Document:

EX-10.2

 

Exhibit 10.2

FORM OF
SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 31, 2006, by and among
Electro-Optical Sciences, Inc., a Delaware corporation, with its principal offices 3 West Main
Street, Suite 201, Irvington, New York 10533 (the “Company”), and the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

     WHEREAS:

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

     B. Each Buyer wishes to purchase on a several and not joint basis, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number
of shares of the Common Stock, par value $0.001 per share, of the Company (the “Common Stock”), set
forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which aggregate amount
for all Buyers together with the Other Buyers (as defined below) shall be 2,312,384 shares of
Common Stock and shall collectively be referred to herein as the “Common Shares”), and (ii) a
warrant to acquire up to that number of additional shares of Common Stock set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers (collectively, the “ Warrant Shares”), in
substantially the form attached hereto as Exhibit A (each a “Warrant” and, collectively,
the “ Warrants”).

     C. Contemporaneously with this execution and delivery of this Agreement, the Company
will execute and deliver one or more Securities Purchase Agreements (the “Other Securities Purchase
Agreements”) with other buyers of Common Shares and Warrants (the “Other Buyers”) each of such
Other Securities Purchase Agreement will be substantially similar to this Agreement.

     D. Contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B (the “Registration Rights Agreement”) pursuant to which the
Company has agreed to provide certain registration rights with respect to the Common Shares, and
the Warrant Shares under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.

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

     NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

 

 

1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS

          (a) Purchase of Common Shares and Warrants.

          Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, shall
purchase from the Company on the Closing Date (as defined below), the number of Common Shares as is
set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers, along with a Warrant
to acquire up to that number of Warrant Shares as is set forth opposite such Buyer’s name in column
(4) on the Schedule of Buyers (the “Closing”).

               (i) Closing. The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York City time, on the date hereof (or such later date as is mutually agreed to by the
Company and the Buyers) after notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6 and 7 below at the offices of Schulte Roth & Zabel LLP, 919 Third
Avenue, New York, New York 10022 or such other location as is mutually agreed by the Company and
the Buyers of a majority in interest of the Securities.

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

          (b) Form of Payment. On the Closing Date, (i) immediately after each Buyer is
delivered the Securities contemplated in clause (ii) below, each such Buyer shall pay its Purchase
Price to the Company for the Common Shares and the Warrants to be issued and sold to such Buyer at
the Closing, by wire transfer of immediately available funds in accordance with the Company’s
written wire instructions and (ii) the Company shall deliver to each Buyer certificates
representing the Common Shares (allocated in the amounts as such Buyer shall request) which such
Buyer is then purchasing hereunder along with certificates representing the Warrants (allocated in
the amounts as such Buyer shall request) which such Buyer is purchasing, in each case duly executed
on behalf of the Company and registered in the name of such Buyer or its designee.

     2. BUYER’S REPRESENTATIONS AND WARRANTIES.

          Each Buyer represents and warrants with respect to only itself that:

          (a) No Public Sale or Distribution. Such Buyer is acquiring the Common Shares and the
Warrants, and upon exercise of the Warrants will acquire the Warrant Shares issuable upon exercise
of the Warrants, for its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such Buyer does not agree
to hold any of the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act and pursuant to the applicable terms of the Transaction Documents
(as defined in Section 3(b)). Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Such Buyer does not

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presently have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities. Such Buyer is not a broker-dealer registered with the SEC under
the 1934 Act or an entity engaged in a business that would require it to be so registered as a
broker-dealer.

          (b) Accredited Investor Status. At the time such Buyer was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any Warrants, it will
be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(5), (a)(6), (a)(7) or
(a)(8) under the 1933 Act.

          (c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying upon the truth and
accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

          (d) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk and is able to afford a complete loss
of such investment. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its acquisition of the
Securities. Such Buyer has not relied on any information or advice furnished by or on behalf of
the Agent (as defined below) or by counsel to the Company in connection with the transactions
contemplated hereby.

          (e) No Governmental Review. Such Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.

          (f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to
the Company an opinion of counsel, in form, scope and substance reasonably acceptable to the
Company, to the effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides
the Company with reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule
thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in

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reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(q)) through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of any exemption
thereunder. The Securities may be pledged in connection with a bona fide margin account or other
loan or financing arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer effecting a
pledge of Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other Transaction Document (as
defined in Section 3(b)), including, without limitation, this Section 2(f).

          (g) Legends. Such Buyer understands that the certificates or other instruments
representing the Common Shares and the Warrants and, until such time as the resale of the Common
Shares and the Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the Warrant Shares, except as
set forth below, shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Securities, if, unless otherwise required by state securities laws, (i)
such Securities are registered for resale under the 1933 Act, (ii) in connection with a sale,
assignment or other transfer, such holder provides the Company with an opinion of a law firm
reasonably acceptable to the Company, in form, scope and substance reasonably acceptable to the
Company, to the effect that such sale, assignment or transfer of the Securities may be made

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without registration under the applicable requirements of the 1933 Act, or (iii) such holder
provides the Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.

          (h) Validity; Enforcement. Each Buyer is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, and has all requisite power and authority
to enter into this Agreement and consummate the transactions contemplated hereby. This Agreement
and the Registration Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and remedies.

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

          (j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.

          (k) General Solicitation. Such Buyer is not purchasing the Securities as a result of
any advertisement, article, notice or other communication regarding the Securities published un any
newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar or any general advertisement.

          (l) Experience of Such Buyer. Such Buyer, 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 Buyer 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.

          (m) Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company or an Investor for any commission, fee or other compensation pursuant to any agreement,
arrangement or understanding with a placement agent entered into by or on behalf of such Buyer.

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          (n) Prohibited Transactions. Since the time when such Buyer was first contacted by the
Company or the Agent regarding the transactions contemplated hereby, neither such Buyer nor any
Affiliate of such Buyer nor any Person acting on behalf of or pursuant to any understanding with
such Buyer (collectively, “Trading Affiliates”) has, directly or indirectly, effected or agreed to
effect any short sale, whether or not against the box, established any “put equivalent position”
(as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any
other right (including without limitation, any put or call option) with respect to the Common Stock
or with respect to any security that includes, relates to or derived any significant part of its
value from the Common Stock or otherwise sought to hedge its position in the Securities (each, a
“Prohibited Transaction”), and neither such Buyer nor its Trading Affiliates will enter into a
Prohibited Transaction after the date hereof until the transactions contemplated hereby are
announced pursuant to the 8-K Filing set forth in Section 4(i) hereof.

