EXHIBIT 10.1

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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
 
by and among
 
Access Pharmaceuticals, Inc.
 
and
 
the parties named herein on Schedule 1, as Purchasers
 

 

 

 

 

 
October 25, 2012
 
 
 
 
 

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This PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is dated
as of October 25, 2012, among Access Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and the purchasers identified on Schedule 1 hereto
(each a “Purchaser” and collectively the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company, in the aggregate, (i) up to 1,000 shares of the Company’s
Series B Cumulative Convertible Preferred Stock, and (ii) Common Stock Purchase
Warrants (the “Warrants”) entitling the holders thereof to purchase up to
20,000,000 shares of the Company’s Common Stock as more fully set forth herein.
 
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
 
ARTICLE I
 
DEFINITIONS AND TERMS OF PREFERRED STOCK AND WARRANTS
 
1.1           Certain Definitions; Terms of Preferred Stock and Warrants.
 
In addition to the terms defined elsewhere in this Agreement, for all purposes
of this Agreement, the following terms have the meanings indicated in this
Section 1.1:
 
“Accrued Dividends” shall have shall have the meaning ascribed to such term in
Section 2.1(c).
 
“Action” shall have the meaning ascribed to such term
in                                                                                               Section
3.1(j).
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144. With respect to
a Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.
 
“Agreement” shall have the meaning ascribed to such term in the Preamble.
 
“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday or a day on which banking institutions in the State of
Texas are authorized or required by law or other governmental action to close.
 
“Certificate of Designation” shall have the meaning ascribed to such term in
Section 1.2.
 
“Closing” shall have the meaning ascribed to such term in Section 2.1(a).
 
“Closing Date” shall have the meaning ascribed to such term in Section 2.1(a).
 
 
 

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“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, $0.01 par value per share,
and any securities into which such common stock may hereafter be reclassified.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
 
“Company” shall have the meaning ascribed to such term in the Preamble.
 
“Conversion Shares” means the shares of Common Stock issuable or issued upon
conversion of the Preferred Stock.
 
“Disclosure Schedules” means the Disclosure Schedules concurrently delivered
herewith.
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the Commission.
 
“Environmental Laws” shall have the meaning ascribed to such term in Section
3.1(y).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“FDC Act” shall have the meaning ascribed to such term in Section 3.1(m).
 
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
 
“Governmental Authorizations” shall have the meaning ascribed to such term in
Section 3.1(m).
 
“Hazardous Substances” shall have the meaning ascribed to such term in Section
3.1(y).
 
“Indemnified Party” shall have the meaning ascribed to such term in Section 5.3.
 
“Indemnifying Party” shall have the meaning ascribed to such term in Section
5.3.
 
“Intellectual Property” shall have the meaning ascribed to such term in Section
3.1(o).
 
“Investor Rights Agreement” means the Investor Rights Agreement, dated as of the
date of this Agreement, between the Company and each of the Purchasers, in the
form of Exhibit A hereto.
 
“Lien” means a lien, charge, security interest, encumbrance, right of first
refusal or other restriction, except for a lien for current taxes not yet due
and payable and a minor imperfection of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company.
 
 
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“Material Adverse Effect” shall have the meaning ascribed to such term in
Section 3.1(b).
 
“Per Share Purchase Price” equals $10,000.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Preferred Shares” means the shares of Preferred Stock issued to each Purchaser
pursuant to this Agreement.
 
“Preferred Stock” means the Company’s Series B Cumulative Convertible Preferred
Stock, par value $0.01 per share.
 
“Premises” shall have the meaning ascribed to such term in Section 3.1(y).
 
“Purchaser” shall have the meaning ascribed to such term in the Preamble.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Investor Rights Agreement and covering the resale by the
Purchasers of the Conversion Shares and the Warrant Shares.
 
“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
exercise or conversion in full of all Warrants and shares of Preferred Stock,
ignoring any conversion or exercise limits set forth therein, and assuming that
any previously unconverted shares of Preferred Stock are held until the fifth
anniversary of the Closing Date and all dividends are paid in shares of Common
Stock until such fifth anniversary.
 
“Rights” shall have the meaning ascribed to such term in Section 3.1(o).
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
 
“Securities” means the Preferred Shares, the Conversion Shares, the Warrants and
the Warrant Shares.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
 
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“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).
 
“Stockholder Approval” means required approval under applicable law and the
Company’s certificate of incorporation, as amended, for at least an additional
20,000,000 authorized shares of Common Stock (as such amount may be ratably
adjusted for stock splits, stock dividends and the like).
 
“Subscription Amount” means, as to each Purchaser, the aggregate purchase price
paid by such Purchaser at the Closing for the shares of Preferred Stock and
Warrants purchased by such Purchaser hereunder as set forth beside such
Purchaser's name on Schedule 1 hereto.
 
“Subsidiary” means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, are directly or indirectly owned by such entity or
of which such entity is a partner or is, directly or indirectly, the beneficial
owner of 50% or more of any class of equity securities or equivalent profit
participation interests.
 
“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market, or (ii) if the Common Stock is not listed on a Trading Market, a day on
which the Common Stock is traded on the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not listed on a Trading
Market or quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by OTC Markets Group (formerly
Pink Sheets LLC) (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
 
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the New York Stock Exchange or the Nasdaq Stock Market.
 
“Transaction Documents” means this Agreement, the Certificate of Designation,
the Investor Rights Agreement, the Warrants and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
 
“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion of the Preferred Stock, upon exercise of the Warrants and issued and
issuable in lieu of the cash payment of dividends on the Preferred Stock in
accordance with the terms of the Certificate of Designation.

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

 
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“Warrants” shall have the meaning ascribed to such term in the recitals hereto.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.
 
1.2              Terms of the Preferred Stock and Warrants.  The terms and
provisions of the Preferred Stock are set forth in the form of Certificate of
Designations, Rights and Preferences of Series B Cumulative Convertible
Preferred Stock, attached hereto as Exhibit B (the “Certificate of
Designation”).  The terms and provisions of the Warrants are as set forth in the
form of Common Stock Purchase Warrant, attached hereto as Exhibit C.
 
ARTICLE II
 
PURCHASE AND SALE
 
2.1           Closing.
 
(a)           The closing of the transactions contemplated under this Agreement
(the “Closing”) will take place upon the execution of this Agreement by the
Company and the Purchasers immediately following satisfaction or waiver of the
conditions set forth in Sections 2.2 and 2.3 (other than those conditions which
by their terms are not to be satisfied or waived until the Closing), at the
offices of Wiggin and Dana LLP, Two Stamford Plaza, 281 Tresser Boulevard,
Stamford, CT 06901 (or remotely via exchange of documents and signatures) or at
such other place or day as may be mutually acceptable to the Purchasers and the
Company.  The date on which the Closing occurs is the “Closing Date”.
 
