Unassociated Document


    EXHIBIT
      10.27

    
      

      

    

     

     

    _____________________________________________________________________________

     

    


     

    


     

    AMENDED
      AND RESTATED

     

    PREFERRED
      STOCK AND WARRANT PURCHASE AGREEMENT

     

    by
      and
      among

     

    Access
      Pharmaceuticals, Inc.

     

    and

     

    the
      parties named herein on Schedule 1, as Purchasers

     

    


     

    


     

    


     

    


     

    


     

    February
      4, 2008

     

    


     

    _____________________________________________________________________________

     

    


     

    


     


    
      
         
          

      

      
         
          

        
          

        

      

      
         
          

      

    


    This
AMENDED
      AND RESTATED PREFERRED STOCK
      AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is dated
      as of
      February 4, 2008, 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(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 4,000 shares of the Company’s Series A Cumulative
      Convertible Preferred Stock, and (ii) Common Stock Purchase Warrants (the “Warrants”) entitling the
      holders thereof to purchase up to 6,666,700 shares of the Company’s
      Common Stock as more fully set forth herein.

     

    WHEREAS,
      the Company and certain
      Purchasers (the “Original
      Purchasers”) have entered into a Preferred Stock and Warrant Purchase
      Agreement dated as of November 7, 2007 (the “Original Purchase Agreement”)
      and consummated the Initial Closing (as defined below) on November 10, 2007
      and
      the Company, Original Purchasers holding not less than the requisite amount
      of
      Securities necessary to amend the Original Purchase Agreement wish to amend
      and
      restate the Original Purchase Agreement and certain additional Purchasers wish
      to execute this Agreement in connection with the Additional Closing (as defined
      below) as 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:

     

    “Action”
shall
      have the
      meaning ascribed to such termin Section 3.1(j).

     

    “Additional
      Closing” shall
      have the meaning ascribed to such term in Section 2.1(c).

     

    “Additional
      Closing Escrow
      Agreement” shall have the meaning ascribed to such term in Section
      2.1(b).

     

    “Additional
      Purchasers” shall
      have the meaning ascribed to such term in Section 2.1(c).

     

    “Additional
      Securities” shall
      have the meaning ascribed to such term in Section 2.1(c).

     

    “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.

     

    
      
        
        

      

      
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    “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).

     

    “Closing
      Escrow Agreement”
shall have the meaning ascribed to such term in Section 2.1(b).

     

    “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).

     

    
      
        
        

      

      
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    “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.

     

    “Initial
      Closing” shall have
      the meaning ascribed to such term in Section 2.1(a).

     

    “Initial
      Closing Date” shall
      have the meaning ascribed to such term in Section 2.1(a).

     

    “Intellectual
      Property” shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Investor
      Rights Agreement”
means the Amended and Restated 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.

     

    “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.

     

    “Placement
      Agents” means SCO
      Securities LLC and Rodman & Renshaw, LLC.

     

    “Placement
      Agent Warrants”
shall mean the common stock purchase warrants to be issued to the Placement
      Agents and/or their designees as compensation for services rendered in
      connection with the transaction set forth herein as provided on Schedule 1 attached
      hereto, which warrants shall be in the form of Exhibit D
      hereto.

     

    “Preferred
      Shares” means the
      shares of Preferred Stock issued to each Purchaser pursuant to this
      Agreement.

     

    “Preferred
      Stock” means the
      Company’s Series A Cumulative Convertible Preferred Stock, par value $0.01 per
      share.

     

    “Premises”
shall
      have the
      meaning ascribed to such term in Section 3.1(y).

     

    
      
        
        

      

      
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    “Promissory
      Notes” shall have
      shall have the meaning ascribed to such term in   Section
      2.1(c).

     

    “Purchase
      Price” means the
      aggregate purchase price paid by each Purchaser for the shares of Preferred
      Stock and Warrants purchased by such Purchaser hereunder.

     

    “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.

     

    “Series
      A Certificate of
      Amendment” means the Certificate of Amendment to the Certificate of
      Designations, Rights and Preferences of the Series A Cumulative Convertible
      Preferred Stock of the Company, in the form attached hereto as Exhibit
      G.

     

    “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).

