Document:

EXHIBIT 4.2

 

THIS SECURITY HAS NOT
BEEN  REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT INCLUDING, WITHOUT
LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE
EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE,
SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.  THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN
RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

STOCK
PURCHASE WARRANT

 

TO
SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF

 

NEUROMETRIX,
INC.

 

	
  No. CSW-

  	
  , 2009

  

 

THIS CERTIFIES THAT, for value received,
                              ,
or registered assigns, (herein referred to as the “Purchaser”
or “holder”), is entitled to subscribe
for and purchase from NEUROMetrix, Inc., a Delaware corporation (herein
called the “Company”), at the exercise
price specified below (subject to adjustment as noted below) at any time
beginning on the date that is the earlier of (x)                           (1) 
and (y) immediately prior to consummation of a Change of Control (as
defined below) to, and including
                        ,
2014(2) (subject to extension as provided below, the “Expiration
Date”),
                        
(                        )
fully paid and nonassessable shares (“Shares”)
of common stock, par value $.0001 per share (herein the “Common
Stock”) (subject to adjustment as noted below).  This Stock Purchase Warrant (this “Warrant”) has been issued pursuant
to a Securities Purchase Agreement, dated as of September     ,
2009 (the “Agreement”), between the
Purchaser and the Company.

 

The warrant exercise price (subject to adjustment as
noted below) shall be
$           per Share (the “Warrant Purchase Price”).

 

This Warrant is subject to the following provisions,
terms and conditions:

 

(1)   Insert date that is 180 days after the date
hereof.

 

(2)   Insert date that is five years from the date
hereof.

 

1

 

1.                                      EXERCISE
OF WARRANT.  The rights
represented by this Warrant may be exercised by the holder hereof, in whole or
in part, by written notice of exercise delivered to the Company and by the
surrender of this Warrant (properly endorsed if required) at the principal
office of the Company and upon payment to it by check of the Warrant Purchase
Price for such Shares, or if available, pursuant to the cashless exercise
procedure specified in Section 2 below; provided, however, that any such
exercise made in connection with a Change in Control, may be conditioned upon
the consummation of such Change in Control and payment with respect to such
exercise shall be made at the time of the consummation of such Change in
Control.

 

2.                                      NET
EXERCISE OF WARRANT.  This Warrant
may also be exercised in whole or in part, at such time by means of a “cashless exercise” in which the
holder shall be entitled to receive a certificate for the number of Shares
equal to the quotient obtained by dividing [(A-B)(X)] by (A), where:

 

	
  (A) =

  	
  the
  VWAP on the trading day immediately preceding the date on which the holder
  elects to exercise this Warrant by means of a “cashless exercise,” as set
  forth in the applicable Notice of Exercise;

  
	
   

  	
   

  
	
  (B) =

  	
  the
  Warrant Purchase Price, as adjusted hereunder; and

  
	
   

  	
   

  
	
  (X) =

  	
  the
  number of Shares that would be issuable upon exercise of this Warrant in
  accordance with the terms of this Warrant if such exercise were by means of a
  cash exercise rather than a cashless exercise.

  

 

“VWAP” means, for any
date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time), (b) if the
OTC Bulletin Board is not a Trading Market, the volume weighted average price
of the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported,
or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Board of Directors of the Company and the holders of a majority in interest of
the Warrants being exercised for which the calculation of VWAP is required in
order to determine the exercise price of such Warrants.

 

“Trading Market” means any of
the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New
York Stock Exchange (or any successors to any of the foregoing).

 

2

 

3.                                      BENEFICIAL
OWNERSHIP.

 

(a)                                  Notwithstanding
anything to the contrary contained in this Warrant (other than the provisions
of Section 3(b) below), the Company shall not effect any exercise of
this Warrant, and a holder shall not have the right to exercise any portion of
this Warrant to the extent (but only to the extent) that, after giving effect
to such issuance after exercise, the holder (together with any person acting as
a group with the holder or the holder’s affiliates) would beneficially own in
excess of 9.99% (the “Maximum Percentage”) of the
outstanding shares of Common Stock.  To
the extent the above limitation applies, the determination of whether this
Warrant shall be exercisable (vis-à-vis other convertible, exercisable or
exchangeable securities owned by the holder) and of which warrants shall be
exercisable (as among all warrants owned by the holder) shall, subject to such
Maximum Percentage limitation, be determined on the basis of the first
submission to the Company for conversion, exercise or exchange (as the case may
be). No prior inability to exercise this Warrant pursuant to this paragraph
shall have any effect on the applicability of the provisions of this paragraph
with respect to any subsequent determination of exercisability.  For the purposes of this paragraph,
beneficial ownership and all determinations and calculations (including,
without limitation, with respect to calculations of percentage ownership and as
to the determination of any group) shall be determined by the holder in
accordance with Section 13(d) of the Securities Exchange Act of 1934
(the “Exchange Act”) and the rules and
regulations promulgated thereunder.  The
provisions of this paragraph shall be implemented in a manner otherwise than in
strict conformity with the terms of this paragraph to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the
intended Maximum Percentage beneficial ownership limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect
to such Maximum Percentage limitation. 
The limitations contained in this paragraph shall apply to a successor
holder of this Warrant.  For any reason
at any time, upon the written or oral request of the holder, the Company shall
within one (1) business day confirm orally and in writing to the holder
the number of shares of Common Stock then outstanding, including by virtue of
any prior conversion or exercise of convertible or exercisable securities into
Common Stock, including, without limitation, pursuant to this Warrant or
securities issued pursuant to the Securities Purchase Agreement.  Each delivery of an Exercise Notice by the
holder will constitute a representation by the holder that it has evaluated the
limitation set forth in this paragraph and determined that issuance of the full
number of Shares requested by the holder in such Exercise Notice is permitted
under this paragraph.

 

(b)                                  The provisions
of Section 3(a) above shall not apply to any exercise by any holder
whose beneficial ownership of Common Stock immediately prior to the issuance of
this Warrant (together with any person acting as a group with the holder and
the holder’s affiliates) exceeds the Maximum Percentage (an “Existing MP Holder”), provided,
however, if at any time after the date hereof an Existing MP Holder and
its affiliates and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with such Holders for purposes of Section 13(d) of
the Exchange Act (including shares held by any “group” of which the holder is a
member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right
to convert, exercise or purchase similar to the limitation set forth herein)
shall collectively beneficially own the Maximum Percentage or less, then such
holder may deliver a written notice to the Company (an “MP 

 

3

 

Notice”) providing
that such holder irrevocably elects to be subject to the provisions of Section 3(a).

 

(c)                                  Notwithstanding
anything to the contrary contained in this Warrant, the Company shall not
effect any exercise of this Warrant (including if held by an Existing MP Holder
that has not delivered an MP Notice), and a holder shall not have the right to
exercise any portion of this Warrant to the extent (but only to the extent)
that, after giving effect to such issuance after exercise, the holder (together
with any person acting as a group with the holder or the holder’s affiliates)
would beneficially own in excess of 19.99% (the “Applicable
Percentage”) of the outstanding shares of Common Stock. To the
extent the above limitation applies, the determination of whether this Warrant
shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable
securities owned by the holder) and of which warrants shall be exercisable (as
among all warrants owned by the holder) shall, subject to such Applicable
Percentage limitation, be determined on the basis of the first submission to
the Company for conversion, exercise or exchange (as the case may be).  No prior inability to exercise this Warrant
pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination of
exercisability.  For the purposes of this
paragraph, beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of percentage
ownership and as to the determination of any group) shall be determined by the
holder in accordance with Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder.  The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Applicable Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Applicable Percentage
limitation.  The limitations contained in
this paragraph shall apply to a successor holder of this Warrant.  For any reason at any time, upon the written
or oral request of the holder, the Company shall within one (1) business
day confirm orally and in writing to the holder the number of shares of Common
Stock then outstanding, including by virtue of any prior conversion or exercise
of convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Warrant or securities issued pursuant to the
Securities Purchase Agreement.  Each
delivery of an Exercise Notice by the holder will constitute a representation
by the holder that it has evaluated the limitation set forth in this paragraph
and determined that issuance of the full number of Shares requested by the
holder in such Exercise Notice is permitted under this paragraph.

 

4.                                      ISSUANCE
OF THE SHARES.  The Company
agrees that the Shares so purchased shall be and are deemed to be issued to the
holder hereof as the record owner of such Shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such Shares as aforesaid.  Subject to the
provisions of the preceding Section, within 3 business days after the rights
represented by this Warrant shall have been exercised, the Company shall cause
its transfer agent to issue the Shares so purchased to Purchaser in book-entry
format and deliver evidence of such issuance to Purchaser, and, unless this
Warrant has expired, a new Warrant representing the number of Shares, if any,
with respect to which this Warrant shall not then have been exercised shall
also be delivered to the holder hereof within such time.  Notwithstanding anything herein to the
contrary, in the event of an exercise of this Warrant effective immediately
prior to a Change of Control (as defined below), the Shares 

 

4

 

purchased upon such exercise
shall be deemed issued and shall be issued immediately prior to consummation of
the Change of Control.

 

5.                                      AUTHORIZATION
OF SHARES.  The Company
represents and warrants that this Warrant has been duly authorized by all
necessary corporate action, has been duly executed and delivered and is a legal
and binding obligation of the Company, enforceable against the Company in
accordance with the terms of this Warrant, except to the extent such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally.  The Company
covenants and agrees that all Shares which may be issued upon the exercise of
the rights represented by this Warrant according to the terms hereof or
represented by the Common Stock will, upon issuance and payment therefor, be
duly authorized and issued, fully paid and nonassessable.  The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by this Warrant, free from
preemptive rights, rights of first refusal or other contingent purchase rights
other than those held by a holder of this Warrant (as a result of holding this
Warrant).

 

6.                                      CHARGES,
TAXES AND EXPENSES. The Company will pay any documentary stamp taxes attributable
to the issuance of Shares of Common Stock upon the exercise of this Warrant.

 

7.                                      ADJUSTMENTS
OF WARRANT PURCHASE PRICE AND NUMBER OF SHARES; STOCK SPLITS, ETC.  The above provisions are,
however, subject to the following:

 

(a)                                  The Warrant
Purchase Price shall, from and after the date of issuance of this Warrant, be
subject to adjustment from time to time as hereinafter provided.  Upon each adjustment of the Warrant Purchase
Price, the holder of this Warrant shall thereafter be entitled to purchase, at
the Warrant Purchase Price resulting from such adjustment, the number of Shares
obtained by multiplying the Warrant Purchase Price in effect immediately prior
to such adjustment by the number of Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Purchase Price resulting from such adjustment.

 

(b)                                  In case the
Company shall (i) declare a dividend upon the Common Stock payable in
Common Stock (other than a dividend declared to effect a subdivision of the
outstanding shares of Common Stock, as described in Subsection (c) below)
or in any obligations or any shares of stock of the Company which are
convertible into or exchangeable for Common Stock (such obligations or shares
of stock being hereinafter referred to as “Convertible Securities”),
or in any rights or options to purchase any Common Stock or Convertible
Securities, or (ii) declare any other dividend or make any other
distribution upon the Common Stock payable otherwise than out of net profits or
surplus, then thereafter the holder of this Warrant upon the exercise hereof
will be entitled to receive the number of shares of Common Stock to which such
holder shall be entitled upon such exercise, and, in addition and without
further payment therefor, such number of shares of Common Stock, such that upon
exercise hereof, such holder would receive 

 

5

 

such number of shares of
Common Stock as a result of each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which
such holder would have received by way of any such dividend or distribution if
continuously since the record date for any such dividend or distribution such
holder (x) had been the record holder of the number of shares of Common
Stock then received, and (y) had retained all dividends or distributions
in stock or securities (including Common Stock or Convertible Securities, or in
any rights or options to purchase any Common Stock or Convertible Securities)
payable in respect of such Common Stock or in respect of any stock or
securities paid as dividends or distributions and originating directly or
indirectly from such Common Stock.

 

(c)                                  In case the
Company shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares, the Warrant Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock of the Company shall be combined
into a smaller number of shares, the Warrant Purchase Price in effect
immediately prior to such combination shall be proportionately increased.

 

(d)                                  If any capital
reorganization or reclassification of the capital stock of the Company shall be
effected in such a way that holders of Common Stock shall be entitled to
receive stock or securities with respect to or in exchange for Common Stock,
then, as a condition of such reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the Shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby, such shares of stock or
securities as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization or
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustments of the Warrant Purchase Price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock or
securities thereafter deliverable upon the exercise hereof.

 

(e)                                  Upon any
adjustment of the Warrant Purchase Price or any adjustment of any material
terms hereof, then and in each such case an officer of the Company shall,
promptly after the occurrence of any event that requires an adjustment or
readjustment, give signed written notice thereof, by first-class mail, postage
prepaid, addressed to the registered holder of this Warrant at the address of
such holder as shown on the books of the Company, which notice shall state the
Warrant Purchase Price resulting from such adjustment, any material change in
the terms of the Warrant, and the increase or decrease, if any, in the number
of Shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.

 

(f)                                    In case any
time:

 

i.                                               the Company
shall pay any dividend payable in stock upon its 

 

6

 

capital stock (other than a dividend declared
to effect a subdivision of the outstanding shares of Common Stock, as described
in Subsection (c) above);

 

ii.                                     the Company
shall make any distribution (other than a cash distribution out of net profits
or surplus) to the holders of its capital stock; or

 

iii.                                 there shall be
any capital reorganization, or reclassification of the capital stock of the
Company,

 

then, in any one or more of said
cases, the Company shall give written notice, by first-class mail, postage
prepaid, addressed to the registered holder of this Warrant at the address of
such holder as shown on the books of the Company, of the date on which (aa) the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (bb) such reorganization or
reclassification, as the case may be. 
Such notice shall also specify the date as of which the holders of
capital stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their capital stock for
securities or other property deliverable upon such reorganization or
reclassification, as the case may be. 
Such written notice shall be given at least twenty (20) days prior to
the action in question and not less than twenty (20) days prior to the record
date or the date on which the Company’s transfer books are closed in respect
thereto.  In each such case, upon
exercise of this Warrant the holder hereof shall be entitled to a proportionate
share of any such distribution as though such holder was the holder of the
number of shares of Common Stock into which this Warrant may be exercised as of
the record date fixed for the determination of the holders of Common Stock
entitled to receive such distribution.

 

8.                                      TREATMENT
OF WARRANT UPON CHANGE IN CONTROL OF COMPANY.

 

(a)                                  Change
in Control. For the purpose of this Warrant, “Change in Control” means (A) a
consolidation, merger, exchange of shares, recapitalization, reorganization,
business combination or other similar event, (1) following which the
holders of Common Stock immediately preceding such consolidation, merger,
exchange, recapitalization, reorganization, combination or event either (a) no
longer hold a majority of the shares of Common Stock or (b) no longer have
the ability to elect a majority of the board of directors of the Company or (2) as
a result of which shares of Common Stock shall be changed into (or the shares
of Common Stock become entitled to receive) the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity and the holders of Common Stock immediately preceding
such event no longer hold a majority of such shares of the Company or another
entity following such reclassification; or (B) the sale or transfer in one
transaction or in a series of related transactions of all or substantially all
of the assets of the Company (an “Asset Sale”).
 The Company shall provide the holder
with written notice of any Change of Control at least twenty (20) days prior to
the consummation of a Change of Control via facsimile or overnight courier.

 

(b)                                  Treatment
of Warrant at Change in Control.

 

(i.)                                 Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the written request of the Company, the holder agrees that, in the event
of a 

 

7

 

Change
in Control that is not an Asset Sale, either (at the option of the holder) (a) the
holder shall exercise its conversion or purchase right under this Warrant and
such exercise will be deemed effective immediately prior to the consummation of
such Change in Control or (b) if the holder elects not to exercise the
Warrant, this Warrant will expire upon the consummation of such Change in
Control.  The Company shall provide the
holder with written notice of its request relating to the foregoing (together
with such reasonable information as the holder may request in connection with
such contemplated Change in Control giving rise to such notice), which is to be
delivered to the holder not less than twenty (20) days prior to the closing of
the proposed Change in Control.

 

(ii.)                             Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the written request of the Company, the holder agrees that, in the event
of a Change in Control that is an “arms length” Asset Sale to a third party
that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (at the
option of the Holder) (a) the holder shall exercise its conversion or
purchase right under this Warrant and such exercise will be deemed effective
immediately prior to the consummation of such Change in Control or (b) if
the holder elects not to exercise the Warrant, this Warrant will continue until
the Expiration Date if the Company continues as a going concern following the
closing of any such True Asset Sale.  The
Company shall provide the holder with written notice of its request relating to
the foregoing (together with such reasonable information as the holder may
request in connection with such contemplated Change in Control giving rise to
such notice), which is to be delivered to the holder not less than twenty (20)
days prior to the closing of the proposed Change in Control.  For purposes of this Warrant, the term “successor entity” shall mean any
person or entity purchasing the Company’s assets or Common Stock, or any
successor entity resulting from a Change of Control.

 

(iii.)                         Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the written request of the Company received at least twenty (20) days
prior to consummation of the applicable Change of Control, the holder agrees
that, in the event of a stock for stock Change in Control of the Company by a
publicly traded acquirer, the Company may require the Warrant to be deemed
automatically exercised and the holder shall participate in the Change in
Control as a holder of the Shares on the same terms as other holders of the
same class of securities of the Company.

 

(iv.)                            Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the closing of any Change in Control other than those particularly described
in subsections (i), (ii) and (iii) above, the successor entity, if
any, and if applicable, shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Change in Control and subsequent closing. The Warrant Price and/or
number of Shares shall be adjusted accordingly.

