, combination of shares or similar
corporate rearrangement, (other than shares of Preferred Stock issued as a stock split,
adjustments in respect of which shall be covered by the terms of Section 4.1 above),

Then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled
to receive, in addition to the number of shares of Preferred Stock receivable thereupon,

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and
without payment of any additional consideration therefore, the amount of stock and other securities
and property (including cash in the cases referred to in clauses (b) and (c) above) which such
Holder would hold on the date of such exercise had he been the holder of record of such Preferred
Stock as of the date on which holders of Preferred Stock received or became entitled to receive
such shares and/or all other additional stock and other securities and property.

          4.3 Reorganization, Reclassification, Consolidation, Mercer or Sale. If any capital
reorganization of the capital stock of the Company, or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Preferred Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Preferred Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights represented hereby) such
shares of stock, securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Preferred Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of the rights
represented hereby. in any such case, appropriate provision shall be made with respect to the
rights and interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be possible, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof The Company will not effect arty such
consolidation, merger or sale unless, prior to the consummation thereof; the successor corporation
(if other than the Company) resulting from such consolidation, or the corporation purchasing such
assets shall assume by written instrument, executed and mailed or delivered to the registered
Holder hereof at the last address of such Holder appearing on the books of the Company, the
obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such Holder may be entitled to purchase.

          4.4 Sale or Issuance Below Purchase Price. The other antidilution rights applicable
to the shares of series Preferred Stock purchasable hereunder are set forth in the Company’s
Articles of Incorporation, as amended through the date hereof (the “Charter”). The Company shall
promptly provide the Holder hereof with any restatement, amendment, modification or waiver of the
Charter promptly after the same has been made.

          4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase Price, and/or any increase or decrease in the
number of shares purchasable upon the exercise of this Warrant the Company shall give written
notice thereof; by first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The notice, which may
be substantially in the form of Exhibit “A” attached hereto, shall be signed by the Company’s chief
financial officer and shall state the Stock Purchase Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price upon the exercise
of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.

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          4.6 Other Notices. If at any time:

          (a) the Company shall declare any cash dividend upon its Preferred Stock;

          (b) the Company shall declare any dividend upon its Preferred Stock payable in stock or make
any special dividend or other distribution to the holders of its Preferred Stock;

          (c) the Company shall offer for subscription pro rata to the holders of its Preferred Stock
any additional shares of stock in connection with a Down Round or additional shares of stock of any
class or other rights;

          (d) there shall be any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of all or substantially all of its
assets to, another entity;

          (e) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the
Company; or

          (f) the Company shall take or propose to take any other action, notice of which is actually
provided to holders of the Preferred Stock;

then, in any one or more of said cases, the Company shall give, by first class mail, postage
prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the
books of the Company, (i) at least 20 day’s prior written notice of the date on which the books of
the Company shall close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, or other action and (ii) in
the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action, at least 20 day’s written notice of the date when the
same shall take place. Any notice given in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights, the date on which
the holders of Preferred Stock shall be entitled thereto. Any notice given hi accordance with the
foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action as the case may be.

     4.7 Certain Events. If any change in the outstanding Preferred Stock of the Company
or any other event occurs as to which the other provisions of this Section 4 are not strictly
applicable and the Board of Directors in good faith believes that an adjustment is necessary to
effect the essential intent and principles with the adjustment provisions of this Warrant or if the
provisions of this Section 4 are strictly applicable to an event but the application of such
provisions would not fairly effect the adjustments to this Warrant in accordance with the essential
intent and principles of such provisions, then the Board of Directors of the Company shall make in
good faith an adjustment in the number and class of shares issuable under this Warrant, the Stock
Purchase Price and/or the application of such provisions, in accordance with such essential intent
and principles, so as to protect such purchase rights as aforesaid. The adjustment shall be such
as will give the Holder of this Warrant upon

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exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as the Holder would have owned had this Warrant been
exercised prior to the event and had the Holder continued to hold such shares until after the event
requiring adjustment.

     5. Issue Tax. The issuance of certificates for shares of Preferred Stock upon the exercise
of this Warrant shall be made without charge to the Holder of this Warrant for any issue tax in
respect thereof, provided, however, that the Company shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the then Holder of this Warrant being exercised.

     6. Closing of Books. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Preferred Stock issued or issuable upon the exercise
of this Warrant in any manner which interferes with the timely exercise of this Warrant, unless
required by applicable law or regulation, or to avoid the violation of any applicable law or
regulation..

     7. No Voting or Dividend Ruts: Limitation of Liability. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof the right to vote or to consent as a
stockholder in respect of meetings of stockholders for the election of directors of the Company or
any other matters or any rights whatsoever as a stockholder of the Company. No dividends or
interest shall be payable or accrued in respect of this Warrant or the interest represented hereby
or the shares purchasable hereunder until, and only to the extent that, this Warrant-shall have
been exercised. No provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Preferred Stock, and no mere enumeration herein of the rights or privileges of
the Holder hereof, shall give rise to any liability of such Holder for the Stock Purchase Price or
as a stockholder of the Company, whether such liability is asserted by the Company or by its
creditors.