     

    “Subscription
      Amount” means,
      as to each Purchaser, the amount set forth beside such Purchaser's name on
Schedule 1 hereto,
      in
      United States dollars and in immediately available funds.

     

    “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.

     

    
      
        
        

      

      
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    “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 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, the Nasdaq National Market, the Nasdaq Capital Market or the OTC
      Bulletin Board.

     

    “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); (v) if the Common Stock
      is not then quoted for trading on any Trading Market and if prices for the
      Common Stock are then reported in the “Pink Sheets” published by 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 (d) in all other cases, the fair market value of a share of
      Common Stock as determined by an independent appraiser selected in good faith
      by
      the Purchasers of a majority in interest of the Securities then outstanding
      and
      reasonably acceptable to the Company.

    


    “Warrants”
shall
      have the
      meaning ascribed to such term in the recitals hereto.  The Placement
      Agent Warrants shall also constitute “Warrants” for all purposes hereunder and
      the Placement Agents and/or their designees and such other persons or entities
      shall constitute “Purchasers” for all purposes hereunder.

    


    “Warrant
      Shares” means the
      shares of Common Stock issuable upon exercise of the Warrants.

     

    
      
        
        

      

      
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    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 Series A 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 (Exhibit
      D in the case
      of the Placement Agent Warrants and Exhibit H in case
      of
      Warrants to be issued in Additional Closings).

     

    1.3              Purchases
      and Sales.  On the terms
      and
      subject to the conditions set forth in this Agreement, at the Initial Closing,
      the Company sold and each of the Purchasers in the Initial Closing purchased
      the
      Preferred Stock in the amounts set forth on Schedule 1
      hereto.  In addition, the Company sold and each Purchaser purchased at
      the Initial Closing Warrants to purchase the number of shares of Common Stock
      set forth on Schedule
      1 hereto.  At the Additional Closings, the Company will sell
      and each of the Additional Purchasers will purchase the Additional Securities
      set forth next to the name of such Additional Purchaser on Schedule 1 as such
      schedule is supplemented pursuant to Section 2.2(c).

     

    ARTICLE
      II

     

    PURCHASE
      AND
      SALE

     

    2.1           Closing.

     

    (a)              The
      initial closing of the transactions contemplated under this Agreement (the
      “Initial Closing”) took
      place on November 10, 2007.  The date on which the Initial Closing
      occurred is the “Initial
      Closing Date”. Any Additional Closing (as defined below) will take place
      at the offices of Wiggin and Dana LLP, 400 Atlantic Street, Stamford, CT 06901
      (or remotely via exchange of documents and signatures) or at such other place
      and on such date as may be mutually acceptable to the Purchasers in such
      Additional Closing and the Company.  The date on which the Additional
      Closing occurs is the “Additional Closing
      Date.”  The term “Closing” shall refer
      to the
      Initial Closing and any Additional Closing, the term “Closing Date” shall refer to
      the Initial Closing Date or the Additional Closing Date, as
      applicable.

     

    (b)              At
      the Initial Closing, the Purchasers purchased, severally and not jointly, and
      the Company issued and sold, in the aggregate, 3,227.3617 shares of Preferred
      Stock and Warrants to purchase 3,440,882 shares of Common Stock on the Initial
      Closing Date. At the Initial Closing and any Additional Closing, each Purchaser
      has purchased or shall purchase (as the case may be) from the Company, and
      the
      Company has issued and sold or shall issue and sell (as the case may be) 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 50%
      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 Promissory Notes (as defined below) pursuant
      to
      Section 2.1(e), the Subscription Amount paid by each Purchaser in the Initial
      Closing was placed in escrow pending the Initial Closing pursuant to a Closing
      Escrow Agreement among the Company, SCO Capital Partners LLC and Wiggin and
      Dana
      LLP (the “Escrow
      Agent”), which agreement was in the form attached hereto as Exhibit E (the
“Closing
      Escrow
      Agreement”).  Subscription Amounts paid by Purchasers in any
      Additional Closing shall be placed in escrow pending such Additional Closing
      pursuant to an escrow agreement in a form substantially similar to the Closing
      Escrow Agreement and attached hereto as Exhibit I, with such
      changes as may be necessary or appropriate to account for the Additional Closing
      (the “Additional Closing
      Escrow Agreement”).

