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Adamis Pharmaceuticals Corporation 8-K [adamis-8k_1109.htm]

Exhibit 10.1

[*] Designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

 
COMMON STOCK PURCHASE AGREEMENT
 
This Common Stock Purchase Agreement (this “Agreement”) is dated as of
November 10, 2010, and is entered into by and between Adamis Pharmaceuticals
Corporation, a Delaware corporation (the “Company”) and Eses Holdings (FZE), a
limited liability free zone establishment formed in accordance with the laws of
Sharjah, United Arab Emirates (“Purchaser” and together with the Company, the
“Parties”, and each, individually, a “Party”).
 
1           AGREEMENT TO PURCHASE AND SELL COMMON STOCK.
 
1.1           Agreement to Purchase and Sell.  Subject to the terms and
conditions of this Agreement, the Company agrees to sell and issue to Purchaser,
and Purchaser agrees to purchase from the Company, forty million (40,000,000)
shares of Common Stock (the “Shares”), at a purchase price of twenty-five U.S.
cents (US$0.25) per share.
 
2           CLOSINGS; PAYMENT AND DELIVERY.
 
2.1           Closings.  The consummation of the purchase and sale of the Shares
shall occur in separate closings (each, a “Closing”).
 
(a)           The initial closing under this Agreement (the “Initial Closing”)
shall take place as soon as practicable but no more than three (3) business days
after the conditions applicable to the Initial Closing set forth in Sections 6
and 7 below have been satisfied (or waived by the Party entitled to waive such
condition), or at such other time and place upon which the Company and Purchaser
mutually agree (the “Initial Closing Date”).  On the Initial Closing Date,
Purchaser shall transfer to the Company the amount of five million U.S. Dollars
(US$5,000,000) and the Company shall issue twenty million (20,000,000) Shares to
Purchaser in exchange therefor.
 
(b)           Subsequent closings (each a “Milestone Closing”) shall take place
within three (3) business days after the conditions applicable to each such
Milestone Closing set forth in Sections 6 and 7 below have been satisfied (or
waived by the Party entitled to waive such condition) as detailed in a notice
from the Company to Purchaser sent no fewer than ten (10) business days prior to
the proposed Milestone Closing Date, or at such other time and place upon which
the Company and Purchaser mutually agree (each a “Milestone Closing Date”).  On
each Milestone Closing Date, Purchaser shall transfer to the Company the amount
of money specified on Exhibit A for such Milestone Closing and the Company shall
issue the number of Shares specified on Exhibit A for such Milestone Closing to
Purchaser in exchange therefor.
 
The place of each Closing shall be such place as shall have been agreed to by
the Company and Purchaser, or shall take place remotely.
 
 
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2.2           Payment and Delivery.  At each Closing, Purchaser will purchase
the Shares being purchased at such Closing against delivery to Purchaser (or its
designated custodian) by the Company of evidence of ownership of such Shares
and/or a copy of the Company’s irrevocable instructions to its transfer agent to
prepare and issue such Shares.  The full purchase price for such Shares shall be
paid at Purchaser’s option at each Closing by (i) a check payable to the
Company’s order, (ii) wire transfer of funds to an account designated by the
Company or (iii) any combination of the foregoing, subject to reasonable prior
notification.  For purposes of this Agreement, a “business day” means a day
(A) other than Saturday or Sunday and (B) on which commercial banks are open for
business in San Diego, California.
 
3           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby
represents and warrants to Purchaser that, except as set forth in the Disclosure
Schedule and Schedule of Exceptions (the “Disclosure Schedule”) separately
delivered by the Company to Purchaser, the statements in the following
paragraphs of this Section 3 are true and correct:
 
3.1           Organization, Good Standing and Qualification.  Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction under which it is
incorporated, and has all requisite corporate power and authority to conduct its
business as currently conducted and to execute, deliver and perform all of its
obligations under this Agreement and to consummate the transactions contemplated
hereby, including, without limitation, the issuance and sale of the Shares (the
“Contemplated Transactions”).  Each of the Company and its Subsidiaries is
qualified to do business as a foreign corporation in each jurisdiction where
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its certificate or articles of
incorporation, bylaws or other organizational or charter documents.  As used in
this Agreement, “Material Adverse Effect” means any event or collection of
events which individually or in the aggregate would reasonably be expected to
have a material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries, taken as a whole, or on the authority or ability
of the Company to perform fully its obligations under this Agreement; provided,
however, that for purposes of this Agreement, “Material Adverse Effect” shall
not include any effect attributable solely to changes in the trading prices for
the Common Stock.
 
3.2           Capitalization.  Section 3.2 of the Disclosure Schedule sets forth
the following information, as of the date hereof:  (i) the number of outstanding
shares of Common Stock and other equity interests in the Company; (ii) the
number of shares of Common Stock and other equity interests in the Company that
are issuable pursuant to the Company’s stock option, stock purchase, or similar
equity incentive plans; and (iii) the number of shares of Common Stock and other
equity interests in the Company that are issuable pursuant to outstanding
securities exercisable for, or convertible into, or exchangeable for, any shares
of Common Stock or other equity interests in the Company.  All of the issued
shares of Common Stock (i) have been duly validly issued, (ii) are fully paid,
non-assessable and free of preemptive rights, (iii) were issued in compliance
with applicable securities law and any rights of third parties, and (iv) except
as set forth in the SEC Filings, are free and clear of any lien, charge,
security interest, encumbrance, right of first refusal, or preemptive right
(collectively, “Liens”).  No Person is entitled, or, to the Company’s knowledge
purports to be entitled, to any right of first refusal, preemptive right, right
of participation, or any similar right, (i) to participate in the Contemplated
Transactions or (ii) otherwise with respect to any securities of the Company.
Except as set forth in the SEC Filings or in the Disclosure Schedule, there are
no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any
Subsidiary is, or may be, obligated to issue any equity securities of any
kind.  Except as forth in the SEC Filings, there are no voting, buy-sell,
outstanding or authorized stock appreciation, right of first purchase, phantom
stock, profit participation or equity-based compensation agreements, options or
arrangements, or like rights relating to the securities of the Company or
agreements of any kind among the Company and any of its security
holders.  Except as forth in the SEC Filings, no Person has the right to require
the Company to register any securities of the Company under the Securities Act
of 1933, as amended (the “Securities Act”), whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person.  The issuance and sale of the
Shares will not obligate the Company to issue shares of Common Stock or other
securities to any other Person and will not result in the adjustment of the
exercise, conversion, exchange, or reset price of any outstanding security.  The
Company does not have outstanding shareholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase any
equity interest in the Company upon the occurrence of certain events.  The
Company has not (i) declared or paid any dividends, or (ii) authorized or made
any distribution upon or with respect to any class or series of its capital
stock.
 
 
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3.3           Indebtedness and Other Contracts.  Except as disclosed in the SEC
Filings, as of the date hereof, neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), or (ii) is in violation
of or default under any Material Agreement, and to the Company’s knowledge, no
counterparty to any Material Agreement is in violation of or default under any
Material Agreement (as defined below) where such violation or default would
reasonably be expected to result in a Material Adverse Effect.  All contracts
and agreements required to be filed as exhibits to the Company’s periodic
reports filed as material agreements (“Material Agreements”) with the U.S.
Securities and Exchange Commission (the “SEC”) have been so filed.  The Company
has not engaged in the past three (3) months in any discussion with any
representative of any Person regarding (i) a sale or exclusive license of all or
substantially all of the Company’s assets or any material asset, or (ii) any
merger, consolidation or other business combination transaction of the Company
with or into another Person.  For purposes of this Agreement:  (x)
“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
accordance with GAAP (as defined below), is classified as a capital lease, (G)
all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations (as defined below) in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof or other entity of whatever
nature.
 
3.4           Insurance.  The Disclosure Schedule sets forth a list of the
insurance policies maintained by the Company.  Neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or applied for, and
neither the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
 
3.5           Employee Matters.
 
(a)           As of the date hereof, the Company employs ten full-time employees
and one part-time employees and engages no consultants or independent
contractors whose services for the Company relate to the creation or development
of Company IP (an “IP Consultant”).  The Disclosure Schedule identifies any
employee, or any such consultant or independent contractor of the Company, whose
cash compensation for the fiscal year ended March 31, 2010 exceeded US$100,000
or is anticipated to receive compensation in excess of US$100,000 for the fiscal
year ending March 31, 2011.
 
(b)           To the Company’s knowledge, none of its officers, directors,
employees, consultants and independent contractors is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such person’s
ability to promote the interest of the Company or that would conflict with the
Company’s business.  Neither the carrying on of the Company’s business by the
employees of the Company, nor the conduct of the Company’s business as now
conducted and as presently proposed to be conducted, will, to the Company’s
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such person is now obligated.
 