     8. Intentionally Omitted.

     9. Registration Rights. The Holder hereof shall be entitled, with respect to the shares of Preferred Stock issued upon
exercise hereof or the shares of Common Stock or other securities issued upon conversion of such
Preferred Stock as the case may be, to all of the registration rights set forth in the Series A
Preferred Shares Investors Rights Agreement executed by the holders of Series A Preferred Stock in
connection with the offering of Series A Preferred Shares (the “Rights Agreement”), to the same
extent and on the same terms and conditions as possessed by the investors thereunder with the
following exceptions and clarifications: (i) the Holder will have no demand registration rights;
(ii) the Holder will be subject to the same provisions regarding indemnification as contained in
the Rights Agreement; (iii) the registration rights are freely assignable by the Holder of this
Warrant in connection with a permitted transfer of this Warrant or the shares issuable upon
exercise hereof; and (iv) the Holder will be subject to the same lock-up obligations as contained
in the Rights Agreement. The Company shall take such action as may be reasonably necessary to
assure that the granting of such registration rights to the Holder does not violate the provisions
of the Rights Agreement or any of the Company’s charter documents or rights of prior grantees of
registration rights.

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     10. Rights and Obligations Survive Exercise of Warrant. The rights and obligations of the
Company, of the Holder of this Warrant and of the holder of shares of Preferred Stock issued upon
exercise of this Warrant, contained in Sections 6 and 9 shall survive the exercise of this Warrant.

     11. Modification and Waiver. This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.

     12. Notices. Any notice, request or other document required or permitted to be given or
delivered to the Holder hereof or the Company shall be deemed to have been given (i) upon receipt
if delivered personally or by courier (ii) upon confirmation of receipt if by telecopy or (iii)
three business days after deposit in the US mail, with postage prepaid and certified or registered,
to each such Holder at its address as shown on the books of the Company or to the Company at the
address indicated therefor in the first paragraph of this Warrant

     13. Binding Effect on Successors. This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially all of the
Company’s assets. All of the obligations of the Company relating to the Preferred Stock issuable
upon the exercise of this Warrant shall survive the exercise and termination of this Warrant. All
of the covenants and agreements of the Company shall inure to the benefit of the successors and
assign of the holder hereof. The Company will, at the time of the exercise of this Warrant, in
whole or in part, upon request of the Holder hereof and at the Holder’s expense, acknowledge in
writing its continuing obligation to the Holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Common Stock) to which the Holder hereof
shall continue to be entitled after such exercise in accordance with this Warrant; provided, that
the failure of the
Holder hereof to make any such request shall not affect the continuing obligation of the Company to
the Holder hereof in respect of such rights.

     14. Descriptive Headings and Governing Law. The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a
part of this Warrant. This Warrant shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of California.

     15. Lost Warrants pr Stock Certificates. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of any Warrant or stock certificate and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in
the case of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company at its expense will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

     16. Fractional Share. No fractional shares shall be issued upon exercise of this Warrant.
The Company shall, in lieu of issuing any fractional share, pay the holder entitled to such
fraction a sum in cash equal to such fraction multiplied by the then effective Stock Purchase
Price.

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     17. Representations of Holder. With respect to this Warrant, Holder represents and
warrants to the Company as follows:

          17.1 Experience. It is an “accredited investor” as that term is defined in Rule 501
(a) promulgated under the Securities Act of 1933, as amended; is experienced in evaluating and
investing in companies engaged in businesses similar to that of the Company; it understands that
investment in this Warrant involves substantial risks; it has made detailed inquiries concerning
the Company, its business and services, its officers and its personnel; the officers of the Company
have made available to Holder any and all written information it has requested; the officers of the
Company have answered to Holder’s satisfaction all inquiries made by it; in making this investment
it has relied upon information made available to it by the Company; and it has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks
of investment in the Company and it is able to bear the economic risk of that investment.

          17.2 Investment. It is acquiring this Warrant for investment for its own account and
not with a view to, or for resale in connection with, any distribution thereof. It understands
that this
Warrant, the shares of Preferred Stock issuable upon exercise thereof and the shares of Common
Stock issuable upon conversion of the Preferred Stock, have not been registered under the
Securities Act, nor qualified under applicable state securities laws.

          17.3 Rule 144. It acknowledges that this Warrant, the Preferred Stock and the Common
Stock must be held indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act.

          17.4 Access to Data. It has had an opportunity to discuss the Company’s business,
management and financial affairs with the Company’s management and has had the opportunity to
inspect the Company’s facilities.

     18. Additional Representations and Covenants of the Company. The Company hereby
represents, warrants and agrees as follows:

          18.1 Corporate Power. The Company has all requisite corporate power and corporate
authority to issue this Warrant and to carry out and perform its obligations hereunder.

          18.2 Authorization. All corporate action on the part of the Company, its directors
and stockholders necessary for the authorization, execution, delivery and performance by the
Company of this has been taken. This Warrant is a valid and binding obligation of the Company,
enforceable in accordance with its terms.

          18.3 Offering. Subject in part to the truth and accuracy of Holder’s representations
set forth in Section 17 hereof, the offer, issuance and sale of this Warrant is, and the issuance
of Preferred Stock upon exercise of this Warrant and the issuance of Common Stock upon conversion
of the Preferred Stock will be exempt from the registration requirements of the Securities Act, and
are exempt from the qualification requirements of any applicable state securities laws; and neither
the Company nor anyone acting on its behalf will take any action hereafter that would cause the
loss of such exemptions.

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          18.4 Stock Issuance. Upon exercise of this Warrant, the Company will use its best
efforts to cause stock certificates representing the shares of Preferred Stock purchased pursuant
to the exercise to be issued in the names of Holder, its nominees or assignees, as appropriate at
the time of such
exercise. Upon conversion of the shares of Preferred Stock into shares of Common Stock, the
Company will issue the Common Stock in the names of Holder, its nominees or assignees, as
appropriate.