(b)              At the Closing, the Purchasers shall purchase, severally and
not jointly, and the Company shall issue and sell, in the aggregate, 1,000
shares of Preferred Stock and Warrants to purchase 20,000,000 shares of Common
Stock. Each Purchaser shall purchase from the Company, and the Company shall
issue and sell to each Purchaser, a number of Preferred Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price and a
Warrant to purchase 100% of the number of Conversion Shares into which the
Preferred Shares purchased by such Purchaser are initially convertible. Except
to the extent paid in the form of surrender and cancellation of Accrued
Dividends (as defined below) pursuant to Section 2.1(c), the Subscription Amount
paid by each Purchaser shall be sent by wire transfer as follows:
 
Bank of America, NA
15303 N. Dallas Parkway
Addison, TX 75001

 
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SWIFT: BOFAUS3N
ABA# 026 009 593
Account# 0048 8183 4394
For credit: Access Pharmaceuticals, Inc.

 
(c)              A portion of the Subscription Amount payable by the Purchasers
for the Preferred Stock and Warrants purchased pursuant to this Agreement may be
payable by the surrender and cancellation of accrued but unpaid dividends in
favor of the Purchasers pursuant to the Company’s outstanding Series A
Cumulative Convertible Preferred Stock (“Accrued Dividends”) (such Accrued
Dividends not to exceed 55% of the total Subscription Amount payable by any such
Purchaser pursuant to this Agreement), representing an aggregate Accrued
Dividend amount of $5,297,300 and described next to such Purchaser’s name in
Schedule 1 hereto.  Each Purchaser tendering Accrued Dividends for cancellation
in payment of any portion of such Purchaser’s Subscription Amount hereby agrees
that such Accrued Dividends shall thereupon be cancelled as of the Closing but
that such Purchaser shall retain all other rights in connection with its
holdings of Series A Cumulative Convertible Preferred Stock.
 
2.2           Conditions to Obligations of Purchasers to Effect the Closing.
 
The obligations of each Purchaser to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by such Purchaser:
 
(a)              At the Closing (unless otherwise specified below) the Company
shall deliver or cause to be delivered to each Purchaser the following:
 
(i) this Agreement, duly executed by the Company;
 
(ii) a certificate evidencing a number of Preferred Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price as set
forth on Schedule 1 hereto, registered in the name of such Purchaser;
 
(iii) a Warrant, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire up to the number of shares of
Common Stock equal to 100% of the shares of Common Stock initially issuable upon
conversion of the Preferred Shares to be issued to such Purchaser at such
Closing, as set forth on Schedule 1 hereto;
 
(iv) the Investor Rights Agreement, duly executed by the Company;
 
(v) a legal opinion of Bingham McCutchen LLP, counsel to the Company, in the
form of Exhibit E hereto;
 
(vii) a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), attaching a true copy of the Certificate of Incorporation and
Bylaws of the Company, as amended to the Closing Date, and attaching true and
complete copies of the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents; and

 
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(vii)              evidence satisfactory to the Purchasers that the Certificate
of Designation was duly filed with, and accepted by, the Secretary of State of
the State of Delaware.
 
(b)              All representations and warranties of the Company contained
herein shall remain true and correct as of the Closing Date as though such
representations and warranties were made on such date (except those
representations and warranties that address matters only as of a particular date
will remain true and correct as of such date).

(c)              As of the Closing Date, there shall have been no Material
Adverse Effect with respect to the Company since the date hereof.
 
(d)              From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities.
 
2.3.              Conditions to Obligations of the Company to Effect the
Closing.
 
The obligations of the Company to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Company.
 
(a) At the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the following:
 
(i) this Agreement, duly executed by such Purchaser;
 
(ii) such Purchaser's Subscription Amount, as applicable, (A) by wire transfer
of immediately available funds to the Company and/or (B) in the case of
Purchasers paying a portion of their Subscription Amount by the cancellation of
Accrued Dividends held by them, by the cancellation of such Accrued Dividends
pursuant to Section 2.1(c); and
 
(iii) the Investor Rights Agreement, duly executed by such Purchaser.
 
(b)              All representations and warranties of each of the Purchasers
contained herein shall remain true and correct as of the Closing Date as though
such representations and warranties were made on such date.
 
(c)              The Certificate of Designation shall have been duly filed with,
and accepted by, the Secretary of State of the State of Delaware.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES
 
 
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3.1           Representations and Warranties of the Company.
 
Except as set forth under the corresponding section of the Disclosure Schedules
delivered concurrently herewith, or in the SEC Reports (with respect to Sections
3.1(a) and 3.1(h)-(kk) only), the Company hereby makes the following
representations and warranties as of the date hereof and as of the Closing Date
to each Purchaser:
 
(a)        Subsidiaries. Except as listed in Schedule 3.1(a), the Company has no
direct or indirect Subsidiaries.
 
(b)        Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or result in (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the business or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company's ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”).
 
(c)              Authorization; Enforceability. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby (including, but not limited to, the sale and delivery of
the Preferred Stock and Warrants) have been duly authorized by all necessary
corporate action on the part of the Company and no further corporate action is
required by the Company in connection therewith.  The issuance and delivery of
the Conversion Shares upon conversion of the Preferred Stock and the Warrant
Shares upon exercise of the Warrants have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company in connection therewith.  Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and rules of law governing specific performance,
injunctive relief, or other equitable remedies.
 
 
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(d)        No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except, in the cases of clause
(ii), where such conflict, default or violation would not have or result in a
Material Adverse Effect.
 
(e)              Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of the Registration Statement, the
application(s) to each Trading Market for the listing of the Conversion Shares
and Warrant Shares for trading thereon in the time and manner required thereby,
Form D and applicable Blue Sky filings, (ii) such as have already been obtained
or such exemptive filings as are required to be made under applicable securities
laws and (iii) the filing of the Certificate of Designation with the Secretary
of State of the State of Delaware.
 
(f)              Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens, other than any Liens created by or imposed on the holders thereof through
no action of the Company.  The Company has reserved from its duly authorized
capital stock (i) the maximum number of shares of Preferred Stock issuable
pursuant to this Agreement and (ii) the maximum number of shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants.
 
(g)        Capitalization.
 
(i)       The authorized and outstanding capitalization of the Company is set
forth on Schedule 3.1(g) hereto.  All shares of the Company’s issued and
outstanding capital stock have been duly authorized, are validly issued and
outstanding, and are fully paid and nonassessable. No securities issued by the
Company from March 1, 2002 to the date hereof were issued in violation of any
statutory or common law preemptive rights.  Except as set forth on Schedule
3.1(g), there are no dividends which have accrued or been declared but are
unpaid on the capital stock of the Company.  All taxes required to be paid by
the Company in connection with the issuance and any transfers of the Company’s
capital stock have been paid. The Rights Agreement dated as of October 31, 2001
by and between the Company and American Stock Transfer as Rights Agent has
expired.  All outstanding securities of the Company have been issued in all
material respects in accordance with the provisions of all applicable securities
and other laws.
 
 
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(ii)       Other than the holders of the Series A Cumulative Convertible
Preferred Stock, no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except for employee and director stock options
under the Company's equity compensation plans and as set forth on Schedule
3.1(g)(ii) hereto, there are no outstanding options, warrants, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities other than the Purchasers to adjust the exercise, conversion,
exchange or reset price under such securities.
 
(h)        SEC Reports; Financial Statements; Liabilities.
 