 

(v.)                                Notwithstanding
anything contained in this Warrant to the contrary (including, without
limitation, any of the provisions of Section 8(b)(i), (ii), (iii) or (iv) hereof),
in the event of a Change of Control, at the request of the holder delivered
before the fifth (5th) business day
prior to the scheduled closing of the consummation of such Change of Control (a

 

8

 

“Redemption Notice”), the Company
shall purchase this Warrant from the holder by paying to the holder cash in an
amount equal to the Black Scholes Value (as defined below) of the remaining
unexercised portion of this Warrant on the date of such Change of Control.  Following the receipt of a Redemption Notice
from the holder, the Company shall not effect a Change of Control that is being
treated as a redemption in accordance with this Section 8(b)(v), unless
either it obtains the written agreement of the successor entity that payment of
the Black Scholes Value shall be made to the holder upon consummation of such
Change of Control or it shall first place into an escrow account with an
independent escrow agent, at least three (3) business days prior to the
closing date of the Change of Control, an amount in cash equal to the Black
Scholes Value.  Concurrently upon closing
of such Change of Control, the Company shall pay or shall instruct the escrow
agent to pay the Black Scholes Value to the holder.  “Black Scholes Value”
means the value of this Warrant based on the Black and Scholes Option Pricing
Model obtained from the “OV” function on Bloomberg Financial Markets (“Bloomberg”) determined as of the
day of the closing of the applicable Change in Control transaction for pricing
purposes and reflecting (i) a risk-free interest rate corresponding to the
U.S.  Treasury rate for a period equal to
the remaining term of this Warrant as of such date of request, (ii) an
expected volatility equal to the greater of 100% and the 100 day volatility
obtained from the HVT function on Bloomberg as of the day immediately following
the public announcement of the applicable Fundamental Transaction and (iii) the
underlying price per share used in such calculation shall be the sum of the
price per share being offered in cash, if any, plus the value of any non cash
consideration, if any, being offered in the Change in Control, such non-cash
values to be as set forth in any definitive agreement for the Change of Control
that has been executed around the time of the first public announcement of the
Change of Control or, if no such value is determinable from such definitive
agreement, based on the closing market price for shares of the successor entity
or its principal securities exchange or quotation system on the trading day
preceding the first public announcement of the Change of Control or, if the
successor entity is not a publicly traded entity, as mutually determined in
good-faith by the holder and the Company’s Board of Directors.  In addition, for purposes of determining the
Black Scholes Value, this Warrant shall be deemed to be exercisable from and
after the date of issuance of the Warrants regardless of any restrictions on
exercisability.

 

(vi.)                            Notwithstanding
anything herein to the contrary, in the event the holder elects to exercise the
Warrant immediately prior to consummation of a Change of Control in accordance
with this Section 8(b), then the Company shall not enter into such Change
in Control transaction unless the successor entity shall, as part of the
transaction constituting such Change in Control, issue or pay to the holder the
identical consideration, less the applicable Warrant Purchase Price, that such
holder would have received upon such Change of Control (whether from the
Company or the successor entity, as applicable) with respect to any portion of
the Warrant that the holder is restricted from exercising due to the provisions
of Section 3 hereof, in exchange for the cancellation of such portion of
the Warrant.

 

9.                                      NO
STOCKHOLDER RIGHTS.  This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company.

 

10.                               REGISTRATION
OR EXEMPTION REQUIRED.  This
Warrant has been issued in a transaction exempt from the registration
requirements of the Securities Act of 1933 (the “Securities
Act”) by virtue of Regulation D and exempt from state
registration under applicable 

 

9

 

state laws. The Warrant and
the Common Stock issuable upon the exercise of this Warrant may not be pledged,
transferred, sold or assigned except pursuant to an effective registration
statement, pursuant to Rule 144 or after receipt by the Company of an
opinion of counsel for the holder that any such pledge, transfer, sale or
assignment shall be exempt from the registration requirements of the Securities
Act, including, without limitation, a so-called “4(1) and a half”
transaction.

 

11.                               TRANSFER
OF WARRANTS.  Subject to
compliance with the second sentence of Section 10 above, the holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole
or in part.  The holder shall deliver a
written notice to Company, indicating the person or persons to whom the Warrant
shall be assigned and the respective number of warrants to be assigned to each
assignee.  The Company shall effect the
assignment within three (3) business days of its receipt of a notice of
assignment and, if required by this Warrant, receipt by the Company of an
opinion of counsel (the “Transfer Delivery Period”),
and shall deliver to the assignee(s) designated by holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.  This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the holder.  The provisions of this
Warrant are intended to be for the benefit of all holders from time to time of
this Warrant, and shall be enforceable by any such holder.  For avoidance of doubt, in the event holder
notifies the Company that such sale or transfer is a so called “4(1) and
half” transaction, the parties hereto agree that a legal opinion from outside
counsel for the holder in reasonable form delivered to counsel for the Company
shall be the only requirement to satisfy an exemption from registration under
the Securities Act to effectuate such “4(1) and half” transaction.

 

12.                               SURRENDER.  This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the principal
office of the Company, for new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of Shares which
may be subscribed for and purchased hereunder, each of such new Warrants to
represent the right to subscribe for and purchase such number of shares as
shall be designated by said holder hereof at the time of such surrender.

 

13.                               RESTRICTED
SECURITIES.  The holder
hereby acknowledges and agrees that this Warrant constitutes a “restricted
security” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the holder may only transfer this Warrant in accordance
with the provisions of this Warrant, including Sections 10 and 11 hereof.  The holder acknowledges that the Company has
no obligation to register or qualify the Warrant for resale.  This Warrant and the Shares shall be
imprinted with a legend in substantially the form set forth in Section 6.3(b) of
the Agreement unless such Shares are theretofore registered for resale.

 

14.                               GOVERNING
LAW.  All questions concerning
this Warrant will be governed and interpreted and enforced in accordance with
the internal law, not the law of conflicts, of the State of Delaware.

 

15.                               MISCELLANEOUS.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of any such loss, theft,
destruction or mutilation of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form to the Company or, in the case of
mutilation, on surrender and 

 

10

 

cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday or Sunday, or shall be a legal
U.S. or New York state holiday, then such action may be taken or such right may
be exercised on the next succeeding day not a Saturday, Sunday or holiday.  The invalidity or unenforceability of any
provision of this Warrant shall in no way affect the validity or enforceability
of any other provisions of this Warrant, or the Agreement.

 

16.                               NOTICES.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be delivered (A) if
within the United States, by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if from outside the United States, by International
Federal Express (or comparable service) or facsimile, and shall be deemed given
(i) if delivered by first-class registered or certified mail domestic,
upon the business day received, (ii) if delivered by nationally recognized
overnight carrier, one (1) business day after timely delivery to such carrier,
(iii) if delivered by International Federal Express (or comparable
service), two (2) business days after so mailed, (iv) if delivered by
facsimile, upon electric confirmation of receipt.  Notices to the Company pursuant to this
Warrant shall be delivered to the address set forth on the signature page hereof,
until another address is designated in writing by the Company.  Notices to the holder pursuant to this
Warrant shall be delivered to the address set forth in the Company’s records,
until another address is designated in writing by the holder.

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer and
this Warrant to be dated as of the date set forth above.

 

	
  Address:

  	
  NEUROMETRIX, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

11

 

NOTICE
OF EXERCISE

 

To:                                                                NEUROMETRIX,
INC.

 

1.                                      The undersigned
hereby elects to purchase
           Shares of
NEUROMETRIX, INC. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.

 

2.                                      Payment shall
take the form of (check applicable box):

 

o                                    in lawful money
of the United States; or

 

o                                    the
cancellation of such number of Shares as is necessary, in accordance with the
formula set forth in Section 2 of the Warrant, to exercise this Warrant
with respect to the maximum number of Shares purchasable pursuant to the
cashless exercise procedure set forth in Section 2 of the Warrant.

 

3.                                      Please issue a
certificate or certificates representing such Shares in the name of the
undersigned or in such other name as is specified below:

 

The Shares shall be delivered to the
following:

 

 

4.                                      The undersigned
is (i) an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended (the “Securities
Act”), and/or (ii) a “qualified institutional buyer” as
defined in Rule 144A promulgated under the Securities Act.

 

	
   

  	
  [NAME
  OF PURCHASER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  

 

12

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to
purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and
all rights evidenced thereby are hereby assigned to:

 

	
  Name:

  	
   

  
	
   

  	
  (Please Print)

  

 

	
  Address:

  	
   

  
	
   

  	
  (Please Print)

  

 

	
  Dated:

  	
   

  	
   

  

Holder’s

	
  Signature:

  	
   

  	
   

  

Holder’s

	
  Address:

  	
   

  	
   

  

 

NOTE:  The
signature to this Assignment Form must correspond with the name as it appears
on the face of the Warrant, without alteration or enlargement or any change
whatever.  Officers of corporations and
those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.

 

13EXHIBIT 10.1

 

SECURITIES
PURCHASE AGREEMENT

 

NEUROMetrix, Inc.

62
Fourth Avenue

Waltham,
Massachusetts 02451

 

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

 

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

 

2.                                       The Company has
authorized the sale and issuance of (i) up to 8,816,521 shares (the “Shares”) of the common stock of the
Company, $.0001 par value per share (the “Common Stock”),
and (ii) warrants to purchase up to 8,375,695 shares of Common Stock (the “Warrants”), to certain investors in
a private placement (the “Offering”).

 

3.                                       The Company and
the Investor agree that the Investor will purchase from the Company and the
Company will issue and sell to the Investor
                
Shares at a purchase price of $2.00 per Share (the “Share
Purchase Price”) and Warrants to purchase
                
shares of Common Stock (which Warrant shall be exercisable for 95% of the
number of Shares that are purchased under this Agreement by the Investor at an
exercise price per share equal to $2.20 per share and at a purchase price of
$0.125 per share of Common Stock underlying the Warrant (the “Warrant Purchase Price”)), for an
aggregate purchase price of
$                
(the “Purchase Price”), subject to the
Terms and Conditions for Purchase of Shares attached hereto as Annex I and
incorporated herein by this reference as if fully set forth herein.  Unless otherwise requested by the Investor in
EXHIBIT A, certificates representing the Shares purchased by the
Investor will be registered in the Investor’s name and address as set forth
below.

 

4.                                       The Investor
represents that, except as set forth below, (a) it has had no position,
office or other material relationship, other than as a shareholder of the
Company, within the past three years with the Company or its affiliates, (b) neither
it, nor any group of which it is a member or to which it is related,
beneficially owns (including the right to acquire or vote) any securities of
the Company other than as set forth below and (c) it has no direct or
indirect affiliation or association with any Financial Industry Regulatory
Authority (“FINRA”) member.  Exceptions (if no exceptions, write
“none.”  If left blank, response will be
deemed to be “none”):

 

No. of
shares of Common Stock of the Company held by Investor and its affiliates
(please break out by holder):

 

 

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

 

	
   

  	
  Dated as of:                                ,
  2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Investor Name]

  

 

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

AGREED
AND ACCEPTED:

 

NEUROMetrix, Inc.

 

 

	
  By:

  	
  /s/
  Shai N. Gozani

  	
   

  
	
  Name:

  	
  Shai
  N. Gozani

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  

 

2

 

ANNEX I

 

TERMS
AND CONDITIONS FOR PURCHASE OF SHARES

 

1.                                      AGREEMENT
TO SELL AND PURCHASE THE SHARES AND WARRANTS; SUBSCRIPTION DATE.

 

1.1                               Purchase
and Sale.  At the
Closing (as defined in Section 2), the Company will sell to the Investor,
and the Investor will purchase from the Company, upon the terms and subject to
the conditions set forth herein, (i) the number of Shares described in
paragraph 3 of the Securities Purchase Agreement to which this Annex I is
attached (collectively with this Annex I and the other exhibits attached
hereto, this “Agreement”) at the Share
Purchase Price specified in the Agreement (which price shall be the
consolidated closing bid price of the Common Stock as reported on the Nasdaq
Global Market immediately prior to the execution of this Agreement), and (ii) Warrants,
in substantially the form attached hereto as EXHIBIT E, to acquire up to
that number of additional shares of Common Stock set forth in paragraph 3 of
the Securities Purchase Agreement to which this Annex I is attached at the
Warrant Purchase Price (the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants issued to the Investors, collectively, the “Warrant Shares”).  The Shares and Warrants are sometimes
referred to herein collectively as the  “Securities.”

 

1.2                               Other
Investors.  As part of
the Offering, the Company proposes to enter into Securities Purchase Agreements
in the same form, and on the same terms and conditions, as this Agreement and
as the Warrant, with certain other investors (the “Other
Investors”), and the Company expects to complete sales of Shares
and Warrants to them.  The Investor and
the Other Investors are sometimes collectively referred to herein as the “Investors,”
and this Agreement and the Securities Purchase Agreements executed by the Other
Investors are sometimes collectively referred to herein as the “Agreements.”  The Company may accept executed Agreements
from the Investors for the purchase of Securities commencing upon the date on
which the Company provides the Investors with a proposed purchase price per
Share and concluding upon the date (the “Subscription Date”)
on which the Company has notified Canaccord Adams (in its capacity as placement
agent for the Shares, the “Placement Agent”)
in writing that it will no longer accept Agreements for the purchase of
Securities in the Offering, which shall be no more than one (1) Business
Day (as defined below) following the Business Day on which the Company has
first accepted an Agreement.  Each
Investor must complete a Securities Purchase Agreement, a Securities
Certificate Questionnaire (in the form attached as EXHIBIT A hereto) and
an Investor Questionnaire (in the form attached as EXHIBIT B hereto) in
order to purchase Securities in the Offering.

 

1.3                               Placement
Agent Fee; Use of Proceeds.  The Investor acknowledges that the Company
intends to pay to the Placement Agent a fee set forth in EXHIBIT E-2
attached hereto in respect of the sale of Securities to the Investor and to
issue to the Placement Agent a warrant to purchase Common Stock in the form
attached hereto as EXHIBIT E-1 and for the number of shares set forth in
EXHIBIT E-2.  The Company has
taken no action, and has not failed to take any action, that would give rise to
any claim by any other person for brokerage commissions, placement agent’s fees
or similar payments relating to this Agreement or the transactions contemplated
hereby.  The Company shall use the
proceeds (after payment of the 

 

1

 

Placement Agent Fee) from
the sale of the Securities hereunder for general working capital purposes.

 

2.                                      DELIVERY
OF THE SHARES AT CLOSING.  The
completion of the purchase and sale of the Securities (the “Closing”)
shall occur on a date specified by the Company and the Placement Agent (the “Closing Date”), but no later than
five (5) Business Days following the date hereof, and of which the
Investors will be notified at least One (1) Business Day in advance by the
Placement Agent.  At the Closing, the
Company shall deliver to the Investor (i) a copy of irrevocable
instructions to American Stock Transfer & Trust Company, the Company’s
transfer agent, certified by the corporate secretary of the Company and
instructing the issuance to Investor in book entry form of the number of Shares
set forth in paragraph 3 of the Securities Purchase Agreement (or, upon request
by Investor, a stock certificate for such number of Shares), such entry (or
certificate, as the case may be) to be registered in the name of the Investor
or, if so indicated on the Securities Certificate Questionnaire, in the name of
a nominee designated by the Investor, and (ii) a Warrant, issued in the name
of such Investor or, if so indicated on the Securities Certificate
Questionnaire, in the name of a nominee designated by the Investor, pursuant to
which such Investor shall have the right to acquire such number of Warrant
Shares set forth in paragraph 3 of the Securities Purchase Agreement.  In exchange for the delivery of the
certificates representing such Securities, the Investor shall deliver the
Purchase Price to the Company by wire transfer of immediately available funds
pursuant to the Company’s written instructions. 
On the Closing Date, the Company shall cause counsel to the Company to
deliver to the Investors a legal opinion, dated the Closing Date, substantially
in the form attached hereto as EXHIBIT D (the
“Legal Opinion”).

 

The Company’s obligation to issue and sell the
Securities to the Investor shall be subject to the following conditions, any
one or more of which may be waived by the Company: (a) prior receipt by
the Company of an executed copy of this Agreement; (b) the accuracy of the
representations and warranties made by the Investor in this Agreement and the
fulfillment of the obligations of the Investor to be fulfilled by it under this
Agreement on or prior to the Closing; (c) the absence of any order, writ,
injunction, judgment or decree that questions the validity of the Agreements or
prohibits the right of the Company to enter into such Agreements or to
consummate the transactions contemplated hereby and thereby, and (d) completion
of purchases and sales under the Agreements in the same form as this Agreement
with Other Investors for an aggregate stock price of not less then
eleven-million and five hundred thousand dollars ($11,500,000), provided that
the Company shall have used its best efforts to consummate such purchases and
sales.

 

Each Investor’s obligation to purchase the
Securities shall be several and not joint, and shall be subject to the
following conditions, any one or more of which may be waived by the Investor: (a) the
delivery of the Legal Opinion to the Investor by counsel to the Company; (b) the
accuracy in all material respects of the representations and warranties (except
with respect to such representations and warranties which are qualified by
words such as “material”, “Material Adverse Effect” or words of similar meaning,
which shall be accurate in all respects) by the Company in this Agreement on
the date hereof and on the Closing Date; (c) the fulfillment of the
obligations of the Company to be fulfilled by it under this Agreement on or
prior to the Closing; (d) the absence of any order, writ, injunction,
judgment or decree that questions the validity of the Agreements or prohibits
the right of the Company to enter into such Agreements or to 

 

2

 

consummate the transactions
contemplated hereby and thereby; and (e) the delivery to the Investor by
the Secretary or Assistant Secretary of the Company of a certificate stating
that the conditions specified in subsections (b) and (c) of this
paragraph have been fulfilled.