          18.5 Certificates and By-Laws. The Company has provided Holder with true and complete
copies of the Company’s Certificate of Incorporation, By-Laws, and each Certificate of Designation
or other charter document setting, forth any rights, preferences and privileges of Company’s
capital stock, each as amended and in effect on the date of issuance of this Warrant.

          18.6 Conversion of Preferred Stock. As of the date hereof, each share of the
Preferred Stock is convertible into one share of the Common Stock.

          18.7 Financial and Other Reports. From time to time up to the earlier of the
Expiration Date or the complete exercise of this Warrant, the Company shall furnish to Holder (i)
within 90 days after the close of each fiscal year of the Company an audited balance sheet and
statement of changes in financial position at and as of the end of such fiscal year, together with
an audited statement of income for such fiscal year; (ii) within 45 days after the close of each
fiscal quarter of the Company, an unaudited balance sheet and statement of cash flows at and as of
the end of such quarter, together with an unaudited statement of income for such quarter, and (iii)
promptly after sending, making available, or filing, copies of all reports, proxy statements, and
financial statements that the Company sends or makes available to its stockholders and all
registration statements and reports that the Company files with the SEC or any other governmental
or regulatory authority.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers,
thereunto duly authorized this 21 day of April, 2004.

	 	 	 	 	 
	OCULUS INNOVATIVE SCIENCES, INC	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert E. Miller	 	 
	 	 	 	 	 
	 
	 	 	 	 
	Title:

	 	CFO	 	 
	 	 	 	 	 

VENTURE LENDING & LEASING III, LLC

By VLLI CAPITAL, LLC,

a Delaware limited liability company,

its Managing Member

	 	 	 
	By:

	 	Westech Investment Advisors, Inc.
	 

	 	its Managing Member

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	By:

	 	/s/ Salvador O. Gutierrez
	 	 
	 	 	 	 	 
	Name: Salvador O. Gutierrez	 	 
	Title: President	 	 

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FORM OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)

To:     OCULUS INNOVATIVE SCIENCES, INC.

	 	 	 
	o

	 	The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, (l) See Below                                         
(                    )
shares (the “Shares”) of Stock of                      and herewith makes payment of                      Dollars ($                    ) therefor, and requests that the certificates for such shares be issued in the name of, and delivered to,                     , whose address is                     .
	 
	 	 
	o

	 	The undersigned hereby elects to convert                      percent (%                    ) of the value of the Warrant pursuant to the provisions of Section 1(b) of the Warrant.

The undersigned acknowledges that it has reviewed the representations and warranties contained in
Section 17 of this Warrant and by its signature below hereby makes such representations and
warranties to the Company.

	 	 	 	 	 	 	 
	 

	 	Dated	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Holder:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	(Address)	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

	(1)	 	Insert here the number of shares called for on the face of the Warrant (or, in the case of a
partial exercise, the portion thereof as to which the Warrant is being exercised), in either
case without making any adjustment for additional Preferred Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of the Warrant,
may be issuable upon exercise.

 

 

ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with respect to the number
of shares of Preferred Stock covered thereby set forth herein below, unto:

	 	 	 	 	 
	Name of Assignee

	 	Address
	 	No. of Shares
	 

	 	 	 	 	 	 	 
	 

	 	Dated	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Holder:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 

	 	 

 

 

EXHIBIT “A”

[On letterhead of the Company]

     Reference is hereby made to that certain Warrant dated February      , 2004 issued by
OCULUS INNOVATIVE SCIENCES, INC, a California corporation (the “Company”), to VENTURE LENDING &
LEASING III, INC., a Maryland corporation (the “Holder”).

     (1F APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the Warrant that the
following adjustment(s) have been made to the Warrant: (describe adjustments, setting forth details
regarding method of calculation and facts upon which calculation is based].

     This certifies that the Holder is entitled to purchase from the Company                     (                    ) fully paid and
nonassessable shares of the Company’s
                    Stock
at a price of
                     Dollars ($                    ) per share (the “Stock
Purchase Price”). The Stock Purchase Price and the number of shares purchasable under the Warrant
remain subject to adjustment as provided in Section 4 of the Warrant.

     Executed this                      day of                                         , 200  
                  .

	 	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:exv4w3

 

Exhibit 4.3

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE
TO AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

WARRANT TO PURCHASE

SHARES OF SERIES B PREFERRED STOCK OF

OCULUS INNOVATIVE SCIENCES, INC.

(Void after March 31, 2017)

 

     This certifies that VENTURE LENDING & LEASING IV, LLC, a Delaware limited liability company,
or assigns (the “Holder”), for value received, is entitled to purchase from OCULUS
INNOVATIVE SCIENCES, INC., a California corporation (the “Company”), a number of fully paid
and nonassessable shares of the Company’s securities for an aggregate exercise price and at a price
per share (the “Stock Purchase Price”) determined as follows:

     All capitalized terms used in this Warrant and not otherwise defined shall have the meanings
ascribed to them in Section 11 of the Loan and Security Agreement dated as of even date herewith
(the “Loan Agreement”) and Part 1 of the Supplement thereto of even date therewith, between
the Company and Venture Lending & Leasing IV, Inc. (“Lender”).

Additional defined terms for this Warrant. For purposes of this Warrant:

“Alternate Price” means (A) seventy-five percent (75%) of the Next Round Price, if
the Next Round occurs prior to an IPO, or (B) seventy-five percent (75%) of the IPO Price,
if an IPO occurs prior to the Next Round.