(i)       The Company has filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) of the Exchange Act, for the 24 months preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively referred
to herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension.  As of their respective filing dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder, as applicable, and none of
the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
 
(ii)       The Company’s (A) audited financial statements for the fiscal years
ended December 31, 2011 and 2010 included in the Company’s annual report on Form
10-K filed with the Commission and (B) the financial statements included in the
Company’s quarterly reports on Form 10-Q filed with the Commission for the first
two fiscal quarters of 2012 comply with applicable accounting requirements and
the rules and regulations of the Commission with respect thereto as in effect at
the time of filing of such reports. Such financial statements have been prepared
in accordance with generally accepted accounting principles in the United
States, applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, subject to normal year-end audit adjustments.  Such
financial statements fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries, if any, as of and for
the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal year-end
audit adjustments.
 
 
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(iii)       Except for liabilities and obligations incurred since June 30, 2012
in the ordinary course of business, consistent with past practice, as of the
date hereof: (i) the Company and its Subsidiaries do not have any material
liabilities or obligations (absolute, accrued, contingent or otherwise) and (ii)
there has not been any aspect of the prior or current conduct of the business of
the Company or its Subsidiaries which may form the basis for any material claim
by any third party which if asserted could result in a Material Adverse Effect.
 
(i)        Material Changes.  Except as set forth on Schedule 3.1(i), since June
30, 2012, the Company has conducted its business only in the ordinary course,
consistent with past practice, and since such date there has not occurred:
 
(i)       any event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect on the Company or
any of its Subsidiaries;
 
(ii)       any amendments or changes in the charter documents of the Company and
its Subsidiaries;
 
(iii)       any:
 
(A) incurrence, assumption or guarantee by the Company or its Subsidiaries of
any debt for borrowed money other than (i) equipment leases made in the ordinary
course of business, consistent with past practice and (ii) any such incurrence,
assumption or guarantee with respect to an amount of $25,000 or less that has
been disclosed in the SEC Reports;
 
(B) other than as set forth on Schedule 3.1(i)(iii)(B) hereto, issuance or sale
of any securities convertible into or exchangeable for securities of the Company
other than to directors, employees and consultants pursuant to existing equity
compensation or stock purchase plans of the Company;
 
(C) issuance or sale of options or other rights to acquire from the Company or
its Subsidiaries, directly or indirectly, securities of the Company or any
securities convertible into or exchangeable for any such securities, other than
options issued to directors, employees and consultants in the ordinary course of
business, consistent with past practice;
 
(D) issuance or sale of any stock, bond or other corporate security other than
to directors, employees and consultants pursuant to existing equity compensation
or stock purchase plans of the Company;
 
(E) discharge or satisfaction of any material Lien;
 
(F) declaration or making any payment or distribution to stockholders or
purchase or redemption of any share of its capital stock or other security other
than to directors, officers and employees of the Company or its Subsidiaries as
compensation for services rendered to the Company or its Subsidiary (as
applicable) or for reimbursement of expenses incurred on behalf of the Company
or its Subsidiary (as applicable);
 
(G) sale, assignment or transfer of any of its intangible assets except in the
ordinary course of business, consistent with past practice, or cancellation of
any debt or claim except in the ordinary course of business, consistent with
past practice;
 
 
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(H) waiver of any right of substantial value whether or not in the ordinary
course of business;
 
(I) material change in officer compensation, except in the ordinary course of
business and consistent with past practice; or
 
(J) other commitment (contingent or otherwise) to do any of the foregoing.
 
(iv)       other than as set forth on Schedule 3(i)(iv) hereto, any creation,
sufferance or assumption by the Company or any of its Subsidiaries of any Lien
on any asset or any making of any loan, advance or capital contribution to or
investment in any Person, in an aggregate amount which exceeds $25,000
outstanding at any time;
 
(v)       any entry into, amendment of, relinquishment, termination or
non-renewal by the Company or its Subsidiaries of any material contract,
license, lease, transaction, commitment or other right or obligation, other than
in the ordinary course of business, consistent with past practice; or
 
(vi) other than as set forth on Schedule 3(i)(vi) hereto, any transfer or grant
of a right with respect to the patents, trademarks, trade names, service marks,
trade secrets, copyrights or other intellectual property rights owned or
licensed by the Company or its Subsidiaries, except as among the Company and its
Subsidiaries.
 
(j)        Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or, to the knowledge of the Company, investigation pending nor, to
the knowledge of the Company, is any of the above threatened against the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any director
or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty within the past five (5) years.  To the knowledge of
the Company, there has not been and there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act
within the past eight (8) years.
 
(k)        Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could have or result in a Material Adverse Effect.
 
(l)        Compliance. Except as set forth on Schedule 3.1(l), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is
currently in default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business, except in the case of clauses (i) and (iii) as would not have or
reasonably be expected to result in a Material Adverse Effect.
 
 
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(m)           Licenses; Compliance With FDA and Other Regulatory Requirements.
 
(i)       The Company holds all material authorizations, consents, approvals,
franchises, licenses and permits required under applicable law or regulation for
the operation of the business of the Company and its Subsidiaries as presently
operated (the “Governmental Authorizations”). All the Governmental
Authorizations have been duly issued or obtained and are in full force and
effect, and the Company and its Subsidiaries are in material compliance with the
terms of all the Governmental Authorizations. The Company and its Subsidiaries
have not engaged in any activity that, to their knowledge, would cause
revocation or suspension of any such Governmental Authorizations. Neither the
execution, delivery nor performance of this Agreement shall adversely affect the
status of any of the Governmental Authorizations.
 
(ii)        Without limiting the generality of the representations and
warranties made in sub-paragraph (i) above, the Company represents and warrants
that (i) the Company and each of its Subsidiaries is in material compliance with
all applicable provisions of the United States Federal Food, Drug, and Cosmetic
Act and the rules and regulations promulgated thereunder (the “FDC Act”) and
equivalent laws, rules and regulations in jurisdictions outside the United
States in which the Company or its Subsidiaries do business, (ii) its products
and those of each of its Subsidiaries that are in the Company’s control are not
adulterated or misbranded and are in lawful distribution, (iii) all of the
products marketed by and within the control of the Company comply in all
material respects with any conditions of approval and the terms of the
application by the Company to the appropriate Regulatory Authorities, (iv) no
Regulatory Authority has initiated legal action with respect to the
manufacturing of the Company’s products, such as seizures or required recalls,
and the Company is in compliance with applicable good manufacturing practice
regulations, (v) its products are labeled and promoted by the Company and its
representatives in substantial compliance with the applicable terms of the
marketing applications submitted by the Company to the Regulatory Authorities
and the provisions of the FDC Act and foreign equivalents, (vi) all adverse
events that were known to and required to be reported by Company to the
Regulatory Authorities have been reported to the Regulatory Authorities in a
timely manner, (vii) neither the Company nor any of its Subsidiaries is, to
their knowledge, employing or utilizing the services of any individual who has
been debarred under the FDC Act or foreign equivalents, (viii) all stability
studies required to be performed for products distributed by the Company or any
of its Subsidiaries have been completed or are ongoing in material compliance
with the applicable Regulatory Authority requirements, (ix) any products
exported by the Company or any of its Subsidiaries have been exported in
compliance with the FDC Act and (x) the Company and its Subsidiaries are in
compliance in all material respects with all applicable provisions of the
Controlled Substances Act.  For purposes of this Section 3.1(m), “Regulatory
Authority” means any governmental authority in a country or region that
regulates the manufacture or sale of Company’s products, including, but not
limited to, the United States Food and Drug Administration.
 