     

    
      
        
        

      

      
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    (c)              After
      the Initial Closing, the Company may sell up to 772.6383 additional shares
      of
      Preferred Stock and additional Warrants to purchase up to 1,287,740 shares
      of
      Common Stock (subject to adjustment for reverse and forward stock splits, stock
      dividends, stock combinations and other similar transactions of the Common
      Stock
      that occur after the Initial Closing and prior to the applicable Additional
      Closing) (the “Additional
      Securities”), to one or more purchasers (the “Additional Purchasers”) as
      are mutually agreed upon by the Company and SCO Capital Partners LLC, provided
      that (i) all such subsequent sale(s) (each an “Additional Closing”) are
      consummated prior to 30 days after the date hereof or at such later time as
      mutually agreed to by the Company and SCO Capital Partners LLC and (ii) each
      Additional Purchaser shall become a party to this Agreement and the Investor
      Rights Agreement, by executing and delivering a counterpart signature page
      hereto and thereto. Schedule 1 to this
      Agreement shall be supplemented to reflect the number of Additional Securities
      purchased at each such Additional Closing and to reflect the parties purchasing
      such Additional Securities.

     

    (d)              The
      Purchasers party to this Agreement hereby (i) irrevocably waive any preemptive
      rights, rights of first offer, rights of first refusal, participation rights,
      anti-dilution rights or other similar rights they may possess now or hereafter,
      pursuant to the terms of any agreement with the Company or otherwise, with
      respect to sales of Additional Securities made pursuant to this Agreement and
      (ii) consent to the joinder of any Additional Purchasers to this
      agreement.

     

    (e)              All
      or a portion of the Subscription Amount payable by certain Purchasers for the
      Preferred Stock and Warrants purchased pursuant to this Agreement shall be
      payable by the surrender and cancellation of promissory notes of the Company
      held by such Purchasers, representing an aggregate principal amount of
      $10,015,000 plus accrued and unpaid interest thereon and described next to
      such
      Purchaser’s name in Schedule 1 hereto
      (the “Promissory
      Notes”), with the value of such Promissory Notes toward such Purchaser’s
      Subscription Amount also described in Schedule
      1.  The value of each Promissory Note toward the Subscription
      Amount shall be determined according to whether the Promissory Note is an “A”
Promissory Note (a “Category A
      Note”) or a “B” Promissory Note (a “Category B Note”), in each
      case, as set forth on Schedule 1 under the
      heading “Promissory Note Category”.  Category A Notes shall be valued
      toward each applicable Purchaser’s Subscription Amount at a dollar amount equal
      to (i) the number of shares of Common Stock into which such Category A Note
      is
      convertible immediately prior to the Closing (without giving effect to any
      limitations on beneficial ownership contained therein) multiplied by (ii) the
      Conversion Value (as defined in the Certificate of Designation); provided that,
      notwithstanding any other provision of this Agreement, the Warrants issuable
      to
      the Category A Note holders in respect of Category A Notes exchanged by them
      shall be exercisable for a number of shares of Common Stock determined as if
      the
      principal and interest on such Category A Notes were exchanged on a
      dollar-for-dollar basis and as set forth next to the name of such Category
      A
      Note holder on Schedule
      1.  Category B Notes shall be valued toward each applicable
      Purchaser’s Subscription Amount at a dollar amount equal to the outstanding
      principal amount of such Category B Note plus all accrued and unpaid interest
      thereon.  Each Purchaser surrendering Promissory Notes for
      cancellation in payment of any portion of such Purchaser’s Subscription Amount
      hereby agrees that such Promissory Notes shall be cancelled and that all liens
      held by such Purchaser in connection with such Promissory Notes shall be
      terminated, in each case, as of the Closing.

     

    
      
        
        

      

      
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    2.2           Conditions
      to Obligations of Purchasers to Effect the Closing.