“IPO” means Company’s first underwritten public offering of its shares of Common
Stock pursuant to an effective registration statement under the Securities Act of 1933, as
amended.

“IPO Price” means the price per share to the public in its IPO.

“Next Round” means the next transaction after the Closing Date, other than an IPO,
in which the Company issues and sells a class or series of equity securities in connection
with a bona fide round of equity financing resulting in net aggregate proceeds to Company of
at least $2,000,000.

“Next Round Price” means the lowest price per share paid by an investor for Next
Round Shares.

“Next Round Shares” means the type and series of securities issued by Company in the
Next Round.

“Series B Price” means $4.50 per share.

“Shares” means the series of Preferred Stock issued or issuable upon the exercise of
this Warrant, or the Company’s Common Stock if Common Stock is issued or issuable upon the
exercise of this Warrant.

“Vested Additional Share Amount” shall mean for each advance by the Lender of any
Loan to the Company pursuant to the Commitment, a percentage of the total Commitment
represented by such Loan multiplied by 85,000. (As an example for illustration purposes
only, if Company draws $1,000,000 of the Commitment in a

 

 

Loan, Lender would be entitled to additional shares of Preferred Stock as follows:
1,000,000/5,000,000=.20*85,000= 17,000 additional shares)

     The Holder shall be entitled initially to purchase hereunder Two Hundred Fifteen Thousand
(215,000) fully paid and nonassessable shares of Series B Preferred Stock of the Company at the
Series B Price, provided, however, if the Company does not successfully complete an IPO on
or before March 31, 2007, then the Holder shall be entitled to purchase the Shares at the Alternate
Price. (For purposes of this Warrant, “Stock Purchase Price” means either the Series B
Price or the Alternate Price, as determined in this paragraph.)

     In addition thereto, for each Loan advanced by Lender to the Company pursuant to the
Commitment up to Five Million United States Dollars ($5,000,000), Holder shall be entitled to
purchase at the Stock Purchase Price the Vested Additional Share Amount of fully paid and
nonassessable shares of the Company’s Preferred Stock up to Eighty-Five Thousand (85,000) shares.

     If this Warrant is exercisable at the Alternate Price based upon an IPO, it shall be
exercisable for shares of Company’s Common Stock. The Stock Purchase Price and the number of
Shares purchasable hereunder are subject to adjustment as provided in Section 4 of this Warrant.

     As soon as reasonably practicable after the occurrence or non-occurrence of the latest event
or condition necessary to determine (i) the actual number and type of the Company’s securities
issuable upon exercise of this Warrant and (ii) the initial Stock Purchase Price, the Company shall
execute and deliver a supplement to this Warrant in substantially the form of Exhibit “A”
attached hereto, completed with such quantity and price terms and other information as have been
determined as a result of the occurrence or non-occurrence of such events or conditions. The
provisions of such supplement, once completed and executed, shall control the interpretation and
exercise of this Warrant; provided, however, that the failure of the Company to deliver such
supplement shall not affect the rights of the Holder of this Warrant to receive the number of
securities at the Stock Purchase Price as set forth herein.

     This Warrant may be exercised at any time or from time to time up to and including 5:00 p.m.
(Pacific time) on March 31, 2017 (the “Expiration Date”), upon surrender to the Company at its
principal office at 1129 North McDowell Blvd., Petaluma, California 94954 (or at such other
location as the Company may advise Holder in writing) of this Warrant properly endorsed with the
Form of Subscription attached hereto duly filled in and signed and upon payment in cash or by check
of the aggregate Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof.

     This Warrant is subject to the following terms and conditions:

     1. Exercise; Issuance of Certificates; Payment for Shares.

          (a) Unless an election is made pursuant to clause (b) of this Section 1, this Warrant shall be
exercisable at the option of the Holder, at any time or from time to time, on or before the
Expiration Date for all or any portion of the Shares (but not for a fraction of a share) which may
be purchased hereunder for the Stock Purchase Price multiplied by the number of Shares to be
purchased. In the event, however, that pursuant to the Company’s Articles of Incorporation, as
amended, an event causing automatic conversion of the Company’s Preferred Stock shall have occurred
prior to the exercise of this Warrant, in whole or in part, then this Warrant shall be exercisable
for the number of shares of Common Stock of the Company into which the Preferred Stock not
purchased upon any prior exercise of this Warrant would have been so converted (and, where the
context requires, reference to “Preferred Stock” shall be deemed to be or include such Common
Stock, as may be appropriate). The Company agrees that the Shares purchased under this Warrant
shall be and are deemed to be issued to the Holder hereof as the record owner of such Shares as of
the close of business on the date on which the form of subscription shall have been delivered and
payment made for such Shares. Subject to the provisions of Section 2, certificates for the Shares
so purchased, together with any other securities or property to which the Holder hereof is entitled
upon such exercise, shall be delivered to the Holder hereof by the Company at the Company’s expense
within a reasonable time after the rights represented by this Warrant have been so exercised.
Except as provided in clause (b) of this

2

 

Section 1, in case of a
purchase of less than all the Shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor for the balance
of the Shares purchasable under this Warrant surrendered upon such purchase to the Holder hereof
within a reasonable time. Each warrant so delivered shall be in such denominations as may be
requested by the Holder hereof and shall be registered in the name of such Holder or such other
name as shall be designated by such Holder, subject to the limitations contained in Section 2.