          (o) Acknowledgement. Such Buyer acknowledges and agrees that the foregoing
representations, warranties, covenants and acknowledgments are made by it with the intention that
they may be relied upon by the Company and its agents and legal counsel in determining its
eligibility or (if applicable) the eligibility of others on whose behalf it is contracting
hereunder to purchase the Securities under the applicable securities legislation. Such Buyer
further agrees that by accepting delivery of the Securities at the Closing Date, it shall be
representing and warranting that the foregoing representations and warranties are true and correct
as at the Closing Date with the same force and effect as if they had been made by such Buyer at the
Closing Date and that they shall survive the purchase by such Buyer of the Securities and still
continue in full force and effect notwithstanding any subsequent disposition by such Buyer of the
Securities. The Company and its counsel shall be entitled to rely on the representations and
warranties of such Buyer contained in this paragraph.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

          The Company represents and warrants to each of the Buyers that, except as set forth in its SEC
Documents:

          (a) Organization and Qualification. The Company is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction in which it is incorporated,
and has the requisite corporate power and authorization to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not reasonably be expected to have
a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material
adverse effect on the business, properties, assets, operations, results of operations, condition
(financial or otherwise) or prospects of the Company, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the authority or ability of the Company to
perform its obligations under the Transaction Documents (as defined below). The Company has no
subsidiaries (which for purposes of this Agreement

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means any entity (i) in which the Company, directly or indirectly, owns capital stock or holds
an equity or similar interest and (ii) which has operations and material assets).

          (b) Authorization; Enforcement; Validity. The Company has the requisite corporate
power and authority to enter into and perform its obligations under this Agreement, the Other
Securities Purchase Agreements, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5), the Warrants and each of the other agreements entered into
by the parties hereto in connection with the transactions contemplated by this Agreement and the
Other Securities Purchase Agreements (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of the Common Shares
and the Warrants and the reservation for issuance and the issuance of the Warrant Shares issuable
upon exercise of the Warrant have been duly authorized by the Company’s Board of Directors and no
further filing, consent or authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents have been duly executed and
delivered by the Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

          (c) Issuance of Securities. The Common Shares and the Warrants are duly authorized
and, when issued and paid for in accordance with the terms hereof, shall be validly issued and free
from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof
and the Common Shares shall be fully paid and nonassessable with the holders being entitled to all
rights accorded to a holder of Common Stock. As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which equals or exceeds 100% of the
aggregate of the maximum number of shares of Common Stock issuable upon exercise of the Warrants.
Upon exercise in accordance with the Warrants, the Warrant Shares will be validly issued, fully
paid and nonassessable and free from all preemptive or similar rights, taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the accuracy of each of the representations and warranties set
forth in Section 2 of this Agreement, the offer and issuance by the Company of the Securities is
exempt from registration under the 1933 Act.

          (d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Common Shares and Warrants
and reservation for issuance and issuance of the Warrant Shares) will not (i) result in a violation
of the certificate of incorporation, or bylaws of the Company or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a default) in any
respect under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and
state securities laws and regulations and the rules and regulations

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of The NASDAQ Capital Market (the “Principal Market”) applicable to the Company or by which
any property or asset of the Company is bound or affected, except for any such violation set forth
in clauses (ii) or (iii) above as could not reasonably be expected to result in Material Adverse
Effect.

          (e) Consents. The Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental agency or any regulatory
or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each case in accordance with
the terms hereof or thereof other than such as have been made or obtained, and except for the
registration of the Securities under the 1933 Act pursuant to the Registration Rights Agreement,
the filing of Form D, any filings required to be made under state securities laws, and any required
filings or notifications regarding the issuance or listing of additional securities with the
Principal Market. The Company has no knowledge of any facts or circumstances that might prevent
the Company from obtaining or effecting any of the registration, application or filings pursuant to
the preceding sentence. The Company is not in violation of the listing requirements of the
Principal Market and has no knowledge of any facts that would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future. As used herein, “knowledge” shall mean
actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the
Company after due inquiry.

          (f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby and thereby and that
no Buyer is acting as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to
such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the
Company’s decision to enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.

          (g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by
any Buyer or its investment advisor) relating to or arising out of the transactions contemplated
hereby. The Company acknowledges that it has engaged Jefferies & Company, Inc. as placement agent
(the “Agent”) in connection with the sale of the Securities. Other than the Agent, the Company has
not engaged any placement agent or other agent in connection with the sale of the Securities.

          (h) No Integrated Offering. Assuming the accuracy of the Buyers’ representations and
warranties set forth in Section 2 hereof, none of the Company, any of their affiliates, and any
Person acting on their behalf has, directly or indirectly, made any offers or

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sales of any security or solicited any offers to buy any security, under circumstances that
would require registration of the issuance of any of the Securities under the 1933 Act, whether
through integration with prior offerings or otherwise, or cause this offering of the Securities to
require approval of stockholders of the Company for purposes of any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the Company are listed or designated.
None of the Company, their affiliates and any Person acting on their behalf will take any action or
steps referred to in the preceding sentence that would require registration of the issuance of any
of the Securities under the 1933 Act or cause the offering of the Securities to be integrated with
other offerings for purposes of any such applicable stockholder approval provisions.

          (i) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of Incorporation (as
defined in Section 3(p)) or the laws of the State of Delaware which is or could become applicable
to any Buyer as a result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities.
The Company and its board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.

          (j) SEC Documents; Financial Statements. Since October 28, 2005 (the “Reporting
Period”), the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting requirements of the
1934 Act (all of the foregoing filed during the Reporting Period or prior to the date of the
Closing and all exhibits included therein and financial statements, notes and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).
The Company has delivered to the Buyers or their respective representatives true, correct and
complete copies of the SEC Documents not available on the EDGAR system, if any. As of their
respective filing dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. As of their respective filing dates, the financial
statements of the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal

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year-end audit adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement or in any disclosure schedules, contains any untrue
statement of a material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or were made not
misleading.

          (k) Absence of Certain Changes. Since June 30, 2006, there has been no material
adverse change and no material adverse development in the business, properties, operations,
condition (financial or otherwise), or results of operations or prospects of the Company. Since
June 30, 2006, the Company has not declared or paid any dividends. The Company has not taken any
steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact that would reasonably lead a creditor to do so. The Company is not as
of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section 3(k), “Insolvent”
means, with respect to any Person (as defined in Section 3(q)), (i) the present fair saleable value
of such Person’s assets is less than the amount required to pay such Person’s total Indebtedness
(as defined in Section 3(q)), (ii) such Person is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured,
(iii) such Person intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted and is currently
proposed to be conducted.

          (l) Conduct of Business; Regulatory Permits. The Company is not in violation of any
term of or in default under its Certificate of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or the Bylaws. The Company is not in
violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable
to the Company, and the Company will not conduct its business in violation of any of the foregoing,
except for possible violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, the
Company is not in violation of any of the rules, regulations or requirements of the Principal
Market and has no knowledge of any facts or circumstances that would reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable future. Since October
28, 2005, (i) the Common Stock has been designated for quotation or included for listing on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the
Principal Market and (iii) the Company has received no communication, written or oral, from the SEC
or the Principal Market regarding the suspension or delisting of the Common Stock from the
Principal Market. The Company possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to its business, except where the failure to possess
such certificates, authorizations or permits could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and the Company has not received any
notice of proceedings relating to the revocation or modification of any such certificate,
authorization or permit.