     

    The
      obligations of each Purchaser to
      effect any Closing and the transactions contemplated by this Agreement shall
      be
      subject to the satisfaction at or prior to such 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 50% of the shares
      of
      Common Stock initially issuable upon conversion of the Preferred Shares to
      be
      issued to such Purchaser at such Closing (except with respect to Warrants issued
      upon exchange of Category A Notes, the number of which shall be determined
      in
      accordance with Section 2.1(e)), 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
      F hereto;

     

    (vi)
      a certificate of the Secretary
      of the Company (the “Secretary’s Certificate”), as
      of the date of the applicable Closing, attaching a true copy of the Certificate
      of Incorporation and Bylaws of the Company, as amended to such applicable
      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

     

    (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)              The
      Company shall have entered into the Closing Escrow Agreement, or the Additional
      Closing Escrow Agreement, as applicable.

     

    (c)              All
      representations and warranties of the Company contained herein shall remain
      true
      and correct as of such applicable 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).

     

    
      
        
        

      

      
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    (d)              In
      connection with the Initial Closing, all of the Promissory Notes referenced
      in
      Schedule 1 hereto shall have been surrendered for cancellation in partial or
      complete payment, as applicable, of the Subscription Amount for the Purchasers
      holding such notes;

     

    (e)              As
      of the applicable Closing Date, there shall have been no Material Adverse Effect
      with respect to the Company since the date hereof.

     

    (f)              From
      the date hereof to the applicable 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 such applicable
      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.

     

    (g)              In
      connection with the Initial Closing, all Purchasers surrendering Promissory
      Notes for cancellation in payment of any portion of their Subscription Amount
      shall have executed this Agreement (which shall be deemed to have taken place
      by
      virtue of such Purchasers’ execution of the Original Purchase
      Agreement).

     

    (h)              In
      connection with the Initial Closing, the minimum aggregate cash Subscription
      Amount hereunder shall be $7,500,000.

     

    (i)              Prior
      to any Additional Closing, the Company shall have provided evidence satisfactory
      to the Additional Purchasers that the Board of Directors of the Company has
      approved the Series A Certificate of Amendment to become effective as soon
      as
      practicable following receipt of stockholder approval thereof.

     

    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
      as
      provided in the Closing Escrow Agreement or Additional Closing Escrow Agreement
      (as applicable) and/or (B) in the case of Purchasers paying all or a portion
      of
      their Subscription Amount by the cancellation of the Promissory Notes held
      by
      them, by the cancellation of such Promissory Notes pursuant to Section 2.1(e);
      and

     

    (iii)
      the Investor Rights Agreement,
      duly executed by such Purchaser.

     

    
      
        
        

      

      
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    (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

     

    3.1           Representations
      and Warranties of the Company.

     

    Except
      as set forth under the
      corresponding section of the Disclosure Schedules delivered concurrently
      herewith, 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,
      except that the Series A Certificate of Amendment must be duly approved by
      the
      Company’s shareholders and the necessary filings must be made with the
      Commission in connection with such approval and with the Secretary of State
      of
      the State of Delaware.  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, (iii) the filing of appropriate documents with the Commission in
      connection with the shareholder approval of the Series A Certificate of
      Amendment and (iv) the filing of the Series A Certificate of Amendment 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.

     

    
      
        
        

      

      
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    (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.  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 holders of the
      Company’s Common Stock have certain rights under the company’s Rights Agreement
      dated as of October 31, 2001 by and between the Company and American Stock
      Transfer as Rights Agent. 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.

     

    (ii)                    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 that has not been either complied with or waived. 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(h)(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.

     

    
      
        
        

      

      
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    (ii)                    The
      Company’s (A) audited financial statements for the fiscal years ended December
      31, 2006 and 2005 included in the Company’s annual reports on Form 10-KSB and
      Form 10-K, respectively, filed with the Commission and (B) the financial
      statements included in the Company’s quarterly reports on Form 10-QSB filed with
      the Commission for the first three fiscal quarters of 2007 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.

     

    (iii)                    Except
      for liabilities and obligations incurred since June 30, 2007 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 for the transactions contemplated by this
      Agreement and except as set forth on Schedule 3.1(i),
      since June 30, 2007, 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)(A) 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;

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    (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;

     

    (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.

     

    
      
        
        

      

      
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    (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.
      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.

     

    (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;

     

    
      
        
        

      

      
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    (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;
      and

     

    (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.