          (b) The Holder, in lieu of exercising this Warrant by the cash payment of the Stock Purchase
Price pursuant to clause (a) of this Section 1, may elect, at any time on or before the Expiration
Date, to surrender this Warrant and receive that number of Shares equal to the quotient of: (i)
the difference between (A) the Per Share Price (as hereinafter defined), less (B) the Stock
Purchase Price then in effect, multiplied by the number of Shares the Holder would otherwise have
been entitled to purchase hereunder pursuant to clause (a) of this Section 1 (or such lesser number
of Shares as the Holder may designate in the case of a partial exercise of this Warrant); over (ii)
the Per Share Price. Election to exercise under this section (b) may be made by delivering a
signed form of subscription to the Company via facsimile, to be followed by delivery of this
Warrant.

          (c) For purposes of clause (b) of this Section 1, “Per Share Price” means the product of: (i)
the greater of (A) the closing price of the securities issuable upon conversion of the Preferred
Stock, as quoted by NASDAQ or listed on any exchange, whichever is applicable, as published in the
Western Edition of The Wall Street Journal for the trading day immediately prior to the
date of the Holder’s election hereunder or, (B) if applicable at the time of or in connection with
the exercise under clause (b) of this Section 1, the gross sales price of one share of the
Company’s Common Stock pursuant to a registered public offering or that amount which stockholders
of the Company will receive for each share of Common Stock pursuant to a merger, reorganization or
sale of assets; and (ii) that number of shares of Common Stock into which each share of Preferred
Stock is convertible. If the securities issuable upon conversion of the Preferred Stock are not
quoted by NASDAQ or listed on an exchange and none of the above clauses apply, the Per Share Price
of the Preferred Stock (or the equivalent number of shares of Common Stock into which such
Preferred Stock is convertible) shall be the price per share which the Board of Directors of the
Company shall determine in good faith.

     2. Limitation on Transfer.

          (a) This Warrant and the Shares shall not be transferable without the prior written consent of
the Company (which shall not be unreasonably withheld or delayed) and then only after compliance
with the conditions specified in this Section 2, which conditions are intended to insure compliance
with the provisions of the Securities Act. The effectiveness of any transfer of this Warrant or
the Shares issuable hereunder is subject to the execution and delivery by the proposed transferee
of the Warrant or the Shares of an assignment and assumption document in a form provided by the
Company whereby such proposed transferee agrees to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 2.

          (b) Each certificate representing (i) this Warrant, (ii) the Shares, (iii) if applicable,
shares of the Company’s Common Stock issued upon conversion of the Shares and (iv) any other
securities issued in respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of this Section 2 or unless such
securities have been registered under the Securities Act or sold under Rule 144) be stamped or
otherwise imprinted with a legend substantially in the following form (in addition to any legend
required under applicable state securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN EXEMPTION THEREFROM
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

3

 

          (c) The Holder of this Warrant and each person to whom this Warrant is subsequently
transferred (if permitted hereunder) represents and warrants to the Company (by acceptance of such
transfer) that it will not transfer this Warrant (or securities issuable upon exercise hereof
unless a registration statement under the Securities Act was in effect with respect to such
securities at the time of issuance thereof) except pursuant to (i) an effective registration
statement under the Securities Act, (ii) Rule 144 under the Securities Act (or any other rule under
the Securities Act exempting the disposition of securities from registration), or (iii) an opinion
of counsel, reasonably satisfactory to counsel for the Company, that an exemption from such
registration is available.

     3. Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from
all preemptive rights of any stockholder and free of all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that during the period within which
the rights represented by this Warrant may be exercised, the Company will at all times have
authorized and reserved, for the purpose of issue upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but unissued Shares, or
other securities and property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be necessary to assure
that such Shares may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon which the Shares may be
listed. The Company will not take any action which would result in any adjustment of the Stock
Purchase Price (as defined in Section 4 hereof) (i) if the total number of Shares issuable after
such action upon exercise of all outstanding warrants, together with all shares of Preferred Stock
then outstanding and all shares of Preferred Stock then issuable upon exercise of all options and
upon the conversion of all convertible securities then outstanding, would exceed the total number
of shares of Preferred Stock then authorized by the Company’s Articles of Incorporation, (ii) if
the total number of shares of Common Stock issuable after such action upon the conversion of all
such shares of Preferred Stock together with all shares of Common Stock then outstanding and then
issuable upon exercise of all options and upon the conversion of all convertible securities then
outstanding would exceed the total number of shares of Common Stock then authorized by the
Company’s Articles of Incorporation, or (iii) if the par value per share of the Preferred Stock
would exceed the Stock Purchase Price.

     4. Adjustment of Stock Purchase Price and Number of Shares. The Stock Purchase Price
and the number of shares purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events described in this Section 4.
Upon each adjustment of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such adjustment, the number of
shares obtained by multiplying the Stock Purchase Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.

          4.1 Subdivision or Combination of Stock. Without duplication of any provision in the
Company’s Articles of Incorporation, as amended, in case the Company shall at any time subdivide
its outstanding Shares into a greater number of shares, the Stock Purchase Price in effect
immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the
outstanding Shares shall be combined into a smaller number of shares, the Stock Purchase Price in
effect immediately prior to such combination shall be proportionately increased.