 
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(n)        Title to Assets. The Company and the Subsidiaries do not own any real
property, and have good and marketable title to all personal property owned by
them that is material to the business of the Company and the Subsidiaries, taken
as a whole, in each case free and clear of all Liens, except those, if any,
reflected in the Company’s financial statements or incurred in the ordinary
course of business consistent with past practice or which would not cause a
Material Adverse Effect.  Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases (subject to laws of general application relating to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and rules of law governing specific
performance, injunctive relief, or other equitable remedies) with which the
Company and the Subsidiaries are in material compliance.
 
(o)        Intellectual Property.
 
(i)       The Company or a Subsidiary thereof has the right to use or is the
sole and exclusive owner of all right, title and interest in and to all material
foreign and domestic patents, patent rights, trademarks, service marks, trade
names, brands and copyrights (whether or not registered and, if applicable,
including pending applications for registration) owned, used or controlled by
the Company and its Subsidiaries (collectively, the “Rights”) and in and to each
material invention, software, trade secret, technology, product, composition,
formula and method of process used by the Company or its Subsidiaries (the
Rights and such other items, the “Intellectual Property”), and, to the Company’s
knowledge, has the right to use the same, free and clear of any claim or
conflict with the rights of others (subject to the provisions of any applicable
license agreement) except as would not cause a Material Adverse Effect.
 
(ii)       Other than in the ordinary course of business, no royalties or fees
(license or otherwise) are payable by the Company or its Subsidiaries to any
Person by reason of the ownership or use of any of the Intellectual Property.
 
(iii)       There have been no written claims made against the Company or its
Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any
of the Intellectual Property, and, to the best of the Company’s knowledge, there
are no reasonable grounds for any such claims which would cause a Material
Adverse Effect.
 
(iv)       Neither the Company nor its Subsidiaries have made any claim of any
violation or infringement by others of its rights in the Intellectual Property,
and to the best of the Company’s knowledge, no reasonable grounds for such
claims exist.
 
(v)       Neither the Company nor its Subsidiaries have received written notice
that it is in conflict with or infringing upon the asserted rights of others in
connection with the Intellectual Property which would cause a Material Adverse
Effect.
 
(p)        Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage in the amount set forth on Schedule 3.1(p) attached
hereto.  All of the insurance policies of the Company and its Subsidiaries are
in full force and effect and are valid and enforceable in accordance with their
terms, and the Company and its Subsidiaries have complied with all material
terms and conditions thereof.  Neither the Company nor any 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 without a
significant increase in cost.
 
 
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(q)        Transactions With Affiliates and Employees.  Except as provided in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, other than (a) for payment of salary or consulting fees for services
rendered, (b) reimbursement for expenses incurred on behalf of the Company and
(c) for other employee benefits, including stock option agreements and other
stock awards under any equity compensation plan of the Company.
 
(r)        Internal Accounting Controls. The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and each of the Subsidiaries maintains a
system of internal accounting controls sufficient in the judgment of the
Company’s management to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that the Company is able to collect the information that it is
required to disclose in the reports it files with the Commission and to process,
summarize and disclose this information in the time periods specified in the
Commission’s rules. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of June 30, 2012 (such
date, the “Evaluation Date”).  The Company presented in its Form 10-Q for the
quarter ended June 30, 2012, the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date, there have
been no significant changes in the Company's internal control over financial
reporting (as such term is defined in Exchange Act Rule 13a-15) or, to the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
 
(s)        Certain Fees. No brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
 
 
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(t)        Private Placement; Integrated Offering. Assuming the accuracy of the
Purchasers representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of the OTC Bulletin Board.  Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act and would as a result require registration under the
Securities Act or trigger any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated.
 
(u)        Charter, Bylaws and Corporate Records. The minute books of the
Company and its Subsidiaries contain in all material respects complete and
accurate records of all meetings and other corporate actions of the board of
directors, committees of the board of directors, incorporators and stockholders
of the Company and its Subsidiaries from the date of incorporation of each such
entity to the date hereof. All material corporate decisions and actions have
been validly made or taken. All corporate books, including without limitation
the share transfer register, comply in all material respects with applicable
laws and regulations and have been regularly updated.
 
(v)        Registration Rights. Except as set forth in Schedule 3.1(v), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
 
(w)        Listing and Maintenance Requirements. Except as set forth on Schedule
3.1(w), the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted or the OTC Bulletin Board to the effect that the Company is not
in compliance with the listing or maintenance requirements of such trading
market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
 
(x)            Taxes. All tax returns and tax reports required to be filed with
respect to the income, operations, business or assets of the Company and its
Subsidiaries have been timely filed (or appropriate extensions have been
obtained) with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, and all of the
foregoing as filed are, in all material respects, correct and complete and, in
all material respects, reflect accurately all liability for taxes of the Company
and its Subsidiaries for the periods to which such returns relate, and all
amounts shown as owing thereon have been paid. All income, profits, franchise,
sales, use, value added, occupancy, property, excise, payroll, withholding,
FICA, FUTA and other taxes (including interest and penalties), if any,
collectible or payable by the Company and its Subsidiaries or relating to or
chargeable against any of its material assets, revenues or income or relating to
any employee, independent contractor, creditor, stockholder or other third party
through the Closing Date, were fully collected and paid by such date if due by
such date or provided for by adequate reserves in the financial statements
contained in the SEC Reports as of and for the periods ended June 30, 2012
(other than taxes accruing after such date) and all similar items due through
the Closing Date will have been fully paid by that date or provided for by
adequate reserves, whether or not any such taxes were reported or reflected in
any tax returns or filings. No taxation authority has sought to audit the
records of the Company or any of its Subsidiaries for the purpose of verifying
or disputing any tax returns, reports or related information and disclosures
provided to such taxation authority, or for the Company’s or any of its
Subsidiaries’ alleged failure to provide any such tax returns, reports or
related information and disclosure. No material claims or deficiencies have been
asserted against or inquiries raised with the Company or any of its Subsidiaries
with respect to any taxes or other governmental charges or levies which have not
been paid or otherwise satisfied, including claims that, or inquiries whether,
the Company or any of its Subsidiaries has not filed a tax return that it was
required to file, and, to the best of the Company’s knowledge, there exists no
reasonable basis for the making of any such claims or inquiries. Neither the
Company nor any of its Subsidiaries has waived any restrictions on assessment or
collection of taxes or consented to the extension of any statute of limitations
relating to taxation.
 