-10-

 

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

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

          (o) Transactions With Affiliates. Except as set forth in the SEC Documents and as set
forth in Schedule 3(o) hereof, none of the officers, or directors, and to the knowledge of
the Company , none of the employees of the Company is presently a party to any transaction with the
Company (other than for ordinary course services as employees, consultants, officers or directors),
including any contract, agreement or other arrangement providing for the furnishing of services to
or by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer, director, or employee
has a substantial interest or is an officer, director, trustee or partner.

          (p) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (x) 30,000,000 shares of Common Stock, of which as of the date hereof,
10,964,602 shares are issued and outstanding, 2,529,378 shares are reserved for issuance pursuant
to the Company’s employee incentive plan and other options and warrants outstanding and no shares
are reserved for issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (y) 10,000,000 shares of
preferred stock, of which as of the date hereof, none are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as set forth above in this Section 3(p): (i) none of the Company’s capital
stock is subject to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; and (ii) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company,
or contracts, commitments, understandings or arrangements by which the Company is or may become
bound to issue additional capital stock of the Company or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the Company; (iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities or other
agreements, documents or instruments evidencing Indebtedness of the Company or by which the Company
is or may become bound; (iv) there are no financing statements securing obligations in any material
amounts, either singly or in the aggregate, filed in connection with the Company; (v) there are no
agreements or arrangements under which the

-11-

 

Company is obligated to register the sale of any of its securities under the 1933 Act (except
pursuant to the Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is or may become bound
to redeem a security of the Company; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of the Securities;
(viii) the Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) the Company has no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company’s business and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company has furnished or made
available to the Buyers true, correct and complete copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”),
and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the
terms of all securities convertible into, or exercisable or exchangeable for, shares of Common
Stock and the material rights of the holders thereof in respect thereto.

          (q) Indebtedness and Other Contracts. The Company (i) does not have any outstanding
Indebtedness (as defined below), (ii) is not a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such contract, agreement or
instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is not in
violation of any term of or in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is not a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. For purposes of this Agreement:
(x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property
or services, including (without limitation) “capital leases” in accordance with generally accepted
accounting principles (other than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case with respect to any
property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of

-12-

 

others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person
with respect to any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or that the holders of
such liability will be protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.

          (r) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, the Common Stock or any of the Company’s officers or directors,
whether of a civil or criminal nature or otherwise that if adversely determined would reasonably be
expected to have a Material Adverse Effect.

          (s) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company is engaged. The
Company has not been refused any insurance coverage sought or applied for and the Company does not
have any reason to believe that 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 at a cost that would not have a Material Adverse Effect.

          (t) Employee Relations.

               (i) The Company is not a party to any collective bargaining agreement or employs any member of
a union. No executive officer of the Company has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer’s employment with the Company. No executive
officer of the Company is in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any
other contract or agreement or any restrictive covenant, and the continued employment of each such
executive officer does not subject the Company to any liability with respect to any of the
foregoing matters.

               (ii) The Company, to its knowledge, is in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

          (u) Title. The Company has good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them which is material to
the business of the Company, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not interfere

-13-

 

with the use made and proposed to be made of such property by the Company. Any real property
and facilities held under lease by the Company are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company.

          (v) Intellectual Property Rights. The Company owns or possesses adequate rights or
licenses to use all trademarks, service marks and all applications and registrations therefor,
trade names, patents, patent rights, copyrights, original works of authorship, inventions, trade
secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to
conduct its business as conducted on the date of this Agreement, except for such Intellectual
Property Rights, the inability to use would not have a Material Adverse Effect. To the knowledge
of the Company, no product or service of the Company infringes the Intellectual Property Rights of
others which could reasonably be expected to result in a Material Adverse Effect. There is no
claim, action or proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company regarding (i) its Intellectual Property Rights, or (ii) that the
products or services of the Company infringe the Intellectual Property Rights of others. The
Company has taken reasonable security measures to protect the secrecy, confidentiality and value of
all of its Intellectual Property Rights.

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

          (x) Tax Status. Except for matters that would not, individually or in the aggregate,
have or reasonably be expected to have a Material Adverse Effect, the Company (i) has made or filed
all foreign, federal and state income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii) has set aside on its
books provision reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.

-14-

 

          (y) Internal Accounting and Disclosure Controls. Except as described in the SEC
Documents, the Company maintains 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 generally accepted accounting principles and to maintain
asset and liability accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with the existing assets and
liabilities at reasonable intervals and appropriate action is taken with respect to any difference.
Except as disclosed in the SEC Documents, the Company maintains disclosure controls and procedures
(as such term is defined in Rule 13a-14 under the 1934 Act) that are effective in ensuring that are
designed to ensure that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC including, without limitation, controls
and procedures designed in to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions regarding required
disclosure.

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

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

          (bb) Form S-3 Eligibility. The Company is eligible to register the Common Shares and
the Warrant Shares for resale by the Buyers using Form S-3 promulgated under the 1933 Act.

          (cc) Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Securities, (ii) other than the Agent, sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the Securities, or (iii) other than the
Agent, paid or agreed to pay to any person any compensation for soliciting another to purchase any
other securities of the Company.

          (dd) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers (other than Dan W. Lufkin) or their agents or counsel
with any information that constitutes or could reasonably be expected to constitute material,
nonpublic information other than the terms of, and the existence of, the transactions

-15-

 

contemplated hereby. The Company understands and confirms that each of the Buyers (other than
Dan W. Lufkin) will rely on the foregoing representations in effecting transactions in securities
of the Company. All disclosure provided to the Buyers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on
behalf of the Company is true and correct and does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or its business,
properties, prospects, operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.

          (ee) U.S. Real Property Holding Corporation. The Company is not, nor has it ever
been, a U.S. real property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify upon any Buyer’s request.

     4. COVENANTS.

          (a) Best Efforts. Each party shall use its reasonable best efforts timely to satisfy
each of the covenants and conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.

          (b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company, on or before the Closing Date, shall take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify
the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.

          (c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Common Shares and Warrant Shares and none of
the Warrants is outstanding (the “Reporting Period”), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination.

          (d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for general corporate purposes, and not for (A) the repayment of any outstanding
Indebtedness of the Company or (B) redemption or repurchase of any of its equity securities.

          (e) Financial Information. The Company agrees to send the following to each Investor
(as defined in the Registration Rights Agreement) during the Reporting Period (i) unless

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the following are filed with the SEC through EDGAR and are available to the public through the
EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports and Quarterly Reports on Form 10-K, 10-Q, any interim reports or any consolidated
balance sheets, income statements, stockholders’ equity statements and/or cash flow statements for
any period other than annual, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile or e-mailed copies of all press releases issued by the Company, and
(iii) copies of any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving thereof to the
stockholders. As used herein, “Business Day” means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required by law to remain
closed.