          4.2 Dividends in Preferred Stock, Other Stock, Property, Reclassification. If at any
time or from time to time the holders of Preferred Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,

               (a) Preferred Stock, or any shares of stock or other securities whether or not such securities
are at any time directly or indirectly convertible into or exchangeable for Preferred Stock, or any
rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or

               (b) any cash paid or payable otherwise than as a cash dividend, or

4

 

               (c) Preferred Stock or other or additional stock or other securities or property (including
cash) by way of spin off, split-up, reclassification, combination of shares or similar corporate
rearrangement, (other than shares of Preferred Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 4.1 above),

Then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled
to receive, in addition to the number of shares of Preferred Stock receivable thereupon, and
without payment of any additional consideration therefore, the amount of stock and other securities
and property (including cash in the cases referred to in clauses (b) and (c) above) which such
Holder would hold on the date of such exercise had he been the holder of record of such Preferred
Stock as of the date on which holders of Preferred Stock received or became entitled to receive
such shares and/or all other additional stock and other securities and property.

          4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital
reorganization of the capital stock of the Company, or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Shares shall be entitled to receive
stock, securities or assets with respect to or in exchange for Shares, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder hereof shall thereafter have the right to purchase and receive (in
lieu of the Shares of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding Shares equal to the
number of shares of such stock immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby. In any such case, appropriate provision shall be made with
respect to the rights and interests of the holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be possible, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The Company will not effect
any such consolidation, merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument, executed and mailed or delivered to the
registered Holder hereof at the last address of such Holder appearing on the books of the Company,
the obligation to deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to purchase.

          4.4 Sale or Issuance Below Purchase Price; “Pay-to-Play” Exemption.

               (a) The other antidilution rights applicable to the Shares purchasable hereunder are set forth
in the Company’s Articles of Incorporation, as amended through the date hereof (the “Charter”).
Such antidilution rights shall not be restated, amended, modified or waived in any manner without
the Holder’s prior written consent if the effect of such restatement, amendment, modification or
waiver on the Holder hereof would be more adverse to the Holder hereof than, and substantially
dissimilar to, its effect on the other holders of the same series of the Company’s stock. The
Company shall promptly provide the Holder hereof with any restatement, amendment, modification or
waiver of the Charter promptly after the same has been made.

               (b) In the event that any “pay to play” terms or conditions (i.e. terms or conditions that
require a holder of the Company’s Preferred Stock to purchase securities in a future round of
equity financing or else lose the benefit of antidilution protection applicable to the shares of
Preferred Stock issuable upon the exercise of this Warrant or have such shares of Preferred Stock
automatically convert to common stock or convert to another class and series of the Company’s
capital stock) in the Company’s Articles of Incorporation, as amended from time to time, are
triggered in connection with the consummation of a Down Round (as defined below) or otherwise after
the date hereof, then in such event, the Shares issued or issuable upon the exercise of the Warrant
shall not be subject to such automatic conversion.

          4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase Price, and/or any
increase or decrease in the number of shares purchasable upon the exercise of this Warrant the
Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the

5

 

address of such holder as shown on the books of the
Company. The notice, which may be substantially in the form of Exhibit “A” attached hereto, shall
be signed by the Company’s chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.

          4.6 Other Notices. If at any time:

               (a) the Company shall declare any cash dividend upon its Preferred Stock (other than in
connection with the Series A dividends as provided in the Companys’ Articles of Incorporation as
amended to date);

               (b) the Company shall declare any dividend upon its Preferred Stock payable in stock or make
any special dividend or other distribution to the holders of its Preferred Stock (other than in
connection with the Series A dividends as provided in the Companys’ Articles of Incorporation as
amended to date);

               (c) the Company shall offer for subscription pro rata to the holders of its Preferred Stock
any additional shares of stock of any class or other rights;

               (d) there shall be any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of all or substantially all of its
assets to, another entity;

               (e) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the
Company; or

               (f) the Company shall take or propose to take any other action, notice of which is actually
provided to holders of the Preferred Stock;

then, in any one or more of said cases, the Company shall give, by first class mail, postage
prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the
books of the Company, (i) at least 20 day’s prior written notice of the date on which the books of
the Company shall close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, or other action and (ii) in
the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action, at least 20 day’s written notice of the date when the
same shall take place. Any notice given in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights, the date on which
the holders of Preferred Stock shall be entitled thereto. Any notice given in accordance with the
foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action as the case may be.

          4.7 Certain Events. If any change in the outstanding Preferred Stock of the Company
or any other event occurs as to which the other provisions of this Section 4 are not strictly
applicable and the Board of Directors in good faith believes that an adjustment is necessary to
effect the essential intent and principles with the adjustment provisions of this Warrant or if the
provisions of this Section 4 are strictly applicable to an event but the application of such
provisions would not fairly effect the adjustments to this Warrant in accordance with the essential
intent and principles of such provisions, then the Board of Directors of the Company shall make in
good faith an adjustment in the number and class of shares issuable under this Warrant, the Stock
Purchase Price and/or
the application of such provisions, in accordance with such essential intent and principles, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as will give the Holder
of this Warrant upon exercise for the same aggregate Stock Purchase Price the total number, class
and kind of shares as the Holder would have owned had this

6

 

Warrant been exercised prior to the
event and had the Holder continued to hold such shares until after the event requiring adjustment.

     5. Issue Tax. The issuance of certificates for Shares upon the exercise of this
Warrant shall be made without charge to the Holder of this Warrant for any issue tax in respect
thereof; provided, however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the then Holder of this Warrant being exercised.