 
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(y)           Environmental Matters. None of the premises or any properties
owned, occupied or leased by the Company or its Subsidiaries (the “Premises”)
has been used by the Company or the Subsidiaries or, to the Company’s knowledge,
by any other Person, to manufacture, treat, store, or dispose of any substance
that has been designated to be a “hazardous substance” under applicable
Environmental Laws (hereinafter defined) (“Hazardous Substances”) in violation
of any applicable Environmental Laws. To its knowledge, the Company has not
disposed of, discharged, emitted or released any Hazardous Substances which
would require, under applicable Environmental Laws, remediation, investigation
or similar response activity. No Hazardous Substances are present as a result of
the actions of the Company or, to the Company’s knowledge, any other Person, in,
on or under the Premises which would give rise to any liability or clean-up
obligations of the Company under applicable Environmental Laws. The Company and,
to the Company’s knowledge, any other Person for whose conduct it may be
responsible pursuant to an agreement or by operation of law, are in compliance
with all laws, regulations and other federal, state or local governmental
requirements, and all applicable judgments, orders, writs, notices, decrees,
permits, licenses, approvals, consents or injunctions in effect on the date of
this Agreement relating to the generation, management, handling, transportation,
treatment, disposal, storage, delivery, discharge, release or emission of any
Hazardous Substance (the “Environmental Laws”). Neither the Company nor, to the
Company’s knowledge, any other Person for whose conduct it may be responsible
pursuant to an agreement or by operation of law has received any written
complaint, notice, order, or citation of any actual, threatened or alleged
noncompliance with any of the Environmental Laws, and there is no proceeding,
suit or investigation pending or, to the Company’s knowledge, threatened against
the Company or, to the Company’s knowledge, any such Person with respect to any
violation or alleged violation of the Environmental Laws, and, to the knowledge
of the Company, there is no basis for the institution of any such proceeding,
suit or investigation.
 
(z)        Disclosure. The Company confirms that neither the Company nor any
other Person acting on its behalf and at the direction of the Company, has
provided any Purchaser or its agents or counsel with any information that in the
Company’s reasonable judgment, at the time such information was furnished,
constitutes or might constitute material, non-public information, other than
information relating to the fact that the Company was considering and engaged in
the transactions contemplated by the Transaction Documents and unless prior
thereto such Purchaser shall have consented in writing to the receipt of such
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
 
 
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    (aa)        No Additional Representations.  Each Purchaser acknowledges and
agrees that the Company does not make and has not made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section 3.1 or in any Transaction Document.
 
    (bb)         Poison Pill. The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under this Agreement and the Transaction Documents,
including without limitation the Company's issuance of the Securities and the
Purchasers’ ownership of the Securities.
 
    (cc)        Solvency.  Based on the consolidated financial condition of the
Company as of the Closing Date after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, (i) the fair saleable
value of the Company’s assets exceeds the amount that will be required to be
paid on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature, (ii) the Company’s
assets do not constitute unreasonably small capital to carry on its business as
now conducted and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business conducted by
the Company, and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its liabilities when such amounts are
required to be paid.  The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).  The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule
3.1(cc) sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness”
means (a) any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Except as set forth in Schedule 3.1(cc),
neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.
   
 
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    (dd)           Accountants.  The Company’s accounting firm is set forth on
Schedule 3.1(dd) of the Disclosure Schedule.  To the knowledge and belief of the
Company, such accounting firm (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with respect to
the financial statements to be included in the Company’s Annual Report for the
year ending December 31, 2012.
 
    (ee)           No Disagreements with Accountants and Lawyers.  There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company and the Company is current with respect to
any fees owed to its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the Transaction
Documents.
    (ff)            Acknowledgment Regarding Purchasers’ Purchase of
Securities.  The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby.  The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers’ purchase of the Securities.  The
Company further represents to each Purchaser that the Company’s decision to
enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by
the Company and its representatives.
 
    (gg)           Acknowledgement Regarding Purchasers’ Trading
Activity.  Notwithstanding anything in this Agreement or elsewhere herein to the
contrary, it is understood and acknowledged by the Company that (i) none of the
Purchasers has been asked to agree by the Company, nor has any Purchaser agreed,
to desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company or
to hold the Securities for any specified term, (ii) past or future open market
or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock; and (iv) each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and acknowledges that
(a) one or more Purchasers may engage in hedging activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (b) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
 
 
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    (hh)         Regulation M Compliance.  The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the securities of the Company, or (iii) paid
or agreed to pay to any Person any compensation for soliciting another to
purchase any other securities of the Company.
 
    (ii)           No General Solicitation.  Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities by any
form of general solicitation or general advertising.  The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.
 
    (jj)           Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.  The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act of 1940, as amended.
   
    (kk)         Shell Company Status.  The Company is not, and has never been,
an issuer identified in Rule 144(i)(1).

 
3.2           Representations and Warranties of the Purchasers.
 
Each Purchaser hereby, for itself and for no other Purchaser, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:
 
(a)        Organization; Authority; Enforceability. Such Purchaser (other than
individuals) is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors’ rights generally and rules of law
governing specific performance, injunctive relief, or other equitable remedies.
 
(b)        General Solicitation. Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
 
 
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(c)        No Public Sale or Distribution. Such Purchaser is (i) acquiring the
Preferred Shares and Warrants and (ii) upon conversion of the Preferred Stock
will acquire the Conversion Shares and upon exercise of the Warrants will
acquire the Warrant Shares, as applicable, for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof; provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
 
(d)        Accredited Investor Status. Such Purchaser is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D.
 
(e)        Residency. Such Purchaser is a resident of the jurisdiction set forth
below such Purchaser’s name on Schedule 1 attached hereto.
 
(f)        Reliance on Exemptions. Such Purchaser understands that the Preferred
Shares and Warrants are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Preferred Shares and Warrants.
 
(g)        Information. Such Purchaser and its advisors, if any, have been
furnished with all publicly available materials (or such materials have been
made available to such Purchaser) relating to the business, finances and
operations of the Company and such other publicly available materials relating
to the offer and sale of the Preferred Shares and Warrants as have been
requested by such Purchaser, including without limitation the Company’s Form
10-K for the period ended December 31, 2011, Forms 10-Q for the periods ended
March 31, 2012 and June 30, 2012 and Forms 8-K filed by the Company since
January 1, 2012.  Each Purchaser acknowledges that it has read and understands
the risk factors set forth in such Form 10-K, Forms 10-Q and Forms 8-K. Neither
such review nor any other due diligence investigations conducted by such
Purchaser or its advisors, if any, or its representatives shall modify, amend or
affect such Purchaser's right to rely on the Company's representations and
warranties contained herein. Such Purchaser understands that its investment in
the Preferred Shares and Warrants involves a high degree of risk.
 
(h)        No Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares
and Warrants or the fairness or suitability of the investment in the Preferred
Shares and Warrants, nor have such authorities passed upon or endorsed the
merits of the offering of the Preferred Shares and Warrants.
 
 
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(i)        Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters, including investing in companies
engaged in the business in which the Company is engaged, so as to be capable of
evaluating the merits and risks of the prospective investment in the Preferred
Shares and Warrants, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
the Preferred Shares and Warrants and, at the present time, is able to afford a
complete loss of such investment.
 
The Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
 

 
ARTICLE IV
 
OTHER AGREEMENTS OF THE PARTIES
 
4.1            Transfer Restrictions.
 
(a)        The Securities may only be disposed of in compliance with state and
federal securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of a Purchaser (who is an accredited investor and executes a customary
representation letter) or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and reasonably satisfactory to
the Company (it being understood that Wiggin and Dana LLP is reasonably
satisfactory), the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act, provided,
however, that in the case of a transfer pursuant to Rule 144, no opinion shall
be required if the transferor provides the Company with a customary seller’s
representation letter, and if such sale is not pursuant to subsection (b)(1) of
Rule 144, a customary broker’s representation letter and a Form 144.  Any such
transferee that agrees in writing to be bound by the terms of this Agreement and
the Investor Rights Agreement shall have the rights of a Purchaser under this
Agreement and the Investor Rights Agreement.  Except as required by federal
securities laws and the securities law of any state or other jurisdiction within
the United States, the Securities may be transferred, in whole or in part, by
any of the Purchasers at any time.  The Company shall reissue certificates
evidencing the Securities upon surrender of certificates evidencing the
Securities being transferred in accordance with this Section 4.1(a).
 
(b)        The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in substantially the
following form:
 
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, SUCH COUNSEL AND THE SUBSTANCE OF SUCH OPINION
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. UNLESS PROHIBITED BY APPLICABLE
LAW, RULE OR REGULATION, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT.
 
 
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The Company acknowledges and agrees that, unless prohibited by applicable law,
rule or regulation, a Purchaser may from time to time pledge pursuant to a bona
fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities Act and, if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties.  Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith; provided, however, that such Purchaser shall provide the
Company with such documentation as is reasonably requested by the Company to
ensure that the pledge is pursuant to a bona fide margin agreement with a
registered broker-dealer or a security interest in some or all of the Securities
to a financial institution that is an “accredited investor” as defined in Rule
501(a) under the Securities Act.  The Company will execute and deliver such
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder.
 
(c)           Certificates evidencing the Conversion Shares and the Warrant
Shares shall not contain any legend (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Underlying Shares pursuant to
Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule
144(b)(1), or (iv) if such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel to
issue a legal opinion to the transfer agent promptly after the Effective Date if
required by the transfer agent to effect the removal of the legend hereunder. If
all or any shares of Preferred Stock or any portion of a Warrant is converted or
exercised (as applicable) at a time when there is an effective registration
statement to cover the resale of the Underlying Shares, or if such Underlying
Shares may be sold under Rule 144(b)(1) or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Underlying Shares shall be issued free of all legends.  The Company agrees
that following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the transfer agent of a
certificate representing Underlying Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver
or cause to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends.  The Company may not
make any notation on its records or give instructions to the transfer agent that
enlarge the restrictions on transfer set forth in this Section.  Certificates
for Underlying Shares subject to legend removal hereunder shall be transmitted
by the transfer agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company System as directed by
such Purchaser.

 
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(d)           In addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages and not
as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the
Common Stock on the date such Securities are submitted to the Transfer Agent)
delivered for removal of the restrictive legend and subject to Section 4.1(c),
$10 per Trading Day (increasing to $20 per Trading Day 5 Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend Removal Date
until such certificate is delivered without a legend.  Nothing herein shall
limit such Purchaser’s right to pursue actual damages for the Company’s failure
to deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

(e)        Each Purchaser, severally and not jointly, agrees that the removal of
the restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company's reliance on, and the
Purchaser's agreement that, and each Purchaser hereby agrees that, the Purchaser
will not sell any Securities except pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
 
4.2          Furnishing of Information.
 
As long as any Purchaser owns Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. Upon the request of any such holder of Securities,
the Company shall deliver to such holder a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence. As
long as any Purchaser owns Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c), such
information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.
 
4.3           Integration.
 
The Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.
 
 
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4.4           Publicity.
 
The Company shall, by 8:30 a.m. (New York City time) on the Trading Day
immediately following the date hereof, issue a press release disclosing the
material terms of the transactions contemplated hereby, and within four Business
Days following the Closing Date, file a Current Report on Form 8-K, disclosing
the transactions contemplated hereby and make such other filings and notices in
the manner and time required by the Commission.
 
4.5            Non-Public Information.
 
The Company covenants and agrees that neither it nor any other Person acting on
its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.
 
4.6           Use of Proceeds.
 
The Company covenants and agrees that the proceeds from the sale of the
Preferred Shares and Warrants shall be used by the Company for working capital
and general corporate purposes and for repayment of $2.75 million of outstanding
secured debt plus accrued interest thereon; under no circumstances shall any
portion of the proceeds be applied to:
 
 
(i)
the payment of dividends or other distributions on any capital stock of the
Company;

 
 
(ii)
the purchase of debt or equity securities of any Person for cash, including the
Company and its Subsidiaries, except in connection with investment of excess
cash in high quality (A1/P1 or better) money market instruments having
maturities of one year or less;

 
 
(iii)
any expenditure not directly related to the business of the Company; or

 
 
(iv)
the redemption of any Company equity or equity-equivalent securities.

 
4.7              Reservation of Preferred Stock and Common Stock.
 
As of the date hereof, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of (a) Preferred Stock for the purpose of enabling
the Company to issue Preferred Shares pursuant to this Agreement and (b) subject
to the Stockholder Approval with respect to the Warrant Shares, Common Stock for
the purpose of enabling the Company to issue Conversion Shares issuable upon
conversion of the Preferred Shares and Warrant Shares issuable upon exercise of
the Warrants.

 
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4.8        Listing of Common Stock.
 
The Company hereby agrees that, from time to time, if the Company applies to
have the Common Stock traded on any Trading Market, it will include in such
application the Conversion Shares and the Warrant Shares, and will take such
other action as is necessary to cause the Conversion Shares and Warrant Shares
to be listed on such Trading Market as promptly as possible.
 
4.9              Business Operations.
 
Until the earlier of:  (i) the third anniversary of the Closing Date and (ii)
the date that the Purchasers own less than 10% of the Preferred Shares
originally issued pursuant to this Agreement or Conversion Shares issuable upon
conversion thereof, the Company shall comply with the following covenants:
 
(a)        Insurance. The Company and its Subsidiaries shall maintain insurance
policies such that the representations contained in the first sentence of
Section 3.1(p) hereof continue to be true and correct and shall, from time to
time upon the written request of the Purchasers, promptly furnish or cause to be
furnished to the Purchasers evidence, in form and substance reasonably
satisfactory to the Purchasers, of the maintenance of all insurance maintained
by it.
 
(b)        Corporate Existence; Licenses.  The Company shall preserve and
maintain and cause its Subsidiaries to preserve and maintain their corporate
existence and good standing in the jurisdiction of their incorporation and the
rights, privileges and franchises of the Company and its Subsidiaries (except,
in each case, in the event of a merger or consolidation in which the Company or
its Subsidiaries, as applicable, is not the surviving entity) in each case where
the failure to so preserve or maintain could have a Material Adverse Effect on
the financial condition, business or operations of the Company and its
Subsidiaries taken as a whole.  The Company shall, and shall cause its
Subsidiaries to, maintain at all times all material licenses or permits
necessary to the conduct of its business and as required by any governmental
agency or instrumentality thereof, including without limitation all Food and
Drug Administration clearances and approvals.
 