(c)           The Company:  (i) is not delinquent in payments to any of its
officers, directors, employees, consultants and independent contractors for any
wages, salaries, commissions, bonuses, or other direct compensation for any
service performed for it to the date hereof or amounts required to be reimbursed
to such employees, consultants, or independent contractors; (ii) has complied in
all material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment, including those
related to wages, hours, worker classification, and collective bargaining; and
(iii) has withheld and paid to the appropriate governmental entity or is holding
for payment not yet due to such governmental entity all amounts required to be
withheld from officers, directors, employees, consultants and independent
contractors of the Company and is not liable for any arrears of wages, taxes,
penalties, or other sums for failure to comply with any of the foregoing, except
where such delinquency, non-compliance, or failure to have taken any action
described above could, individually or in the aggregate, not reasonably be
expected to result in a Material Adverse Effect.  To the Company’s knowledge,
all elections and notices under Section 83(b) of the Internal Revenue Code have
been or will be timely filed by all individuals who have acquired unvested
shares of the Company’s Common Stock.
 
 
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(d)           Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or enterprise agreement or employs any member of
a union or any employees subject to an award.  The Company and its Subsidiaries
believe that their relations with their officers, directors, employees,
consultants and independent contractors are good.  No “executive officer” of the
Company or any of its Subsidiaries (as defined in Rule 501(f) of the Securities
Act) has notified the Company or any such Subsidiary in writing that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary, nor
does the Company have a present intention to terminate the employment of any
such person.  To the Company’s knowledge, no executive officer of the Company or
any of its Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any such
Subsidiary to any material liability with respect to any of the foregoing
matters.
 
(e)           The employment of each employee of the Company is terminable at
the will of the Company.  As of the date of this Agreement, except as required
by law, upon termination of the employment of any such employees, no severance
or other payments will become due.  The Company has no policy, practice, plan,
or program of paying severance pay or any form of severance compensation in
connection with the termination of employment services.
 
(f)           To the Company’s knowledge, none of its officers, directors,
employees, or IP Consultants, has been:  (i) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency law or the
appointment of a receiver, fiscal agent or similar officer by a court for his
business or property; (ii) convicted in a criminal proceeding or named as a
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); (iii) subject to any order, judgment, or decree (not
subsequently reversed, suspended, or vacated) of any court of competent
jurisdiction permanently or temporarily enjoining him from engaging, or
otherwise imposing limits or conditions on his engagement in any securities,
investment advisory, banking, insurance, or other type of business or acting as
an officer or director of a public company; or (iv) found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures
Trading Commission to have violated any federal or state securities,
commodities, or unfair trade practices law, which such judgment or finding has
not been subsequently reversed, suspended, or vacated.

 
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3.6           Subsidiaries.  The names of the Company’s subsidiaries
(collectively, the “Subsidiaries”) are set forth in the SEC Filings (as defined
below).  All of the Subsidiaries are directly or indirectly wholly-owned by the
Company.
 
3.7           Due Authorization; No Violation.  All corporate action on the part
of the Company and its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Agreement and the authorization, issuance, and
delivery of the Shares being sold under this Agreement, have been taken or will
be taken prior to the Closing, and this Agreement constitutes a valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.  Neither the execution, delivery or performance by the
Company of this Agreement nor the consummation by the Company of the
Contemplated Transactions will (i) conflict with or result in a breach of any
provision of the Amended and Restated Certificate of Incorporation of the
Company (the “Restated Certificate”) or the Amended and Restated Bylaws of the
Company (the “Bylaws”), (ii) conflict with, result in a violation or breach of,
or cause a default (or give rise to any right of termination, cancellation or
acceleration), or result in the creation or imposition of any Lien upon any of
the properties or assets of the Company or any of the Subsidiaries, under any of
the terms, conditions or provisions of any agreement, instrument or obligation
to which the Company is a party or (iii) to the Company’s knowledge, violate any
law, statute, rule or regulation or judgment, order, writ, injunction or decree
of any governmental authority.  The business and operations of the Company and
its Subsidiaries have been conducted in accordance with all applicable laws,
rules and regulations of all governmental authorities, except where failure to
be in compliance would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
 
3.8           Valid Issuance of Stock.  The Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable and free and clear of all pledges, Liens and restrictions (other
than those arising under federal or state securities laws as a result of the
private placement of the Shares to Purchaser).
 
3.9           Governmental Consents.  No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the valid execution and delivery of
this Agreement, the offer, sale and issuance of the Shares, or the consummation
of the Contemplated Transactions, except for qualifications or filings which are
not required prior to the Initial Closing under the Securities Act and the
applicable rules and regulations (the “Rules and Regulations”) of the SEC under
the Securities Act, and all other applicable securities laws, as may be required
in connection with the Contemplated Transactions.
 
 
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3.10           Application of Takeover Protections; Rights Agreement.  The
Company and the Board of Directors of the Company (the “Board”) have taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Restated
Certificate or the laws of any jurisdiction which is or could become applicable
to Purchaser or otherwise effective as a result of the Contemplated
Transactions.
 
3.11           Acknowledgment Regarding Purchaser’s Purchase of Shares.  The
Company acknowledges and agrees that Purchaser is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the Contemplated
Transactions and that:  (i) Purchaser is not an officer or director of the
Company, (ii) as of the date immediately prior to the date hereof, Purchaser was
not (x) an “affiliate” of the Company (as defined in Rule 144 of the Securities
Act) or (y) to the knowledge of the Company, a “beneficial owner” (as defined
for purposes of Rule 13d-3 of the Exchange Act (as defined below)) of more than
ten percent (10%) of the outstanding shares of Common Stock.  The Company
further acknowledges that Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the Contemplated Transactions, and any advice given by Purchaser
or any of its representatives or agents in connection with this Agreement and
the Contemplated Transactions is merely incidental to Purchaser’s purchase of
the Shares.
 
3.12           Foreign Corrupt Practices.  Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company:  (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any applicable 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.
 
3.13           OTC Bulletin Board.  The Common Stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and is quoted on the OTC Bulletin Board under the symbol “ADMP”.  The
Common Stock is not listed or traded on NASDAQ or a national securities exchange
or, to the Company’s knowledge, on any other exchange or trading board.  The
Company is in material compliance with all applicable eligibility, listing and
maintenance requirements of the OTC Bulletin Board.
 
3.14           Governmental Permits, Etc.  The Company possesses all licenses,
franchises, governmental approvals, permits or other governmental authorizations
(collectively, “Authorizations”) relating to or required in connection with the
operation of the respective businesses of the Company and its Subsidiaries,
except for those Authorizations the failure of which to possess would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
 
 
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3.15           Transactions With Affiliates.  Except as set forth in the SEC
Filings filed before the date of this Agreement, as of the date hereof, none of
the officers, directors or employees of the Company is presently a party to or
directly or indirectly interested in any transaction involving the Company or
any of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.  None of the directors or officers, or any members of their
immediate families, has any material commercial, industrial, banking,
consulting, legal, accounting, charitable or familial relationship with any of
the Company’s customers, suppliers, service providers, joint venture partners,
licensees or competitors.
 
3.16           Intellectual Property.
 
(a)           All patents used or held for use in or related to the respective
businesses of the Company and its Subsidiaries and that are material to the
business of the Company and its Subsidiaries (considered together) as now
conducted and as presently proposed to be conducted (assuming successful
development of all products in development) (“Company Patents”) are, to the
Company’s knowledge (without having conducted any specific investigation or
inquiry in connection with the Contemplated Transactions), valid and
enforceable.  Except as disclosed in the SEC Filings, no Intellectual Property
(as defined below) used or held for use in or related to the respective
businesses of the Company and its Subsidiaries and that is material to the
business of the Company and its Subsidiaries (considered together) as now
conducted and as presently proposed to be conducted (assuming successful
development of all products in development) (the “Company IP”) has, to the
Company’s knowledge, been or is now involved in any cancellation, dispute or
litigation, and, to the Company’s knowledge, no such action is threatened.  No
Company Patent has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.  For purposes of this Agreement, the
term “Intellectual Property” means all of the following:  (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) protected formulae, formulations,
processes, methods, trade secrets, proprietary computer software (including but
not limited to data, data bases and documentation), and (vi) manufacturing
research and similar technical information, engineering know-how, supplier
information, test data and drawings.
 
(b)           Except as disclosed in the SEC Filings, all of the licenses and
sublicenses and consent, royalty or other agreements concerning Intellectual
Property to which the Company or any Subsidiary is a party or by which any of
their assets are bound (other than generally commercially available, non-custom,
off-the-shelf software application programs having a retail acquisition price of
less than US$10,000 per license) (collectively, “License Agreements”) are valid
and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company’s knowledge, the other parties thereto, enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors’ rights
generally, and to the Company’s knowledge there exists no event or condition
which will result in a material violation or breach of or constitute (with or
without due notice or lapse of time or both) a default by the Company or any of
its Subsidiaries under any such License Agreement.