          (f) Listing. The Company shall promptly secure the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement), once they have been issued, upon each
national securities exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company shall maintain the
Common Stock’s authorization for quotation on the Principal Market. The Company shall not take any
action which would be reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).

          (g) Fees. The Company shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by any
Buyer) relating to or arising out of the transactions contemplated hereby, including, without
limitation, any fees or commissions payable to the Agents. Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses in connection with
the sale of the Securities to the Buyers.

          (h) Pledge of Securities. The Company acknowledges and agrees that the Securities may
be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a
bona fide margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including, without limitation, Section 2(f) of
this Agreement; provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) of this Agreement in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to
such pledgee by an Investor.

          (i) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City time, on the first Business Day following the date of this Agreement, the
Company shall issue a press release and file a Current Report on Form 8-K describing the

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terms of the transactions contemplated by the Transaction Documents in the form required by
the 1934 Act and attaching the material Transaction Documents (including, without limitation, this
Agreement, the form of Warrant and the form of the Registration Rights Agreement) as exhibits to
such filing (including all attachments, the “8-K Filing”). From and after the filing of the 8-K
Filing with the SEC, no Buyer shall be in possession of any material, nonpublic information
received from the Company or any of its officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause its officers, directors,
employees and agents, not to, provide any Buyer with any material, nonpublic information regarding
the Company from and after the filing of the 8-K Filing with the SEC without the express written
consent of such Buyer. If a Buyer has, or believes it has, received any such material, nonpublic
information regarding the Company, it shall provide the Company with written notice thereof. The
Company shall, within five (5) Trading Days (as defined in the Warrants) of receipt of such notice,
make public disclosure of such material, nonpublic information. Neither the Company nor any Buyer
shall issue any press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case of clause (i) each
Buyer shall be consulted by the Company in connection with any such press release or other public
disclosure prior to its release). Without the prior written consent of any applicable Buyer,
neither the Company nor any affiliates shall disclose the name of such Buyer in any filing,
announcement, release or otherwise other than in connection with the Registration Statement, as
contemplated pursuant to the Registration Rights Agreement, unless such disclosure is required by
law, regulation or the Principal Market.

          (j) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than 100% of the number of
shares of Common Stock issuable upon exercise of the Warrants issued at the Closing (without taking
into account any limitations on exercise of the Warrants set forth in the Warrants).

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

     5. REGISTER; TRANSFER AGENT INSTRUCTIONS.

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

-18-

 

          (b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of
each Buyer or its respective nominee(s), for the Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company upon exercise of the Warrants in the form of Exhibit
C attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company represents and
warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in
this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof, will be given
by the Company to its transfer agent with respect to the Securities, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section 2(f), the Company shall permit
the transfer and shall promptly instruct its transfer agent to issue one or more certificates or
credit shares to the applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale,
assignment or transfer involves Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or pursuant to Rule 144, the transfer agent shall issue such
Securities to the Buyer, assignee or transferee, as the case may be, without any restrictive
legend.

          (c) Breach. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this Section 5, that a
Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.

          (d) Additional Relief. If the Company shall fail for any reason or for no reason to
issue to such holder unlegended certificates within three (3) Business Days of (x) receipt of
documents necessary for the removal of legend set forth above or (y) the date of its obligation to
deliver the shares of Common Stock as contemplated pursuant to clause (ii) below (the “Deadline
Date”), then, in addition to all other remedies available to the holder, if on or after the Trading
Day (as defined in the Warrants) immediately following such three Business Day period, the holder
purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the holder of shares of Common Stock that the holder anticipated
receiving from the Company (a “Buy-In”), then the Company shall, within three Business Days after
the holder’s request and in the holder’s discretion, either (i) pay cash to the holder in an amount
equal to the holder’s total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the holder a certificate or certificates representing
such shares of Common Stock and pay cash to the holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the
Closing Bid Price on the Deadline Date. “Closing Bid Price” means, for any security as of any
date, the last closing price for such security on The NASDAQ Capital Market (the “Principal
Market”), as reported by Bloomberg, or, if the Principal Market

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

     6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

          The obligation of the Company hereunder to issue and sell the Common Shares and the related
Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:

               (i) Such Buyer shall have executed each of the Transaction Documents to which it is a party
and delivered the same to the Company.

               (ii) Such Buyer shall have delivered to the Company the Purchase Price for the Common Shares
and the related Warrants being purchased by such Buyer and each other Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions provided by the Company.

               (iii) The representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such
specified date), and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.

               (iv) Absence of Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the
Closing, shall have been instituted or be pending before any court, arbitrator, governmental body,
agency or official.

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               (v) No Governmental Prohibition. The sale of the Securities by the Company shall not
be prohibited by any law or governmental order or regulation.

     7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

          The obligation of each Buyer hereunder to purchase the Common Shares and the related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company with prior written
notice thereof:

               (i) The Company shall have duly executed and delivered to such Buyer (i) each of the
Transaction Documents and (ii) the Common Shares (in such amounts as such Buyer shall request) and
the related Warrants (in such amounts as such Buyer shall request) being purchased by such Buyer at
the Closing pursuant to this Agreement.

               (ii) Such Buyer shall have received the opinion of Dreier LLP, counsel for the Company
(“Company Counsel”), dated as of the Closing Date, in substantially the form of Exhibit D
attached hereto.

               (iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit C attached hereto, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.

               (iv) The Company shall have delivered to such Buyer a certificate evidencing the incorporation
and good standing of the Company in the Company’s state of incorporation issued by the Secretary of
State as of a date within 10 days of the Closing Date.

               (v) The Common Stock (I) shall be listed on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market.

               (vi) The Company shall have delivered to such Buyer a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section
3(b) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such Buyer,
(ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing, in
the form attached hereto as Exhibit E.

               (vii) The representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such
specified date) and the Company shall have performed, satisfied and complied

-21-

 

in all material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form attached hereto as Exhibit
F.

               (viii) The Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Common Shares and the Warrants.

               (ix) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

     8. TERMINATION. In the event that the Closing shall not have occurred with respect to
a Buyer on or before five (5) Business Days from the date hereof due to the Company’s or such
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the close of business on
such date without liability of any party to any other party.

     9. MISCELLANEOUS.

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

          (b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become

-22-

 

effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.

          (c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

          (d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.

          (e) Entire Agreement; Amendments. This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters discussed herein, and
this Agreement, the other Transaction Documents and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Common Shares representing at least a majority of the amount of the
Common Shares, or, if prior to the Closing Date, the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least a majority of the amount of the Common Shares. No provision
hereof may be waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that it applies to less
than all of the holders of the Common Shares then outstanding. No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any provision of any of
the Transaction Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Common Shares or holders of the Warrants, as the case may be.
The Company has not, directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that,
except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.