     

    (q)              Transactions
      With Affiliates and
      Employees.  Except as provided in the SEC Reports, or as
      contemplated by this Agreement, 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, 2007 (such date, the “Evaluation
      Date”).  The Company presented in its Form 10-QSB for the
      quarter ended June 30, 2007, 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.

     

    
      
        
        

      

      
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    (s)        Certain
      Fees. Except for fees
      payable to the Placement Agents, 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.

     

    (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 Trading
      Market.  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(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 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.

     

    
      
        
        

      

      
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    (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 September 30, 2005 (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.

     

    (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.

     

    
      
        
        

      

      
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    (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.

     

    (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.  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, 2007.

    


    (ee)           Seniority.  Except
      as set forth on Schedule 3.1(ee) as of the Closing Date, no Indebtedness or
      other claim against the Company is senior to the Preferred Stock in right of
      payment, whether with respect to interest or upon liquidation or dissolution,
      or
      otherwise, other than indebtedness secured by purchase money security interests
      (which is senior only as to underlying assets covered thereby) and capital
      lease
      obligations (which is senior only as to the property covered
      thereby).

    


    (ff)           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.

    


    (gg)           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.

    


    
      
        
        

      

      
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    (hh)           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.

    


    (ii)           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, other than, in the case of clauses (ii) and (iii), compensation paid
      to
      the Company’s placement agent in connection with the placement of the
      Securities.

    


    (jj)           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.

    


    (kk)           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.

    


    
      
        
        

      

      
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    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 Initial Closing Date or the Additional Closing Date, as applicable, 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.

     

    (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.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

       

    

    (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-KSB for the period ended December 31, 2006,
      Forms 10-QSB for the periods ended March 31, 2007, June 30, 2007, and September
      30, 2007,  and Forms 8-K filed by the Company since January 1,
      2007.  Each Purchaser acknowledges that it has read and understands
      the risk factors set forth in such Form 10-KSB, Forms 10-QSB 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.

     

    (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.

     

    


    
      
        
        

      

      
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    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 (k) 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.

     

    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.

     

    
      
        
        

      

      
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    (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(k), 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(k) 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.

    


    (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.

     

    
      
        
        

      

      
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    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.

     

    4.4           Publicity.

     

    The
      Company shall, by 8:30 a.m. (New
      York City time) on the Trading Day immediately following the date of each
      Closing, issue a press release disclosing the material terms of the transactions
      contemplated hereby, and within two Business Days following such 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.  The Company and the Placement Agents shall consult
      with each other in issuing any press releases with respect to the transactions
      contemplated hereby, and neither the Company nor any Purchaser nor any of the
      Placement Agents shall issue any such press release or otherwise make any such
      public statement without the prior consent of the Company, with respect to
      any
      press release of any Purchaser or any of the Placement Agents, or without the
      prior consent of the Placement Agents, with respect to any press release of
      the
      Company, except if such disclosure is required by applicable law, rule or
      regulation, in which case the disclosing party shall promptly provide the other
      party with prior notice of such public statement or communication.

     

    
      
        
        

      

      
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    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 Stock and Warrants shall be used
      by
      the Company for working capital and general corporate purposes; under no
      circumstances shall any portion of the proceeds be applied to:

     

    
      	
               
                

            	
              (i)

            	
              accelerated
                repayment of debt existing on the date hereof (other than payment
                of trade
                payables in the ordinary course of the Company’s business and consistent
                with prior practices);

            


    

     

    
      	
               
                

            	
              (ii)

            	
              the
                payment of dividends or other distributions on any capital stock
                of the
                Company;

            


    

     

    
      	
               
                

            	
              (iii)

            	
              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;

            


    

     

    
      	
               
                

            	
              (iv)

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

            


    

     

    
      	
               
                

            	
              (v)