 
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(c)           Except as disclosed in the SEC Filings, the Company and its
Subsidiaries own or have the valid right to use all of the Company IP free and
clear of all Liens, adverse claims or obligations to license all such owned
Intellectual Property, other than licenses entered into in the ordinary course
of the Company’s and its Subsidiaries’ businesses.  Each employee and IP
consultant has assigned to the Company all Intellectual Property rights he or
she owns (or, in the case of an IP Consultant, the rights relating to the
services such IP Consultant was retained to perform for and deliver to the
Company) that is used or held for use in or related to the respective businesses
of the Company and its Subsidiaries as now conducted and as presently proposed
to be conducted (assuming successful development of all products in
development).  No current or former employee or consultant who has substantially
contributed Intellectual Property to the Company IP has excluded works or
inventions from his or her assignment of inventions pursuant to such person’s
Confidential Information Agreement (as defined below).  The Company is not aware
that any of its employees or consultants is in violation thereof.  To the
Company’s knowledge, the Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property used or held by
the Company that is material to the business of the Company and its
Subsidiaries(considered together) as now conducted and as presently proposed to
be conducted (assuming successful development of all products in development),
except where failure to have such rights would not reasonably be expected to
result in a Material Adverse Effect.  Except as disclosed in the SEC Filings,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company is a party or by which it is bound that
involve indemnification by the Company with respect to infringements of
Intellectual Property rights.
 
(d)           To the Company’s knowledge (without having conducted any specific
investigation relating to the Contemplated Transactions), the conduct of the
Company’s and its Subsidiaries’ businesses, as currently conducted, does not
infringe or otherwise impair or conflict with (collectively, “Infringe”), any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company’s knowledge, the Company
IP is not being Infringed by any third party.  Except as disclosed in the SEC
Filings, there is no litigation or order pending or outstanding or, to the
Company’s knowledge, threatened or imminent, that seeks to limit or challenge or
that concerns the ownership, use, validity or enforceability of any Company IP
and the Company’s and its Subsidiaries’ use of any Intellectual Property owned
by a third party, and, to the Company’s knowledge, there is no valid basis for
the same.
 
(e)           The consummation of the Contemplated Transactions will not result
in the alteration, loss, impairment of or restriction on the Company’s or any of
its Subsidiaries’ ownership or right to use any of the Company IP.
 
(f)           Each person who has been an employee, or IP Consultant, of or to
the Company during the preceding twelve (12) months who has had access to
Confidential Information (as defined below) of the Company has executed an
agreement (a “Confidential Information Agreement”) to maintain the
confidentiality of such Confidential Information and has executed appropriate
agreements that are substantially consistent with the Company’s standard forms
thereof, except where failure to have executed such an agreement would not
reasonably be expected to result in a Material Adverse Effect.  To the Company’s
knowledge, except under valid, enforceable and comprehensive confidentiality
obligations, there has been no material disclosure of any of the Company’s or
its Subsidiaries’ Confidential Information (as defined below) to any third
party.  For purposes of this Agreement, the term “Confidential Information”
means trade secrets, confidential information and know-how (including but not
limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance
specifications, support documentation, drawings, specifications, designs,
business and marketing plans, and customer and supplier lists and related
information).

 
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3.17           Financial Statements.  The financial statements of the Company
and the related notes thereto, in each case included in the SEC Filings, present
fairly the financial position of the Company as of the dates indicated, and the
results of its operations and cash flows for the periods therein specified
(except that the unaudited financial statements do not contain all notes
required by GAAP and are subject to normal year-end audit adjustments).  Such
financial statements (including the related notes) have been prepared in
accordance with GAAP, subject in the case of unaudited financial statements to
normal year-end audit adjustments.
 
3.18           Internal Accounting Controls.  Except as set forth in the SEC
Filings, the Company maintains a system of internal accounting controls
sufficient, in the judgment of the Board, to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
 
3.19           Manipulation of Price.  The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Shares, (ii) sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Shares, or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the
Company.
 
3.20           No Registration.  Assuming the accuracy of the representations
and warranties made by, and compliance with the covenants of, Purchaser in
Section 4 hereof, no registration of the Shares under the Securities Act is
required in connection with the issuance and sale of the Shares to Purchaser as
contemplated by this Agreement.
 
3.21           Absence of Certain Changes.  Since March 31, 2010, except as
disclosed in SEC Filings after such date, there has not been:
 
(a)           any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
caused, in the aggregate, a Material Adverse Effect;
 
 
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(b)           any material damage, destruction or loss, whether or not covered
by insurance;
 
(c)           any waiver or compromise by the Company of a valuable right or of
a debt owed to it;
 
(d)           any satisfaction or discharge of any Lien, claim, or encumbrance
or payment of any obligation by the Company, except for the payment of
outstanding Indebtedness or except in the ordinary course of business;
 
(e)           any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
 
(f)            any change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;
 
(g)           any resignation or termination of employment of any executive
officer of the Company;
 
(h)           any mortgage, pledge, transfer of a security interest in, or Lien,
created by the Company, with respect to any of its properties or assets, except
Liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not impair the Company’s use of such property or
assets;
 
(i)            any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of business;
 
(j)            any dividend, declaration, setting aside or payment or other
distribution in respect of any class of stock or other securities of the
Company, or any direct or indirect redemption, purchase, or other acquisition of
any of such Common Stock or other securities by the Company;
 
(k)           any sale, assignment or transfer of any Intellectual Property;
 
(l)            receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
 
(m)          to the Company’s knowledge, any other event or condition of any
character, other than events affecting the economy or the Company’s industry
generally, that could reasonably be expected to result in a Material Adverse
Effect; or
 
(n)           any arrangement or commitment by the Company to effect or that
could reasonably be expected to result in the occurrence of any of the changes
specified in Subsections 3.21(a) through 3.21(m) above.
 
3.22           Investment Company.  The Company is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
 
 
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3.23           Tax Matters.  The Company and each Subsidiary have each timely
prepared and filed all tax returns required to have been filed by the Company or
such Subsidiary with all appropriate governmental authorities and timely paid
all taxes shown thereon or otherwise owed by it.  The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company’s
knowledge, any basis for the assessment of any material additional taxes,
penalties or interest for any fiscal period or audits by any taxing
authority.  All material taxes and other assessments and levies that the Company
or any Subsidiary is required to withhold or to collect for payment have been
duly withheld and collected and paid to the proper governmental entity or third
party when due.  There are no tax liens or claims pending or, to the Company’s
knowledge, threatened against the Company or any Subsidiary or any of their
respective assets or property.  There are no outstanding tax sharing agreements
or other such arrangements between the Company and any Subsidiary or other
corporation or entity.
 
3.24           Title to Properties.  Except as disclosed in the SEC Filings, the
Company and each Subsidiary each has good and marketable title to all real
properties and all other material properties and assets owned by it, in each
case free from Liens, claims, and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and the Company and each Subsidiary hold any leased real
or personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or currently planned to be made
thereof by them.
 
3.25           Environmental Matters.  To the Company’s knowledge, neither the
Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental authority or body or any court, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, “Environmental Laws”), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s knowledge,
threatened investigation that might lead to such a claim.
 
3.26           Litigation.
 
(a)           Except as set forth in the SEC Filings, there are no pending
actions, suits or proceedings against or affecting the Company, its Subsidiaries
or any of its or their properties, and to the Company’s knowledge, no such
actions, suits or proceedings are threatened or contemplated.
 
(b)           Except as set forth in the SEC Filings, neither the Company nor
any Subsidiary, nor any director or officer thereof, is or has been the subject
of any action, suit, proceeding, or investigation involving a claim of violation
of or liability under securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the knowledge of the Company, there is no
pending or contemplated investigation by the SEC involving the Company or any
current or former director or officer of the Company.  The SEC has not issued
any stop order or other order suspending the effectiveness of, respectively, any
prospectus or registration statement filed by the Company or any Subsidiary.

 
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3.27           Brokers and Finders.  No Person will have, as a result of the
Contemplated Transactions, any valid right, interest or claim against or upon
the Company, any Subsidiary or Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company.
 
3.28           No Registration Rights.  Except as described in the SEC Filings,
no Person has any right to require the Company to effect a registration under
the Securities Act of any securities of the Company.
 
3.29           Employee Benefit Plans.  Section 3.29 of the Disclosure Schedule
sets forth each employee benefit plan maintained, established or sponsored by
the Company, or which the Company participates in or contributes to, which is
subject to the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”).  The Company has made all required contributions and has no material
liability to any such employee benefit plan, other than liability for health
plan continuation coverage described in Part 6 of Title I(B) of ERISA, and to
its knowledge has complied in all material respects with all applicable laws for
any such employee benefit plan.
 
3.30           Real Property Holding Corporation.  The Company is not now and
has never been a “United States real property holding corporation” as defined in
the Code and any applicable regulations promulgated thereunder.  The Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under such regulations.
 