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

-23-

 

     If to the Company:

Electro-Optical Sciences, Inc.

3 West Main Street, Suite 201

Irvington, New York 10533

Telephone: (914) 591-3783

Facsimile: (914) 591-3701

Attention: Chief Financial Officer

     with a copy (for informational purposes only) to:

Dreier LLP

499 Park Avenue

New York, NY 10022

Telephone: (212) 328-6100

Facsimile: (212) 328-6101

Attention: Valerie Price

     If to the Transfer Agent:

American Stock Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

Telephone: (718) 921-8206

Facsimile: (718) 921-8336

Attention: Geraldine Lippman

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

With a copy (for informational purposes only; provided that failure to deliver notice to the
following will not result in a breach by any party hereto) to:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone: (212) 756-2000

Facsimile: (212) 593-5955

Attention: Eleazer N. Klein, Esq.

-24-

 

          (g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Common Shares or the Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at least a majority of
the aggregate number of Registrable Securities issued and issuable hereunder, including by way of a
Fundamental Transaction. A Buyer may assign some or all of its rights hereunder without the
consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with
respect to such assigned rights. A merger or sale of the Company shall not be deemed to be an
assignment for the purposes of this section.

          (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, except that the Agent may rely
upon the representations and warranties contained in Section 2 hereof.

          (i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers in Sections 2 and 3 shall survive the
Closing until the eighteen-month anniversary of the Closing Date (except for the representations
and warranties of the Company made pursuant to Section 3(c), which shall survive indefinitely), and
the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing until the
expiration of the applicable statute of limitations. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants hereunder.

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

          (k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives (including, without limitation,
those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or

-25-

 

document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or
made against such Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii)
the status of such Buyer or holder of the Securities as an investor in the Company. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall
be the same as those set forth in Section 6 of the Registration Rights Agreement.

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

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

          (n) Payment Set Aside. To the extent that the Company makes a payment or payments to
the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not occurred.

          (o) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other

-26-

 

Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an
additional party in any proceeding for such purpose.

[Signature Page Follows]

-27-

 

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

	 	 	 	 	 
	 	 	COMPANY:
	 	 
	 	 	ELECTRO-OPTICAL SCIENCES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

 

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

	 	 	 	 	 
	 	 	BUYERS:
	 
	 	 	 	 
	 	 	[BUYERS]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 	 	Name, as it should appear on the Securities
	 
	 	 	 	 
	 	 	 

 

 

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

	 	 	 	 	 
	 	 	[OTHER BUYERS]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 	 	Name, as it should appear on the Securities
	 
	 	 	 	 
	 	 	 

 

 

EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Warrant
	Exhibit B

	 	Form of Registration Rights Agreement
	Exhibit C

	 	Form of Irrevocable Transfer Agent Instructions
	Exhibit D

	 	Form of Company Counsel Opinion
	Exhibit E

	 	Form of Secretary’s Certificate
	Exhibit F

	 	Form of Officer’s CertificateEX-10.3

 

Exhibit 10.3

FORM OF
REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of October 31, 2006, by and among
Electro-Optical Sciences, Inc., a corporation organized under the laws of Delaware, with its
principal offices at 3 West Main Street, Suite 201, Irvington, New York 10533 (the “Company”), and
the undersigned buyers (each, a “Buyer”, and collectively, the “Buyers”).

          WHEREAS:

          A. In connection with the Securities Purchase Agreements by and among the parties hereto of
even date herewith (collectively, the “Securities Purchase Agreement”), the Company has agreed,
upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and
sell on the date hereof to each Buyer (i) shares (the “Common Shares”) of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), and (ii) warrants (the “Warrants”), which
will be exercisable to purchase shares of Common Stock (as exercised collectively, the “Warrant
Shares”).

          B. To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute (collectively, the “1933
Act”), and applicable state securities laws.

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

          1. Definitions.

          Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

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

               b.  “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.

               c.  “Effective Date” means the date the Registration Statement has been declared effective by
the SEC.

               d.  “Effectiveness Deadline” means the date that is 120 days after the Closing Date.

 

 

               e.  “Filing Deadline” means the date that is 30 days after the Closing Date.

               f.  “Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.

               g.  “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.

               h.  “register,” “registered,” and “registration” refer to a registration effected by preparing
and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act
and pursuant to Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

               i.  “Registrable Securities” means (i) the Common Shares, (ii) the Warrant Shares issued or
issuable upon exercise of the Warrants and (iii) any shares of capital stock issued or issuable
with respect to the Common Shares, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to
any limitations on exercise of the Warrants.

               j.  “Registration Statement” means a registration statement or registration statements of the
Company filed under the 1933 Act covering the Registrable Securities.

               k.  “Required Holders” means the holders of at least a majority of the Registrable Securities.

               l.  “Required Registration Amount” for the Registration Statement means 100% of the sum of (i)
the number of Common Shares issued pursuant to the Securities Purchase Agreement and (ii) the
number of Warrant Shares issued and issuable pursuant to the Warrants as of the trading day
immediately preceding the applicable date of determination, all subject to adjustment as provided
in Section 2(e) (without regard to any limitations on exercise of the Warrants).

               m.  “Rule 415” means Rule 415 promulgated under the 1933 Act or any successor rule providing
for offering securities on a continuous or delayed basis.

               n.  “SEC” means the United States Securities and Exchange Commission.

          2. Registration.

               a. Mandatory Registration. The Company shall prepare, and, as soon as practicable but
in no event later than the Filing Deadline, use its commercially reasonable

2

 

efforts to file with the SEC the Registration Statement on Form S-3 covering the resale of at
least the number of shares of Common Stock equal to the Required Registration Amount determined as
of date the Registration Statement is initially filed with the SEC. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as is available for such
a registration on another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(d). The Registration Statement shall contain (except if otherwise
directed by the Required Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit B. The
Company shall use its commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the Effectiveness Deadline.
By 9:30 am on the Business Day following the Effective Date, the Company shall file with the SEC
in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with
sales pursuant to such Registration Statement.

               b. Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have the
right to select one legal counsel to review and oversee any registration pursuant to this Section 2
(“Legal Counsel”), which shall be counsel designated by the Required Holders. The Company and
Legal Counsel shall reasonably cooperate with each other in performing the Company’s obligations
under this Agreement.

               c. Ineligibility for Form S-3. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company shall (i) register the
resale of the Registrable Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by the SEC.

               d. Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover
all of the Registrable Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to Section 2(b), the Company
shall amend the applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable, but in any event not
later than fifteen (15) days after the necessity therefor arises. The Company shall use its
reasonable best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as reasonably practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the number of shares of
Common Stock available for resale under the Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. The
calculation set forth in the foregoing sentence shall be made without regard to any limitations on
the exercise of the Warrants and such calculation shall assume that the Warrants