 

For purposes of this Agreement, “Business
Day” shall mean any day other than a Saturday, Sunday or other
day on which the Nasdaq Global Market or commercial banks located in Boston,
Massachusetts are permitted or required by law to close.

 

3.                                      REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE COMPANY.  Except (i) as set forth in the Company
disclosure schedules (the “Disclosure Schedules”),
which Disclosure Schedules are being delivered to the Investors at the same
time as this Agreement, and (ii) as otherwise described in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008 (and
any amendments thereto filed at least two (2) Business Days prior to the
date hereof), the Company’s Proxy Statement for its 2009 Annual Meeting of
Stockholders, or the Company’s Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2009 and June 30, 2009 (and any amendments
thereto filed at least two Business Days prior to the date hereof) or any of
the Company’s Current Reports on Form 8-K filed since August 14, 2009
and at least two (2) Business Days prior to the date hereof (collectively,
the “SEC Reports”), the Company hereby
represents and warrants to, and covenants with, the Investor as of the date
hereof and the Closing Date, as follows:

 

3.1                               Organization.  The Company is duly incorporated and validly
existing in good standing under the laws of the State of Delaware.  The Company has the requisite power and
authority to own, operate and occupy its properties and to conduct its business
as presently conducted and is registered or qualified to do business and is in
good standing in each jurisdiction in which it owns or leases property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the Company or the business, financial condition,
properties, operations or assets of the Company or the Company’s ability to
perform its obligations under the Agreements in all material respects (“Material Adverse Effect”).  The Company has no “subsidiaries” (as defined
in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”)).  The Company does not own any real
property.  To the Company’s knowledge,
the Company is in possession of and operating in material compliance with all
authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities that are material to the
conduct of its business, all of which are valid and in full force and
effect.  The Company has good and
marketable title in fee simple to, or has valid rights to lease or otherwise
use, all items of real and personal property that are material to the business
of the Company free and clear of all liens, encumbrances, claims and defects
and imperfections of title except those that (i) do not materially
interfere with the use of such property by the Company or (ii) would not
reasonably be expected to have a Material Adverse Effect.

 

3.2                               Due
Authorization.  The Company
has the requisite power and authority to execute, deliver and perform its
obligations under the Agreement and the Warrants (together, the “Transaction Documents”).  The execution and delivery of the Transaction
Documents, and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action and no
further action on the part of the Company or its Board of Directors or
stockholders is required.  The
Transaction Documents have been (or 

 

3

 

upon delivery will have
been) validly executed and delivered by the Company and constitute legal, valid
and binding agreements of the Company enforceable against the Company in
accordance with their terms, except to the extent (i) rights to indemnity
and contribution may be limited by state or federal securities laws or the
public policy underlying such laws, (ii) such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally and
(iii) such enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

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

 

3.4                               Capitalization.  The outstanding capital stock of the Company
as of June 30, 2009 is set forth on Schedule 3.4 of the Disclosure
Schedules.  The Company has not issued
any capital stock since December 31, 2008 other than the issuance of
common stock in lieu of cash bonuses and pursuant to the terms and conditions
of the Company’s employee stock purchase plan. 
The Securities to be sold pursuant to the Transaction Documents have
been duly authorized, and when issued and paid for in accordance with the terms
of the Agreements, will be duly and validly issued, fully paid and nonassessable,
subject to no lien, claim or encumbrance (except for any such lien, claim or
encumbrance created, directly or indirectly, by the Investor).  The Warrant Shares, when issued and paid for
in accordance with the terms of the 

 

4

 

Warrants, will be duly and
validly issued, fully paid and nonassessable, subject to no lien, claim or
encumbrance (except for any such lien, claim or encumbrance created, directly
or indirectly, by the Investor).  The
Warrant Shares have been duly reserved for issuance pursuant to the exercise of
the Warrants. The outstanding shares of capital stock of the Company have been
duly and validly issued and are fully paid and nonassessable, have been issued
in compliance with the registration requirements of federal and state
securities laws, and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  Except as set forth on Schedule 3.4 of the
Disclosure Schedules and except as disclosed in the SEC Reports, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company, or
any contract, commitment, agreement, understanding or arrangement of any kind
to which the Company is a party and providing for the issuance or sale of any
capital stock of the Company, any such convertible or exchangeable securities
or any such rights, warrants or options. 
Without limiting the foregoing, no preemptive right, co-sale right,
registration right, right of first refusal or other similar right exists with
respect to the issuance and sale of the Securities, except as provided in the
Transaction Documents or except for such rights as may have been waived prior
to the date of this Agreement.  There are
no shareholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party or, to the
knowledge of the Company, between or among any of the Company’s stockholders.

 

3.5                               Legal
Proceedings.  Except as
set forth in Schedule 3.5 of the Disclosure Schedules, there is no material
legal, regulatory or governmental proceeding pending, or to the knowledge of
the Company, threatened, to which the Company is a party or of which the
business or property of the Company is subject that is required to be disclosed
and that is not so disclosed in the SEC Reports.  The Company is not subject to any injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other government body.  Neither the
Company, nor any director or officer thereof, is or has been the subject of any
action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of any duty relating to the Company that
is not disclosed in the SEC Reports. 
There has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the SEC or state securities
commission involving the Company or any current or former director or officer
of the Company.  The Company has not
received any stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”),
or the Securities Act and, to the Company’s knowledge, the SEC has not issued
any such order.

 

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

 

5

 

3.7                               Compliance
and Governmental Permits, Etc.  The Company has all necessary franchises,
licenses, certificates and other authorizations from any foreign, federal,
state or local government or governmental agency, department or body that are
currently necessary for the operation of the business of the Company as
currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations would not
reasonably be expected to have a Material Adverse Effect.  The Company has not received any notice of
any proceeding relating to revocation or modification of any such franchise,
permit, license, or similar authority except where such revocation or
modification would not reasonably be expected to have a Material Adverse
Effect.  The Company is not in violation
of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business except in each case as could not reasonably be
expected to have a Material Adverse Effect.

 

3.8                               Intellectual
Property.  The Company
owns, or has valid, binding and enforceable rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
know-how, domain names, trade secrets, inventions, copyrights, licenses and
other similar intellectual property rights, of the nature as generally described
in the SEC Reports and as necessary or material for use in connection with its
business as currently conducted, and which the failure to so have would not
reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  In the last 18 months, the Company has not
received a notice (written or otherwise) that any of the Intellectual Property
Rights used by the Company violates or infringes upon the rights of any person.  All such Intellectual Property Rights are
enforceable and there is no existing infringement by another person of any of
the Intellectual Property Rights of others which would reasonably be expected
to have a Material Adverse Effect.  The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. 
All patent applications of the Company have been properly filed and
prosecuted in accordance with all applicable laws, including without limitation
all rules regarding the duty of candor, and, to the Company’s knowledge,
no claim of any patent or patent application (assuming the claims of patent applications
issue as currently pending) included in the Company Intellectual Property is
unenforceable or invalid, except for such unenforceability or invalidity that
would not reasonably be expected to result, individually or in the aggregate,
in a Material Adverse Effect.  The
Company is not obligated to pay a royalty, grant a license or provide other
consideration to any third party in connection with the Company Intellectual
Property other than as disclosed in the SEC Documents.  There is no pending, nor to the knowledge of
the Company, threatened action, suit, proceeding, or other claim that the
Company infringes, misappropriates, or otherwise violates any intellectual
property or proprietary rights of any third party.

 

3.9                               Financial
Statements.  The financial
statements of the Company contained in the SEC Reports have been prepared in
accordance with generally accepted accounting principles in the United States (“GAAP”)  applied on a consistent basis at the times
and throughout the periods therein specified, except as may be otherwise
specified in such financial statements or the notes thereto and that unaudited
financial statements may not contain all footnotes required by GAAP.  Such financial statements present fairly and
accurately in all material respects the financial position of the Company as of
the dates indicated, and the results 

 

6

 

of its operations, cash
flows and the changes in stockholders’ equity for the periods therein
specified, subject, in the case of unaudited financial statements for interim
periods, to normal year-end audit adjustments. 
There are no financial statements (historical or pro forma) and/or
related schedules and notes that are required to be included in the SEC
Documents that are not included as required by the Securities Act, the Exchange
Act and/or the Rules and Regulations, except where a failure to so include
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

3.10                        No Material
Adverse Change.  Except as
disclosed in the SEC Reports or in any press releases issued by the Company at
least two (2) Business Days prior to the date of this Agreement, since June 30,
2009, there has not been (i) any event, circumstance or change that has
had or that would reasonably be expected to have a Material Adverse Effect, (ii) any
obligation incurred by the Company, direct or contingent, that is material to
the Company other than (A) trade payables, accrued expenses and other
liabilities incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, (iii) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, (iv) any loss
or damage (whether or not insured) to the physical property of the Company
which has had, or would reasonably be expected to have, a Material Adverse
Effect, (v) any material change in the Company’s method of accounting, or (vi) any
issuance of equity securities to any officer, director or affiliate, except
pursuant to existing Company stock option plans or agreements.

 

3.11                        Nasdaq
Compliance.  The
Company’s Common Stock is registered pursuant to Section 12(b) of the
Exchange Act, and is listed on The Nasdaq Global Market (the “Nasdaq Stock Market”).  The Company has taken no action intended to
terminate the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq Stock Market, nor has the Company
received any notification that the SEC or the Nasdaq Stock Market is
contemplating terminating such registration or listing.  The issuance of the Securities does not require
stockholder approval, including, without limitation, pursuant to FINRA Rule 5635(b) or
(d).  The Company is in compliance with
all corporate governance requirements of the Nasdaq Stock Market.  Except as set forth in Section 3.11 of
the Disclosure, the Company has complied with all requirements of the Nasdaq
Stock Market with respect to the issuance of the Securities.

 

3.12                        Reporting
Status.  The Company has timely made all
filings required under the Exchange Act during the 12 months preceding the date
of this Agreement, and all of those documents complied in all material respects
with the SEC’s requirements as of their respective filing dates, and the
information contained therein as of the respective dates thereof did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which they were made not misleading.

 

3.13                        Disclosure
of Information.  The Company
has not disclosed any material non-public information to the Investors.

 

7

 

3.14                        Accountants.  Pricewaterhouse Coopers LLP, who expressed
their opinion with respect to the consolidated financial statements to be
incorporated by reference from the Company’s Annual Report on Form 10-K
for the year ended December 31, 2008 into the registration statement to be
filed under the Securities Act as provided in Section 6.1 hereof (the “Registration Statement”) and the
prospectus which forms a part thereof (the “Prospectus”),
have advised the Company that they are, and to the knowledge of the Company
they are, independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder (the “Rules and Regulations”).  Except as described in the SEC Documents and
as pre-approved in accordance with the requirements set forth in Section 10A
of the Exchange Act, to the Company’s knowledge, Pricewaterhouse Coopers LLP
has not engaged in any “prohibited activities” (as defined in Section 10A
of the Exchange Act) on behalf of the Company.

 

3.15                        Taxes.  Except for matters which would not reasonably
be expected to have a Material Adverse Effect, each of the Company and the
Subsidiaries has timely filed all necessary federal, state and foreign income
and franchise tax returns and has paid or accrued on the books of the Company
all taxes shown as due thereon, and the Company has no knowledge of a tax
deficiency which has been asserted or threatened against the Company.

 

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

 

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

 

3.18                        Insurance.  The Company maintains insurance of the types
and in the amounts that the Company reasonably believes is adequate for its
businesses and consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not limited to, insurance
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism, insurance covering the acts and
omissions of directors and officers, and insurance covering all other risks
customarily insured against by similarly situated companies, all of which
insurance is in full force and effect. 
The Company has not received any written notice that the Company will
not be able to renew its existing insurance coverage as and when such coverage
expires.

 

3.19                        Offering
Prohibitions.  Neither the
Company nor any person acting on its behalf or at its direction has in the past
or will in the future take any action to sell, offer for sale or solicit offers
to buy any securities of the Company which would bring the offer or sale of the
Shares as contemplated by this Agreement within the provisions of Section 5
of the Securities Act.  The Company has
not made any offers or sales of any security or solicited any offers to buy any
security, under any circumstances that would require registration of the
Securities under the 

 

8

 

Securities Act. Assuming the
accuracy of the Investors’ representations and warranties set forth in this
Agreement, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Investors as contemplated
hereby.  Assuming that all of the
representations and warranties of the Investor set forth in Section 4 are
true and correct, the offer and sale of the Securities has been conducted and
completed in compliance with the Securities Act.  The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Nasdaq
Stock Market.

 

3.20                        Listing.  The Company shall comply with all
requirements of FINRA with respect to the issuance of the Shares and the
listing thereof on the Nasdaq Stock Market. 
The Company shall use its best efforts to maintain the listing of the
Company’s Common Stock on the Nasdaq Stock Market.

 

3.21                        Related
Party Transactions.  Except as
disclosed in the SEC Reports, none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner, in
each case in excess of $120,000 other than (i) for payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.

 

3.22                        Registration
Rights.  Other than each of the
Investors, no person or entity has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company, other
than registration statements which have already been filed and declared
effective or registration rights which have been waived for all times prior to
the date hereof.  No person has the right
to prohibit the Company from filing a registration statement in accordance with
Section 6 hereof.  The granting and
performance of the registration rights under this Agreement will not violate or
conflict with, or result in a breach of any provision of, or constitute a
default under, any agreement, indenture, or instrument to which the Company is
a party.  The Company covenants that it
shall provide and cause to be maintained a registrar and transfer agent for all
Registrable Securities (as defined in Section 6.1) covered by any
registration statement from and after a date not later than the initial
effective date of such Registration Statement.

 

3.23                        Internal
Accounting Controls.  The books,
records and accounts of the Company accurately and fairly reflect, in all
material respects, the transactions in, and dispositions of, the assets of, and
the operations of, the Company.  The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 which are applicable to it as of the Closing Date.  The Company maintains a system of internal
controls over financial reporting (as such term is defined in Rule 13a-15(f) of
the Exchange Act) in the manner and to the extent required by the Exchange Act
and the rules promulgated thereunder by the SEC, and in all cases
sufficient to provide reasonable assurance that (i) transactions are
executed in 

 

9

 

accordance with management’s
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  The Company has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company is made known to
the certifying officers by others within those entities, particularly during
the period in which the Company’s most recently filed periodic report under the
Exchange Act, as the case may be, is being prepared.  The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the
end of the period prior to the filing date of the most recently filed quarterly
or annual periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently
filed quarterly or annual periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation
Date, there have been no significant changes in the Company’s internal controls
over financial reporting (as such term is defined in Rule 13a-15(f) under
the Exchange Act) or in other factors that has materially affected, or is
reasonably likely to materially affect, the Company’s internal controls over
financial reporting.

 

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

 

3.25                        No
Manipulation of Stock. 
Neither the Company nor, to its knowledge, any of its affiliates has
taken, nor will the Company take, directly or indirectly any action designed to
or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock or any security of the Company to
facilitate the sale or resale of any of the Shares.

 

3.36                        Company
Acknowledgement of Purchaser Representation.  The Company acknowledges and agrees that the
Investor does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in paragraph 4 of the Securities Purchase Agreement, Section 4
of this Agreement, and in the Investor Questionnaire.

 

3.27                        Acknowledgment
Regarding the Investors’ Purchase of Securities.  The Company acknowledges and agrees that each
of the Investors is acting solely in the capacity of an arm’s length purchaser
with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that no
Investor is acting as a financial advisor or 

 

10

 

fiduciary of the Company (or
in any similar capacity with respect to the Company) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents to the Company
in connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Investor’s purchase of the Securities.  The Company further represents to each
Investor that the Company’s decision to enter into this Agreement has been based
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.

 

3.28                        FDA.  As to each product subject to the
jurisdiction of the U.S. Food and Drug Administration (“FDA”)
under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is manufactured,
packaged, labeled, tested, distributed, sold, and/or marketed by the Company
(each a “Product”), such Product is
being manufactured, packaged, labeled, tested, distributed, sold and/or
marketed by the Company in compliance with all applicable requirements under
FDCA and similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application approval,
good manufacturing practices, good laboratory practices, good clinical
practices, product listing, quotas, labeling, advertising, record keeping and
filing of reports, and in all other respects, except where the failure to be in
compliance would not have a Material Adverse Effect.  There is no pending, completed or, to the
Company’s knowledge, threatened, action (including any lawsuit, arbitration, or
legal or administrative or regulatory proceeding, charge, complaint, or
investigation) against the Company and the Company has not received any notice,
warning letter or other communication from the FDA or any other governmental
entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Product, (ii) withdraws its approval of, requests the
recall, suspension, or seizure of, or withdraws or orders the withdrawal of
advertising or sales promotional materials relating to, any Product, (iii) imposes
a clinical hold on any clinical investigation by the Company, (iv) enjoins
production at any facility of the Company, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company, or (vi) otherwise
alleges any violation of any laws, rules or regulations by the Company,
and which, either individually or in the aggregate, would not be reasonably
expected to have a Material Adverse Effect. 
The properties, business and operations of the Company have been and are
being conducted in all material respects in accordance with all applicable
laws, rules and regulations of the FDA.  The Company has not been
informed by the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed, produced or
marketed by the Company nor has the FDA expressed any concern as to approving
or clearing for marketing any product being developed or proposed to be
developed by the Company.