3.31           Investment Company.  The Company is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
 
3.32           SEC Filings.  The Company has filed all reports, registration
statements, prospectuses and other information required to be filed (the “SEC
Filings”) with the SEC pursuant to the Exchange Act and the Securities Act.  On
their respective dates of filing, the SEC Filings complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as
applicable, and the published rules and regulations of the SEC promulgated
thereunder.  On their respective dates of filing, the SEC Filings did not
include any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and all financial statements contained in the
SEC Filings (the “Financial Statements”) fairly present the financial position
of the Company on the dates of such statements and the results of operations for
the periods covered thereby in accordance with generally accepted accounting
principles consistently applied throughout the periods involved and prior
periods (“GAAP”), except as otherwise indicated in the notes to such financial
statements.
 
3.33           Disclosure.  The representations and warranties made by the
Company in this Agreement (including the Disclosure Schedule and other material
disclosed in writing to Purchaser) and the SEC Filings when read together do not
contain any untrue statement of a material fact and do not omit to state a
material fact necessary to make the statements herein as a whole not misleading.

 
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4           REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF
PURCHASER.  Purchaser hereby represents and warrants to, and agrees with, the
Company, that:
 
4.1           Authorization.  All action (corporate or otherwise) on the part of
Purchaser and its officers, directors and stockholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of Purchaser under, this Agreement has been taken or will be taken prior to the
Initial Closing, and this Agreement constitutes a valid and legally binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
 
4.2           Purchase for Own Account.  The Shares to be purchased by Purchaser
will be acquired for investment for Purchaser’s own account, not as a nominee or
agent, and not with a view to the public resale or distribution thereof within
the meaning of the Securities Act, and Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the same in
violation of the Securities Act.  Purchaser also represents that Purchaser has
not been formed for the specific purpose of acquiring the Shares.
 
4.3           Disclosure of Information.  Purchaser has received and/or had full
access to a copy of the SEC Filings and has received or has had full access to
all the information it considers necessary or appropriate to make an informed
investment decision with respect to the Shares to be purchased by Purchaser
under this Agreement.  Purchaser further has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Shares and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to make its investment decision.
 
4.4           Investment Experience.  Purchaser understands that the purchase of
the Shares involves substantial risk.  Purchaser (i) has experience as an
investor in securities of companies in the development stage, (ii) acknowledges
that Purchaser is able to fend for itself, (iii) can bear the economic risk of
Purchaser’s investment in the Shares and (iv) has such knowledge and experience
in financial or business matters that Purchaser is capable of evaluating the
merits and risks of this investment in the Shares and protecting its own
interests in connection with this investment.
 
4.5           Accredited Investor Status.  Purchaser is an “accredited investor”
within the meaning of Regulation D promulgated under the Securities Act.
 
4.6           Restricted Securities.  Purchaser understands that the Shares,
once purchased, will be characterized as “restricted securities” under the
Securities Act inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under the Securities Act
and the Rules and Regulations such securities may be resold without registration
under the Securities Act only in certain limited circumstances and after certain
holding period requirements have been satisfied.  In this connection, Purchaser
represents that Purchaser is familiar with Rule 144 and Regulation S of the SEC
and understands the resale limitations imposed thereby and by the Securities
Act.
 
 
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4.7           Further Limitations on Disposition.  Without in any way limiting
the representations set forth above, Purchaser further agrees not to make any
disposition of all or any portion of the Shares, unless and until:
 
(a)           there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
 
(b)           Purchaser shall have furnished the Company, at the expense of
Purchaser or its transferee, with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of such
securities under the Securities Act.
 
(c)           Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be required for any sale
of any Shares in compliance with Rule 144, provided that Purchaser furnishes the
Company with customary documentation regarding compliance with Rule 144.
 
4.8           Legend.
 
(a)           It is understood that any certificates evidencing the Shares will
bear the legend set forth below:
 
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN
“OFFSHORE TRANSACTION” IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION.  ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”) AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH
REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
 
(b)           The legend set forth in paragraph (a) shall, upon the request of
Purchaser, be promptly removed by the Company from any certificate evidencing
Shares upon delivery to the Company of an opinion of counsel to Purchaser,
reasonably satisfactory to the Company, that the legended security can be freely
transferred without a registration statement being in effect under the
Securities Act.
 
 
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4.9           Compliance With Laws.  Purchaser has satisfied the laws of
Purchaser’s jurisdiction in connection with the Contemplated Transactions,
including (i) the legal requirements within the jurisdiction for the purchase of
the Shares, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be obtained and (iv)
the income tax and other tax consequences, if any, that may be relevant to the
purchase or holding of the Shares.
 
4.10         Regulation S.  Purchaser is not a United States person (as defined
in Regulation S of the Securities Act) (a “U.S. Person”), and in order to
establish the basis for an exemption for the offer and sale of the Shares under
Regulation S promulgated under the Securities Act for offshore transactions with
non-U.S. Persons, Purchaser makes the representations, warranties and
acknowledgements set forth on Exhibit B attached hereto.
 
4.11         Regulatory Approvals.  Purchaser has disclosed to the Company any
governmental, foreign exchange or regulatory approvals or consents that, to its
knowledge, are required to be obtained under the laws of its jurisdiction of
organization in order for Purchaser to purchase the Shares as contemplated by
this Agreement.
 
5           COVENANTS AND ADDITIONAL PROVISIONS.
 
5.1           Regulatory Approvals.  Promptly after the date of this Agreement,
Purchaser shall use all commercially reasonable efforts to obtain all required
governmental, foreign exchange and regulatory approvals or consents in its
jurisdiction of organization and any approvals from any other third parties, and
to satisfy the legal requirements applicable to Purchaser relevant to the
purchase or holding of the Shares.
 
5.2           Cooperation.  Purchaser shall provide such assistance, information
and documentation as the Company may reasonably request in connection with the
Company’s obligations under any applicable federal or state laws or regulations
concerning investments in the Company by non-U.S. Persons or other similar
reporting obligations.
 
5.3           Consummation of Transaction.  The Parties shall use all
commercially reasonable efforts to cause to be taken all actions necessary to
consummate the Contemplated Transactions.
 
5.4           [RESERVED]
 
5.5           Use of Proceeds.  Except as the Purchaser may otherwise approve,
the Company shall use the proceeds from the sale of Shares solely in accordance
with Exhibit C to this Agreement with such variances, not to exceed two percent
(2%) without the Purchaser’s consent, deemed necessary or desirable by
management in light of actual future developments.
 
 
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5.6           Disclosure of Transactions and Other Material Information.  On or
before 8:00 a.m. in Washington, D.C. on the business day immediately following
(a) the Initial Closing Date, the Company shall file a Current Report on Form
8-K describing the terms of the Contemplated Transactions in the form required
by the Exchange Act and (b) unless not required under applicable securities laws
and rules and regulations of the SEC, each Closing Date after the Initial
Closing Date, the Company shall file a Current Report on Form 8-K describing
such Closing in the form required by the Exchange Act.  Before the initial Form
8-K is filed following the Initial Closing Date, neither the Company nor its
Subsidiaries nor Purchaser shall issue any press releases or any other public
statements with respect to the Contemplated Transactions.  The Company shall
consult with Purchaser regarding the initial press release and any subsequent
press release regarding the Contemplated Transactions following the Initial
Closing Date or any subsequent Closing Date.  Neither the Company nor its
Subsidiaries shall issue any other press releases or any other public statements
with respect to the Contemplated Transactions or the Purchaser or its Affiliates
without the prior written consent of Purchaser; provided, however, that after
the initial press release regarding the Contemplated Transactions, the Company
may make public statements in press releases or otherwise concerning the
Contemplated Transactions that are consistent in all material respects with such
initial press release and other public statements concerning the Contemplated
Transactions; and provided further, that any such subsequent public statements
by the Company that name or provide any information concerning the Purchaser, or
any of its Affiliates, shall require the prior written consent of the Purchaser.
 
5.7           Compliance with Laws.  The Company shall comply, and cause each
Subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could reasonably be expected to have a Material Adverse
Effect on the Company.
 