3

 

are then exercisable for shares of Common Stock at the then prevailing Exercise Price (as
defined in the Warrants).

               e. Effect of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement. If (i) a Registration Statement covering all of the Registrable Securities required
to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not
filed with the SEC on or before the Filing Deadline (a “Filing Failure”) or (B) not declared
effective by the SEC on or before the Effectiveness Deadline (an “Effectiveness Failure”) or (ii)
on any day after the Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an Allowable Grace Period
(as defined in Section 3(r)) pursuant to such Registration Statement (including, without
limitation, because of a failure to keep such Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration Statement or to
register a sufficient number of shares of Common Stock) (a “Maintenance Failure”) then, as partial
relief for the damages to any holder by reason of any such delay in or reduction of its ability to
sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), subject to Section 2(g) hereof, the Company shall pay to
each holder of Registrable Securities relating to such Registration Statement an amount in cash
equal to one percent (1.0%) of the aggregate Purchase Price (as such term is defined in the
Securities Purchase Agreement) of such Investor’s Registrable Securities included in such
Registration Statement on each of the following dates: (i) the day of a Filing Failure and on every
thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until such
Filing Failure is cured; (ii) the day of an Effectiveness Failure and on every thirtieth day (pro
rated for periods totaling less than thirty (30) days) thereafter until such Effectiveness Failure
is cured; and (iii) the initial day of a Maintenance Failure and on every thirtieth day (pro rated
for periods totaling less than thirty (30) days) thereafter until such Maintenance Failure is
cured. The payments to which a holder shall be entitled pursuant to this Section 2(f) are referred
to herein as “Registration Delay Payments.” Registration Delay Payments shall be paid on the
earlier of (I) the last day of the calendar month during which such Registration Delay Payments are
incurred and (II) the third Business Day after the event or failure giving rise to the Registration
Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a
timely manner, such Registration Delay Payments shall bear interest at the rate of one percent
(1.0%) per month (prorated for partial months) until paid in full. Notwithstanding anything herein
or in the Securities Purchase Agreement to the contrary, in no event shall the aggregate amount of
Registration Delay Payments (other than Registration Delay Payments payable pursuant to events that
are within the control of the Company) exceed, in the aggregate, 10% of the aggregate Purchase
Price of the Common Shares.

               f. Selling Investor Questionnaire. Each Investor agrees to furnish to the Company a
completed Questionnaire in the form attached to this Agreement as Annex A or in such other
form that provides substantially similar information (a “Selling Investor Questionnaire”). The
Company shall not be required to include the Registrable Securities of an Investor in a
Registration Statement and shall not be required to pay any Registration Delay Payments under
Section 2(f) hereof to any Investor who fails to furnish the Company a fully completed Selling
Holder Questionnaire at least three Trading Days prior to the Filing Deadline or fails to comply
with its obligations pursuant to Section 4 hereof.

4

 

          3. Related Obligations.

          At such time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(c) or 2(d), the Company will use its reasonable best efforts to effect
the registration of the Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have the following obligations:

               a. The Company shall submit to the SEC, within five (5) Business Days after the Company learns
that no review of a particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on a particular Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a time and date not
later than 48 hours after the submission of such request. The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) (or any successor thereto) promulgated under the 1933
Act or (ii) the date on which the Investors shall have sold all of the Registrable Securities
covered by such Registration Statement (the “Registration Period”). The Company shall ensure that
each Registration Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements therein (in the
case of prospectuses, in the light of the circumstances in which they were made) not misleading.

               b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under
the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the seller or sellers thereof
as set forth in such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-QSB,
Form 10-K, Form 10-KSB or any analogous report under the Securities Exchange Act of 1934, as
amended (the “1934 Act”), the Company shall have incorporated such report by reference into such
Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on
the same day on which the 1934 Act report is filed which created the requirement for the Company to
amend or supplement such Registration Statement.

               c. The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration
Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments
and supplements to all Registration Statements (except for Annual Reports on Form 10-K and Form
10-KSB, and Reports on Form 10-Q and Form 10-QSB and any similar or successor reports) within a
reasonable number of days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto in a

5

 

form to which Legal Counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably
withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its representatives relating
to any Registration Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an Investor, and all
exhibits and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to
this Section 3.

               d. The Company shall furnish to each Investor whose Registrable Securities are included in any
Registration Statement, without charge, (i) promptly after the same is prepared and filed with the
SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, if requested
by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

               e. The Company shall use its reasonable best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors of the Registrable
Securities covered by a Registration Statement under such other securities or “blue sky” laws of
all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall reasonably promptly notify Legal Counsel and each
Investor who holds Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the Registrable Securities
for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of notice of the initiation or threatening of any proceeding for such purpose.

               f. The Company shall notify Legal Counsel and each Investor in writing of the happening of any
event, as reasonably promptly as practicable after becoming

6

 

aware of such event, as a result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section 3(r), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request).
The Company shall also reasonably promptly notify Legal Counsel and each Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when
a Registration Statement or any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related information, and (iii) of
the Company’s reasonable determination that a post-effective amendment to a Registration Statement
would be appropriate.

               g. The Company shall use its reasonable best efforts to prevent the issuance of any stop order
or other suspension of effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an
order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Investor who holds Registrable Securities
being sold of the issuance of such order and the resolution thereof or its receipt of notice of the
initiation or threat of any proceeding for such purpose.

               h. If any Investor is required under applicable securities law to be described in the
Registration Statement as an underwriter, at the reasonable request of such Investor, the Company
shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request (i) a letter,
dated such date, from the Company’s independent certified public accountants in form and substance
as is customarily given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering, addressed to the
Investors.

               i. Upon the written request of any Investor in connection with any Investor’s due diligence
requirements, if any, the Company shall make available for inspection by (i) any Investor, (ii)
Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and
employees to supply all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a

7

 

misstatement or omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or
order from a court or government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure in violation of
this or any other Transaction Document. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to
sell Registrable Securities in a manner which is otherwise consistent with applicable laws and
regulations.

               j. The Company shall hold in confidence and not make any disclosure of information concerning
an Investor provided to the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

               k. The Company shall use its reasonable best efforts either to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on each securities exchange
on which securities of the same class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all of the Registrable Securities covered by a
Registration Statement on The NASDAQ Capital Market or (iii) if, despite the Company’s best efforts
to satisfy, the preceding clauses (i) and (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) and (ii), to secure the inclusion for quotation on the The New York Stock
Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market or the American Stock Exchange
for such Registrable Securities and, without limiting the generality of the foregoing, to use its
reasonable best efforts to arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. (“NASD”) as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).

               l. The Company shall cooperate in all reasonable respects with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.