 

3.29                        SEC
Documents.  The Company
has filed in a timely manner all documents that the Company was required to
file under the Exchange Act during the 12 months preceding the date of this
Agreement.  As of their respective filing
dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable, and all rules and
regulations promulgated thereunder, and to the knowledge of the Company none of
the SEC Documents contained or will contain, and none of the Transaction
Documents contain, any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, as of their 

 

11

 

respective filing dates or as of the Closing Date,
as the case may be, except to the extent with respect to the SEC Documents
corrected by a SEC Document filed prior to the date of this Agreement.  From and after the date hereof the Company
currently expects to meet each of the eligibility requirements for the use of Form S-3
in connection with the resale registration of the Securities and the Warrant
Shares as contemplated under Section 6 of this Agreement.

 

4.                                      REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTOR.

 

4.1                               Investor
Knowledge and Status.  The
Investor represents and warrants to, and covenants with, the Company that: (i) the
Investor is an “accredited investor” as defined in Regulation D under the
Securities Act, is knowledgeable, sophisticated and experienced in making, and
is qualified to make decisions with respect to, investments in securities
presenting an investment decision similar to that involved in the purchase of
the Securities, and has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision to purchase the
Securities; (ii) the Investor understands that the Securities are
“restricted securities” and have not been registered under the Securities Act
and is acquiring the number of Securities set forth in paragraph 3 of the
Securities Purchase Agreement to which this Annex I is attached in the ordinary
course of its business and for its own account for investment only, has no
present intention of distributing any of such Securities and has no arrangement
or understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting the Investor’s right
to sell Registrable Securities pursuant to a Registration Statement or
otherwise pursuant to an exemption from registration under the Securities Act);
(iii) the Investor will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder; (iv) the
Investor has answered all questions in paragraph 4 of the Securities Purchase
Agreement to which this Annex I is attached and the Investor Questionnaire
attached hereto as EXHIBIT B for use in preparation of the Registration
Statement and the answers thereto are true and correct in all material respects
as of the date hereof and will be true and correct in all material respects as
of the Closing Date; (v) the Investor will notify the Company promptly of
any change in any of such information until such time as the Investor has sold
all of its Securities or until the Company is no longer required to keep the
Registration Statement effective with respect to the such Investor’s
Registrable Securities; and (vi) the Investor has, in connection with its
decision to purchase the number of Securities set forth in paragraph 3 of the
Securities Purchase Agreement, relied only upon the representations and
warranties of the Company contained herein and the information contained in the
SEC Reports.  The Investor understands
that the Securities have not been registered under the Securities Act or
registered or qualified under any state securities law, and that the Securities
are being issued in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the representations made by the Investor
in this Agreement.  No person is
authorized to provide any representation that is inconsistent or in addition to
those contained herein or in the SEC Reports, and the Investor acknowledges
that it has not received or relied on any such representations.

 

4.2                               Transfer
of Securities.  The Investor
agrees that it will not make any sale, transfer or other disposition of the
Securities (a “Disposition”) other than
Dispositions of Registrable Securities (as defined in Section 6.1(a)) that
are made by the Investors pursuant to 

 

12

 

the Registration Statement
or Dispositions by the Investor that are exempt from registration under the
Securities Act and, if made pursuant to the Registration Statement by the
Investor, without complying with any applicable prospectus delivery
requirements.

 

4.3                               Power
and Authority.  The Investor
represents and warrants to the Company that (i) the Investor has the
right, power, authority and capacity to enter into the Transaction Documents
and to consummate the transactions contemplated thereby and has taken all
necessary action to authorize the execution, delivery and performance of the
Transaction Documents, (ii) the Transaction Documents have been validly
executed and delivered by the Investor, and (iii) the Transaction
Documents constitute valid and binding obligations of the Investor enforceable
against the Investor in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ and contracting parties’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.

 

4.4                               Short
Position.  The Investor
has not established any hedge or other position in the Common Stock that is
outstanding on the Closing Date and is designed to or could reasonably be
expected to lead to or result in a Disposition by the Investor or any other
person or entity.  For purposes hereof, a
“hedge or other position” would include, without limitation, effecting any
short sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered
into) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock.  For the avoidance of
doubt, notwithstanding anything else contained herein, the representations made
in this Section 4.4 are made only as of the date of execution of this
Agreement.

 

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

 

4.6                               Confidential
Information.  The Investor
covenants that from the date hereof it will maintain in confidence all material
non-public information regarding the Company received by the Investor from the
Company (other than disclosure of such information to its representatives or
agents), including the receipt and content of any Suspension Notice (as defined
in Section 6.2(c)) until such information (a) becomes generally
publicly available other than through a violation of this provision by the
Investor or its agents or (b) is required to be disclosed in legal
proceedings (such as a request of a regulatory authority, by deposition, interrogatory,
request for documents, subpoena, civil investigation demand, filing with any
governmental authority, regulatory body or similar process); provided, however,
that before making any disclosure in reliance on this Section 4.6 (other
than disclosure of such information to its representatives or agents), the
Investor will give the Company prior written notice, as soon as 

 

13

 

reasonably practicable and
if not prohibited under law or regulation, specifying the circumstances giving
rise thereto in order to permit the Company to seek protective orders or take
other action with respect to such compelled disclosure, and will furnish only
that portion of the non-public information which it is advised by legal counsel
is legally required.  The parties
acknowledge and agree that as of the date hereof and as of the Closing Date,
the Company has not disclosed any material non-public information to the
Investor.

 

4.7                               Acknowledgments
Regarding Placement Agent.  The Investor acknowledges that the Placement
Agent has acted solely as placement agent for the Company in connection with
the Offering of the Securities by the Company, that the Placement Agent has
made no representation or warranty whatsoever with respect to the accuracy or
completeness of such information, data or other related disclosure material,
and that the Placement Agent will be compensated solely by the Company for
acting in such capacity.  The Investor
further acknowledges that in making its decision to enter into this Agreement
and purchase the Securities, it has relied on its own examination of the
Company and the terms of, and consequences of holding, the Securities.  The Investor further acknowledges that the provisions
of this Section 4.7 are for the benefit of, and may be enforced by, the
Placement Agent.

 

4.8                               Additional
Acknowledgement.  The Investor
acknowledges that it has independently evaluated the merits of the transactions
contemplated by this Agreement, that it has independently determined to enter
into the transactions contemplated hereby, that it is not relying on any advice
from or evaluation by any other Investor, and that it is not acting in concert
with any other Investor (other than the Investors who may be directly
affiliated with such Investor) in making its purchase of the Securities
hereunder.  The Investor and, to its
knowledge, the Company acknowledge that the Investors have not taken any
actions that would deem the Investors to be members of a “group” for purposes
of Section 13(d) of the Exchange Act (other than with other Investors
who may be affiliated with the Investor). 
Such Investor is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

 

5.                                      SURVIVAL
OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  Notwithstanding any investigation made by any
party to this Agreement or by the Placement Agent, all representations and
warranties made by the Company and the Investors herein shall survive the
execution of this Agreement, the delivery to the Investor of the Securities
being purchased and the payment therefor for a period of two (2) years
following the date of this Agreement (except for claims made by any party to
this Agreement during the two (2) year period following the date of this
Agreement with respect to a breach of any representation and warranty, which
shall survive indefinitely), and unless otherwise set forth herein, all
covenants and agreements in this Agreement shall survive indefinitely.

 

14

 

6.                                      REGISTRATION
OF REGISTRABLE SECURITIES; COMPLIANCE WITH THE SECURITIES ACT.

 

6.1                               Registration
Procedures and Expenses.  The
Company shall:

 

(a)                                        subject to
receipt of necessary information from the Investor and subject to Section 6.1(d),
prepare and file with the Securities and Exchange Commission (“SEC”), within forty-five (45) days
after the Closing Date (the “Required Filing Date”),
a Registration Statement on Form S-3 to enable the resale of the
Registrable Securities by the Investor from time to time on a continuous basis
pursuant to Rule 415 of the Securities Act or, only if the Company is not
eligible to use Form S-3, on such other form which is appropriate to
register such Registrable Securities for resale from time to time by the
Investors.  For purposes of this
Agreement, “Registrable Securities” means
(i) the Shares issued pursuant to this Agreement; (ii) the Warrant
Shares; (iii) for any Investor which, immediately following the completion
of the Offering, together with its affiliates and other persons or entities
whose beneficial ownership of Common Stock would be aggregated with the
Investor’s for purposes of Section 13(d) of the Exchange Act,
beneficially owns at least fifteen percent (15%) of the issued and outstanding
shares of Common Stock of the Company (a “Qualified Investor”)
all such shares of Common Stock held by such Qualified Investor and its
affiliates, as set forth in paragraphs 1 and 4 of the Securities Purchase
Agreement to which this Annex I is attached (the “Current
Qualified Shares”); (iv) any shares of capital stock issued
or issuable as a dividend on or in exchange for or otherwise with respect to
the foregoing, and (v) any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event with
respect to the foregoing;

 

(b)                                        use its best
efforts, subject to receipt of necessary information from the Investors, to
cause the Registration Statement to become effective as soon as practicable
after the Registration Statement is filed by the Company, but in any event no
later than 4:00 p.m. Eastern Time on the 60th day after the Closing Date,
or if the Registration Statement is reviewed by the SEC, on the 120th day after
the Closing Date (such date, as applicable, the
“Required Effective Date”). 
Except as provided in Section 6.1(d), if the Registration Statement
(i) has not been filed by the Required Filing Date or (ii) has not
been declared effective by the SEC on or before the Required Effective Date,
the Company shall, on the Business Day immediately following the Required
Filing Date or the Required Effective Date, as the case may be, and each 30th
day thereafter, make a payment to the Investor as partial compensation for such
delay and not as a penalty (the “Late Registration
Payments”) in cash equal to 1% of the purchase price paid under
this Agreement for the Registrable Securities that are held by such Investor
until the Registration Statement is filed or declared effective by the SEC, as
the case may be; provided, however, that in no event shall the payments made
pursuant to this paragraph (b), if any, exceed in the aggregate 12% of such
purchase price paid for the Registrable Securities; provided, further, that in
all events such penalties shall cease to accrue with respect to any Investor on
the date on which such Investor may sell Registrable Securities pursuant to Rule 144
under the Securities Act or any successor rule (“Rule 144”)
without limitations on volume or manner of sales.  Late Registration Payments will be prorated
on a daily basis during each 30 day period and will be paid to the Investor by
wire transfer or check within five Business Days after the earlier of (i) the
end of each 30 day period following the Required Effective Date or (ii) the
effective date of the Registration Statement. 
Late Registration 

 

15

 

Payments
payable by the Company pursuant to this Section 6.1(b) shall be
payable on the first (1st) business day
of each thirty (30) day period following the Required Effective Date;

 

(c)                                        use its best
efforts to cause any Prospectus used in connection with any Registration
Statement to be filed with the SEC pursuant to Rule 424(b) under the
Securities Act as soon as practicable but in any event no later than 9:00 a.m.
Eastern Time the next day that is not a weekend or holiday and the Nasdaq Stock
Market is not closed following the date such Registration Statement is declared
effective by the SEC and prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement current and
effective for a period ending on the earlier of (i) the date on which all
of the Registrable Securities for such Registration Statement have been sold by
such Investor and (ii) the date on which all of the Registrable Securities
for such Registration Statement (in the opinion of counsel to such Investor)
held by such Investor may be immediately sold to the public without
registration or restriction (including, without limitation, as to volume by
each holder thereof) under the Securities Act, and to notify each Investor
promptly upon the Registration Statement and each post-effective amendment
thereto, being declared effective by the SEC;

 

(d)                                        notwithstanding
the registration obligations set forth in this Section 6.1, in the event
the SEC informs the Company that all of the Registrable Securities cannot, as a
result of the application of Rule 415, be registered for resale as a
secondary offering on a single registration statement, the Company agrees to
promptly (i) inform each of the Investors thereof and file amendments to
the initial Registration Statement as required by the SEC and/or (ii) withdraw
the initial Registration Statement and file a new registration statement, in
either case covering the maximum number of Registrable Securities permitted to
be registered by the SEC, on Form S-3 or such other form available to
register for resale the Registrable Securities as a secondary offering;  provided, however, that prior to filing
such amendment or new Registration Statement, the Company shall be obligated to
use its best efforts to advocate with the SEC for the registration of all of
the Registrable Securities in accordance with the SEC Guidance, including
without limitation, the Manual of Publicly Available Telephone Interpretations
D.29.  Notwithstanding any other
provision of this Agreement, if any SEC Guidance imposes a limitation on the
number of Registrable Securities permitted to be registered on a particular
Registration Statement as a secondary offering (and notwithstanding that the
Company used best efforts to advocate with the SEC for the registration of all
or a greater number of Registrable Securities), the number of Registrable
Securities to be registered on such Registration Statement shall be reduced in
the following order of priority (each, a “Cut Back”):  (i) all Warrant Shares held by Investors
who are not Qualified Investors on a pro rata basis; (ii) all Shares
issued to Investors who are not Qualified Investors on a pro rata basis; (iii) the
Warrant Shares held by Qualified Investors on a pro rata basis; (iv) the
Current Qualified Shares on a pro rata basis; and (v) the Shares issued to
Qualified Investors pursuant to this Agreement (the “Cut
Back Shares”), provided that the Company shall have an ongoing
obligation to register the remaining Registrable Securities in one or more
additional Registration Statements to be filed within 30 days of the Company
becoming eligible to do so (the “Springing Date”),
with such subsequent Registration Statement(s) to be declared effective
within 90 days from the Springing Date, or as otherwise provided in this
Agreement.  The Investor acknowledges and
agrees that the payment of Late Registration Payments shall not be triggered by
the occurrence of a Cut Back;

 

16

 

(e)                                        furnish to the
Investor with respect to the Registrable Securities registered under the
Registration Statement such number of copies of the Prospectus (including
preliminary and supplemental prospectuses and prospectus amendments) as the
Investor may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Registrable Securities by the Investor;

 

(f)                                          file documents
required of the Company for normal blue sky clearance in states as shall be
reasonably appropriate in the opinion of the Company and its legal counsel;
provided, however, that the Company shall not be required to qualify to do
business or consent to general service of process in any jurisdiction in which
it would not otherwise be required to qualify but for this Section 6(f);

 

(g)                                       bear all
expenses (other than underwriting discounts and commissions, if any) in
connection with the procedures in this Section 6.1 and the registration of
the Registrable Securities pursuant to the Registration Statement, and
otherwise with respect to any action required of the Company pursuant to this Section 6;

 

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

 

(i)                                          with a view to
making available to the Investor the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit the Investor to sell Shares
or Warrant Shares to the public without registration, the Company covenants and
agrees to use its reasonable best efforts to: 
(i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) such
date as all of the Investor’s Securities (including Common Stock issuable upon
exercise thereof) may be resold pursuant to Rule 144 without volume or
manner of sales limitations, or any other rule of similar effect and (B) such
date as all of the Investor’s Shares shall have been resold; (ii) file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and under the Exchange Act; (iii) furnish
to the Investor upon request, as long as the Investor owns any Securities, (A) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and  of the
Securities Act and the Exchange Act, (B) a copy of the Company’s most
recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q,
and (C) such other information as may be reasonably requested in order to
avail the Investor of any rule or regulation of the SEC that permits the
selling of any such Securities (including common stock issuable upon exercise
thereof) without registration, and (iv) undertake any additional actions
reasonably necessary to maintain the availability of the Registration Statement
or the use of Rule 144;

 

(j)                                          if (i) there
is material non-public information regarding the Company which the Company’s
Board of Directors (the “Board”)
determines not to be in the Company’s best interest to disclose and which the
Company is not otherwise required to disclose, (ii) there is a significant
business opportunity (including, but not limited to, the 

 

17

 

acquisition
or disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board determines not to be in the Company’s best interest
to disclose, or (iii) the Company is required to file a post-effective
amendment to a Registration Statement to incorporate the Company’s quarterly
and annual reports and audited financial statements on Forms 10-Q and 10-K,
then the Company may (x) postpone or suspend filing of a Registration
Statement for a period not to exceed thirty (30) consecutive days or (y) postpone
or suspend effectiveness of a Registration Statement for a period not to exceed
thirty (30) consecutive days (each, an “Allowed Delay”);
provided that the Company may not postpone or suspend effectiveness of a
Registration Statement under this Section 6.1(j) for more than 60
days in the aggregate during any 360 day period; provided, however, that no
such postponement or suspension shall be permitted for consecutive thirty (30)
day periods arising out of the same set of facts, circumstances or transactions,
and provided further that in all events the Company shall use its best efforts
to terminate any suspension period as promptly as possible;

 

(k)                                            permit counsel
designated by the Investor to review such Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC (not less than five (5) Business Days) and use reasonable best
efforts to reflect in such documents any comments as such counsel may
reasonably propose (so long as such comments are provided to the Company at
least two (2) business days prior to the expected filing date) and will
not request acceleration of a Registration Statement without prior notice to
such counsel;

 

(l)                                          at the
reasonable request of the Investor, prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to make reasonable changes
to the plan of distribution set forth in such Registration Statement;

 

(m)                                          use reasonable
best efforts to cause all the Registrable Securities covered by each
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 the listing of such Registrable Securities is then permitted under the rules of
such exchange;

 

(n)                                       if required by
FINRA, the Company shall promptly effect a filing with FINRA pursuant to FINRA Rule 5110 with
respect to the public offering contemplated by resales of securities under the
Registration Statement(s) (an “Issuer Filing”), and pay the
filing fee required by such Issuer Filing. 
The company shall
use reasonable best efforts to pursue the Issuer Filing until FINRA issues a
letter confirming that it does not object to the terms of the offering
contemplated by the Registration Statement(s); and

 

(o)                                        notify the
Investor, at any time during which a prospectus relating to such registration
statement is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in or
relating to the registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading; and, thereafter, the Company will promptly prepare (and, when
completed, give notice and provide a copy thereof to Investor) a supplement 

 

18

 

or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading.