            	
              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) Common Stock for the purpose of enabling the Company
      to issue Conversion Shares issuable upon conversion of the Preferred Stock
      and
      Warrant Shares issuable upon exercise of the Warrants.  If, on any
      date, the number of authorized but unissued (and otherwise unreserved) shares
      of
      Common Stock plus the number of shares of authorized but unissued Common Stock
      reserved for issuance upon conversion of the Preferred Stock and exercise of
      the
      Warrants is less than 130% of (i) the Required Minimum on such date, minus
      (ii) the number of shares of Common Stock previously issued pursuant to the
      Transaction Documents, then the Board of Directors shall use commercially
      reasonable efforts to amend the Company’s certificate or articles of
      incorporation to increase the number of authorized but unissued shares of Common
      Stock to at least the Required Minimum at such time (minus the number of shares
      of Common Stock previously issued pursuant to the Transaction Documents), as
      soon as possible and in any event not later than the 75th day after such date;
      provided that the Company will not be required at any time to authorize a number
      of shares of Common Stock greater than the maximum remaining number of shares
      of
      Common Stock that could possibly be issued after such time pursuant to the
      Transaction Documents.

     

    
      
        
        

      

      
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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.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

       

    

    (d)        Affiliate
      Transactions.  Except for transactions approved by the
      Company’s Audit Committee or a majority of the disinterested members of the
      board of directors of the Company, neither the Company nor any of its
      Subsidiaries shall enter into any transaction with any (i) director, officer,
      employee or holder of more than 5% of the outstanding capital stock of any
      class
      or series of capital stock of the Company or any of its Subsidiaries, (ii)
      member of the immediate family of any such person, or (iii) corporation,
      partnership, trust or other entity in which any such person, or member of the
      immediate family of any such person, is a director, officer, trustee, partner
      or
      holder of more than 5% of the outstanding capital stock thereof.

     

    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 Stock and
      Warrants under this Agreement.

     

    (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 Stock 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.

     

    
      
        
        

      

      
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    4.12
Surrender
      of Promissory Notes.  Each Purchaser
      surrendering Promissory Notes for cancellation in payment of any portion of
      such
      Purchaser’s Subscription Amount that does not deliver such original Promissory
      Notes to the Company prior to the Closing, hereby covenants to deliver such
      original Promissory Notes to the Company as soon as practicable following the
      Closing Date.

     

    4.13           Subsequent
      Equity
      Sales.

    


    (a) Other
      than the issuance of Securities in Additional Closings pursuant to the terms
      of
      this Agreement, or the issuance of any equity securities issued in connection
      with the Agreement and Plan of Merger by and among Access, Somanta Acquisition
      Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and Somanta
      Limited dated as of April 18, 2007, from the date hereof until 45 days after
      the
      Effective Date, neither the Company nor any Subsidiary shall issue shares of
      Common Stock or Common Stock Equivalents; provided, however, the 45 day period
      set forth in this Section 4.13 shall be extended for the number of Trading
      Days
      during such period in which (i) trading in the Common Stock is suspended by
      any
      Trading Market, or (ii) following the Effective Date, the Registration Statement
      is not effective or the prospectus included in the Registration Statement may
      not be used by the Purchasers for the resale of the Underlying
      Shares.

    


    (b) Other
      than the issuance of Securities in Additional Closings pursuant to the terms
      of
      this Agreement, from the date hereof until such time as no Purchaser holds
      any
      of the Securities, the Company shall be prohibited from effecting or entering
      into an agreement to effect any Subsequent Financing involving a Variable Rate
      Transaction. “Variable
      Rate Transaction” means a transaction in which the Company issues or
      sells (i) any debt or equity securities that are convertible into, exchangeable
      or exercisable for, or include the right to receive additional shares of Common
      Stock either (A) at a conversion, exercise or exchange rate or other price
      that
      is based upon and/or varies with the trading prices of or quotations for the
      shares of Common Stock at any time after the initial issuance of such debt
      or
      equity securities, or (B) with a conversion, exercise or exchange price that
      is
      subject to being reset at some future date after the initial issuance of such
      debt or equity security or upon the occurrence of specified or contingent events
      directly or indirectly related to the business of the Company or the market
      for
      the Common Stock or (ii) enters into any agreement, including, but not limited
      to, an equity line of credit, whereby the Company may sell securities at a
      future determined price.

    


    4.14           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.

     

    4.15           Amendment
      to Series A Preferred Stock. The Company
      shall use
      its best efforts to obtain stockholder approval for the Series A Certificate
      of
      Amendment and to cause the amendments to the Certificate of Designation
      contemplated thereby to become effective, in each case, as promptly as
      practicable following the date hereof.