(c)        Taxes and Claims.  The Company and its Subsidiaries shall duly pay
and discharge (a) all taxes, assessments and governmental charges upon or
against the Company or its properties or assets prior to the date on which
penalties attach thereto, unless and to the extent that such taxes are being
diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established, and (b) all lawful claims,
whether for labor, materials, supplies, services or anything else which might or
could, if unpaid, become a lien or charge upon the properties or assets of the
Company or its Subsidiaries, unless and to the extent only that the same are
being contested in good faith and by appropriate proceedings and appropriate
reserves therefor have been established.
 
4.10         Securities Law Compliance.
 
(a)              Securities Act.  The Company shall timely prepare and file with
the Securities and Exchange Commission the form of notice of the sale of
securities pursuant to the requirements of Regulation D regarding the sale of
the Preferred Shares and Warrants under this Agreement.
 
 
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(b)              State Securities Law Compliance -- Sale.  The Company shall
timely prepare and file such applications, consents to service of process (but
not including a general consent to service of process) and similar documents and
take such other steps and perform such further acts as shall be required by the
state securities law requirements of each jurisdiction where a Purchaser
resides, as indicated on Schedule 1, with respect to the sale of the Preferred
Shares and Warrants under this Agreement.
 
(c)        State Securities Law Compliance --Resale.  Beginning no later than 30
days following any date, from time to time, on which the Common Stock is no
longer a “covered security” under Section 18(b)(1)(A) of the Securities Act and
continuing until either (i) the Purchasers have sold all of their Conversion
Shares and Warrant Shares under a registration statement pursuant to the
Investor Rights Agreement or (ii) the Common Stock becomes a “covered security”
under Section 18(b)(1)(A) of the Securities Act, the Company shall maintain
within either Moody’s Industrial Manual or Standard and Poor’s Standard
Corporation Descriptions (or any successors to these manuals which are similarly
qualified as “recognized securities manuals” under state Blue Sky laws) an
updated listing containing (i) the names of the officers and directors of the
Company, (ii) a balance sheet of the Company as of a date that is at no time
older than eighteen months and (iii) a profit and loss statement of the Company
for either the preceding fiscal year or the most recent year of operations.
 
    4.11    Poison Pill.  From time to time, for as long as any Purchaser holds
any Securities, the Company and its Board of Directors shall take all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under this Agreement and the Transaction Documents,
including without limitation the Company's issuance of the Securities and the
Purchasers’ ownership of the Securities.
 
4.12           Stockholder Approval.  Not later than June 30, 2013, the Company
shall prepare and file with the Commission, preliminary proxy materials in
compliance with Section 14 of the Exchange Act for the purpose of obtaining the
Stockholder Approval (the “Proxy Statement”).  As promptly as practicable after
comments, if any, are received from the Commission thereon, the Company shall
prepare and the Company shall file any required amendments, if any, with the
Commission.  The Company shall use its best efforts to have the Proxy Statement
cleared by the SEC and shall thereafter mail to the holders of Common Stock as
promptly as practicable the Proxy Statement and all other proxy materials for
such stockholder meeting.

The Company shall take, in accordance with applicable law and its certificate or
incorporation and bylaws, all action necessary to convene such stockholder
meeting promptly to submit for approval by the requisite vote of the
stockholders of the Company, the Stockholder Approval.  The Company shall use
its reasonable best efforts to solicit from the stockholders proxies in favor of
the Stockholder Approval and take all other action necessary or advisable to
secure the vote or consent of the stockholders that are required by applicable
law to approve the Stockholder Approval proposal, including, if necessary or
appropriate, adjourning the stockholder meeting to solicit additional
proxies.  Promptly following receipt of requisite approval, the Company shall
file a certificate of amendment with the Secretary of State of the State of
Delaware with respect thereto.
 
 
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4.13           Equal Treatment of Purchasers.  No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents.  For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended for the Company to treat the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
 

 
ARTICLE V
 
INDEMNIFICATION, TERMINATION AND DAMAGES
 
5.1        Survival of Representations.
 
Except as otherwise provided herein, the representations and warranties of the
Company and the Purchasers contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing Date and
shall continue in full force and effect for a period of three (3) years from the
Closing Date.  The Company’s and the Purchasers’ warranties and representations
shall in no way be affected or diminished in any way by any investigation of (or
failure to investigate) the subject matter thereof made by or on behalf of the
Company or the Purchasers.
 
5.2        Indemnification.
 
The Company agrees to indemnify and hold harmless the Purchasers, their
Affiliates, each of their officers, directors, employees and agents and their
respective successors and assigns, from and against any losses, damages, or
expenses which are caused by or arise out of (i) any breach or default in the
performance by the Company of any covenant or agreement made by the Company in
this Agreement or in any of the Transaction Documents; (ii) any breach of
warranty or representation made by the Company in this Agreement or in any of
the Transaction Documents; (iii) any and all third party actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the foregoing; and/or
(iv) any action instituted against a Purchaser in any capacity, or any of them
or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance).
 
 
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5.3              Indemnity Procedure.
 
A party or parties hereto agreeing to be responsible for or to indemnify against
any matter pursuant to this Agreement is referred to herein as the “Indemnifying
Party” and the other party or parties claiming indemnity is referred to as the
“Indemnified Party”.  An Indemnified Party under this Agreement shall, with
respect to claims asserted against such party by any third party, give written
notice to the Indemnifying Party of any liability which might give rise to a
claim for indemnity under this Agreement within sixty (60) Business Days of the
receipt of any written claim from any such third party, but not later than
twenty (20) days prior to the date any answer or responsive pleading is due, and
with respect to other matters for which the Indemnified Party may seek
indemnification, give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
materially prejudiced.
 
The Indemnifying Party shall have the right, at its election, to take over the
defense or settlement of such claim by giving written notice to the Indemnified
Party at least fifteen (15) days prior to the time when an answer or other
responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party’s approval of
such counsel, which approval shall not be unreasonably withheld or delayed),
shall be solely responsible for the expenses of such defense and shall be bound
by the results of its defense or settlement of the claim. The Indemnifying Party
shall not settle any such claim without prior notice to and consultation with
the Indemnified Party, and no such settlement involving any equitable relief or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). So long as the Indemnifying Party is
diligently contesting any such claim in good faith, the Indemnified Party may
pay or settle such claim only at its own expense and the Indemnifying Party will
not be responsible for the fees of separate legal counsel to the Indemnified
Party, unless the named parties to any proceeding include both parties or
representation of both parties by the same counsel would be inappropriate in the
reasonable opinion of counsel to the Indemnified Party, due to conflicts of
interest or otherwise. If the Indemnifying Party does not make such election, or
having made such election does not, in the reasonable opinion of the Indemnified
Party proceed diligently to defend such claim, then the Indemnified Party may
(after written notice to the Indemnifying Party), at the expense of the
Indemnifying Party, elect to take over the defense of and proceed to handle such
claim in its discretion and the Indemnifying Party shall be bound by any defense
or settlement that the Indemnified Party may make in good faith with respect to
such claim. In connection therewith, the Indemnifying Party will fully cooperate
with the Indemnified Party should the Indemnified Party elect to take over the
defense of any such claim. The parties agree to cooperate in defending such
third party claims and the Indemnified Party shall provide such cooperation and
such access to its books, records and properties (subject to the execution of
appropriate non-disclosure agreements) as the Indemnifying Party shall
reasonably request with respect to any matter for which indemnification is
sought hereunder; and the parties hereto agree to cooperate with each other in
order to ensure the proper and adequate defense thereof.
 
 
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With regard to claims of third parties for which indemnification is payable
hereunder, such indemnification shall be paid by the Indemnifying Party upon the
earlier to occur of: (i) the entry of a judgment against the Indemnified Party
and the expiration of any applicable appeal period, or if earlier, five (5) days
prior to the date that the judgment creditor has the right to execute the
judgment; (ii) the entry of an unappealable judgment or final appellate decision
against the Indemnified Party; or (iii) a settlement of the claim.
Notwithstanding the foregoing, the reasonable expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying Party
upon demand by the Indemnified Party.
 
ARTICLE VI
 
MISCELLANEOUS
 
6.1           Fees and Expenses.
 
The Company shall be responsible for the payment of the Purchasers’ reasonable
and documented legal fees and other third-party expenses relating to the
preparation, negotiation and execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated herein.
 
6.2           Entire Agreement.
 
The Transaction Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
 
6.3           Notices.
 
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified on
the signature pages attached hereto prior to 5:00 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number on
the signature pages attached hereto on a day that is not a Trading Day or later
than 5:00 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
 
If to the Purchasers, at each Purchaser’s address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, addressed to:
 
 
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Access Pharmaceuticals, Inc.
2600 Stemmons Freeway, Suite 176
Dallas, Texas 75207
Attention: President
Facsimile No.: (214) 905-5101
 
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to:
 
Bingham McCutchen LLP
150 Federal Street
Boston, Massachusetts 02110
Attention:  John J. Concannon, III
Facsimile No.: (617) 951-8736

Copies of notices to any Purchaser shall be sent to the addresses, if any,
listed on Schedule 1 attached hereto.
 
6.4          Amendments; Waivers.
 
This Agreement or any provision thereof may be waived or amended pursuant to a
written instrument signed by the Company and the Purchasers holding a majority
of the Preferred Shares then outstanding; provided, however that any such
amendment or waiver that has a disproportionately adverse effect on any
Purchaser shall require the consent of such Purchaser. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
 
6.5           Construction.
 
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
 
6.6           Successors and Assigns.
 
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser may assign any or all of its rights
under this Agreement to any Person, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the Purchasers.
 
6.7           No Third-Party Beneficiaries.
 
This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Article V.
 
 
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6.8           Governing Law.
 
All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.
 
6.9           Jurisdiction; Venue; Service of Process.
 
This Agreement shall be subject to the exclusive jurisdiction of the Federal
District Court, Southern District of New York and if such court does not have
proper jurisdiction, the State Courts of New York County, New York. The parties
to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of New York by
virtue of a failure to perform an act required to be performed in the State of
New York and irrevocably and expressly agree to submit to the jurisdiction of
the Federal District Court, Southern District of New York and if such court does
not have proper jurisdiction, the State Courts of New York County, New York for
the purpose of resolving any disputes among the parties relating to this
Agreement or the transactions contemplated hereby. The parties irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, or any judgment entered by any
court in respect hereof brought in New York County, New York, and further
irrevocably waive any claim that any suit, action or proceeding brought in
Federal District Court, Southern District of New York and if such court does not
have proper jurisdiction, the State Courts of New York County, New York has been
brought in an inconvenient forum. Each of the parties hereto consents to process
being served in any such suit, action or proceeding, by mailing a copy thereof
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing in this Section 6.9 shall affect or limit
any right to serve process in any other manner permitted by law.
 
6.10           Execution.
 
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.
 
6.11           Severability.
 
If any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
 
 
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6.12           Replacement of Securities.
 
If any certificate or instrument evidencing any of the Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity (but no bond shall be
required), if requested by the Company.
 
6.13           Remedies.
 
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers and the Company
will be entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
 
6.14           Payment Set Aside.
 
To the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall, to the extent
permissible under applicable law, be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
 
6.15           Independent Nature of Purchasers' Obligations and Rights.
 
The obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through Wiggin and Dana LLP, but such
counsel does not represent any of the Purchasers in this transaction other than
SCO Capital Partners LLC. The Company has elected to provide all Purchasers with
the same terms and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by the Purchasers.
 
 
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6.16         Waiver of Trial by Jury.
 
THE PARTIES HERETO IRREVOCABLY WAIVE TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
6.17         Further Assurances.
 
Each party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurances as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement, and further agrees
to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable law
to consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals, to effect all necessary
registrations and filings, and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
 
       6.18   Termination.  This Agreement may be terminated by any Purchaser,
as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been consummated on
or before the fifth business day following the date hereof; provided, however,
that such termination will not affect the right of any party to sue for any
breach by the other party (or parties).
 

 

 
[Signature pages follow.]
 

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
 
COMPANY:
 
ACCESS PHARMACEUTICALS, INC.

By:  /s/ Stephen B. Thompson
Name: Stephen B. Thompson
Title: Vice President
     Chief Financial Officer
 

 
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PURCHASERS:

Print Exact Name:________________________________

By:____________________________________________
Name:
Title:

Address:________________________________________

_______________________________________________

_______________________________________________

Telephone:______________________________________

Facsimile:_______________________________________

Email:__________________________________________

SSN/EIN:_______________________________________

Total Subscription Amount:$_______________________

OF WHICH:

Cash Portion of Subscription Amount:$_______________

Accrued Dividend Portion of Subscription
Amount:$_____________________________________

[Omnibus Access Pharmaceuticals, Inc.
Preferred Stock and Warrant Purchase Agreement Signature Page]

 
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Schedule 1

to Preferred Stock and Warrant Purchase Agreement

Purchasers, Shares of Preferred Stock and Warrants

Name, Address and Fax
Number of Purchaser
Shares of
Preferred Stock Purchased
Common
Stock
Underlying
Warrants
Amount of Accrued
Dividends
to be Cancelled
 
Cash
Consideration
 
Total Subscription Amount
 
SCO Capital Partners LLC
1325 Avenue of the Americas
27th Floor
New York, NY 10019
Attn: Steven Rouhandeh
Fax: 212-786-6210
 
With a copy to:
 
Wiggin and Dana LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901
Attn: Michael Grundei
Fax: 203-363-7676
 
 
929.7
18,594,000
$4,911,199
 
 
 
 
$4,385,801
 
 
 
 
$9,297,000
Beach Capital LLC
1325 Avenue of the Americas
27th Floor
New York, NY 10019
Attn: Steven Rouhandeh
Fax: 212-786-6210
 
70.3
1,406,000
$386,101
 
$316,899
 
$703,000
Totals:
1,000
20,000,000
$5,297,300
$4,702,700
 
$10,000,000
 

 

 
 

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