 

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

 

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

 

6.2                               Transfer
of Shares After Registration; Suspension.

 

(a)                                        Each Investor
agrees that it will not effect any Disposition of the Securities or Warrant
Shares or its right to purchase the Securities or Warrant Shares that would
constitute a sale within the meaning of the Securities Act other than
transactions exempt from the registration requirements of the Securities Act
(including, without limitation, a so-called “4(1) and a half” transaction)
or as contemplated by a Registration Statement and that it will promptly notify
the Company of any material changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.

 

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

 

(c)                                        Subject to
paragraph (d) below, in the event: (i) of any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or related Prospectus or for additional information;
(ii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the 

 

19

 

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

 

(d)                                        Notwithstanding
the foregoing paragraphs of this Section 6.2, the Company shall use its
best efforts to ensure that (i) a Suspension shall not exceed thirty (30)
days individually, (ii) no more than two (2) Suspensions shall occur
during any twelve month period and (iii) each Suspension shall be
separated by a period of at least thirty (30) days from a prior Suspension
(each Suspension that satisfies the foregoing criteria being referred to herein
as a “Qualifying Suspension”).  If a Suspension occurs and such Suspension is
not a Qualifying Suspension (a “Non-Qualifying
Suspension”), the Company shall, on the 10th Business Day
immediately following the effectiveness of the Non-Qualifying Suspension and
each 30th day thereafter, make a payment to the Investor as partial
compensation for such Non-Qualifying Suspension equal to 1% of the purchase
price paid under this Agreement for the Registrable Securities that are held by
the Investor until the Non-Qualifying Suspension has ended; provided, however,
that in no event shall the payments made pursuant to this paragraph (d), if
any, exceed in the aggregate 12% of the purchase price paid for the Registrable
Securities; provided, further, that in all events such penalties under this
paragraph (d) shall cease to accrue with respect to any Investor on the
date on which such Investor may sell all Registrable Securities pursuant to Rule 144
without limitations on volume or manner of sales.

 

(e)                                        If a Suspension
is not then in effect, the Investor may sell Registrable Securities under the
Registration Statement, provided that it complies with any applicable
prospectus delivery requirements.  Upon
receipt of a request therefor, the Company will provide an adequate number of
current Prospectuses to the Investor and to any other parties requiring such
Prospectuses.

 

20

 

(f)                                          The Company
agrees that it shall, immediately prior to the Registration Statement being
declared effective, deliver to its transfer agent an opinion letter of counsel,
opining that at any time the Registration Statement is effective, the transfer
agent shall issue, in connection with the sale of the Registrable Securities,
certificates representing such securities without restrictive legend, provided
the Registrable Securities are to be sold pursuant to the prospectus contained
in the Registration Statement and the transfer agent receives a Certificate of
Subsequent Sale in the form attached hereto as EXHIBIT C.  Upon receipt of such opinion, the Company
shall cause the transfer agent to confirm, for the benefit of the Investor,
that no further opinion of counsel is required at the time of transfer in order
to issue such Registrable Securities without restrictive legend.

 

(g)                                 If, at any time
after the six (6) month period after the Closing Date and prior to the
date on which the Investor may sell all Registrable Securities without volume
or manner of sale restrictions pursuant to Rule 144, the Registration
Statement is no longer effective, and, subject to the conditions set forth in
this subsection (g), the Company shall receive a written request from the
Investor (provided that the Investor has purchased at least $2 million in
aggregate amount of the Securities, and provided that the Investor is not a
Qualified Investor), that the Company file a registration statement under the
Securities Act covering the registration of Registrable Securities then held by
the Investor, the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to the Other Investors, and
subject to the limitations of this Section 6, effect, as expeditiously as
reasonably possible, the registration under the Securities Act of all
Registrable Securities that all Investors request to be registered on Form S-3
to enable the resale of the Registrable Securities by the Investor from time to
time on a continuous basis pursuant to Rule 415 of the Securities Act or,
only if the Company is not eligible to use Form S-3, on such other form
which is appropriate to register such Registrable Securities for resale from
time to time by the Investors on a continuous basis, or on a Form S-1 if a
Form S-3 or such other form as referred to above is unavailable.  The Company shall not be required to effect a
registration pursuant to this subsection (g): (i) after the Company has
effected one registration pursuant to this subsection (g); (ii) during the
period starting with the date of filing of, and ending on the date one hundred
eighty (180) days following the effective date of the registration statement
pertaining to a public offering, other than pursuant to a registration statement
on Form S-8; provided, that
the Company makes reasonable good faith efforts to cause such registration
statement to become effective; and (iii) if the Company shall furnish to
the Investor and the Other Investors a certificate signed by the Chairman of the
Board stating that in the good faith judgment of the Board, it would be
materially detrimental to the Company and its stockholders for such
registration statement to be effected at such time because such action (x) would
materially interfere with a significant acquisition, corporate reorganization
or financing or other similar transaction involving the Company, (y) would
require premature disclosure of material information that the Company has a
bona fide business purpose for preserving as confidential (provided, that no such information will be
disclosed to such Investors) or (z) would render the Company unable to
comply with requirements under the Securities Act or Exchange Act, in which
event the Company shall have the right to defer such filing for a period of not
more than ninety (90) days after receipt of the request of Investor or the in
initiating Other Investor, as the case may be, provided,
that such right to delay a request shall be exercised by the Company not more
than once; provided,  further, that the Company shall not register any securities for the account of itself or any
other stockholder during such ninety (90) day period (other than pursuant to a
registration statement on Form S-4 or S-8).  In connection 

 

21

 

with
any registration under this Section 6.2(g), the Company shall comply with
Sections 6.1(e) through (h), and Sections 6.1(k) through (o), as if
such registration is a registration pursuant to Section 6.1.

 

The Company shall cause its transfer agent to issue
a certificate without any restrictive legend to a purchaser of any Securities
from the Investor, if (a) the sale of such Registrable Securities is
registered under the Registration Statement (including registration pursuant to
Rule 415 under the Securities Act) and the Investor has delivered a
Certificate of Subsequent Sale to the Transfer Agent; (b) the holder has
provided the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Securities may be made without
registration under the Securities Act; or (c) such Securities are sold in
compliance with Rule 144 under the Securities Act.  In addition, the Company shall, at the
request of the Investor, remove the restrictive legend from any Shares held by
the Investor following the first date on which such Investor may sell such
Shares pursuant to Rule 144 under the Securities Act (or any successor rule without
limitations on volume or manner of sales. 
Each Investor, severally and not jointly with the Other Investors,
agrees that such Investor will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom, and that if Securities are
Registrable Securities held by an Investor that are sold pursuant to the
Registration Statement, they will be sold in compliance with the plan of
distribution set forth therein, and acknowledges that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section 6.2 is predicated upon the Company’s reliance upon this
understanding.

 

6.3                               Securities
Ineligible for Registration; Transfer Restrictions.

 

(a)                                        The Investors
hereby acknowledge and agree that the Securities are “restricted securities”
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, the Investor must hold the Securities (including shares of common
stock issuable upon exercise thereof) indefinitely unless they are registered
with the SEC and qualified by state authorities, or an exemption from such
registration and qualification requirements is available.  The Investors acknowledge that the Company
has no obligation to register or qualify any of the Securities (including
shares of common stock issuable upon exercise thereof) for resale, except for
the registration rights in Sections 6.1, 6.2 hereof which pertain only to the
Investors.  The Investors further
acknowledge that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and on requirements relating to the Company which are outside of the Investor’s
control.

 

(b)                                        Subject to Section 6.2(g) above,
the Investors agree to the imprinting on any of the Securities in the following
form:

 

THIS SECURITY HAS NOT BEEN 
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN 

 

22

 

EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT INCLUDING, WITHOUT LIMITATION,
PURSUANT TO RULE 144 UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED
UNDER APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A
SO-CALLED “4(1) AND A HALF” SALE. 
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and
agrees that an Investor may from time to time pledge pursuant to a bona fide
margin agreement with a registered broker-dealer or grant a security interest
in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities
Act and who agrees to be bound by the provisions of this Agreement and, if
required under the terms of such arrangement, such Investor may transfer
pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such
pledge.  At the appropriate Investor’s
expense, the Company will execute and deliver such reasonable documentation as
a pledgee or secured party of Securities may reasonably request in connection
with a pledge or transfer of the Securities, including, if the Securities are
subject to registration rights with the SEC, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.

 

6.4                               Indemnification.  For the purpose of this Section 6.4:

 

(a)                                        the term “Selling Stockholder” shall mean the
Investor, the directors, partners, managers, members, employees, accountants,
counsel and agents of such Investor, each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and each such persons directors, partners, managers,
members, employees, accountants, counsel and agents;

 

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

 

(c)                                        the term “untrue statement” shall mean any
untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement 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.

 

23

 

(d)                                        (i)                              The Company
agrees to indemnify and hold harmless each Selling Stockholder, any investment
banking firm acting as an underwriter for the Selling Stockholder, and
broker/dealer acting on behalf of any Selling Stockholder, from and against any
losses, claims, damages or liabilities to which such Selling Stockholder may
become jointly and severally, or jointly or severally, subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) any untrue or alleged untrue statement of a material fact
contained in any preliminary prospectus or final prospectus related to any
Registration Statement, or in any amendments or supplements to the Registration
Statement or any such preliminary prospectus or final prospectus, or in the
Registration Statement, (ii) any inaccuracy in the representations and
warranties of the Company contained in the Agreement or the failure of the
Company to perform its obligations hereunder, (iii) any failure by the
Company to fulfill any undertaking included in the Registration Statement or (iv) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act or any other law or any rule promulgated thereunder, in each
case related to the offer or sale of the Registrable Securities, and the
Company will reimburse such indemnified person for any reasonable legal expense
or other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim; provided, however, that the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue statement
made in such Registration Statement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement,
or any inaccuracy in representations made by such Selling Stockholder in the
Investor Questionnaire, or any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Selling Stockholder in
accordance with the terms of this Agreement prior to the pertinent sale or
sales by the Selling Stockholder.

 

(ii)                                The Investor,
severally and not jointly with the Other Investors, agrees to indemnify and
hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of
the Company who signs the Registration Statement and each director of the
Company) from and against any losses, claims, damages or liabilities to which
the Company (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement of a material fact
contained in the Registration Statement, if, and only if, such untrue statement
was made in reliance upon and in conformity with written information furnished
by or on behalf of the Investor specifically for use in preparation of the
Registration Statement, and the Investor will reimburse the Company (or such
officer, director or controlling person), as the case may be, for any reasonable
legal expense or other actual accountable out-of-pocket expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim.  The obligation to
indemnify shall be limited to the net amount of the proceeds received by the
Investor from the sale of the Shares pursuant to the Registration
Statement.  The indemnity agreement
contained in this Section 6.4(d)(ii) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor(s) against
which the request for indemnity is being made (which consent shall not be
unreasonably withheld).

 

24

 

(iii)                            Promptly after
receipt by any indemnified person of a notice of a claim or the beginning of
any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 6.4, such indemnified person
shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party under this Section 6.4 (except to the extent that such
omission materially and adversely affects the indemnifying party’s ability to
defend such action) or from any liability otherwise than under this Section 6.4.  Subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person, the
indemnifying person shall be entitled to participate therein, and, to the
extent that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party,
shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. 
After notice from the indemnifying person to such indemnified person of
its election to assume the defense thereof (unless it has failed to assume the
defense thereof and appoint counsel reasonably satisfactory to the indemnified
party), such indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it inappropriate, in the
reasonable opinion of counsel to the indemnified person, for the same counsel
to represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. 
All indemnified amounts shall be reimbursed as incurred.  In no event shall any indemnifying person be
liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld.  No indemnifying person shall, without the
prior written consent of the indemnified person, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified person is
or could reasonably have been a party and indemnification could have been
sought hereunder by such indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability on claims
that are the subject matter of such proceeding.

 

(iv)                               If the
indemnification provided for in this Section 6.4 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (d)(i) or
(d)(ii) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Investor on the other
in connection with the statements or omissions or other matters which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations.  The relative fault shall be determined by
reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by the Company on the one
hand or the Investor on the other and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement.  The Company and the

 

25

 

Investor agree that it would
not be just and equitable if contribution pursuant to this subsection (iv) were
determined by pro rata allocation (even if the Investor and the Other Investors
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (e). 
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the provisions of this
subsection (d), the Investor shall not be required to contribute any amount in
excess of the amount by which the gross amount received by the Investor from
the sale of the Shares to which such loss relates exceeds the amount of any
damages which the Investor has otherwise been required to pay by reason of such
untrue statement.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.  The Investors’ obligations in this subsection
to contribute are several in proportion to their sales of Shares to which such
loss relates and not joint.

 

The parties to this Agreement hereby acknowledge
that they are sophisticated business persons who were represented by counsel
during the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 6.4, and are fully informed
regarding said provisions.  They further
acknowledge that the provisions of this Section 6.4 fairly allocate the
risks in light of the ability of the parties to investigate the Company and its
business in order to assure that adequate disclosure is made in the
Registration Statement as required by the Securities Act and the Exchange Act.

 

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

 

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

 

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

 

(b)                                        upon the
reasonable request of the Investor, all exhibits excluded by the parenthetical
to subparagraph (a)(ii) of this Section 6.6 as filed with the SEC and
all other information that is made available to shareholders; and

 

26

 

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

 

6.7                               Public
Statements.  By 8:30 a.m.,
Eastern time, on the trading day immediately following the execution of this
Agreement, the Company shall issue one or more press releases disclosing all
material terms of the transactions contemplated hereby in compliance with the
Securities Act and the Exchange Act.  The
Company agrees to disclose on a Current Report on Form 8-K the existence of
the Offering and the material terms, thereof, including pricing, within two (2) Business
Days after the Closing.  Such Current
Report on Form 8-K shall include a form of this Agreement as an exhibit
thereto.  The Company will not issue any
public statement, press release or any other public disclosure listing the
Investor as one of the purchasers of the Securities without the Investor’s
prior written consent, except as may be required by applicable law or rules of
any exchange on which the Company’s securities are listed.

 

6.8                               Limits
on Additional Issuances. 
Except for an Exempt Issuance, the Company will not, for a period of six
months following the final closing date of the Offering, offer for sale or sell
any securities unless, in the opinion of the Company’s counsel, such offer or
sale does not jeopardize the availability of exemptions from the registration
and qualification requirements under applicable securities laws with respect to
the Offering.  “Exempt
Issuances” shall mean, in each case only if approved in advance
by the Board of Directors of the Company, the issuance of (a) shares of
Common Stock or options to employees, officers, directors or vendors of the
Company pursuant to any employee stock purchase, stock or option plan duly
adopted for such purpose, by the Board or which are issued as an inducement to
employment, (b) securities upon the exercise or exchange of or conversion
of any Securities issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of
such securities or to decrease the exercise price, exchange price or conversion
price of such securities, and (c)  securities issued pursuant to
acquisitions or strategic transactions approved by the Board, provided that any
such issuance shall only be to a person (or to the equityholders of a person)
which is, itself or through its subsidiaries, an operating company or an asset
in a business synergistic with the business of the Company and shall provide to
the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities. 
Except as disclosed in the SEC Reports, and the offering contemplated
hereby, the Company has not engaged in any such offering during the six 

 

27

 

months prior to the date of
this Agreement.  The foregoing provisions
shall not prevent the Company from filing a “shelf” registration statement
pursuant to Rule 415 under the Securities Act, but the foregoing
provisions shall apply to any sale of securities thereunder.

 

6.9                               Remedies.  [Intentionally Deleted].

 

6.10                        Assignment
of Registration Rights. 
Notwithstanding anything herein to the contrary, the Investor’s rights
under this Section 6 shall be automatically assignable by the Investor to
any permitted transferee of all or any portion of such Registrable Securities
and/or the Warrants, to the extent of the Registrable Securities and/or
Warrants so transferred, if: (i) the 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 such
registration rights are being transferred or assigned, and (iii) 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 to be bound by the
provisions of Sections 6-12 of this Agreement. 
In the event that the Investor transfers all or any portion of its
Registrable Securities pursuant to this Section 6.10, the Company shall
have ten (10) Business Days following the receipt of such notice to file
any amendments or supplements necessary to keep a Registration Statement
current and effective pursuant to Rule 415.  Upon any such assignment, all of the
transferring Investor’s rights under this Agreement with respect to such
transferred securities shall inure to the benefit of the transferee.

 

6.11                        Lockup
by Qualified Investors.  Each
Qualified Investor hereby agrees that it shall not, directly or indirectly,
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase, or otherwise transfer or dispose of (other
than by bona fide gift to donees who agree to be similarly bound) any
Registrable Securities until the earlier of (i) six (6) months
following the Closing Date and (ii) the date upon which a Registration
Statement covering all of the Shares issued to non-Qualified Investors has been
declared effective by the SEC.  The
Company and each Qualified Investors agree and acknowledge that each Other
Investor which is not a Qualified Investor is expressly made a third party
beneficiary of this Section 6.11.