     

    


    
      
        
        

      

      
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    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).

     

    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.

     

    
      
        
        

      

      
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    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.

     

    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.

     

    
      
        
        

      

      
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    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:

     

    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.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

       

    

    6.4          Amendments;
      Waivers.

     

    No
      provision of this Agreement may be
      waived or amended except in a written instrument signed, in the case of an
      amendment, by the Company and the Purchasers holding 66% in interest of the
      Securities then outstanding or, in the case of a waiver, by the party against
      whom enforcement of any such waiver is sought; 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.  Notwithstanding the
      foregoing, this Agreement may be amended by the Company without the consent
      of
      the Purchasers (other than SCO Capital Partners LLC, which must agree pursuant
      to Section 2.1(c)) by supplementing Schedule 1 with
      respect to Purchasers in any Additional Closing and by adding any such
      Purchasers as parties to this Agreement in accordance with Sections 2.1(c)
      and
      (d).

     

    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.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

    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.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

       

    

    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.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

    

    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 applicable
      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.]

     


    
      
         
          

      

      
        38

        
          

        

      

      
         
          

      

    


    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

    



    
      
         
          

      

      
        39

        
          

        

      

      
         
          

      

    

    
                                                                          Schedule
      G

     

    


     

    ACCESS
      PHARMACEUTICALS, INC.

     

    CERTIFICATE
      OF AMENDMENT

     

    TO

     

    CERTIFICATE
      OF DESIGNATIONS, RIGHTS AND PREFERENCES

     

    OF

     

    SERIES
      A CUMULATIVE CONVERTIBLE PREFERRED STOCK

    


    Pursuant
      to Section 242 of the

    General
      Corporation Law of the State of Delaware

    


    Access
      Pharmaceuticals, Inc., a
      corporation organized and existing under the laws of the State of Delaware
      (the
“Corporation”), hereby certifies that the following resolutions (a) were
      duly adopted by the Board of Directors of the Corporation pursuant to authority
      conferred upon the Board of Directors by the provisions of the Certificate
      of
      Incorporation of the Corporation, as amended (the “Certificate of
      Incorporation”), which authorizes the issuance of up to 2,000,000 shares of
      preferred stock, $0.01 par value per share, at a meeting of the Board of
      Directors held on December 18, 2007, (b) was consented to by holders of more
      than 66% of the outstanding shares of the Series A Cumulative Convertible
      Preferred Stock, par value $0.01 per share, of the Corporation (the “Series A
      Preferred Stock”) and (c) was consented to by holders of more than 50% of
      the voting power of the common stock, par value $0.01 per share, of the
      Corporation (the “Common Stock”).

    


    RESOLVED,
      that effective upon the filing of this Certificate of Amendment to
      Certificate of Designations, Rights and Preferences of Series A Cumulative
      Convertible Preferred Stock (this “Certificate of Amendment”), the
      Certificate of Designations, Rights and Preferences of Series A Cumulative
      Convertible Preferred Stock dated and filed with the Delaware Secretary of
      State
      on November 9, 2007 (the “Certificate of Designation”), be amended as
      follows:

    


    1.  The
      first paragraph of Section 4 of the Certificate of Designation is hereby deleted
      in its entirety and replaced with the following:

    


    
      “4.            Actions
      Requiring the Consent of Holders of Series A Preferred Stock.  As long
      as at least 20% of the shares of Series A Preferred Stock issued pursuant to
      the
      Purchase Agreement remain outstanding, the consent of the holders of at least
      66% of the shares of Series A Preferred Stock at the time outstanding, given
      in
      accordance with the Certificate of Incorporation and Bylaws of the Corporation,
      as amended from time to time, shall be necessary for effecting or validating
      any
      of the following transactions or acts, whether by merger, consolidation or
      otherwise (for the avoidance of doubt, no such consent shall be required for
      the
      Corporation to amend the Certificate merely to increase the Corporation’s
      authorized shares of Common Stock or undesignated preferred
      stock):”

     