5.8           Information Rights.  For purposes of this Agreement, a “Governance
Event” means the occurrence of one of the following:  (i) a majority of the
persons who constitute the Board are persons who the board of directors of the
Company has in good faith determined are “independent” under the rules,
regulations and standards promulgated by (A) the SEC and (B) Nasdaq or the New
York Stock Exchange, and all of the members of the audit and compensation
committees of the Board are independent; or (ii) Purchaser’s divestiture of
Shares resulting in Purchaser holding fewer than twenty million (20,000,000)
Shares; or (iii) the sale of all or substantially all of the assets of the
Company or a merger, consolidation or similar transaction in which the
shareholders of the Company immediately before the transaction hold less than a
majority of the outstanding shares of the Company (or its parent) immediately
after consummation of the transaction.  From and after the date of the Initial
Closing and until the earlier of (1) the termination of this Agreement by the
Company pursuant to Section 10.1(e) and (2) a Governance Event (such period, the
“Governance Period”), the Company shall deliver to Purchaser (unless any of
following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system):
 
(a)           as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company (or, if the Company has filed a
Form 12b-25 (or any successor form) with the SEC then within the period of time
specified in Rule 12b-25 for filing its annual report on Form 10-K with respect
to such fiscal year), (i) a balance sheet as of the end of such year, (ii)
statements of income and of cash flows for such year, and a comparison between
(x) the actual amounts as of and for such fiscal year and (y) the comparable
amounts for the prior year, with an explanation comparable to the explanation to
be included in an annual report on Form 10-K of any material differences between
such amounts, and (iii) a statement of stockholders’ equity as of the end of
such year, all such financial statements audited and certified by independent
public accountants of nationally recognized standing selected by the Company;
 
(b)           as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company (or, if the Company has filed a Form 12b-25 (or any successor
form) with the SEC then within the period of time specified in Rule 12b-25 for
filing its quarterly report on Form 10-Q with respect to the most recently
completed quarter), unaudited statements of income and of cash flows for such
fiscal quarter, and an unaudited balance sheet and a statement of stockholders’
equity as of the end of such fiscal quarter, all prepared in accordance with
GAAP (except that such financial statements may (i) be subject to normal
year-end audit adjustments and (ii) not contain all notes thereto that may be
required in accordance with GAAP);
 
 
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(c)           as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, a statement showing the number of shares of each class and
series of capital stock and securities convertible into or exercisable for
shares of capital stock outstanding at the end of the period, the Common Stock
issuable upon conversion or exercise of any outstanding securities convertible
or exercisable for Common Stock and the exchange ratio or exercise price
applicable thereto, and the number of shares of issued stock options and stock
options not yet issued but reserved for issuance, if any, all in sufficient
detail as to permit Purchaser to calculate its respective percentage equity
ownership in the Company, and certified by the chief financial officer or chief
executive officer of the Company as being true, complete, and correct;
 
(d)           as soon as practicable, but in any event within thirty (30) days,
following the end of each month, an unaudited income statement and statement of
cash flows for such month, and an unaudited balance sheet and statement of
stockholders’ equity as of the end of such month, all prepared in accordance
with GAAP (except that such financial statements may (i) be subject to normal
year-end audit adjustments and (ii) not contain all notes thereto that may be
required in accordance with GAAP) and a report summarizing all new information
that management reasonably believes is material relating to litigation,
regulatory matters, defaults, and other events and occurrences with respect to
the Company; and
 
(e)           as soon as practicable, but in any event not less than thirty (30)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year (collectively, the “Budget”), approved by the Board, including
balance sheets, income statements, and statements of cash flow for each month
and, promptly after prepared, any other budgets or revised budgets prepared by
the Company;
 
(f)           with respect to the financial statements called for in
Sections 5.8(a), 5.8(b) and 5.8(d), a certificate signed by the chief financial
officer of the Company certifying that such financial statements were prepared
in accordance with GAAP consistently applied with prior practice for earlier
periods (except as otherwise set forth in Sections 5.8(b) and 5.8(d)) and fairly
present the financial condition of the Company and its results of operation for
the periods specified therein;
 
(g)           as soon as practicable, but in any event within thirty (30) days
of the end of each month, a summary of the status of all products under
development, including, for each product:  (i) regulatory status and expected
timing for each phase of the U.S. Food and Drug Administration (“FDA”) approval
process, (ii) results of interim testing, (iii) cost of development (historical
and projected) and (iv) a summary of critical technology or research necessary
for FDA approval;

 
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(h)           copies of all reports, opinions, applications or other
documentation related to the process of obtaining FDA approval for any of the
Company’s products currently marketed or under development;
 
(i)            copies of any reports filed by the Company with any relevant
securities exchange, regulatory authority or governmental agency, copies of any
such reports or documents, provided that such reports or other documents are not
available to the public;
 
(j)            copies of all other documents or other information sent to any
Person in such Person’s capacity as a shareholder of the Company, and notice of
any material liabilities incurred by or threatened against, and any material
lawsuit or other material claim filed or threatened against, the Company or any
Affiliate thereof; and
 
(k)           such other information relating to the financial condition,
business, prospects, or corporate affairs of the Company as Purchaser may from
time to time reasonably request.
 
If, for any period, the Company has any Subsidiary whose accounts are
consolidated with those of the Company, then in respect of such period the
financial statements delivered pursuant to the foregoing sections shall be the
consolidated and consolidating financial statements of the Company and all such
consolidated Subsidiaries.
 
5.9           Matters Requiring Purchaser Approval.  During the Governance
Period, the Company shall not, without the prior written consent of Purchaser:
 
(a)           make, or permit any Subsidiary to make, any loan or advance to, or
own any stock or other securities of, any subsidiary or other corporation,
partnership, or other entity, unless it is wholly owned by the Company;
 
(b)           make, or permit any subsidiary to make, any loan or advance to any
Person, including, without limitation, any employee or director of the Company
or any subsidiary, except advances and similar expenditures in the ordinary
course of business;
 
(c)           guarantee, directly or indirectly, or permit any subsidiary to
guarantee, directly or indirectly, any indebtedness, except for trade accounts
of the Company or any Subsidiary arising in the ordinary course of business;
 
(d)           make any investment inconsistent with any investment policy
approved by the Board;
 
(e)           incur any aggregate Indebtedness in excess of US$50,000, other
than trade credit incurred in the ordinary course of business;
 
(f)           enter into or be a party to any transaction with any director,
executive officer or employee of the Company or any “associate” (as defined in
Rule 12b-2 promulgated under the Exchange Act) of any such Person; provided,
however, that the Company and/or the Board of Directors of the Company (the
“Board”) may, without the consent of Purchaser, appoint independent directors to
the Board and may enter into customary indemnification agreements and other
customary arrangements with such directors;
 
 
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(g)          change the compensation of the executive officers, including
approving any option grants or stock awards to executive officers;
 
(h)          change the principal business of the Company, enter new lines of
business, or exit the current line of business;
 
(i)           acquire or begin development of any product not currently under
development by the Company or abandon the development of any product currently
under development by the Company;
 
(j)           sell, assign, license, pledge, or encumber material technology or
Intellectual Property;
 
(k)          enter into any corporate strategic relationship involving the
payment, contribution, or assignment by the Company or to the Company of money
or assets greater than US$50,000;
 
(l)           amend or otherwise modify the Restated Certificate, the Bylaws or
the equivalent organizational documents of any of its Subsidiaries, in any
material respect;
 
(m)         with the exception of the Contemplated Transactions, agreements
currently in place and disclosed to Purchaser and employee stock plans, issue,
sell, contract to issue or sell, pledge, dispose of, grant, encumber or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of (i)
any equity interests of the Company or any of the Subsidiaries, (ii) any
options, warrants, convertible securities or other rights of any kind to acquire
any equity interest, or any other ownership interest, of the Company or any of
the Subsidiaries, or (iii) any material portion of the assets of the Company or
any of the Subsidiaries;
 
(n)          reclassify, combine, split, subdivide, redeem, purchase, or
otherwise acquire, directly or indirectly, any of the securities of the Company
or the Subsidiaries, except pursuant to agreements that are outstanding on the
Closing Date;
 
(o)          adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of the Subsidiaries or permit the corporate existence of
the Company or any of the Subsidiaries or the rights or franchises or any
license, permit or authorization under which the business of the Company or any
of the Subsidiaries operates, to be suspended, lapsed or revoked; or
 
(p)          agree to do any of the foregoing.
 
5.10           Listing of Shares.  The Company shall use all commercially
reasonable efforts to comply with such requirements so that the Common Stock
will continue to be listed on at least one of the OTC Bulletin Board, NASDAQ,
American Stock Exchange or the New York Stock Exchange.  The Company shall
promptly secure the listing of all of the Shares upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed.  Neither the Company nor any of its Subsidiaries shall take any
action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the OTC Bulletin Board, NASDAQ or the New York
Stock Exchange.  The Company shall pay all fees and expenses in connection with
satisfying its obligations under this section.
 
 
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5.11           Opinions.  In connection with an opinion to be rendered in
connection with Sections 4.7 or 4.8, the Company shall, to the extent it is
able, provide such certifications as Purchaser’s counsel may reasonably deem
necessary for the delivery of such opinion.
 
5.12           Blue Sky.  The Company shall, on or before the Initial Closing
Date, take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Shares for sale to Purchaser
at the Closings pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to
Purchaser on or prior to the Initial Closing Date.  The Company shall make all
filings and reports relating to the offer and sale of the Shares required under
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Dates.
 
5.13           Employee Agreements.  The Company will (a) cause each person
hereafter employed by it or by any subsidiary, and (b) use commercially
reasonable efforts to cause each person now employed by it or by any subsidiary
with access to material confidential information and/or trade secrets, to the
extent any such person has not already, to enter into a traditional
nondisclosure and proprietary rights assignment agreement substantially in the
form approved by the Board of Directors, and will use commercially reasonable
efforts to cause each person engaged by the Company or any subsidiary as an IP
Consultant to enter into customary arrangements to maintain the confidentiality
of the Company’s confidential or trade secret information and assign to the
Company the intellectual property rights relating to deliverables resulting from
the services that such IP Consultant agrees to perform for the Company under the
Company’s agreements with such IP Consultant.
 
6           CONDITIONS TO PURCHASER’S OBLIGATIONS AT CLOSING.
 
6.1            Closing Conditions.  The obligations of Purchaser under Section 2
of this Agreement to purchase the Shares at each Closing are subject to the
fulfillment or waiver, on or before the applicable Closing Date, of each of the
conditions set forth below, and the Company shall use all commercially
reasonable efforts to cause such conditions to be satisfied on or before such
Closing Date.  These conditions are for Purchaser’s sole benefit and may be
waived by Purchaser at any time in its sole discretion.
 
(a)           Representations and Warranties True.  Each of the representations
and warranties of the Company contained in this Agreement shall be true and
correct in all respects (in the case of any representation or warranty qualified
by materiality or Material Adverse Effect) or in all material respects (in the
case of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of such Closing Date with the same effect as though
such representations and warranties had been made on and as of such Closing
Date, except that with respect to the Milestone Closings, the failure of a
representation or warranty to be true and correct as if made on and as of a
Milestone Closing Date because of actions or events occurring after the Initial
Closing Date in the ordinary course of the Company’s business which have not
resulted in a Material Adverse Effect shall not be deemed to be a failure to
satisfy the closing condition set forth in this paragraph.
 
 
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(b)           Performance.  The Company shall have performed and complied in all
material respects with all agreements, obligations and conditions contained in
this Agreement or the Registration Rights Agreement (as defined below) that are
required by this Agreement or the Registration Rights Agreement to be performed
or complied with by it on or prior to or on the applicable Closing Date and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
 
(c)           No Material Adverse Effect.  There shall not have occurred a
Material Adverse Effect between the date of this Agreement and such Closing
Date.
 
(d)           Officer’s Certificate.  The President of the Company shall have
delivered to Purchaser a certificate, dated as of the Closing Date, certifying
that (i) the conditions specified in Subsections 6.1(a), 6.1(b), 6.1(c), 6.1(h),
6.1(i), 6.1(k) and 6.1(l) have been satisfied, and (ii) in the case of any
Milestone Closing, the condition specified in Subsections 6.1(n) has been
satisfied.
 
(e)           Opinion of Company Counsel.  Purchaser shall have received from
Weintraub Genshlea Chediak, counsel for the Company, an opinion, dated as of the
applicable Closing Date, in substantially the form of Exhibit D attached to this
Agreement.
 
(f)            Secretary’s Certificate.  The Secretary of the Company shall have
delivered to Purchaser a certificate, executed on behalf of the Company by its
Secretary, dated as of the applicable Closing Date, certifying (i) the
resolutions adopted by the Board approving the Contemplated Transactions, (ii)
the Restated Certificate, (iii) the Bylaws and (iv) the signatures and authority
of Persons signing the Agreement, the Registration Rights Agreement, and any
certificates or other documents on behalf of the Company.
 
(g)           [RESERVED]
 
(h)           Preemptive Rights.  The Company shall have fully satisfied
(including with respect to rights of timely notification) or obtained
enforceable waivers in respect of any preemptive or similar rights relating to
any of its securities.
 
(i)            Regulatory Approvals.  Purchaser shall have obtained all material
required governmental, foreign exchange and regulatory approvals or consents in
its jurisdiction of organization that are required under the laws of its
jurisdiction of organization in order for Purchaser to purchase the Shares as
contemplated by this Agreement.
 
(j)            Registration Rights Agreement.  The Company and Purchaser shall
have entered into a registration rights agreement (the “Registration Rights
Agreement”), dated as of the Initial Closing Date, in substantially the form of
Exhibit E attached to this Agreement.
 
(k)           No Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the Contemplated Transactions.
 
 
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(l)            No Proceedings or Litigation.  No action, suit or proceeding by
or before any governmental authority or arbitrator shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
Affiliates of the Company or any Subsidiary, seeking to restrain, prevent or
change the Contemplated Transactions, or seeking damages in connection with such
Contemplated Transactions.
 
(m)           Milestones.  With respect to the Milestone Closings only, the
milestone events applicable to such Milestone Closing, as specified in Exhibit A
attached to this Agreement (the “Applicable Milestones”) shall have occurred or
been achieved; provided that, the determination of whether the Applicable
Milestones have been achieved as of any date shall be made by Purchaser in its
reasonable discretion.
 
7           CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING.
 
7.1           Closing.  The obligations of the Company under this Agreement to
sell the Shares to Purchaser at each Closing are subject to the fulfillment or
waiver, on or before the applicable Closing Date, of the conditions set forth
below, and Purchaser shall use all commercially reasonable efforts to cause such
conditions to be satisfied on or before such Closing Date.  These conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion.
 
(a)           Representations and Warranties.  Each of the representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects on and as of such Closing Date with the same effect as
though such representations and warranties had been made on and as of such
Closing Date.
 
(b)           Performance.  Purchaser shall have performed and complied in all
material respects with all agreements, obligations and conditions contained in
this Agreement that are required by this Agreement to be performed or complied
with by it on or prior to the applicable Closing Date and shall have obtained
all approvals, consents and qualifications necessary to complete the purchase
and sale described herein.
 
(c)           Regulatory Approvals.  Purchaser shall have obtained all material
required governmental, foreign exchange and regulatory approvals or consents in
its jurisdiction of organization that are required under the laws of its
jurisdiction of organization in order for Purchaser to purchase the Shares as
contemplated by this Agreement.
 
(d)           No Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the Contemplated Transactions.
 
8           [RESERVED]
 
 
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9           ADDITIONAL ISSUANCES OF SECURITIES.
 
9.1           Right of First Offer.  Subject to the terms and conditions of this
Section 9.1 and applicable securities laws, during the Governance Period, if the
Company proposes to offer or sell any New Securities (as defined below) in a
transaction primarily for purposes of financing the operations or business of
the Company and its Subsidiaries, the Company shall first offer such New
Securities to Purchaser in accordance with the procedures set forth in this
Section 9.1.  Purchaser shall be entitled to apportion the right of first offer
hereby granted to it among itself and its Affiliates (as defined below) in such
proportions as it deems appropriate.  For purposes of this Agreement:  (x)
“Affiliate”, with respect to any Party, means an entity over fifty percent (50%)
of the voting securities of which are directly or indirectly owned by such
Party, or an entity that directly or indirectly owns over fifty percent (50%) of
the voting securities of such Party, and (y) “New Securities” means any
securities (as defined by the Securities Act and the Rules and Regulations) of
the Company proposed or intended to be offered, issued or exchanged by the
Company during the Governance Period; provided, however, that “New Securities”
shall not include any of the following:
 
(i)           shares issued or sold upon the exercise of any options,
convertible security, warrant or other right or agreement to which the Company
is party that is outstanding on the date of this Agreement;
 
(ii)          shares of Common Stock or options therefor (or similar equity
incentives) issued to employees, consultants, officers, directors or vendors (if
in transactions with primarily non-financing purposes) of or to the Company;
 
(iii)         shares of Common Stock issued pursuant to the conversion or
exercise of convertible or exercisable securities outstanding as of the date
hereof or subsequently issued;
 
(iv)         shares issued in connection with a bona fide business acquisition
of or by the Company, whether by merger, consolidation, sale or purchase of
assets, sale or exchange of stock or otherwise;
 
(v)          shares issued in exchange for the acquisition or in-licensing of
intellectual property rights, products or technologies; or
 
(vi)         shares of Common Stock issued or issuable in exchange for other
than cash in connection with any other transaction that is not for the primary
purpose of financing the Company’s business.
 
(a)           The Company shall give notice (the “Offer Notice”) to Purchaser,
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price (or range of
proposed prices) and other material terms (to the extent then-known), if any,
upon which it proposes to offer such New Securities.
 
(b)           By notification (the “New Securities Purchase Notice”) to the
Company within ten (10) business days after the Offer Notice is given (the “New
Securities Sale Election Period”), Purchaser may elect to purchase or otherwise
acquire all or any portion of the New Securities at the price (expressed on per
share basis, if applicable) and on the terms specified in the Offer Notice.  If
the Company delivers a New Securities Purchase Notice, the Parties shall
cooperate to enter into a definitive purchase agreement as promptly thereafter
as reasonably practicable.
 
 
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(c)           If all New Securities referred to in the Offer Notice are not
elected to be purchased or acquired as provided in Section 9.1(b), the Company
may, during the ninety (90) day period following the expiration of the New
Securities Sale Election Period (or, if the offering is pursuant to a
registration statement filed with the SEC, then within sixty (60) days after the
registration statement is declared effective by the SEC), offer and sell the
remaining unsubscribed portion of such New Securities to any Person or Persons
at a price not less than, and upon terms no more favorable in material respects
to the offeree than, those specified in the Offer Notice.  If the Company does
not enter into an agreement for the sale of the New Securities within such
period, or if such agreement (or, if the agreement contemplates multiple
closings, the initial closing) is not consummated within thirty (30) days of the
execution thereof, the right provided under this Section 9 shall be deemed to be
revived and such New Securities shall not be offered, unless first reoffered to
Purchaser in accordance with this Section 9.
 
10           TERMINATION OF AGREEMENT.
 
10.1           Termination.  This Agreement may be terminated:
 
(a)           at any time by mutual written consent of the Company and
Purchaser;
 
(b)           (i) by Purchaser if satisfaction of any of the conditions in
Section 6 is or becomes impossible prior to any Closing Date (other than through
the failure of Purchaser to comply with its obligations under this Agreement)
and Purchaser has not waived such condition on or before such Closing Date; or
(ii) by the Company, if satisfaction of any of the conditions in Section 7
hereof is or becomes impossible prior to any Closing Date (other than through
the failure of the Company to comply with its obligations under this Agreement)
and the Company has not waived such condition on or before such Closing Date;
 
(c)           [reserved];
 
(d)           by either Party if a Milestone Closing shall not have been
consummated by applicable Milestone Closing Outside Date as set forth on Exhibit
A; provided, however, that the right to terminate this Agreement pursuant to
this Subsection 10.1(c) shall not be available to a Party if such Party’s
failure to fulfill or diligently pursue fulfillment of any material obligation
under this Agreement has been a principal cause of or resulted in the failure of
such Milestone Closing to occur on or before the applicable Milestone Closing
Outside Date;
 
(e)           by either Party if a material breach of any provision of this
Agreement has been committed by the other Party and such breach has not been
waived or cured within ten (10) business days after the date of delivery of a
notice from such Party to the other Party specifying in reasonable detail the
nature of the alleged material breach; provided, that (i) no such notice need be
given in the case of a material breach that cannot by its nature by cured, and
(ii) for purposes of determining whether there has been a material breach of any
provision of this Agreement, all references to “material” and “Material Adverse
Effect” (or similar words or phrases) shall be ignored;
 
 
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(f)           by Purchaser if a material breach of any provision of the
Registration Rights Agreement has been committed by the Company and such breach
has not been waived or cured within ten (10) business days after the date of
delivery of a notice from such Party to the other Party specifying in reasonable
detail the nature of the alleged material breach; provided, that (i) no such
notice need be given in the case of a material breach that cannot by its nature
by cured, and (ii) for purposes of determining whether there has been a material
breach of any provision of the Registration Rights Agreement, all references to
“material” and “Material Adverse Effect” (or similar words or phrases) shall be
ignored; or
 
(g)           at any time by either Party if a court of competent jurisdiction
or other governmental authority shall have issued a non-appealable final order,
decree or ruling or taken any other non-appealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Contemplated Transactions; provided, however, that neither Party may
terminate this Agreement pursuant to this Subsection 10.1(g), unless that Party
first shall have used all commercially reasonable efforts to procure the
removal, reversal, dissolution, setting aside or invalidation of any such order,
decree, ruling or action.
 
10.2           Effect of Termination.  In the event of the termination of this
Agreement as provided in Section 10.1, this Agreement shall be of no further
force or effect; provided, however, that (i) Sections 5.2, 5.5, 5.8, 5.9, 5.10,
5.11, 5.12, 9, 10.2, 11 and 12 shall survive the termination of this Agreement
and shall remain in full force and effect and (ii) the termination of this
Agreement shall not relieve any Party from any liability for any breach of any
representation, warranty, covenant, obligation or other provision contained in
this Agreement.
 
11           BOARD MATTERS.
 
11.1           Board Observer.  For purposes of this Agreement, the “Board
Observer Period” shall commence after the Initial Closing and shall continue
until the earlier to occur of the following events:  (i) Purchaser divests
Shares resulting in Purchaser holding fewer than twenty million (20,000,000)
Shares; (ii) the number of Shares held by Purchaser represents less than ten
percent (10%) of the outstanding shares of Common Stock of the Company; or (iii)
the sale of all or substantially all of the assets of the Company or a merger,
consolidation or similar transaction in which the shareholders of the Company
immediately before the transaction hold less than a majority of the outstanding
shares of the Company (or its parent) immediately after consummation of the
transaction.  During the Board Observer Period, the Company shall allow a
representative of Purchaser, reasonably satisfactory to the Company, to attend
all meetings of the Board in a non-voting observer capacity (the
“Observer”).  The Observer shall (i) be entitled to attend each telephonic or in
person meeting of the Board; (ii) not have any voting rights; and (iii) not be
included for the purposes of determining the presence of a quorum at any meeting
of the Board.  The Company shall provide to Purchaser the same notices, minutes,
consents and other materials that the Company provides to its directors at the
same time and in the same manner as provided to such directors.  The Company
shall have the right to withhold any information and to exclude the Observer
from any portion of a meeting if the Chairman of the Board or a majority of
members of the Board reasonably and in good faith determine, upon advice of
counsel, that access to such information or attendance would (i) jeopardize the
attorney-client privilege between the Company and its counsel or (ii) result in
a violation of any applicable law or would otherwise be inappropriate due to
conflicting or differing interests between the Company and Purchaser or any
Affiliate of Purchaser or any Person of which Purchaser is an Affiliate.  The
rights set forth in this Section are contingent upon the Observer and Purchaser
agreeing to hold in confidence and trust all information provided to it or
learned by it in connection with its rights under this Section.  The Observer
and Purchaser shall not disclose or use such information other than for a
Company purpose or with the Company’s consent or use such information in
connection with managing Purchaser’s investment in the Company.  Purchaser
acknowledges that it is aware that the United States securities laws prohibit
any person who has material non-public information about a company from
purchasing or selling securities of such company, or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities, and
it agrees not to engage in any unlawful trading in securities of the Company or
unlawful misuse or misappropriation of any such information.
 
 
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11.2           Visitation Rights.  At all times during the Board Observer
Period, the Company shall permit a representative of Purchaser, at Purchaser’s
expense, to visit and inspect the Company’s offices and discuss the Company’s
affairs, finances and business with its officers, all at such reasonable times
as may be requested by Purchaser.  Such discussions may also be via telephone or
video conference.
 
11.3           Meetings of the Board of Directors.  During the Board Observer
Period, unless agreed to otherwise by Purchaser, the Board of Directors shall
meet at least two times per quarter in accordance with an agreed-upon schedule
and reasonable accommodation shall be made to allow the Observer to participate.
 
12           MISCELLANEOUS.
 
12.1           Survival of Warranties.  The representations, warranties and
covenants of the Company and Purchaser contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and each of
the Closings and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of Purchaser, their counsel or the Company,
as the case may be.
 
12.2           Successors and Assigns.  The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the Parties.
 
12.3           Governing Law.  This Agreement shall be governed by and construed
under the laws of the State of Delaware, United States of America.
 
12.4           Dispute Resolution.  Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall be settled under the
rules of the American Arbitration Association (“AAA Rules”) in New York by a
single arbitrator appointed in accordance with the AAA Rules.  Judgment on the
award rendered by the arbitral tribunal may be entered in any court having
jurisdiction thereof.  The determination of the arbitral tribunal shall be final
and binding on the parties.
 
12.5           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
 
12.6           Headings.  The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.  All references in this Agreement to sections,
paragraphs, exhibits, and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
 
 
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12.7           Notices.  Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described.  Specifically, (i) if given by
personal delivery, then such notice shall be deemed given upon such delivery,
(ii) if given by facsimile or email of a PDF document (with confirmation of
transmission), then such notice shall be deemed given (x) if sent during normal
business hours of the recipient, on the date such facsimile or email was sent,
and (y) if sent after normal business hours of the recipient, on the next
business day after the date such facsimile or email was sent, (iii) if given by
internationally recognized air courier, then such notice shall be deemed given
upon the confirmed receipt of such notice by the recipient.  All notices shall
be addressed to the Party to be notified at the address as follows, or at such
other address as such Party may designate by ten (10) days advance written
notice to the other Party:
 
If to the Company:
 
Adamis Pharmaceuticals Corporation
2658 Del Mar Heights Road, #555
Del Mar, CA  92014
 
Email:  adcarlo@aol.com
 
Attn:  President
 
With a copy (with shall not constitute notice) to:
 
Weintraub Genshlea Chediak
400 Capitol Mall, 11th Floor
Sacramento, CA  95814
 
Attn:  C. Kevin Kelso, Esq.
 
Fax:  +1 (916) 446-1611
 
Email:  kkelso@weintraub.com
 
If to Purchaser:
 
Eses Holdings (FZE)
P.O. Box 9366
Sharjah, United Arab Emirates
 
Email:  shayan@rahman.net
 
With copies to (with shall not constitute notice) to:
 
Curtis, Mallet-Prevost, Colt &Mosle LLP
The Gate Village Building 1, Level 1, Unit 105
Dubai International Financial Centre
P.O. Box 9498
Dubai, United Arab Emirates
 
Attn:  Peter Stewart, Esq.
 
Fax:  +971 4 325 9143
 
Email:  pstewart@curtis.com
 
and
 
Curtis, Mallet-Prevost, Colt &Mosle LLP
101 Park Avenue, 35th Floor
New York, NY  10178-0061
 
Attn:  Peter Stewart, Esq.
 
Fax:  +1 (212) 697-1559
 
Email:  pstewart@curtis.com
 
 
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12.8           Finder’s Fees.  Purchaser agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finder’s or broker’s fee (and any asserted liability) for which
Purchaser or any of its officers, partners, employees, or representatives is
responsible; and the Company agrees to indemnify and to hold harmless Purchaser
from any liability for any commission or compensation in the nature of a
finder’s or broker’s fee (and any asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
 
12.9           Fees and Expenses.  Each party shall pay the fees and expenses of
its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, that in
connection with the preparation of this Agreement, the Company shall pay an
expense allowance to Purchaser or its designee(s) in an amount not to exceed
US$25,000, which amount shall be withheld by Purchaser from amounts paid at the
Initial Closing.
 
12.10         Amendments and Waivers.  Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and Purchaser, except that a Party may
unilaterally waive any condition to such Party’s obligations at Closing set
forth in Section 6 or 7, as applicable.
 
12.11         Severability.  If one or more provisions of this Agreement are
held to be invalid, illegal or unenforceable under applicable law, such
provision(s) shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.
 
12.12         Entire Agreement.  This Agreement, together with the Registration
Rights Agreement and any exhibits or schedules hereto or thereto, constitutes
the entire agreement and understanding of the Parties with respect to the
subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
Parties with respect to the subject matter hereof.
 
12.13         Further Assurances.  From and after the date of this Agreement,
upon the request of Purchaser or the Company, the Company and Purchaser shall
execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
 
12.14         Confidential Information.  Purchaser agrees to keep confidential
and not disclose any nonpublic information concerning the Company that Purchaser
acquires from the Company; provided, however, that in the event that Purchaser
learns any material nonpublic information about the Company of which it
determines, upon advice of U.S. counsel, public disclosure is necessary,
Purchaser shall have the right to require the Company to make promptly a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information.  Purchaser acknowledges that Purchaser
is aware that the United States securities laws prohibit any person who has
material non-public information about a company from purchasing or selling
securities of such company, or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, and it agrees not to
engage in any unlawful trading in securities of the Company.
 
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28

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IN WITNESS WHEREOF, the Parties hereto have executed this Common Stock Purchase
Agreement as of the date first above written.
 

ADAMIS PHARMACEUTICALS CORPORATION
 
ESES HOLDINGS (FZE)
         
By:
/s/ Dennis J. Carlo
 
By:
/s/ Ahmed Shaman Fazlur Rahman
Name:  
Dennis J. Carlo  
Name:  
Ahmed Shaman Fazlur Rahman 
Its:
President and CEO  
Its:
Owner and Manager 

 
 
 

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EXHIBIT A
 
MILESTONES
 
Milestone
Amount of Investment
Number of Shares
Milestone Events
Milestone Outside Date
1
US$2,500,000
10,000,000
●The following date shall have passed:  January 1, 2011
●Complete manufacture of the telomerase gene or CPC-100
●Submission to FDA of IND filing for telomerase vaccine or CPC-100 clinical
study
●Licenses finalized for  telomerase vaccine
●Complete clinical trial protocol for three specialty pharma products
April 30, 2011
         
2
US$2,500,000
10,000,000
●The following date shall have passed:  February 1, 2011
●Submit documentation to Institutional Review Board (IRB) for telomerase vaccine
clinical trial
●Submission to FDA of IND filing for both telomerase vaccine and CPC100 clinical
study
●Submit documentation to IRB for CPC100 clinical trial
●Begin manufacturing of CPC-200
●Complete clinical protocol for CPC200 clinical trial (everything except the
dosing schedule)
April 30, 2011

 
A-1

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EXHIBIT B
 
REGULATION S REPRESENTATIONS
 
(a)           Purchaser understands and acknowledges that (A) the Shares are
being sold in reliance upon an exemption from registration afforded by
Regulation S promulgated under the Securities Act (or other applicable exemption
from the registration requirements under the Securities Act), and that such
Shares have not been registered with any state securities commission or
authority; and (B) pursuant to the requirements of Regulation S, the Shares may
not be transferred, sold or otherwise exchanged, unless in compliance with the
provisions of Regulation S and/or pursuant to registration under the Securities
Act, or pursuant to another available exemption thereunder.
 
(b)           Purchaser is not a U.S. Person (as defined under Regulation S) and
is not acquiring the Shares of for the account of any U.S. Person; no director
or executive officer of Purchaser (if a corporation) is a national or citizen of
the United States; and Purchaser is not otherwise deemed to be a “U.S. Person”
within the meaning of Regulation S.
 
(c)           Purchaser was not formed specifically for the purpose of acquiring
the Shares purchased pursuant to this Agreement.
 
(d)           The offer leading to the sale evidenced hereby was made in an
“offshore transaction.”  For purposes of Regulation S, Purchaser understands
that an “offshore transaction” as defined under Regulation S is any offer or
sale not made to a person in the United States and either (A) at the time the
buy order is originated, the purchaser is outside the United States, or the
seller or any person acting on his/her behalf reasonably believes that the
purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of
Regulation S, the transaction is executed in, or on or through a physical
trading floor of an established foreign exchange that is located outside the
United States or (2) Rule 904 of Regulation S, the transaction is executed in,
on or through the facilities of a designated offshore securities market, and
neither the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the U.S.
 
(e)           Neither Purchaser, nor any affiliate or any Person acting on
Purchaser’s behalf, has made or is aware of any “directed selling efforts” in
the United States, which is defined in Regulation S to be any activity
undertaken for the purpose of, or that could reasonably be expected to have the
effect of, conditioning the market in the United States for any of the Shares
being purchased hereby.
 
(f)           Purchaser understands that the Company is the seller of the Shares
which are the subject of this Agreement, and that, for purpose of Regulation S,
a “distributor” is any underwriter, dealer or other person who participates,
pursuant to a contractual arrangement, in the distribution of securities offered
or sold in reliance on Regulation S and that an “affiliate” is any partner,
officer, director or any person directly or indirectly controlling, controlled
by or under common control with any person in question.  Purchaser agrees that
he/she will not, during the Restricted Period set forth under Rule
903(b)(iii)(A), act as a distributor, either directly or through any affiliate,
nor shall he/she sell, transfer, hypothecate or otherwise convey the Shares
other than to a non-U.S. Person.
 
(g)           Purchaser is purchasing the Shares for its own account and risk
and not for the account or benefit of a U.S. Person (as defined in Regulation S)
and no other person has any interest in or participation in the Shares or any
right, option, security interest, pledge or other interest in or to the Shares.
 
(h)           Purchaser will, after the expiration of the Restricted Period, as
set forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or
otherwise transfer the Shares only in accordance with Regulation S, or pursuant
to an available exemption under the Securities Act and, in any case, in
accordance with applicable state securities laws.  The transactions contemplated
by this Agreement have neither been pre-arranged with a purchaser who is in the
U.S. or who is a U.S. Person, nor are they part of a plan or scheme to evade the
registration provisions of the United States federal securities laws.
 
 
B-1

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EXHIBIT C
 
USE OF FUNDS
 
 
Initial Closing
 
Amount:  US$4,975,000
 
Use of funds:
 
●   US$[*] – Operating expenses (including non-product salaries, legal, audit,
insurance, rent, utilities, etc.)
 
●   US$[*] – Product development, biotech and specialty pharma products
 
●   US$[*] – Retirement of debt and AP
 
1st Milestone Closing:
 
Amount:  US$2,500,000
 
Use of funds:
 
●   US$[*] – Operating expenses (see above)
 
●   US$[*] – Product development, biotech and specialty pharma products
 
●   US$[*] – Retirement of debt and AP
 
2nd Milestone Closing:
 
Amount:  US$2,500,000
 
Use of funds:
 
●   US$[*] – Operating expenses (see above)
 
●   US$[*] – Product development, biotech and specialty pharma products
 
●   US$[*] – Retirement of debt and AP
 
 
C-1

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EXHIBIT D
 
FORM OF OPINION OF COUNSEL

 
D-1

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EXHIBIT E
 
FORM OF REGISTRATION RIGHTS AGREEMENT
 
 
E-1