 

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

 

28

 

(i)              if to the
Company, to:

 

NEUROMetrix, Inc.

62
Fourth Avenue

Waltham,
MA 02451

Attention:
Shai Gozani, MD, Ph.D., Chairman, President & CEO

Telephone:
(781) 890-9989

Facsimile:
(781) 891-1556

 

with
a copy to:

 

Honigman
Miller Schwartz and Cohn LLP

444
West Michigan Avenue

Kalamazoo,
MI 49007

Attention:  Phillip D. Torrence, Esq.

Telephone:
(269) 337-7702

Facsimile:  (269) 337-7701

 

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

 

8.             AMENDMENTS;
WAIVER.  This Agreement and the
Warrant may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor. Any waiver of a provision of
this Agreement must be in writing and executed by the party against whom enforcement
of such waiver is sought.  The Company
agrees that it will not enter into any modification or amendment of any
agreement or warrant by or between the Company and any Other Investor in any
manner that is in any respect more favorable to the Other Investors, and will
not waive any rights of the Company, or any obligations of the Other Investors
with respect to the Securities or the Warrant Shares, in each case without the
prior written consent of the Investor. 
The Company shall give prompt written notice, including a copy thereof,
of any amendment, modification or waiver of this Agreement, a warrant, or any
agreement by or between the Company and any Other Investor to the Investor if
the Investor did not consent in writing to such amendment, modification or
waiver.

 

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

 

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

 

29

 

11.          GOVERNING LAW.  This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware,
without giving effect to the principles of conflicts of law.

 

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

 

13.          RIGHTS CUMULATIVE.  Each and all of the various rights, powers
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement.  The exercise or partial
exercise of any right, power or remedy shall neither constitute the exclusive
election thereof nor the waiver of any other right, power or remedy available
to such party.

 

14.          SEVERABILITY.  Should any part or provision of this
Agreement be held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable part or
provisions shall be replaced with a provision which accomplishes, to the extent
possible, the original business purpose of such part or provision in a valid
and enforceable manner, and the remainder of this Agreement shall remain
binding upon the parties hereto.

 

15.          REMEDIES.  Each of the parties
acknowledges and agrees that damages will not be an adequate remedy for any
material breach or violation of this Agreement if such material breach or
violation would cause immediate and irreparable harm (an “Irreparable
Breach”).  Accordingly, in
the event of a threatened or ongoing Irreparable Breach, each party shall be
entitled to seek equitable relief of a kind appropriate in light of the nature
of the ongoing or threatened Irreparable Breach, which relief may include,
without limitation, specific performance or injunctive relief.  Such remedies shall not be the parties’
exclusive remedies, but shall be in addition to all other remedies provided in
this Agreement.

 

16.          WAIVER.  No waiver of any term, provision or condition
of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or be construed as, a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.

 

17.          INDEPENDENT NATURE OF INVESTOR’S
OBLIGATIONS AND RIGHTS.  The
obligations of the Investor under this Agreement are several and not joint with
the obligations of any Other Investor, and Investor shall in no way be
responsible in any way for the performance of the obligations of any Other
Investor.  Nothing contained herein, and
no action taken by Investor, shall be deemed to constitute the Investor, the Other
Investors and/or the Company as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Investor and the
Other Investors are in any way acting in concert or as a group with respect to
such obligations or the transaction contemplated hereby.  Investor and each Other Investor shall be
entitled to independently protect and enforce its rights, including without
limitation with respect to the Investor the rights arising out of this
Agreement, and it shall not be

 

30

 

necessary for any Other
Investor to be joined as an additional party in any proceeding for such
purpose.

 

31

 

EXHIBIT A

 

NEUROMetrix, Inc.

 

SECURITIES CERTIFICATE
QUESTIONNAIRE

 

	
   

  	
   

  	
  Pursuant to Section 1
  of the Agreement, please provide us with the following information:

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  The exact name in which
  your Securities are to be registered (this is the name that will appear on
  your book entry statements. You may use a nominee name if appropriate:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  The relationship between
  you and the registered holder listed in response to item 1 above:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The mailing address,
  telephone and fax number and e-mail address of the registered holder listed
  in response to item 1 above:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

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

  	
   

  

 

1

 

EXHIBIT B

 

NEUROMetrix, Inc.

 

INVESTOR QUESTIONNAIRE

 

(All information will be
treated confidentially)

 

To: 
NEUROMetrix, Inc.,

 

This Investor Questionnaire (“Questionnaire”)
must be completed by each potential investor in connection with the offer and
sale of the shares of the common stock, par value $.0001 per share (the “Shares”), and warrants to purchase
common stock (the “Warrants” and, together with
the Shares, the “Securities”), of NEUROMetrix, Inc.
(the “Company”).  The Securities are being offered and sold by
the Company without registration under the Securities Act of 1933, as amended
(the “Securities Act”), and the
securities laws of certain states, in reliance on the exemptions contained in Section 4
of the Securities Act and on Regulation D promulgated thereunder and in
reliance on similar exemptions under applicable state laws.  The Company must determine that a potential
investor meets certain suitability requirements before offering or selling
Securities to such investor.  The purpose
of this Questionnaire is to assure the Company that each investor will meet the
applicable suitability requirements.  The
information supplied by you will be used in determining whether you meet such
criteria, and reliance upon the private offering exemption from registration is
based in part on the information herein supplied.

 

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

 

A.            BACKGROUND
INFORMATION

 

	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Business Address:

  	
   

  	
   

  	
   

  
	
   

  	
  (Number
  and Street)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City)

  	
  (State)

  	
  (Zip
  Code)     

  
	
   

  	
   

  	
   

  
	
  Telephone Number: (           )

  	
   

  	
   

  
	
   

  	
   

  
	
  Residence Address:

  	
   

  	
   

  
							

 

1

 

	
   

  	
  (Number
  and Street)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City)

  	
  (State)

  	
  (Zip
  Code)

  
	
   

  	
   

  	
   

  
	
  Telephone Number: (           )

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If an individual:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Age:

  	
   

  	
   

  	
  Citizenship:

  	
   

  	
   

  	
  Where registered to vote:

  	
   

  
	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Type of entity:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  State of formation:

  	
   

  	
   

  	
  Date of formation:

  	
   

  
	
   

  	
   

  	
   

  
	
  Social Security or
  Taxpayer Identification No.

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  
														

 

B.            STATUS
AS ACCREDITED INVESTOR

 

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

 

INDIVIDUALS

 

	
  o

  	
  A.

  	
  The undersigned is an
  individual with a net worth, or a joint net worth together with his or her
  spouse, in excess of $1,000,000. (In calculating net worth, you may include
  equity in personal property and real estate, including your principal
  residence, cash, short-term investments, stock and securities. Equity in
  personal property and real estate should be based on the fair market value of
  such property minus debt secured by such property.)

  
	
   

  	
   

  	
   

  
	
  o

  	
  B.

  	
  The undersigned is an
  individual (not a partnership, corporation, etc.) with income in excess of
  $200,000 in each of the prior two years and reasonably expects an income in
  excess of $200,000 in the current year.

  
	
   

  	
   

  	
   

  
	
  o

  	
  C.

  	
  The undersigned is an
  individual (not a partnership, corporation, etc.) who, with his or her
  spouse, had joint income in excess of $300,000 in each of the prior two years
  and reasonably expects joint income in excess of $300,000 in the current
  year.

  
	
   

  	
   

  	
   

  
	
  o

  	
  D.

  	
  The undersigned is a director
  or executive officer of the Company.

  

 

2

 

ENTITIES

 

	
  o

  	
  E.

  	
  The undersigned, if other
  than an individual, is an entity all of whose equity owners meet one of the
  tests set forth in (a) through (d) above.

  
	
   

  	
   

  	
   

  
	
  o

  	
  F.

  	
  The undersigned is an entity, and is an
  “Accredited Investor” as defined in Rule 501(a) of Regulation D
  under the Act. This representation is based on the following (check one or
  more, as applicable):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  1.

  	
  The undersigned (or, in
  the case of a trust, the undersigned trustee) is a bank or savings and loan
  association as defined in Sections 3(a)(2) and 3(a)(5)(A), respectively,
  of the Act acting either in its individual or fiduciary capacity; or a broker
  or dealer registered pursuant to Section 15 of the Securities Exchange
  Act of 1934.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  2.

  	
  The undersigned is an
  insurance company as defined in Section 2(13) of the Act.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  3.

  	
  The undersigned is an
  investment company registered under the Investment Company Act of 1940 or a
  business development company as defined in Section 2(a)(48) of that Act.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  4.

  	
  The undersigned is a Small
  Business Investment Company licensed by the U.S. Small Business
  Administration under Section 301(c) or (d) of the Small
  Business Investment Act of 1958.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  5.

  	
  The undersigned is an employee benefit plan
  within the meaning of Title I of the Employee Retirement Income Security Act
  of 1974 (“ERISA”) and either (check
  all that apply):

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
  a.

  	
  the investment decision is
  made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is
  either a bank, savings and loan association, insurance company, or registered
  investment adviser; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
  b.

  	
  the employee benefit plan
  has total assets in excess of $5,000,000; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
  c.

  	
  the plan is a self
  directed plan with investment decisions made solely by or for the account of
  persons who are “Accredited Investors” as defined under the Act.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  6.

  	
  The undersigned is a
  private business development company as defined in Section 202(a)(22) of
  the Investment Advisers Act of 1940.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  7.

  	
  The undersigned has total
  assets in excess of $5,000,000, was not formed for the specific purpose of
  acquiring securities of the Company and is one or more of the following
  (check one or more, as appropriate):

  

 

3

 

	
   

  	
   

  	
   

  	
   

  	
  o

  	
  a.

  	
  an organization described
  in Section 501(c)(3) of the Internal Revenue Code; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
  b.

  	
  a corporation; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
  c.

  	
  a Massachusetts or similar
  business trust; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
  d.

  	
  a partnership.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  8.

  	
  The undersigned is a trust
  with total assets exceeding $5,000,000 which was not formed for the specific
  purpose of acquiring securities of the Company and whose purchase is directed
  by a person who has such knowledge and experience in financial and business
  matters that he is capable of evaluating the merits and risks of the
  investment in the Securities.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  9.

  	
  The undersigned is a plan
  established and maintained by a state, its political subdivisions, or any
  agency or instrumentality of a state or its political subdivisions for the
  benefit of its employees, if such plan has total assets in excess of
  $5,000,000.

  

 

C.            REPRESENTATIONS

 

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

 

1.             The overall
commitment of the undersigned to investments which are not readily marketable
is not excessive in view of the undersigned’s net worth and financial
circumstances, and any purchase of the Securities will not cause such commitment
to become excessive.  The undersigned is
able to bear the economic risk of an investment in the Securities.

 

2.             The undersigned
has carefully considered the potential risks relating to the Company and a
purchase of the Securities and fully understands that the Securities are
speculative investments which involve a high degree of risk of loss of the
undersigned’s entire investment.  Among
others, the undersigned has carefully considered each of the risks described in
the Company’s Annual Report on Form 10-K for the year ended December 31,
2008.

 

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

 

 

The undersigned agrees to notify the Company in
writing of any additional states or other jurisdictions in which blue sky or
similar clearance will be required in connection with the

 

4

 

undersigned’s purchase of the Securities.

 

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire
this            day of
                    ,
2009, and declares under oath that it is truthful and correct.

 

	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

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

  

 

5

 

 

EXHIBIT
C

 

NEUROMetrix, Inc.

CERTIFICATE
OF SUBSEQUENT SALE

 

[Transfer Agent]

 

 

RE:          Sale of Shares
of Common Stock of NEUROMetrix, Inc. (the “Company”)
pursuant to the Company’s Prospectus dated
                              ,
2009 (the “Prospectus”)

 

Dear Sir/Madam:

 

The undersigned hereby certifies, in connection with
the sale of shares of Common Stock of the Company included in the table of
Selling Shareholders in the Prospectus, that the undersigned has sold the
Shares pursuant to the Prospectus and in a manner described under the caption “Plan
of Distribution” in the Prospectus and that such sale complies with all
applicable securities laws, including, without limitation, the Prospectus
delivery requirements of the Securities Act of 1933, as amended.

 

	
  Selling
  Stockholder (the beneficial owner):

  	
   

  
	
   

  	
   

  
	
  Record
  Holder (e.g., if held in name of nominee):

  	
   

  
	
   

  	
   

  
	
  Restricted
  Stock Certificate No.(s):

  	
   

  
	
   

  	
   

  
	
  Number
  of Shares Sold:

  	
   

  
	
   

  	
   

  
	
  Date of Sale:

  	
   

  

 

In the event that you receive a stock certificate(s) representing
more shares of Common Stock than have been sold by the undersigned, then you
should return to the undersigned a newly issued certificate for such excess
shares in the name of the Record Holder and BEARING A RESTRICTIVE LEGEND.  Further, you should place a stop transfer on
your records with regard to such certificate.

 

	
  Dated:

  	
   

  	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

1

 

EXHIBIT
D

 

FORM OF
LEGAL OPINION

 

September       ,
2009

 

To:  Each
of the Investors listed on

Exhibit A hereto

 

Re:          Issuance and Sale of Common Stock and Warrants by NEUROMetrix, Inc.

 

Ladies and Gentlemen:

 

We have acted as counsel to NEUROMetrix, Inc.,
a Delaware corporation (the “Company”),
in connection with the issuance and sale of
                                      
shares (the “Shares”) of common stock,
$.0001 par value per share (the “Common Stock”),
and warrants to purchase up to
                      
million shares of Common Stock (the “Warrants”)
to the Investors identified as such pursuant to the Securities Purchase
Agreement, dated August     , 2009 (the “Purchase Agreement”) among the
Company and the Investors party thereto. 
This opinion letter is provided to you at the request of the Company
pursuant to Section 2 of the Purchase Agreement.  Except as otherwise indicated, capitalized
terms used in this opinion letter are defined as set forth in the Purchase
Agreement.

 

In so acting, we have reviewed the Certificate of
Incorporation and the Bylaws (collectively, the “Organizational
Documents”) of the Company, and the Purchase Agreement and the
Warrants (together the “Financing Agreements”),
and have considered such matters of law and of fact, and relied upon such
certificates and other information furnished to us, as we have deemed
appropriate as a basis for our opinions set forth below.  As to matters involving facts relevant to the
opinions stated in this opinion letter, we have relied, without independent
investigation or verification, solely upon (a) representations made in the
Financing Agreements, (b) certificates of officers of the Company, and (c) certificates
of government officials.

 

The law covered by the opinions expressed in this
opinion letter is limited to the Law (as defined in paragraph C below) of the
State of Michigan, the Delaware General Corporation Law and the federal Law of
the United States.  We are not admitted
to practice in the State of Delaware and, with respect to the opinions set
forth below, insofar as they relate to any Delaware law, with your permission,
we (i) have limited our review to standard compilations available to us of
the Delaware General Corporation Law, which we have assumed to be accurate and
complete, and (ii) have not reviewed case law.

 

Based upon and subject to
the foregoing, we are of the opinion that:

 

1.             The Company is (a) duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware, and (b) duly qualified to transact business as a foreign
corporation and in good standing under the laws of the Commonwealth of
Massachusetts.  The Company has the
requisite corporate power and authority to execute and deliver, and to perform

 

1

 

its obligations under, the
Financing Agreements.  The execution,
delivery and performance of the Financing Agreements by the Company have been
duly authorized by all necessary corporate action on behalf of the Company.

 

2.             Each of the Financing
Agreements (a) has been duly executed and delivered by the Company(3) and
(b) constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as limited by
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
other laws relating to or affecting the enforcement of creditors’ rights
generally, and subject to general principles of equity, regardless of whether
considered in a proceeding at law or in equity. 
The opinion in clause (b) of this paragraph 2 is given as if
the Law of the State of Michigan governs the Financing Agreements, without
regard to whether the Financing Agreements so provide, and does not include an
opinion as to what law governs.

 

3.             The Company’s execution and
delivery of the Financing Agreements and the issuance of the Common Stock,
Warrants and Warrant Shares pursuant thereto do not violate (i) the
Company’s Organizational Documents, or (ii) any Law which, to our Actual
Knowledge (as to factual matters only), is applicable to the Company.

 

4.             The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Purchase Agreement, will be validly issued,
fully paid and nonassessable.  The
Warrant Shares have been duly authorized and, when issued and delivered against
payment therefor upon exercise of the Warrants in accordance with their terms,
will be validly issued, fully paid and nonassessable.  The Warrant Shares have been duly reserved
for issuance pursuant to the exercise of the Warrants.

 

5.             All consents, approvals,
authorizations, or orders of, and filings, registrations, and qualifications
with, any U.S. Federal regulatory authority or U.S. Federal governmental body
required for the issuance of the Shares and the Warrants have been made or obtained,
except (a) for the filing of a Form D pursuant to Securities and
Exchange Commission Regulation D, and (b) for an application to the Nasdaq
Global Market for the listing of the Shares.

 

6.             Assuming the accuracy of the
representations in the Purchase Agreement, the offering, sale and issuance of
the Shares, the Warrants and the Warrant Shares under the Financing Agreements
do not require registration under the Securities Act of 1933, as amended (the “Securities Act”), subject to the
timely filing of a Form D pursuant to Securities and Exchange Commission
Regulation D; it being understood that no opinion is expressed as to any
subsequent resale of such shares.

 

The foregoing opinions are subject to the following
(in addition to the qualifications and other limitations set forth above):

 

A.            The opinion as
to enforceability of the Financing Agreements and the rights and remedies set
forth in the Financing Agreements, and the compliance with law of the
execution, delivery and performance of the Financing Agreements, are subject to
established and evolving

 

(3) We
will need to see the executed warrants.

 

2

 

principles of equity, commercial reasonableness and conscionability,
and to the limitations imposed by applicable law on (i) the enforceability
of purported waivers or rights and defenses, (ii) the granting of rights,
remedies, covenants or security in excess of those available under applicable
law, and (iii) the exercise and availability of remedies and defenses
generally, including the availability or non-availability of the remedy of
specific performance.

 

B.            We express no
opinion as to the enforceability of the indemnification and contribution
provisions of the Financing Agreements, or any provisions exculpating you or
any of your representatives from any liability, in each case insofar as such
provisions might require indemnification or exculpation with respect to any
violations of securities laws or relating to any litigation by any party
determined adversely to any party other than the Company.

 

C.            For purposes of
this opinion letter, “Law” means
the statutes, and, other than with respect to Delaware laws, the judicial and
administrative decisions, and the rules and regulations of the
governmental agencies of the applicable jurisdiction, but excluding the
statutes and ordinances, the administrative decisions, and the rules and
regulations of counties, towns, municipalities, and special political
subdivisions (whether created or enabled through legislative action at the
Federal, state or regional level), and judicial decisions to the extent that
they deal with any of the foregoing.

 

D.            We have only
considered the applicability of Laws that a lawyer in the State of Michigan
exercising customary professional diligence would reasonably recognize as being
directly applicable to the Company, the transactions described in the Financing
Agreements, or both.  We disclaim any
opinion with respect to specialized laws that are not customarily covered in
opinion letters of this kind, such as tax, securities (except as specified in
paragraphs 5 and 6), insolvency, bankruptcy, antitrust, pension, employee
benefit, environmental, intellectual property, bank regulatory, usury,
insurance, labor, and health and safety laws or any laws, rules or
regulations relating to the United States Food and Drug Administration or any
federal, state or foreign agencies or bodies engaged in the regulation of
pharmaceutical products or the bylaws, rules or regulations of the
Financial Industry Regulatory Authority, Inc.  Furthermore, we express no opinion with
respect to compliance with antifraud laws, rules or regulations relating
to securities or the offer and sale thereof, compliance with fiduciary duties
by the Company’s Board of Directors or stockholders; compliance with safe
harbors for disinterested Board of Director or stockholder approvals; or
compliance with state securities or blue sky laws.

 

E.             Our “Actual Knowledge” or a phrase
having similar wording means the conscious awareness of facts or other
information by Barbara A. Kaye, Phillip D. Torrence and Kara L. Hoorn (the “Designated Attorneys”).  Except as described in this opinion letter,
the Designated Attorneys have not undertaken any investigation or made inquiry
of other attorneys or employees of Honigman Miller Schwartz and Cohn LLP to
determine the existence or absence of such facts.

 

F.             In rendering
this opinion, we have assumed:  the
authenticity of all documents submitted to us as originals; the conformity to
originals of all documents submitted to us as copies; the accuracy,
completeness and authenticity of certificates of public officials; the due
authorization, execution and delivery of all documents (except the due
authorization, execution and delivery by the Company of the Financing
Agreements), where authorization, execution and

 

3

 

delivery are prerequisites to the effectiveness of such documents; and
the genuineness and authenticity of all signatures on original documents.  We have also assumed:  that all individuals executing and delivering
documents had the legal capacity to so execute and deliver; that the Financing
Agreements are obligations binding upon the parties thereto other than the
Company; and that there are no extrinsic agreements or understandings among the
parties to the Financing Agreements that would modify or interpret the terms of
any documents or the respective rights or obligations of the parties
thereunder.

 

G.            With regard to
our opinion in paragraph 4 with respect to the Warrant Shares, we express no
opinion as to the authorization or valid issuance of shares to the extent that,
notwithstanding its current reservation of shares of Common Stock, future
issuance of securities of the Company and/or antidilution adjustments to
outstanding securities of the Company may cause the Warrants to be issuable for
more shares of Common Stock than the number that then remain authorized but
unissued.

 

H.            With regard to
our opinion in paragraph 6 concerning no registration required, our opinion is
expressed only with respect to the offer and sale of the Shares and the
Warrants without regard to any offers or sales of other securities occurring
prior to or subsequent to the date hereof.

 

I.              No opinion is
given with respect to any late charges, penalties, liquidated or other
pre-measured damages or limitations thereon.

 

J.             The opinion set
forth in item 5 above is qualified by the fact that the Company did not provide
notice to NASDAQ 15 calendar days prior to the issuance of the Shares and the
Warrants as required by Rule 5250(e)(2).

 

This opinion letter may be relied upon by you only
in connection with the transactions described in the Financing Agreements.  This opinion letter may not be used or relied
upon by any other person or for any other purpose whatsoever without, in each
instance, our prior written consent.

 

This opinion letter speaks only as of its date.  We do not undertake any obligation to advise
you or any other party of changes of law or fact that occur after the date of
this opinion letter — even though the change may affect the legal analysis, a
legal conclusion or an information confirmation in this opinion letter.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HONIGMAN
  MILLER SCHWARTZ AND COHN LLP

  

 

4

 

EXHIBIT
E

 

FORM OF
WARRANT

 

THIS SECURITY HAS NOT
BEEN  REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT INCLUDING, WITHOUT
LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE
EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE,
SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.  THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

 

STOCK
PURCHASE WARRANT

 

TO
SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF

 

NEUROMETRIX,
INC.

 

	
  No. CSW-     

  	
   

  	
                       ,
  2009

  

 

THIS CERTIFIES THAT, for value received,
                              ,
or registered assigns, (herein referred to as the “Purchaser”
or “holder”), is entitled to subscribe
for and purchase from NEUROMetrix, Inc., a Delaware corporation (herein
called the “Company”), at the exercise
price specified below (subject to adjustment as noted below) at any time
beginning on the date that is the earlier of (x)                           (4) 
and (y) immediately prior to consummation of a Change of Control (as
defined below) to, and including
                        ,
2014(5) (subject to extension as provided below, the “Expiration
Date”),
                        
(                        )
fully paid and nonassessable shares (“Shares”)
of common stock, par value $.0001 per share (herein the “Common
Stock”) (subject to adjustment as noted below).  This Stock Purchase Warrant (this “Warrant”) has  been issued pursuant to a Securities Purchase
Agreement, dated as of September     , 2009 (the “Agreement”), between the Purchaser
and the Company.

 

The warrant exercise price (subject to adjustment as
noted below) shall be
$           per Share (the “Warrant Purchase Price”).

 

(4)   Insert date that is 180 days after the date
hereof.

 

(5)   Insert date that is five years from the date
hereof.

 

1

 

This Warrant is subject to the following provisions,
terms and conditions:

 

1.             EXERCISE
OF WARRANT.  The rights
represented by this Warrant may be exercised by the holder hereof, in whole or
in part, by written notice of exercise delivered to the Company and by the
surrender of this Warrant (properly endorsed if required) at the principal
office of the Company and upon payment to it by check of the Warrant Purchase
Price for such Shares, or if available, pursuant to the cashless exercise
procedure specified in Section 2 below; provided, however, that any such
exercise made in connection with a Change in Control, may be conditioned upon
the consummation of such Change in Control and payment with respect to such
exercise shall be made at the time of the consummation of such Change in
Control.

 

2.             NET
EXERCISE OF WARRANT.  This Warrant
may also be exercised in whole or in part, at such time by means of a “cashless exercise” in which the
holder shall be entitled to receive a certificate for the number of Shares
equal to the quotient obtained by dividing [(A-B)(X)] by (A), where:

 

	
  (A) =

  	
  the
  VWAP on the trading day immediately preceding the date on which the holder
  elects to exercise this Warrant by means of a “cashless exercise,” as set
  forth in the applicable Notice of Exercise;

  
	
   

  	
   

  
	
  (B) =

  	
  the
  Warrant Purchase Price, as adjusted hereunder; and

  
	
   

  	
   

  
	
  (X) =

  	
  the
  number of Shares that would be issuable upon exercise of this Warrant in
  accordance with the terms of this Warrant if such exercise were by means of a
  cash exercise rather than a cashless exercise.

  

 

“VWAP” means, for any
date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time), (b) if the
OTC Bulletin Board is not a Trading Market, the volume weighted average price
of the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported,
or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Board of Directors of the Company and the holders of a majority in interest of
the Warrants being exercised for which the calculation of VWAP is required in
order to determine the exercise price of such Warrants.

 

“Trading Market” means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, or the New York Stock Exchange (or any successors to any
of the foregoing).

 

2

 

3.             BENEFICIAL
OWNERSHIP.

 

(a)           Notwithstanding anything to
the contrary contained in this Warrant (other than the provisions of Section 3(b) below),
the Company shall not effect any exercise of this Warrant, and a holder shall
not have the right to exercise any portion of this Warrant to the extent (but
only to the extent) that, after giving effect to such issuance after exercise,
the holder (together with any person acting as a group with the holder or the
holder’s affiliates) would beneficially own in excess of 9.99% (the “Maximum
Percentage”) of the outstanding shares of Common Stock. To the
extent the above limitation applies, the determination of whether this Warrant
shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable
securities owned by the holder) and of which warrants shall be exercisable (as
among all warrants owned by the holder) shall, subject to such Maximum
Percentage limitation, be determined on the basis of the first submission to
the Company for conversion, exercise or exchange (as the case may be). No prior
inability to exercise this Warrant pursuant to this paragraph shall have any
effect on the applicability of the provisions of this paragraph with respect to
any subsequent determination of exercisability. For the purposes of this paragraph,
beneficial ownership and all determinations and calculations (including,
without limitation, with respect to calculations of percentage ownership and as
to the determination of any group) shall be determined by the holder in
accordance with Section 13(d) of the Securities Exchange Act of 1934
(the “Exchange Act”) and the rules and
regulations promulgated thereunder. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant. For any reason at any time, upon the written
or oral request of the holder, the Company shall within one (1) business
day confirm orally and in writing to the holder the number of shares of Common
Stock then outstanding, including by virtue of any prior conversion or exercise
of convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Warrant or securities issued pursuant to the
Securities Purchase Agreement.  Each
delivery of an Exercise Notice by the holder will constitute a representation
by the holder that it has evaluated the limitation set forth in this paragraph
and determined that issuance of the full number of Shares requested by the
holder in such Exercise Notice is permitted under this paragraph.

 

(b)           The provisions of Section 3(a) above
shall not apply to any exercise by any holder whose beneficial ownership of
Common Stock immediately prior to the issuance of this Warrant (together with
any person acting as a group with the holder and the holder’s affiliates)
exceeds the Maximum Percentage (an “Existing MP Holder”),
provided, however, if at any time after the date hereof an
Existing MP Holder and its affiliates and any other persons or entities whose
beneficial ownership of Common Stock would be aggregated with such Holders for
purposes of Section 13(d) of the Exchange Act (including shares held
by any “group” of which the holder is a member, but excluding shares
beneficially owned by virtue of the ownership of securities or rights to
acquire securities that have limitations on the right to convert, exercise or
purchase similar to the limitation set forth herein) shall collectively
beneficially own the Maximum Percentage or less, then such holder may deliver a
written notice to the Company

 

3

 

(an “MP
Notice”) providing that such holder irrevocably elects to be
subject to the provisions of Section 3(a).

 

(c)           Notwithstanding anything to
the contrary contained in this Warrant, the Company shall not effect any
exercise of this Warrant (including if held by an Existing MP Holder that has
not delivered an MP Notice), and a holder shall not have the right to exercise
any portion of this Warrant to the extent (but only to the extent) that, after
giving effect to such issuance after exercise, the holder (together with any
person acting as a group with the holder or the holder’s affiliates) would
beneficially own in excess of 19.99% (the “Applicable Percentage”)
of the outstanding shares of Common Stock. To the extent the above limitation
applies, the determination of whether this Warrant shall be exercisable
(vis-à-vis other convertible, exercisable or exchangeable securities owned by
the holder) and of which warrants shall be exercisable (as among all warrants
owned by the holder) shall, subject to such Applicable Percentage limitation,
be determined on the basis of the first submission to the Company for
conversion, exercise or exchange (as the case may be). No prior inability to
exercise this Warrant pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to any
subsequent determination of exercisability. For the purposes of this paragraph,
beneficial ownership and all determinations and calculations (including,
without limitation, with respect to calculations of percentage ownership and as
to the determination of any group) shall be determined by the holder in
accordance with Section 13(d) of the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder. The provisions of
this paragraph shall be implemented in a manner otherwise than in strict
conformity with the terms of this paragraph to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Applicable Percentage beneficial ownership limitation herein contained or to
make changes or supplements necessary or desirable to properly give effect to
such Applicable Percentage limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant. For any reason at
any time, upon the written or oral request of the holder, the Company shall
within one (1) business day confirm orally and in writing to the holder
the number of shares of Common Stock then outstanding, including by virtue of
any prior conversion or exercise of convertible or exercisable securities into
Common Stock, including, without limitation, pursuant to this Warrant or
securities issued pursuant to the Securities Purchase Agreement.  Each delivery of an Exercise Notice by the
holder will constitute a representation by the holder that it has evaluated the
limitation set forth in this paragraph and determined that issuance of the full
number of Shares requested by the holder in such Exercise Notice is permitted
under this paragraph.

 

4.             ISSUANCE
OF THE SHARES.  The Company
agrees that the Shares so purchased shall be and are deemed to be issued to the
holder hereof as the record owner of such Shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such Shares as aforesaid.  Subject to the
provisions of the preceding Section, within 3 business days after the rights
represented by this Warrant shall have been exercised, the Company shall cause
its transfer agent to issue the Shares so purchased to Purchaser in book-entry
format and deliver evidence of such issuance to Purchaser, and, unless this
Warrant has expired, a new Warrant representing the number of Shares, if any,
with respect to which this Warrant shall not then have been exercised shall
also be delivered to the holder hereof within such time.  Notwithstanding anything herein to the
contrary, in the event of an exercise of this

 

4

 

Warrant effective
immediately prior to a Change of Control (as defined below), the Shares
purchased upon such exercise shall be deemed issued and shall be issued
immediately prior to consummation of the Change of Control.

 

5.             AUTHORIZATION
OF SHARES.  The Company
represents and warrants that this Warrant has been duly authorized by all
necessary corporate action, has been duly executed and delivered and is a legal
and binding obligation of the Company, enforceable against the Company in
accordance with the terms of this Warrant, except to the extent such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally.  The Company covenants and
agrees that all Shares which may be issued upon the exercise of the rights
represented by this Warrant according to the terms hereof or represented by the
Common Stock will, upon issuance and payment therefor, be duly authorized and
issued, fully paid and nonassessable. 
The Company further covenants and agrees that during the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of issue or transfer
upon exercise of the subscription rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant, free from preemptive rights, rights of
first refusal or other contingent purchase rights other than those held by a
holder of this Warrant (as a result of holding this Warrant).

 

6.             CHARGES,
TAXES AND EXPENSES. The Company will pay any documentary stamp taxes
attributable to the issuance of Shares of Common Stock upon the exercise of
this Warrant.

 

7.             ADJUSTMENTS
OF WARRANT PURCHASE PRICE AND NUMBER OF SHARES; STOCK SPLITS, ETC.   The above provisions are, however,
subject to the following:

 

(a)           The Warrant Purchase Price
shall, from and after the date of issuance of this Warrant, be subject to
adjustment from time to time as hereinafter provided.  Upon each adjustment of the Warrant Purchase
Price, the holder of this Warrant shall thereafter be entitled to purchase, at
the Warrant Purchase Price resulting from such adjustment, the number of Shares
obtained by multiplying the Warrant Purchase Price in effect immediately prior
to such adjustment by the number of Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Purchase Price resulting from such adjustment.

 

(b)           In case the Company shall (i) declare
a dividend upon the Common Stock payable in Common Stock (other than a dividend
declared to effect a subdivision of the outstanding shares of Common Stock, as
described in Subsection (c) below) or in any obligations or any shares of
stock of the Company which are convertible into or exchangeable for Common
Stock (such obligations or shares of stock being hereinafter referred to as “Convertible Securities”), or in any
rights or options to purchase any Common Stock or Convertible Securities, or (ii) declare
any other dividend or make any other distribution upon the Common Stock payable
otherwise than out of net profits or surplus, then thereafter the holder of
this Warrant upon the exercise hereof will be entitled to receive the number of
shares of Common

 

5

 

 

Stock to which such holder
shall be entitled upon such exercise, and, in addition and without further
payment therefor, such number of shares of Common Stock, such that upon
exercise hereof, such holder would receive such number of shares of Common
Stock as a result of each dividend described in clause (i) above and each
dividend or distribution described in clause (ii) above which such holder
would have received by way of any such dividend or distribution if continuously
since the record date for any such dividend or distribution such holder (x) had
been the record holder of the number of shares of Common Stock then received,
and (y) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, or in any rights or options
to purchase any Common Stock or Convertible Securities) payable in respect of
such Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock.

 

(c)                                 In case the
Company shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares, the Warrant Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock of the Company shall be combined
into a smaller number of shares, the Warrant Purchase Price in effect
immediately prior to such combination shall be proportionately increased.

 

(d)                                 If any capital
reorganization or reclassification of the capital stock of the Company shall be
effected in such a way that holders of Common Stock shall be entitled to
receive stock or securities with respect to or in exchange for Common Stock,
then, as a condition of such reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the Shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby, such shares of stock or
securities as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization or
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustments of the Warrant Purchase Price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock or
securities thereafter deliverable upon the exercise hereof.

 

(e)                                 Upon any
adjustment of the Warrant Purchase Price or any adjustment of any material
terms hereof, then and in each such case an officer of the Company shall,
promptly after the occurrence of any event that requires an adjustment or
readjustment, give signed written notice thereof, by first-class mail, postage
prepaid, addressed to the registered holder of this Warrant at the address of
such holder as shown on the books of the Company, which notice shall state the
Warrant Purchase Price resulting from such adjustment, any material change in
the terms of the Warrant, and the increase or decrease, if any, in the number
of Shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.

 

6

 

(f)                                   In case any
time:

 

(i)                                          the Company
shall pay any dividend payable in stock upon its capital stock (other than a
dividend declared to effect a subdivision of the outstanding shares of Common
Stock, as described in Subsection (c) above);

 

(ii)                                the Company
shall make any distribution (other than a cash distribution out of net profits
or surplus) to the holders of its capital stock; or

 

(iii)                            there shall be
any capital reorganization, or reclassification of the capital stock of the
Company,

 

then, in any one or more of
said cases, the Company shall give written notice, by first-class mail, postage
prepaid, addressed to the registered holder of this Warrant at the address of
such holder as shown on the books of the Company, of the date on which (aa) the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (bb) such reorganization or
reclassification, as the case may be. 
Such notice shall also specify the date as of which the holders of
capital stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their capital stock for
securities or other property deliverable upon such reorganization or
reclassification, as the case may be. 
Such written notice shall be given at least twenty (20) days prior to
the action in question and not less than twenty (20) days prior to the record
date or the date on which the Company’s transfer books are closed in respect
thereto.  In each such case, upon
exercise of this Warrant the holder hereof shall be entitled to a proportionate
share of any such distribution as though such holder was the holder of the
number of shares of Common Stock into which this Warrant may be exercised as of
the record date fixed for the determination of the holders of Common Stock
entitled to receive such distribution.

 

8.                                      TREATMENT
OF WARRANT UPON CHANGE IN CONTROL OF COMPANY.

 

(a)                                 Change
in Control.  For the purpose
of this Warrant, “Change in Control” means (A) a
consolidation, merger, exchange of shares, recapitalization, reorganization,
business combination or other similar event, (1) following which the
holders of Common Stock immediately preceding such consolidation, merger, exchange,
recapitalization, reorganization, combination or event either (a) no
longer hold a majority of the shares of Common Stock or (b) no longer have
the ability to elect a majority of the board of directors of the Company or (2) as
a result of which shares of Common Stock shall be changed into (or the shares
of Common Stock become entitled to receive) the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity and the holders of Common Stock immediately preceding
such event no longer hold a majority of such shares of the Company or another
entity following such reclassification; or (B) the sale or transfer in one
transaction or in a series of related transactions of all or substantially all
of the assets of the Company (an “Asset Sale”).  The Company shall provide the holder with
written notice of any Change of Control at least twenty (20) days prior to the
consummation of a Change of Control via facsimile or overnight courier.

 

7

 

(b)                                 Treatment
of Warrant at Change in Control.

 

(i)                                    Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the written request of the Company, the holder agrees that, in the event
of a Change in Control that is not an Asset Sale, either (at the option of the
holder) (a) the holder shall exercise its conversion or purchase right
under this Warrant and such exercise will be deemed effective immediately prior
to the consummation of such Change in Control or (b) if the holder elects
not to exercise the Warrant, this Warrant will expire upon the consummation of
such Change in Control. The Company shall provide the holder with written
notice of its request relating to the foregoing (together with such reasonable
information as the holder may request in connection with such contemplated
Change in Control giving rise to such notice), which is to be delivered to the
holder not less than twenty (20) days prior to the closing of the proposed
Change in Control.

 

(ii)                                Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the written request of the Company, the holder agrees that, in the event
of a Change in Control that is an “arms length” Asset Sale to a third party
that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (at the
option of the Holder) (a) the holder shall exercise its conversion or
purchase right under this Warrant and such exercise will be deemed effective
immediately prior to the consummation of such Change in Control or (b) if
the holder elects not to exercise the Warrant, this Warrant will continue until
the Expiration Date if the Company continues as a going concern following the
closing of any such True Asset Sale. The Company shall provide the holder with
written notice of its request relating to the foregoing (together with such
reasonable information as the holder may request in connection with such
contemplated Change in Control giving rise to such notice), which is to be
delivered to the holder not less than twenty (20) days prior to the closing of
the proposed Change in Control.  For
purposes of this Warrant, the term “successor entity”
shall mean any person or entity purchasing the Company’s assets or Common
Stock, or any successor entity resulting from a Change of Control.

 

(iii)                            Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the written request of the Company received at least twenty (20) days
prior to consummation of the applicable Change of Control, the holder agrees
that, in the event of a stock for stock Change in Control of the Company by a
publicly traded acquirer, the Company may require the Warrant to be deemed
automatically exercised and the holder shall participate in the Change in
Control as a holder of the Shares on the same terms as other holders of the
same class of securities of the Company.

 

(iv)                               Unless the
holder has elected to exercise its rights under Section 8(b)(v) below,
upon the closing of any Change in Control other than those particularly
described in subsections (i), (ii) and (iii) above, the successor
entity, if any, and if applicable, shall assume the obligations of this
Warrant, and this Warrant shall be exercisable for the same securities, cash,
and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Change in Control and subsequent closing. The Warrant Price
and/or number of Shares shall be adjusted accordingly.

 

8

 

(v)                                   Notwithstanding
anything contained in this Warrant to the contrary (including, without
limitation, any of the provisions of Section 8(b)(i), (ii), (iii) or (iv) hereof),
in the event of a Change of Control, at the request of the holder delivered
before the fifth (5th) business day
prior to the scheduled closing of  the
consummation of such Change of Control (a “Redemption Notice”),
the Company shall purchase this Warrant from the holder by paying to the holder
cash in an amount equal to the Black Scholes Value (as defined below) of the
remaining unexercised portion of this Warrant on the date of such Change of
Control.  Following the receipt of a
Redemption Notice from the holder, the Company shall not effect a Change of
Control that is being treated as a redemption in accordance with this Section 8(b)(v),
unless either it obtains the written agreement of the successor entity that
payment of the Black Scholes Value shall be made to the holder upon
consummation of such Change of Control or it shall first place into an escrow
account with an independent escrow agent, at least three (3) business days
prior to the closing date of the Change of Control, an amount in cash equal to
the Black Scholes Value.  Concurrently
upon closing of such Change of Control, the Company shall pay or shall instruct
the escrow agent to pay the Black Scholes Value to the holder.  “Black Scholes Value”
means the value of this Warrant based on the Black and Scholes Option Pricing
Model obtained from the “OV” function on Bloomberg Financial Markets (“Bloomberg”) determined as of the
day of the closing of the applicable Change in Control transaction for pricing
purposes and reflecting (i) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant as
of such date of request, (ii) an expected volatility equal to the greater
of 100% and the 100 day volatility obtained from the HVT function on Bloomberg
as of the day immediately following the public announcement of the applicable
Fundamental Transaction and (iii) the underlying price per share used in
such calculation shall be the sum of the price per share being offered in cash,
if any, plus the value of any non cash consideration, if any, being offered in
the Change in Control, such non-cash values to be as set forth in any
definitive agreement for the Change of Control that has been executed around
the time of the first public announcement of the Change of Control or, if no
such value is determinable from such definitive agreement, based on the closing
market price for shares of the successor entity or its principal securities
exchange or quotation system on the trading day preceding the first public
announcement of the Change of Control or, if the successor entity is not a
publicly traded entity, as mutually determined in good-faith by the holder and
the Company’s Board of Directors.  In
addition, for purposes of determining the Black Scholes Value, this Warrant
shall be deemed to be exercisable from and after the date of issuance of the
Warrants regardless of any restrictions on exercisability.

 

(vi)                               Notwithstanding
anything herein to the contrary, in the event the holder elects to exercise the
Warrant immediately prior to consummation of a Change of Control in accordance
with this Section 8(b), then the Company shall not enter into such Change
in Control transaction unless the successor entity shall, as part of the
transaction constituting such Change in Control, issue or pay to the holder the
identical consideration, less the applicable Warrant Purchase Price, that such
holder would have received upon such Change of Control (whether from the
Company or the successor entity, as applicable) with respect to any portion of
the Warrant that the holder is restricted from exercising due to the provisions
of Section 3 hereof, in exchange for the cancellation of such portion of
the Warrant.

 

9.                                      NO
STOCKHOLDER RIGHTS.  This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company.

 

9

 

10.                               REGISTRATION
OR EXEMPTION REQUIRED.  This
Warrant has been issued in a transaction exempt from the registration
requirements of the Securities Act of 1933 (the “Securities
Act”) by virtue of Regulation D and exempt from state
registration under applicable state laws. The Warrant and the Common Stock
issuable upon the exercise of this Warrant may not be pledged, transferred,
sold or assigned except pursuant to an effective registration statement,
pursuant to Rule 144 or after receipt by the Company of an opinion of
counsel for the holder that any such pledge, transfer, sale or assignment shall
be exempt from the registration requirements of the Securities Act, including,
without limitation, a so-called “4(1) and a half” transaction.

 

11.                               TRANSFER
OF WARRANTS.  Subject to
compliance with the second sentence of Section 10 above, the holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole
or in part. The holder shall deliver a written notice to Company, indicating
the person or persons to whom the Warrant shall be assigned and the respective
number of warrants to be assigned to each assignee. The Company shall effect
the assignment within three (3) business days of its receipt of a notice
of assignment and, if required by this Warrant, receipt by the Company of an
opinion of counsel (the “Transfer Delivery Period”),
and shall deliver to the assignee(s) designated by holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.  This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the holder. The provisions of this Warrant are intended to be for the benefit
of all holders from time to time of this Warrant, and shall be enforceable by
any such holder.  For avoidance of doubt,
in the event holder notifies the Company that such sale or transfer is a so
called “4(1) and half” transaction, the parties hereto agree that a legal
opinion from outside counsel for the holder in reasonable form delivered to
counsel for the Company shall be the only requirement to satisfy an exemption
from registration under the Securities Act to effectuate such “4(1) and
half” transaction.

 

12.                               SURRENDER.  This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the principal
office of the Company, for new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of Shares which
may be subscribed for and purchased hereunder, each of such new Warrants to
represent the right to subscribe for and purchase such number of shares as
shall be designated by said holder hereof at the time of such surrender.

 

13.                               RESTRICTED
SECURITIES.  The holder
hereby acknowledges and agrees that this Warrant constitutes a “restricted
security” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the holder may only transfer this Warrant in accordance
with the provisions of this Warrant, including Sections 10 and 11 hereof.  The holder acknowledges that the Company has
no obligation to register or qualify the Warrant for resale.  This Warrant and the Shares shall be
imprinted with a legend in substantially the form set forth in Section 6.3(b) of
the Agreement unless such Shares are theretofore registered for resale.

 

14.                               GOVERNING
LAW.  All questions concerning
this Warrant will be governed and interpreted and enforced in accordance with
the internal law, not the law of conflicts, of the State of Delaware.

 

10

 

15.                               MISCELLANEOUS.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of any such loss, theft,
destruction or mutilation of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form to the Company or, in the case of
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.  If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday, or shall be a legal U.S. or New York
state holiday, then such action may be taken or such right may be exercised on
the next succeeding day not a Saturday, Sunday or holiday.  The invalidity or unenforceability of any
provision of this Warrant shall in no way affect the validity or enforceability
of any other provisions of this Warrant, or the Agreement.

 

16.                               NOTICES.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be delivered (A) if
within the United States, by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if from outside the United States, by International
Federal Express (or comparable service) or facsimile, and shall be deemed given
(i) if delivered by first-class registered or certified mail domestic,
upon the business day received, (ii) if delivered by nationally recognized
overnight carrier, one (1) business day after timely delivery to such
carrier, (iii) if delivered by International Federal Express (or
comparable service), two (2) business days after so mailed, (iv) if
delivered by facsimile, upon electric confirmation of receipt.  Notices to the Company pursuant to this Warrant
shall be delivered to the address set forth on the signature page hereof,
until another address is designated in writing by the Company.  Notices to the holder pursuant to this
Warrant shall be delivered to the address set forth in the Company’s records,
until another address is designated in writing by the holder.

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer and
this Warrant to be dated as of the date set forth above.

 

	
  Address:

  	
   

  	
  NEUROMETRIX, INC.  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

11

 

NOTICE
OF EXERCISE

 

To:                                                               NEUROMETRIX,
INC.

 

1.                                      The undersigned
hereby elects to purchase
           Shares of
NEUROMETRIX, INC. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.

 

2.                                      Payment shall take the form
of (check applicable box):

 

o                                    in lawful money
of the United States; or

 

o                                    the cancellation of such
number of Shares as is necessary, in accordance with the formula set forth in Section 2
of the Warrant, to exercise this Warrant with respect to the maximum number of
Shares purchasable pursuant to the cashless exercise procedure set forth in Section 2
of the Warrant.

 

3.                                            Please issue a
certificate or certificates representing such Shares in the name of the
undersigned or in such other name as is specified below:

 

The Shares shall be delivered to the
following:

 

 

4.                                      The undersigned
is (i) an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended (the “Securities
Act”), and/or (ii) a “qualified institutional buyer” as
defined in Rule 144A promulgated under the Securities Act.

 

	
   

  	
  [NAME
  OF PURCHASER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  

 

12

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to
purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and
all rights evidenced thereby are hereby assigned to:

 

	
  Name:

  	
   

  
	
  (Please Print)

  
	
   

  
	
  Address:

  	
   

  
	
  (Please Print)

  
	
   

  
	
  Dated:

  	
   

  	
   

  
	
   

  
	
  Holder’s

  	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  
	
  Holder’s

  	
   

  
	
  Address:

  	
   

  	
   

  
							

 

NOTE:  The
signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

13

 

EXHIBIT
E-1

 

FORM OF
AGENT WARRANT

 

(See Exhibit E)

 

1

 

EXHIBIT
E-2

 

6.5% of the gross proceeds
received by the Company in connection with the sale of the Securities in the
Transaction, plus a warrant to purchase shares of the Common Stock equal to
2.35% of the Shares sold by the Company to the Investors in the Transaction.

 

1

 

EXHIBIT
F

 

SELLING
SECURITYHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned beneficial owner of common stock
(the “Registrable Securities”) of
NEUROMetrix, Inc., a Delaware corporation (the
“Company”), understands that the Company has filed or intends to
file with the Securities and Exchange Commission (the “Commission”)
a registration statement (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”),
of the Registrable Securities, in accordance with the terms of the Securities
Purchase Agreement (the “Securities Purchase
Agreement”) to which this document is annexed.  A copy of the Securities Purchase Agreement
is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Securities Purchase
Agreement.

 

Certain legal consequences arise from being named as
a selling securityholder in the Registration Statement and the related
prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Securityholder”) of
Registrable Securities hereby elects to include the Registrable Securities
owned by it in the Registration Statement.

 

1

 

The undersigned hereby
provides the following information to the Company and represents and warrants
that such information is accurate:

 

QUESTIONNAIRE

 

1.                                      Name.

 

(a)                                  Full Legal Name of Selling
Securityholder

 

 

 

(b)                                 Full Legal Name
of Registered Holder (if not the same as (a) above) through which
Registrable Securities are held:

 

 

 

(c)                                  Full Legal Name
of Natural Control Person (which means a natural person who directly or
indirectly alone or with others has power to vote or dispose of the securities
covered by the questionnaire):

 

 

 

2.                                      Address
for Notices to Selling Securityholder:

 

 

 

Telephone:

Fax:

Contact Person:

 

3.                                      Broker-Dealer
Status:

 

(a)                                  Are you a broker-dealer?

 

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

(b)                                 If “yes” to Section 3(a),
did you receive your Registrable Securities as compensation for investment
banking services to the Company.

 

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

1

 

Note:                   If no, the
Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 

(c)                                  Are you an affiliate of a
broker-dealer?

 

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

(d)                                 If you are an
affiliate of a broker-dealer, do you certify that you bought the Registrable
Securities in the ordinary course of business, and at the time of the purchase
of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

Note:                   If no, the
Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 

4.                                      Beneficial
Ownership of Securities of the Company Owned by the Selling Securityholder.

 

Except as set forth below in this Item 4, the undersigned is not the
beneficial or registered owner of any securities of the Company other than the
securities issuable pursuant to the Securities Purchase Agreement.

 

(a)                                  Type and amount
of other securities beneficially owned by the Selling Securityholder:

 

 

 

5.                                      Relationships
with the Company:

 

Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of 5% of
more of the equity securities of the undersigned) has held any position or
office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

 

 

The undersigned agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time 

 

2

 

while the Registration
Statement remains effective.

 

By signing below, the undersigned consents to the
disclosure of the information contained herein in its answers to Items 1
through 5 and the inclusion of such information in the Registration Statement
and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information
will be relied upon by the Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus.

 

IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by
its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
						

 

 

PLEASE FAX A COPY OF THE
COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY
OVERNIGHT MAIL, TO:

 

NEUROMetrix, Inc.

62
Fourth Avenue

Waltham,
Massachusetts 02451

Attention:                        

Telephone:                       

Facsimile:                        

 

3

 

SECURITIES
PURCHASE AGREEMENT

 

DISCLOSURE
SCHEDULE

 

(Dated  September 8, 2009)

 

(SEE
ATTACHED)

 

1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00163-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00163-of-00352.parquet"}]]