     6. Closing of Books. The Company will at no time close its transfer books against
the transfer of this Warrant or of any Shares issued or issuable upon the exercise of this Warrant
in any manner which interferes with the timely exercise of this Warrant, unless required by
applicable law or regulation, or to avoid the violation of any applicable law or regulation..

     7. No Voting or Dividend Rights; Limitation of Liability. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent as
a stockholder in respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company. No dividends or
interest shall be payable or accrued in respect of this Warrant or the interest represented hereby
or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have
been exercised. No provisions hereof, in the absence of affirmative action by the Holder to
purchase Shares, and no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the Stock Purchase Price or as a stockholder of
the Company, whether such liability is asserted by the Company or by its creditors.

     8. Intentionally Omitted.

     9. Registration Rights. The Holder hereof shall be entitled, with respect to the
securities issued upon exercise hereof or the shares of Common Stock or other securities issued
upon conversion of such securities as the case may be, to all of the registration rights set forth
in the Investors Rights Agreement executed by the holders in connection with the offering of the
type of securities for which this Warrant is exercisable (the “Rights Agreement”), to the same
extent and on the same terms and conditions as possessed by such investors thereunder with the
following exceptions and clarifications: (i) the Holder will have no right to initiate a demand
registration; (ii) the Holder will be subject to the same provisions regarding indemnification as
contained in the Rights Agreement; (iii) the registration rights will have the same rights of
assignment as contained in the Rights Agreement, and (iv) the Holder will be subject to the same
lock-up obligations as contained in the Rights Agreement. The Company shall take such action as may
be reasonably necessary to assure that the granting of such registration rights to the Holder does
not violate the provisions of the Rights Agreement or any of the Company’s charter documents or
rights of prior grantees of registration rights.

     10. Rights and Obligations Survive Exercise of Warrant. The rights and obligations of
the Company, of the Holder of this Warrant and of the holder of shares of Preferred Stock issued
upon exercise of this Warrant, contained in Sections 6 and 9 shall survive the exercise of this
Warrant.

     11. Modification and Waiver. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.

     12. Notices. Any notice, request or other document required or permitted to be given
or delivered to the Holder hereof or the Company shall be deemed to have been given (i) upon
receipt if delivered personally or by courier (ii) upon confirmation of receipt if by telecopy or
(iii) three business days after deposit in the US mail, with
postage prepaid and certified or registered, to each such Holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor in the first paragraph of
this Warrant.

7

 

     13. Binding Effect on Successors. This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially all of the
Company’s assets. All of the obligations of the Company relating to the Shares issuable upon the
exercise of this Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the successors and assign of
the holder hereof. The Company will, at the time of the exercise of this Warrant, in whole or in
part, upon request of the Holder hereof and at the Holder’s expense, acknowledge in writing its
continuing obligation to the Holder hereof in respect of any rights (including, without limitation,
any right to registration of the shares of Common Stock) to which the Holder hereof shall continue
to be entitled after such exercise in accordance with this Warrant; provided, that the failure of
the Holder hereof to make any such request shall not affect the continuing obligation of the
Company to the Holder hereof in respect of such rights.

     14. Descriptive Headings and Governing Law. The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a
part of this Warrant. This Warrant shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of California.

     15. Lost Warrants or Stock Certificates. The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant or stock certificate and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or
in the case of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company at Holder’s expense will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.

     16. Fractional Shares. No fractional shares shall be issued upon exercise of this
Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to
such fraction a sum in cash equal to such fraction multiplied by the then effective Stock Purchase
Price.

     17. Representations of Holder. With respect to this Warrant, Holder represents and
warrants to the Company as follows:

          17.1 Experience. It is an “accredited investor” as that term is defined in Rule 501
(a) promulgated under the Securities Act of 1933, as amended; is experienced in evaluating and
investing in companies engaged in businesses similar to that of the Company; it understands that
investment in this Warrant involves substantial risks; it has made detailed inquiries concerning
the Company, its business and services, its officers and its personnel; the officers of the Company
have made available to Holder any and all written information it has requested; the officers of the
Company have answered to Holder’s satisfaction all inquiries made by it; in making this investment
it has relied upon information made available to it by the Company; and it has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks
of investment in the Company and it is able to bear the economic risk of that investment.

          17.2 Investment. It is acquiring this Warrant for investment for its own account and
not with a view to, or for resale in connection with, any distribution thereof. It understands
that this Warrant, the shares of Preferred Stock issuable upon exercise thereof and the shares of
Common Stock issuable upon conversion of the Preferred Stock, have not been registered under the
Securities Act, nor qualified under applicable state securities laws.

          17.3 Rule 144. It acknowledges that this Warrant, the Preferred Stock and the Common
Stock must be held indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such
registration is available. It has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.

          17.4 Access to Data. It has had an opportunity to discuss the Company’s business,
management and financial affairs with the Company’s management and has had the opportunity to
inspect the Company’s facilities.

8

 

     18. Additional Representations and Covenants of the Company. The Company hereby
represents, warrants and agrees as follows:

          18.1 Corporate Power. The Company has all requisite corporate power and corporate
authority to issue this Warrant and to carry out and perform its obligations hereunder.

          18.2 Authorization. All corporate action on the part of the Company, its directors
and stockholders necessary for the authorization, execution, delivery and performance by the
Company of this has been taken. This Warrant is a valid and binding obligation of the Company,
enforceable in accordance with its terms.

          18.3 Offering. Subject in part to the truth and accuracy of Holder’s representations
set forth in Section 17 hereof, the offer, issuance and sale of this Warrant is, and the issuance
of Preferred Stock upon exercise of this Warrant and the issuance of Common Stock upon conversion
of the Preferred Stock will be exempt from the registration requirements of the Securities Act, and
are exempt from the qualification requirements of any applicable state securities laws; and neither
the Company nor anyone acting on its behalf will take any action hereafter that would cause the
loss of such exemptions.

          18.4 Stock Issuance. Upon exercise of this Warrant, the Company will use its best
efforts to cause stock certificates representing the Shares purchased pursuant to the exercise to
be issued in the names of Holder, its nominees or assignees, as appropriate at the time of such
exercise. Upon conversion of the shares of Preferred Stock into shares of Common Stock, the
Company will issue the Common Stock in the names of Holder, its nominees or assignees, as
appropriate.

          18.5 Certificates and By-Laws. The Company has provided Holder with true and complete
copies of the Company’s Articles of Incorporation, By-Laws, and each Certificate of Designation or
other charter document setting, forth any rights, preferences and privileges of Company’s capital
stock, each as amended and in effect on the date of issuance of this Warrant.

          18.6 Conversion of Preferred Stock. As of the date hereof, each share of the
Preferred Stock is convertible into one share of the Common Stock.

          18.7 Financial and Other Reports. From time to time up to the earlier of the
Expiration Date or the complete exercise of this Warrant, the Company shall furnish to Holder (i)
within 150 days after the close of each fiscal year of the Company an audited balance sheet and
statement of changes in financial position at and as of the end of such fiscal year, together with
an audited statement of income for such fiscal year; (ii) within 45 days after the close of each
fiscal quarter of the Company, an unaudited balance sheet and statement of cash flows at and as of
the end of such quarter, together with an unaudited statement of income for such quarter; and (iii)
promptly after sending, making available, or filing, copies of all reports, proxy statements, and
financial statements that the Company sends or makes available to its stockholders and all
registration statements and reports that the Company files with the SEC or any other governmental
or regulatory authority.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers,
thereunto duly authorized this 14th day of June, 2006.

	 	 	 	 	 
	OCULUS INNOVATIVE SCIENCES, INC	 	 
	 
	 	 	 	 
	By:
	 	/s/ Hojabr Alimi	 	 
	Name:

	 	Hojabr Alimi 

	 	 
	 

	 	 	 	 
	Title:
	 	President & CEO 	 	 
	 

	 	 	 	 

9

 

	 	 	 	 	 
	VENTURE LENDING & LEASING IV, LLC	 	 
	 
	 	 	 	 
	By: WESTECH INVESTMENT ADVISORS, INC.,
a California Corporation, its Managing
Member	 	 
	 
	 	 	 	 
	By:
	 	/s/ Ronald W. Swenson 	 	 
	Name:

	 	Ronald W. Swenson 

	 	 
	 

	 	 	 	 
	Title:
	 	CEO 	 	 
	 

	 	 	 	 

10

 

FORM OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)

	To:	 	 OCULUS INNOVATIVE SCIENCES, INC.
	 
	o	 	 The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, (1) See Below
                     (___)shares (the “Shares”) of Stock of
                     and herewith makes payment of                      Dollars
($                    ) therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to,                     ,
whose address is                     .
	 
	o	 	 The undersigned hereby elects to convert                      percent (___%) of
the value of the Warrant pursuant to the provisions of Section
1(b) of the Warrant.

The undersigned acknowledges that it has reviewed the representations and warranties contained in
Section 17 of this Warrant and by its signature below hereby makes such representations and
warranties to the Company.

	 	 	 	 	 	 	 
	 

	 	Dated
	 	 
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Holder:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	(Address)	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

 

	(1)	 	Insert here the number of shares called for on the face of the Warrant (or, in the case of a
partial exercise, the portion thereof as to which the Warrant is being exercised), in either
case without making any adjustment for additional Preferred Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of the Warrant,
may be issuable upon exercise.

 

 

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with respect to the number
of shares of Preferred Stock covered thereby set forth herein below, unto:

	 	 	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	 	No. of Shares	 
	 
	 
	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Dated
	 	 
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Holder:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT “A”

[On letterhead of the Company]

          Reference is hereby made to that certain Warrant dated March ___, 2006, issued by OCULUS
INNOVATIVE SCIENCES, INC, a California corporation (the “Company”), to VENTURE LENDING & LEASING
IV, INC., a Maryland corporation (the “Holder”).

     [IF APPLICABLE] The Warrant provides that the actual number of shares of the Company’s
capital stock issuable upon exercise of the Warrant and the initial exercise price per share are to
be determined by reference to one or more events or conditions subsequent to the issuance of the
Warrant. Such events or conditions have now occurred or lapsed, and the Company wishes to confirm
the actual number of shares issuable and the initial exercise price. The provisions of this
Supplement to Warrant are incorporated into the Warrant by this reference, and shall control the
interpretation and exercise of the Warrant.

     [IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the Warrant that the
following adjustment(s) have been made to the Warrant: [describe adjustments, setting forth
details regarding method of calculation and facts upon which calculation is based].

     This certifies that the Holder is entitled to purchase from the Company
                                         (                    ) fully paid and nonassessable shares of the Company’s
                     Stock at a price of                                          Dollars ($                
    ) per share (the “Stock
Purchase Price”). The Stock Purchase Price and the number of shares purchasable under the Warrant
remain subject to adjustment as provided in Section 4 of the Warrant.

     Executed this ___day of                     , 200___.

	 	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:

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