8

 

               m. If requested by an Investor, the Company shall (i) as soon as reasonably practicable
incorporate in a prospectus supplement or post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as soon as reasonably
practicable make all required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as reasonably practicable, supplement or make
amendments to any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

               n. The Company shall use its reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

               o. The Company shall make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first day of the
Company’s fiscal quarter next following the effective date of a Registration Statement.

               p. The Company shall otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the SEC in connection with any registration hereunder.

               q. Within two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.

               r. Notwithstanding anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the
Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the
Company, otherwise required (a “Grace Period”); provided, that the Company shall reasonably
promptly (i) notify the Investors in writing of the existence of material, non-public information
giving rise to a Grace Period (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Investors) and the date on which the Grace
Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed five (5) consecutive days and during
any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of
twenty (20) days and the first day of any Grace Period

9

 

must be at least five (5) trading days after the last day of any prior Grace Period (each, an
“Allowable Grace Period”). For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the Investors receive the notice referred to in
clause (i) and shall end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g)
hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of
the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with
respect to the information giving rise thereto unless such material, non-public information is no
longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for sale, and delivered a
copy of the prospectus included as part of the applicable Registration Statement (unless an
exemption from such prospectus delivery requirement exists), prior to the Investor’s receipt of the
notice of a Grace Period and for which the Investor has not yet settled.

               s. All information disclosed in the notices contemplated in this Section 3 shall be kept
confidential by the recipient thereof until such information is publicly disclosed by the Company
unless disclosure by the recipient is required by law or legal process.

          4. Obligations of the Investors.

               a. At least five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the information in
addition to the information required pursuant to the Selling Investor Questionnaire, the Company
requires from each such Investor if such Investor elects to have any of such Investor’s Registrable
Securities included in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request.

               b. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement hereunder, unless such Investor has notified
the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.

               c. Each Investor agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of 3(f)
or receipt of notice that no supplement or amendment is

10

 

required. Notwithstanding anything to the contrary, the Company shall use its reasonable best
efforts to cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in connection with
any sale of Registrable Securities with respect to which an Investor has entered into a contract
for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event
of the kind described in Section 3(g) or the first sentence of 3(f) and for which the Investor has
not yet settled.

               d. Each Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales
of Registrable Securities pursuant to the Registration Statement.

               e. Each Investor agrees not to take any action with respect to any distribution deemed to be
made pursuant to such Registration Statement which would constitute a violation of Regulation M
under the Exchange Act or any other applicable rule, regulation or law.

          5. Expenses of Registration.

          All reasonable expenses, other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company, shall be paid by the Company;
provided, however, that all selling commissions applicable to the sale of Registrable Securities
and all fees and expenses of legal counsel for any Investor shall be borne by such Investor.

          6. Indemnification.

          In the event any Registrable Securities are included in a Registration Statement under this
Agreement:

               a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend each Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within the meaning of the
1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid
in settlement or expenses, joint or several, (collectively, “Claims”) (it being understood and
agreed that Claims shall not include any Claims for loss of market value of the Registrable
Securities) incurred in investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement
or any post-effective amendment thereto or in any filing made in

11

 

connection with the qualification of the offering under the securities or other “blue sky”
laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the statements made therein,
in the light of the circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other
law, including, without limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or
(iv) any violation of this Agreement by the Company (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable,
for any reasonable legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a
Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by such Indemnified
Person for such Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(d) and (ii) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.

               b. In connection with any Registration Statement in which an Investor is participating, each
such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, agents and employees and each Person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act and their directors, officers, agents and their
employees (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in connection with such
Registration Statement; and, subject to Section 6(c), such Investor will reimburse any legal or
other expenses reasonably incurred by an Indemnified Party in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement contained in this Section
6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided,
further, however, that the Investor shall be liable under this Section 6(b) for only that amount of
a Claim or Indemnified

12

 

Damages as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.

               c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel reasonbly satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel with the fees and
expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential differing interests between
such Indemnified Person or Indemnified Party and any other party represented by such counsel in
such proceeding. In the case of an Indemnified Person, legal counsel referred to in the
immediately preceding sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or Claim by the indemnifying
party and shall furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person reasonably apprised at all times as to
the status of the defense or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding effected without its
prior written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the Indemnified Party.
Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action.

13

 

               d. The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred and bills therefor are received.

               e. The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

          7. Contribution.

          To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no Person involved in the sale of Registrable
Securities, which Person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) in connection with such sale, shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of such Registrable
Securities pursuant to such Registration Statement.

          8. Reports Under the 1934 Act.

          With a view to making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration (“Rule 144”), the
Company agrees to:

               a. make and keep public information available, as those terms are understood and defined in
Rule 144;

               b. file with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is required for the applicable
provisions of Rule 144; and

               c. furnish to each Investor so long as such Investor owns Registrable Securities, reasonably
promptly upon request, (i) a written statement by the Company, if true, that it has complied with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to permit the Investors
to sell such securities pursuant to Rule 144 without registration.

          9. Assignment of Registration Rights.

          The rights under this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of such Investor’s Registrable Securities if: (i) the

14

 

Investor agrees in writing with the transferee or assignee to assign such rights and a copy of
such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee and (b) the securities with
respect to which such registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities by the transferee
or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement and applicable securities laws.

          10. Amendment of Registration Rights.

          Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of the holders of the
Registrable Securities. 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 this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

          11. Miscellaneous.

               a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is
deemed to own of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from
the such record owner of such Registrable Securities.

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

     If to the Company:

If to the Company:

Electro-Optical Sciences, Inc.

3 West Main Street, Suite 201

15

 

     Irvington, New York 10533

Telephone: (914) 541-3783

Facsimile: (914) 591-3701

Attention: Chief Financial Officer

     If to Legal Counsel:

Dreier LLP

499 Park Ave

New York, NY 10022

Telephone: (212) 328-6100

Facsimile: (212) 328-6101

Attention: Valerie Price

     With a copy (for informational purposes) to:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone: (212) 756-2000

Facsimile: (212) 593-5955

Attention: Eleazer N. Klein, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached
hereto, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to
such other address and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five (5) days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.

               c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

               d. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York. Each party hereby irrevocably submits to the

16

 

exclusive jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of any provision of this Agreement in any
other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

               e. This Agreement, the other Transaction Documents (as defined in the Securities Purchase
Agreement) and the instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the other Transaction Documents and the instruments referenced
herein and therein supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

               f. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and
be binding upon the permitted successors and assigns of each of the parties hereto.

               g. The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

               h. This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.

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

17

 

               j. All consents and other determinations required to be made by the Investors pursuant to this
Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

               k. 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.

               l. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

               m. The obligations of each Investor hereunder are several and not joint with the obligations
of any other Investor, and no provision of this Agreement is intended to confer any obligations on
any Investor vis-à-vis any other Investor. Nothing contained herein, and no action taken by any
Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated herein.

* * * * * *

18

 

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

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	ELECTRO-OPTICAL SCIENCES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

 

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

	 	 	 	 	 
	 	 	BUYERS:
	 
	 	 	 	 
	 	 	[BUYERS]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

 

SCHEDULE OF BUYERS

	 	 	 	 	 	 	 
	 	 	Buyer’s Address	 	Buyer's Representative’s Address
	Buyer	 	and Facsimile Number	 	and Facsimile Number
	[Buyers]

	 	[Address]	 	 	 	 
	 

	 	Attention:
	 	[          ]	 	 
	 

	 	Facsimile:
	 	(  ) -	 	 
	 

	 	Telephone:
	 	(  ) -	 	 
	 

	 	 	 	(  ) -	 	 
	 

	 	Residence:
	 	[          ]	 	 

 

 

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[          ]

[          ]

[          ]

Attention: [     ]

          Re: Electro-Optical Sciences, Inc.

Ladies and Gentlemen:

          [We are][I am] counsel to Electro-Optical Sciences, Inc., a corporation organized under the
laws of Delaware (the “Company”), and have represented the Company in connection with that certain
Securities Purchase Agreement (the “Securities Purchase Agreement”), entered into by and among the
Company and the buyers named therein (collectively, the “Holders”) pursuant to which the Company
issued to the Holders its shares of the Company’s Common Stock, par value $0.001 per share (the
"Common Stock”) and warrants exercisable for shares of Common Stock (the “Warrants”). Pursuant to
the Securities Purchase Agreement, the Company also has entered into a Registration Rights
Agreement with the Holders (the “Registration Rights Agreement”) pursuant to which the Company
agreed, among other things, to register the resale of the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable upon exercise of the
Warrants under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the
Company’s obligations under the Registration Rights Agreement, on                      ___, 2006, the
Company filed a Registration Statement on Form S-3 (File No. 333-                    ) (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.

          In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has
advised [us][me] by telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the SEC and the Registrable Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.

          This letter shall serve as our standing instruction to you that the shares of Common Stock are
freely transferable by the Holders pursuant to the Registration Statement. You need not require
further letters from us to effect any future legend-free issuance or reissuance of shares of Common
Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
October ___, 2006, provided at the time of such

1

 

reissuance, the Company has not otherwise notified you that the Registration Statement is
unavailable for the resale of the Registrable Securities.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	[ISSUER’S COUNSEL]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	CC: [LIST NAMES OF HOLDERS]
	 	 	 	 

2

 

EXHIBIT B

SELLING STOCKHOLDERS

     The shares of common stock being offered by the selling stockholders are those previously
issued to the Selling Stockholders and those issuable to the Selling Stockholders upon exercise of
the warrants. For additional information regarding the issuances of common stock and the warrants,
see “Private Placement of Common Shares and Warrants” above. We are registering the shares of
common stock in order to permit the selling stockholders to offer the shares for resale from time
to time. Except for the ownership of the shares of common stock and the warrants, the selling
stockholders have not had any material relationship with us within the past three years.

     The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of common stock by each of the selling stockholders. The second column
lists the number of shares of common stock beneficially owned by each selling shareholder, based on
its ownership of the shares of common stock and the warrants, as of ___, 2006, assuming
exercise of the warrants held by the selling stockholders on that date, without regard to any
limitations on exercise.

     The third column lists the shares of common stock being offered by this prospectus by the
selling stockholders.

     In accordance with the terms of registration rights agreements with the holders of the shares
of common stock and the warrants, this prospectus generally covers the resale of that number of
shares of common stock equal to the number of shares of common stock issued and the shares of
common stock issuable upon exercise of the related warrants, determined as if the outstanding
warrants were exercised, as applicable, in full, in each case, as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC. The fourth column
assumes the sale of all of the shares offered by the selling stockholders pursuant to this
prospectus.

     Under the terms of the warrants, a selling shareholder may not exercise the warrants, to the
extent such exercise would cause such selling shareholder, together with its affiliates, to
beneficially own a number of shares of common stock which would exceed [4.99]% of our then
outstanding shares of common stock following such exercise, excluding for purposes of such
determination shares of common stock issuable upon exercise of the warrants which have not been
exercised. The number of shares in the second column does not reflect this limitation. The
selling stockholders may sell all, some or none of their shares in this offering. See “Plan of
Distribution.”

1

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Maximum Number of Shares	 	 	 	 
	 	 	Number of Shares Owned	 	 	to be Sold Pursuant to this	 	 	Number of Shares Owned	 
	Name of Selling Stockholder	 	Prior to Offering	 	 	Prospectus	 	 	After Offering	 
	(1) [Buyers]
	 	 	 	 	 	 	 	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(1)
	 	 	 	 	 	 	 	 	 	 	 	 

2

 

PLAN OF DISTRIBUTION

     We are registering the shares of common stock previously issued and the shares of common stock
issuable upon exercise of the warrants to permit the resale of these shares of common stock by the
holders of the common stock and warrants from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by the selling stockholders of the shares of
common stock. We will bear all fees and expenses incident to our obligation to register the shares
of common stock.

     The selling stockholders may sell all or a portion of the shares of Common Stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or
commissions or agent’s commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,

	 	•	 	on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
	 
	 	•	 	in the over-the-counter market;
	 
	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
	 
	 	•	 	through the writing of options, whether such options are listed on an options
exchange or otherwise;
	 
	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	short sales;
	 
	 	•	 	sales pursuant to Rule 144;

C-1

 

	 	•	 	broker-dealers may agree with the selling securityholders to sell a specified number
of such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

     If the selling stockholders effect such transactions by selling shares of Common Stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of Common Stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of Common Stock or otherwise,
the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short and deliver shares of
Common Stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling stockholders may also loan or pledge shares of
Common Stock to broker-dealers that in turn may sell such shares.

     The selling stockholders may pledge or grant a security interest in some or all of the
convertible notes, warrants or shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell the
shares of Common Stock from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of Common Stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

     The selling stockholders and any broker-dealer participating in the distribution of the shares
of Common Stock may be deemed to be “underwriters” within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of shares of Common Stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

     Under the securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of Common Stock may not be sold unless such shares have been registered or qualified

C-2

 

for sale in such state or an exemption from registration or qualification is available and is
complied with.

     There can be no assurance that any selling stockholder will sell any or all of the shares of
Common Stock registered pursuant to the registration statement, of which this prospectus forms a
part.

     The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of Common Stock to engage in market-making
activities with respect to the shares of Common Stock. All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of Common Stock.

     We will pay all expenses of the registration of the shares of Common Stock pursuant to the
registration rights agreement, estimated to be $[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholders against liabilities,
including some liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by the selling stockholder specifically
for use in this prospectus, in accordance with the related registration rights agreement, or we may
be entitled to contribution.

     Once sold under the registration statement, of which this prospectus forms a part, the shares
of Common Stock will be freely tradable in the hands of persons other than our affiliates.

C-3

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