    2.           Existing
      Section 4(h) of the Certificate of Designation is hereby re-numbered as Section
      4(j) and the following new Sections 4(h) and 4(i) are inserted after existing
      Section 4(g):

    


    “(h)
      any
      Change of Control or any liquidation, winding up or dissolution of the
      Corporation or any subsidiary thereof, whether in one transaction or a series
      of
      transactions, or adoption of any plan for the same;

    


    (i)
      in a
      transaction or series of related transactions involving aggregate potential
      consideration in excess of $20 million, any sale, transfer, license, sublicense,
      encumbrance or other disposition of any of the Corporation’s intellectual
      property, including, without limitation, patents, trademarks, service marks,
      copyrights, trade secrets, technologies, compounds and trade names, whether
      owned outright by the Corporation or licensed from another person or entity,
      whether in registered or unregistered form, and whether or not an application
      for registration has been filed; or”

    


    3.           Existing
      Section 5(b) of the Certificate of Designation is hereby deleted in its entirety
      (except that the existing defined terms “Conversion Triggering Event” and
“Registration Statement” contained in Section 5(b) are not deleted and remain in
      full force and effect) and replaced with the following:

    


    “(b)                      Mandatory
      Conversion. With the prior written consent of holders of not less than a
      majority of the Series A Preferred Stock at such time outstanding, if a
      Conversion Triggering Event (as defined below) has occurred, and provided that
      the Corporation has delivered a written notice to the holders of the Series
      A
      Preferred Stock (the “Notice”) that the Corporation intends to convert
      all of the outstanding Series A Preferred Stock into Common Stock, then, subject
      to the limitations set forth in Section 5(i) hereof, as of the date that is
      sixty-five days following the date that such Notice is given (the “Mandatory
      Conversion Date”), the Series A Preferred Stock shall be converted into such
      number of fully paid and non-assessable shares of Common Stock as is determined
      by dividing (i) the aggregate Liquidation Preference of the shares of Series
      A
      Preferred Stock to be converted plus accrued and unpaid dividends thereon by
      (ii) the applicable Conversion Value (as hereinafter defined) then in effect
      for
      such Series A Preferred Stock (the “Mandatory
      Conversion”).  Nothing in this Section 5(b) shall be construed so
      as to limit the right of a holder of Series A Preferred Stock to convert
      pursuant to Section 5(a) at any time. The Corporation may not deliver a Notice,
      and any Mandatory Conversion delivered by the Corporation shall not be
      effective, unless all of the Equity Conditions have been met on each Trading
      Day
      during the twenty day period prior to and including the later of the Mandatory
      Conversion Date and the Trading Day after the date that the Conversion Shares
      issuable pursuant to such conversion are actually delivered to the Holders
      pursuant to the Notice.”

     

    4.           Existing
      Section 5(c)(iii) of the Certificate of Designation is hereby deleted in its
      entirety and replaced with the following:

     

               “(iii)                 

    The
      Corporation’s obligation to issue Common Stock upon conversion
      of Series A Preferred Stock in accordance with this Certificate of Designation
      shall be absolute, is independent of any covenant of any holder of Series A
      Preferred Stock, and shall not be subject to:  (A) any offset or
      defense; or (B) any claims against the holders of Series A Preferred Stock
      whether pursuant to this Certificate of Designation, the Preferred Stock and
      Warrant Purchase Agreement entered into among the Corporation and the purchasers
      of the Series A Preferred Stock on or about the Filing Date (as amended or
      amended and restated from time to time, the “Purchase Agreement”), the Investor
      Rights Agreement, the Warrants or otherwise.”

     

    


    RESOLVED,  that
      the Certificate of Designation shall remain in full force and effect except
      as
      expressly amended hereby.

    


    [Signature
      page follows.]


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    THE
      UNDERSIGNED, being a duly
      authorized officer of the Corporation, does file this Certificate of Amendment
      to Certificate of Designations, Rights and Preferences of Series A Cumulative
      Convertible Preferred Stock, hereby declaring and certifying that the facts
      herein stated are true and accordingly has hereunto set his hand this _____
      day
      of ________________, 2007.

    


    


    ACCESS
      PHARMACEUTICALS, INC.

    


    


    


    By:___ ______

    Name:  

    Title: