Document:

ex10_1.htm

    
      

    

    Exhibit
10.1

    WaferGen
Bio-Systems, Inc.

     

    2008
Stock Incentive Plan

     

    1.           Purposes of the
Plan.  The purposes of this Plan are to attract and retain the
best available personnel, to provide additional incentives to Employees,
Directors and Consultants and to promote the success of the Company’s
business.

     

    2.           Definitions.  The
following definitions shall apply as used herein and in the individual Award
Agreements except as defined otherwise in an individual Award
Agreement.  In the event a term is separately defined in an individual
Award Agreement, such definition shall supersede the definition contained in
this Section 2.

     

    (a)           “Administrator” means
the Board or any of the Committees appointed to administer the
Plan.

     

    (b)           “Affiliate” and “Associate” shall have
the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.

     

    (c)           “Applicable Laws”
means the legal requirements relating to the Plan and the Awards under
applicable provisions of federal and state securities laws, the corporate laws
of California and, to the extent other than California, the corporate law of the
state of the Company’s incorporation, the Code, the rules of any applicable
stock exchange or national market system, and the rules of any non-U.S.
jurisdiction applicable to Awards granted to residents therein.

     

    (d)           “Assumed” means that
pursuant to a Corporate Transaction either (i) the Award is expressly
affirmed by the Company or (ii) the contractual obligations represented by the
Award are expressly assumed (and not simply by operation of law) by the
successor entity or its Parent in connection with the Corporate Transaction with
appropriate adjustments to the number and type of securities of the successor
entity or its Parent subject to the Award and the exercise or purchase price
thereof which at least preserves the compensation element of the Award existing
at the time of the Corporate Transaction as determined in accordance with the
instruments evidencing the agreement to assume the Award.

     

    (e)           “Award” means the
grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted
Stock Unit or other right or benefit under the Plan.

     

    (f)           “Award Agreement”
means the written agreement evidencing the grant of an Award executed by the
Company and the Grantee, including any amendments thereto.

     

    (g)           “Board” means the
Board of Directors of the Company.

     

    (h)           “Cause” means, with
respect to the termination by the Company or a Related Entity of the Grantee’s
Continuous Service, that such termination is for “Cause” as such term (or word
of like import) is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the
Grantee’s:  (i) performance of any act or failure to perform any
act in bad faith and to the detriment of the Company or a Related Entity;
(ii) dishonesty, intentional misconduct or material breach of any agreement
with the Company or a Related Entity; or (iii) commission of a crime
involving dishonesty, breach of trust, or physical or emotional harm to any
person; provided, however, that with regard to any agreement that defines
“Cause” on the occurrence of or in connection with a Corporate Transaction or a
Change in Control, such definition of “Cause” shall not apply until a Corporate
Transaction or a Change in Control actually occurs.

     

    
      
        
           

        

        
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    (i)           “Change in
Control” means a change in
ownership or control of the Company effected through either of the following
transactions:

     

    (i)           the
direct or indirect acquisition by any person or related group of persons (other
than an acquisition from or by the Company or by a Company-sponsored employee
benefit plan or by a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company’s outstanding securities pursuant to a tender or exchange offer made
directly to the Company’s stockholders which a majority of the Continuing
Directors who are not Affiliates or Associates of the offeror do not recommend
such stockholders accept, or

     

    (ii)           a
change in the composition of the Board over a period of twelve (12) months or
less such that a majority of the Board members (rounded up to the next whole
number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who are Continuing
Directors.

     

    (j)           “Code” means the
Internal Revenue Code of 1986, as amended.

     

    (k)           “Committee” means any
committee composed of members of the Board appointed by the Board to administer
the Plan.

     

    (l)           “Common Stock” means
the common stock of the Company.

     

    (m)           “Company” means
WaferGen Bio-Systems, Inc., a Nevada corporation, or any successor entity that
adopts the Plan in connection with a Corporate Transaction.

     

    (n)           “Consultant” means any
person (other than an Employee or a Director, solely with respect to rendering
services in such person’s capacity as a Director) who is engaged by the Company
or any Related Entity to render consulting or advisory services to the Company
or such Related Entity.

     

    (o)           “Continuing Directors”
means members of the Board who either (i) have been Board members
continuously for a period of at least twelve (12) months or
(ii) have been Board members for less than twelve (12) months and were
elected or nominated for election as Board members by at least a majority of the
Board members described in clause (i) who were still in office at the time
such election or nomination was approved by the Board.

     

    
      
        
           

        

        
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    (p)           “Continuous Service”
means that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant is not interrupted or
terminated.  In jurisdictions requiring notice in advance of an
effective termination as an Employee, Director or Consultant, Continuous Service
shall be deemed terminated upon the actual cessation of providing services to
the Company or a Related Entity notwithstanding any required notice period that
must be fulfilled before a termination as an Employee, Director or Consultant
can be effective under Applicable Laws.  A Grantee’s Continuous
Service shall be deemed to have terminated either upon an actual termination of
Continuous Service or upon the entity for which the Grantee provides services
ceasing to be a Related Entity.  Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entity, or any successor, in
any capacity of Employee, Director or Consultant, or (iii) any change in
status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director or Consultant (except as
otherwise provided in the Award Agreement).  An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave.  For purposes of each Incentive Stock Option granted
under the Plan, if such leave exceeds three (3) months, and reemployment upon
expiration of such leave is not guaranteed by statute or contract, then the
Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the
day three (3) months and one (1) day following the expiration of such three (3)
month period.

     

    (q)           “Corporate
Transaction” means any of the following transactions, provided, however,
that the Administrator shall determine under parts (iv) and (v) whether multiple
transactions are related, and its determination shall be final, binding and
conclusive:

     

    (i)            
a merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the state
in which the Company is incorporated;

     

    (ii)           
the sale, transfer or other disposition of all or substantially all of the
assets of the Company;

     

    (iii)           the
complete liquidation or dissolution of the Company;

     

    (iv)           any
reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in
which the Company is the surviving entity but (A) the shares of Common
Stock outstanding immediately prior to such merger are converted or exchanged by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or (B) in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company’s outstanding
securities are transferred to a person or persons different from those who held
such securities immediately prior to such merger or the initial transaction
culminating in such merger; or

     

    (v)            
acquisition in a single or series of related transactions by any person or
related group of persons (other than the Company or by a Company-sponsored
employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company’s outstanding securities but
excluding any such transaction or series of related transactions that the
Administrator determines shall not be a Corporate Transaction.

     

    

    
      
        
           

        

        
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    (r)           “Covered Employee”
means an Employee who is a “covered employee” under Section 162(m)(3) of
the Code.

     

    (s)           “Director” means a
member of the Board or the board of directors of any Related
Entity.

     

    (t)           “Disability” means as
defined under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy.  If the Company or the Related Entity to
which the Grantee provides service does not have a long-term disability plan in
place, “Disability” means that a Grantee is unable to carry out the
responsibilities and functions of the position held by the Grantee by reason of
any medically determinable physical or mental impairment for a period of not
less than ninety (90) consecutive days.  A Grantee will not be
considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its
discretion.

     

    (u)           “Dividend Equivalent
Right” means a right entitling the Grantee to compensation measured by
dividends paid with respect to Common Stock.

     

    (v)           “Employee” means any
person, including an Officer or Director, who is in the employ of the Company or
any Related Entity, subject to the control and direction of the Company or any
Related Entity as to both the work to be performed and the manner and method of
performance.  The payment of a director’s fee by the Company or a
Related Entity shall not be sufficient to constitute “employment” by the
Company.

     

    (w)          “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    (x)           “Fair Market Value”
means, as of any date, the value of Common Stock determined as
follows:

     

    (i)            
If the Common Stock is listed on one or more established stock exchanges or
national market systems, including without limitation The NASDAQ Global Select
Market, The NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ
Stock Market LLC, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on the
principal exchange or system on which the Common Stock is listed (as determined
by the Administrator) on the date of determination (or, if no closing sales
price or closing bid was reported on that date, as applicable, on the last
trading date such closing sales price or closing bid was reported), as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable;

     

    (ii)          
 If the Common Stock is regularly quoted on an automated quotation system
(including the OTC Bulletin Board) or by a recognized securities dealer, its
Fair Market Value shall be the closing sales price for such stock as quoted on
such system or by such securities dealer on the date of determination, but if
selling prices are not reported, the Fair Market Value of a share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the date of determination (or, if no such prices were reported on that
date, on the last date such prices were reported), as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
or

     

    

    
      
        
           

        

        
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    (iii)           In
the absence of an established market for the Common Stock of the type described
in (i) and (ii), above, the Fair Market Value thereof shall be determined by the
Administrator in good faith and in a manner consistent with Applicable
Laws.

     

    (y)           “Grantee” means an
Employee, Director or Consultant who receives an Award under the
Plan.

     

    (z)           “Immediate Family”
means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Grantee’s household (other than a tenant
or employee), a trust in which these persons (or the Grantee) have more than
fifty percent (50%) of the beneficial interest, a foundation in which these
persons (or the Grantee) control the management of assets, and any other entity
in which these persons (or the Grantee) own more than fifty percent (50%) of the
voting interests.

     

    (aa)         “Incentive Stock
Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code.

     

    (bb)        “Non-Qualified Stock
Option” means an Option not intended to qualify as an Incentive Stock
Option.

     

    (cc)         “Officer” means a
person who is an officer of the Company or a Related Entity within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

     

    (dd)        “Option” means an
option to purchase Shares pursuant to an Award Agreement granted under the
Plan.

     

    (ee)         “Parent” means a
“parent corporation”, whether now or hereafter existing, as defined in
Section 424(e) of the Code.

     

    (ff)          “Performance-Based
Compensation” means compensation qualifying as “performance-based
compensation” under Section 162(m) of the Code.

     

    (gg)        “Plan” means this 2008
Stock Incentive Plan.

     

    (hh)        “Post-Termination Exercise
Period” means the period specified in the Award Agreement and to the
extent required by Applicable Laws, shall be a period of not less than thirty
(30) days commencing on the date of termination (other than termination by the
Company or any Related Entity for Cause) of the Grantee’s Continuous Service, or
such longer period as may be required by Applicable Laws upon death or
Disability.

     

    

    
      
        
           

        

        
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    (ii)           “Related Entity” means
any Parent or Subsidiary of the Company.

     

    (jj)           “Replaced” means that
pursuant to a Corporate Transaction the Award is replaced with a comparable
stock award or a cash incentive program of the Company, the successor entity (if
applicable) or Parent of either of them which preserves the compensation element
of such Award existing at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same (or a more favorable) vesting
schedule applicable to such Award.  The determination of Award
comparability shall be made by the Administrator and its determination shall be
final, binding and conclusive.

     

    (kk)         “Restricted Stock”
means Shares issued under the Plan to the Grantee for such consideration, if
any, and subject to such restrictions on transfer, rights of first refusal,
repurchase provisions, forfeiture provisions, and other terms and conditions as
established by the Administrator.

     

    (ll)           “Restricted Stock
Units” means an Award which may be earned in whole or in part upon the
passage of time or the attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.

     

    (mm)       “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor
thereto.

     

    (nn)        “SAR” means a stock
appreciation right entitling the Grantee to Shares or cash compensation, as
established by the Administrator, measured by appreciation in the value of
Common Stock.

     

    (oo)        “Share” means a share
of the Common Stock.

     

    (pp)         “Subsidiary” means a
“subsidiary corporation”, whether now or hereafter existing, as defined in
Section 424(f) of the Code.

     

    3.           Stock Subject to the
Plan.

     

    (a)           Subject
to the provisions of Section 10 below, the maximum aggregate number of
Shares which may be issued pursuant to all Awards (including Incentive Stock
Options) is Two Million (2,000,000) Shares.  Notwithstanding the
foregoing, the maximum aggregate number of Shares which may be issued pursuant
to all Awards of Restricted Stock and Restricted Stock Units is One Million
(1,000,000) Shares.  The Shares may be authorized, but unissued, or
reacquired Common Stock.

     

    (b)           Any
Shares covered by an Award (or portion of an Award) which is forfeited, canceled
or expires (whether voluntarily or involuntarily) shall be deemed not to have
been issued for purposes of determining the maximum aggregate number of Shares
which may be issued under the Plan.  Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited or repurchased by the Company, such Shares shall
become available for future grant under the Plan.  To the extent not prohibited by the listing
requirements of The NASDAQ
Stock Market LLC (or other established stock exchange or
national market system on which the Common Stock is traded) and Applicable Law,
any Shares covered by an Award which are surrendered (i) in payment of the
Award exercise or purchase price or (ii) in satisfaction of tax withholding
obligations incident to the exercise of an Award shall be deemed not to have
been issued for purposes of determining the maximum number of Shares
which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the
Administrator.

     

    

    
      
        
           

        

        
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    4.           Administration of the
Plan.

     

    (a)           Plan
Administrator.

     

    (i)            
Administration with
Respect to Directors and Officers.  With respect to grants of
Awards to Directors or Employees who are also Officers or Directors of the
Company, the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which Committee shall be constituted in such
a manner as to satisfy the Applicable Laws and to permit such grants and related
transactions under the Plan to be exempt from Section 16(b) of the Exchange Act
in accordance with Rule 16b-3.  Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board.

     

    (ii)          
 Administration
With Respect to Consultants and Other Employees.  With respect
to grants of Awards to Employees or Consultants who are neither Directors nor
Officers of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.  Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.  The Board may authorize one or more Officers
to grant such Awards and may limit such authority as the Board determines from
time to time.

     

    (iii)           Administration With Respect
to Covered Employees.  Notwithstanding the foregoing, grants of
Awards to any Covered Employee intended to qualify as Performance-Based
Compensation shall be made only by a Committee (or subcommittee of a Committee)
which is comprised solely of two or more Directors eligible to serve on a
committee making Awards qualifying as Performance-Based
Compensation.  In the case of such Awards granted to Covered
Employees, references to the “Administrator” or to a “Committee” shall be deemed
to be references to such Committee or subcommittee.

     

    (iv)           Administration
Errors.  In the event an Award is granted in a manner
inconsistent with the provisions of this subsection (a), such Award shall
be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

     

    (b)           Powers of the
Administrator.  Subject to Applicable Laws and the provisions
of the Plan (including any other powers given to the Administrator hereunder),
and except as otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:

     

    (i)           to
select the Employees, Directors and Consultants to whom Awards may be granted
from time to time hereunder;

     

    

    
      
        
           

        

        
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    (ii)           to
determine whether and to what extent Awards are granted hereunder;

     

    (iii)           to
determine the number of Shares or the amount of other consideration to be
covered by each Award granted hereunder;

     

    (iv)           to
approve forms of Award Agreements for use under the Plan;

     

    (v)           to
determine the terms and conditions of any Award granted hereunder;

     

    (vi)           to
establish additional terms, conditions, rules or procedures to accommodate the
rules or laws of applicable non-U.S. jurisdictions and to afford Grantees
favorable treatment under such rules or laws; provided, however, that no Award
shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan;

     

    (vii)         to amend the terms of any outstanding
Award granted under the Plan, provided that (A) any amendment that would
adversely affect the Grantee’s rights under an outstanding Award shall not be
made without the Grantee’s written consent, provided, however, that an
amendment or modification that may cause an Incentive Stock Option to become a
Non-Qualified Stock Option shall not be treated as adversely affecting the
rights of the Grantee (B) the
reduction of the exercise price of any Option awarded under the Plan and the
base appreciation amount of any SAR awarded under the Plan shall be subject to
stockholder approval and (C) canceling an Option or SAR at a time when its
exercise price or base appreciation amount (as applicable) exceeds the Fair
Market Value of the underlying Shares, in exchange for another Option, SAR,
Restricted Stock, or other Award shall be subject to stockholder approval,
unless the cancellation and exchange occurs in connection with a Corporate
Transaction.  Notwithstanding the foregoing, canceling an Option or
SAR in exchange for another Option, SAR, Restricted Stock, or other Award with
an exercise price, purchase price or base appreciation amount (as applicable)
that is equal to or greater than the exercise price or base appreciation amount
(as applicable) of the original Option or SAR shall not be subject to
stockholder approval;

     

    (viii)        to
construe and interpret the terms of the Plan and Awards, including without
limitation, any notice of award or Award Agreement, granted pursuant to the Plan; and

     

    (ix)           to
take such other action, not inconsistent with the terms of the Plan, as the
Administrator deems appropriate.

     

    The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator; provided
that the Administrator may not exercise any right or power reserved to the
Board.  Any decision made, or action taken, by the Administrator or in
connection with the administration of this Plan shall be final, conclusive and
binding on all persons having an interest in the Plan.

    

    
      
        
           

        

        
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    (c)           Indemnification. In
addition to such other rights of indemnification as they may have as members of
the Board or as Officers or Employees of the Company or a Related Entity,
members of the Board and any Officers or Employees of the Company or a Related
Entity to whom authority to act for the Board, the Administrator or the Company
is delegated shall be defended and indemnified by the Company to the extent
permitted by law on an after-tax basis against all reasonable expenses,
including attorneys’ fees, actually and necessarily incurred in connection with
the defense of any claim, investigation, action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any Award granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Company) or paid
by them in satisfaction of a judgment in any such claim, investigation, action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such claim, investigation, action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct;
provided, however, that within thirty (30) days after the institution of such
claim, investigation, action, suit or proceeding, such person shall offer to the
Company, in writing, the opportunity at the Company’s expense to defend the
same.

     

    5.           Eligibility.  Awards
other than Incentive Stock Options may be granted to Employees, Directors and
Consultants.  Incentive Stock Options may be granted only to Employees
of the Company or a Parent or a Subsidiary of the Company.  An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards.  Awards may be granted to such
Employees, Directors or Consultants who are residing in non-U.S. jurisdictions
as the Administrator may determine from time to time.

     

    6.           Terms and Conditions of
Awards.

     

    (a)           Types of Awards. The
Administrator is authorized under the Plan to award any type of arrangement to
an Employee, Director or Consultant that is not inconsistent with the provisions
of the Plan and that by its terms involves or might involve the issuance of
(i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions.  Such awards include, without limitation, Options,
SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend
Equivalent Rights, and an Award may consist of one such security or benefit, or
two (2) or more of them in any combination or alternative.

     

    (b)           Designation of
Award.  Each Award shall be designated in the Award
Agreement.  In the case of an Option, the Option shall be designated
as either an Incentive Stock Option or a Non-Qualified Stock
Option.  However, notwithstanding such designation, an Option will
qualify as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not
exceeded.  The $100,000 limitation of Section 422(d) of the Code
is calculated based on the aggregate Fair Market Value of the Shares subject to
Options designated as Incentive Stock Options which become exercisable for the
first time by a Grantee during any calendar year (under all plans of the Company
or any Parent or Subsidiary of the Company).  For purposes of this
calculation, Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be
determined as of the grant date of the relevant Option.  In the event
that the Code or the regulations promulgated thereunder are amended after the
date the Plan becomes effective to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to Incentive Stock Options, then
such different limit will be automatically incorporated herein and will apply to
any Options granted after the effective date of such amendment.

     

    

    
      
        
           

        

        
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    (c)           Conditions of
Award.  Subject to the terms of the Plan, the Administrator
shall determine the provisions, terms, and conditions of each Award including,
but not limited to, the Award vesting schedule, repurchase provisions, rights of
first refusal, forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria.  The performance criteria
established by the Administrator may be based on any one of, or combination of,
the following: (i) increase in share price, (ii) earnings per share, (iii) total
stockholder return, (iv) operating margin, (v) gross margin, (vi) return on
equity, (vii) return on assets, (viii) return on investment, (ix) operating
income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii)
revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation,
(xvi) economic value added and (xvii) market share.  The performance
criteria may be applicable to the Company, Related Entities and/or any
individual business units of the Company or any Related
Entity.  Partial achievement of the specified criteria may result in a
payment or vesting corresponding to the degree of achievement as specified in
the Award Agreement.  In addition, the performance criteria shall be
calculated in accordance with generally accepted accounting principles, but
excluding the effect (whether positive or negative) of any change in accounting
standards and any extraordinary, unusual or nonrecurring item, as determined by
the Administrator, occurring after the establishment of the performance criteria
applicable to the Award intended to be performance-based
compensation.  Each such adjustment, if any, shall be made solely for
the purpose of providing a consistent basis from period to period for the
calculation of performance criteria in order to prevent the dilution or
enlargement of the Grantee’s rights with respect to an Award intended to be
performance-based compensation.

     

    (d)           Acquisitions and Other
Transactions.  The Administrator may issue Awards under the
Plan in settlement, assumption or substitution for, outstanding awards or
obligations to grant future awards in connection with the Company or a Related
Entity acquiring another entity, an interest in another entity or an additional
interest in a Related Entity whether by merger, stock purchase, asset purchase
or other form of transaction.

     

    (e)           Deferral of Award
Payment.  The Administrator may establish one or more programs
under the Plan to permit selected Grantees the opportunity to elect to defer
receipt of consideration upon exercise of an Award, satisfaction of performance
criteria, or other event that absent the election would entitle the Grantee to
payment or receipt of Shares or other consideration under an
Award.  The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.

    

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

    

    (f)           Separate
Programs.  The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.

     

    (g)           Individual Limitations on
Awards.

     

    (i)           Individual Option and SAR
Limit.  The maximum number of Shares with respect to which
Options and SARs may be granted to any Grantee in any calendar year shall be One
Million (1,000,000) Shares.  The foregoing limitation shall be
adjusted proportionately in connection with any change in the Company’s
capitalization pursuant to Section 10, below.  To the extent
required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitation with respect to a Grantee, if any Option or
SAR is canceled, the canceled Option or SAR shall continue to count against the
maximum number of Shares with respect to which Options and SARs may be granted
to the Grantee.  For this purpose, the repricing of an Option (or in
the case of a SAR, the base amount on which the stock appreciation is calculated
is reduced to reflect a reduction in the Fair Market Value of the Common Stock)
shall be treated as the cancellation of the existing Option or SAR and the grant
of a new Option or SAR.

     

    (ii)           Individual Limit for
Restricted Stock and Restricted Stock Units.  For awards of
Restricted Stock and Restricted Stock Units that are intended to be
Performance-Based Compensation, the maximum number of Shares with respect to
which such Awards may be granted to any Grantee in any calendar year shall be
Five Hundred Thousand (500,000) Shares.  The foregoing limitation
shall be adjusted proportionately in connection with any change in the Company’s
capitalization pursuant to Section 10, below.

     

    (h)           Early
Exercise.  The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award.  Any unvested Shares received pursuant to such exercise may
be subject to a repurchase right in favor of the Company or a Related Entity or
to any other restriction the Administrator determines to be
appropriate.

     

    (i)           Term of
Award.  The term of each Award shall shall be no more than
seven  (7) years from the date of grant thereof.  However, in the
case of an Incentive Stock Option granted to a Grantee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company, the term of the Incentive Stock Option shall be
five (5) years from the date of grant thereof or such shorter term as may
be provided in the Award Agreement.  Notwithstanding the foregoing,
the specified term of any Award shall not include any period for which the
Grantee has elected to defer the receipt of the Shares or cash issuable pursuant
to the Award.

     

    (j)           Transferability of
Awards.   Incentive
Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Grantee, only by
the Grantee.   Other
Awards shall be transferable (i) by will and by the laws of descent and
distribution and (ii) during the lifetime of the Grantee, to the extent and
in the manner authorized by the Administrator by gift or pursuant to a domestic
relations order to members of the Grantee’s Immediate
Family.  Notwithstanding the foregoing, the Grantee may designate one
or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death
on a beneficiary designation form provided by the Administrator.

    

    
      
        
           

        

        
          11

          
            

          

        

        
           

        

      

    

    

    (k)           Time of Granting
Awards.  The date of grant of an Award shall for all purposes
be the date on which the Administrator makes the determination to grant such
Award, or such other later date as is determined by the
Administrator.

     

    7.           Award Exercise or Purchase
Price, Consideration and Taxes.

     

    (a)           Exercise or Purchase
Price.  The exercise or purchase price, if any, for an Award
shall be as follows:

     

    (i)           In
the case of an Incentive Stock Option:

     

    (A)           granted
to an Employee who, at the time of the grant of such Incentive Stock Option owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary of the Company, the
per Share exercise price shall be not less than one hundred ten percent (110%)
of the Fair Market Value per Share on the date of grant; or

     

    (B)           granted
to any Employee other than an Employee described in the preceding paragraph, the
per Share exercise price shall be not less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant.

     

    (ii)           In
the case of a Non-Qualified Stock Option, the per Share exercise price shall be
such price as is determined by the Administrator.

     

    (iii)           In
the case of SARs, the base appreciation amount shall not be less than one
hundred percent (100%) of the Fair Market Value per Share on the date of
grant.

     

    (iv)           In
the case of Awards intended to qualify as Performance-Based Compensation, the
exercise or purchase price, if any, shall be not less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant.

     

    (v)           In
the case of the sale of Shares, the per Share purchase price, if any, shall be
such price as is determined by the Administrator.

     

    (vi)           In
the case of other Awards, such price as is determined by the
Administrator.

     

    (vii)           Notwithstanding
the foregoing provisions of this Section ‎7‎(a),
in the case of an Award issued pursuant to Section ‎6(d),
above, the exercise or purchase price for the Award shall be determined in
accordance with the provisions of the relevant instrument evidencing the
agreement to issue such Award.

    

    
      
        
           

        

        
          12

          
            

          

        

        
           

        

      

    

    

    (b)           Consideration.  Subject
to Applicable Laws, the consideration to be paid for the Shares to be issued
upon exercise or purchase of an Award including the method of payment, shall be
determined by the Administrator.  In addition to any other types of
consideration the Administrator may determine, the Administrator is authorized
to accept as consideration for Shares issued under the Plan the
following:

     

    (i)           cash;

     

    (ii)           check;

     

    (iii)           delivery
of Grantee’s promissory note with such recourse, interest, security, and
redemption provisions as the Administrator determines as appropriate (but only
to the extent that the acceptance or terms of the promissory note would not
violate an Applicable Law);

     

    (iv)           surrender
of Shares or delivery of a properly executed form of attestation of ownership of
Shares as the Administrator may require which have a Fair Market Value on the
date of surrender or attestation equal to the aggregate exercise price of the
Shares as to which said Award shall be exercised;

     

    (v)           with
respect to Options, payment through a broker-dealer sale and remittance
procedure pursuant to which the Grantee (A) shall provide written instructions
to a Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company sufficient funds to cover
the aggregate exercise price payable for the purchased Shares and (B) shall
provide written directives to the Company to deliver the certificates for the
purchased Shares directly to such brokerage firm in order to complete the sale
transaction; 

     

    (vi)           with
respect to Options, payment through a “net exercise” such that, without the
payment of any funds, the Grantee may exercise the Option and receive the net
number of Shares equal to (i) the number of Shares as to which the Option
is being exercised, multiplied by (ii) a fraction, the numerator of which
is the Fair Market Value per Share (on such date as is determined by the
Administrator) less the Exercise Price per Share, and the denominator of which
is such Fair Market Value per Share (the number of net Shares to be received
shall be rounded down to the nearest whole number of Shares); or

     

    (vii)           any
combination of the foregoing methods of payment.

     

    The
Administrator may at any time or from time to time, by adoption of or by
amendment to the standard forms of Award Agreement described in
Section 4(b)(iv), or by other means, grant Awards which do not permit all
of the foregoing forms of consideration to be used in payment for the Shares or
which otherwise restrict one or more forms of consideration.

     

    (c)           Taxes.  No
Shares shall be delivered under the Plan to any Grantee or other person until
such Grantee or other person has made arrangements acceptable to the
Administrator for the satisfaction of any non-U.S., federal, state, or local
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares.  Upon
exercise or vesting of an Award the Company shall withhold or collect from the
Grantee an amount sufficient to satisfy such tax obligations, including, but not
limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum
applicable tax withholding
obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of
Shares if such number of Shares withheld would result in withholding a
fractional Share with any remaining tax withholding settled in
cash).

    

    
      
        
           

        

        
          13

          
            

          

        

        
           

        

      

    

    

    8.           Exercise of
Award.

     

    (a)           Procedure for Exercise;
Rights as a Stockholder.

     

    (i)           Any
Award granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator under the terms of the Plan and
specified in the Award Agreement.

     

    (ii)           An
Award shall be deemed to be exercised when written notice of such exercise has
been given to the Company in accordance with the terms of the Award by the
person entitled to exercise the Award and full payment for the Shares with
respect to which the Award is exercised has been made, including, to the extent
selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 7(b)(v).

     

    (b)           Exercise of Award Following
Termination of Continuous Service.  To the extent required
under Applicable Laws, in the event of termination of a Grantee’s Continuous
Service for any reason other than Disability or death (but not in the event of a
Grantee’s change of status from Employee to Consultant or from Consultant to
Employee), such Grantee may, but only during the Post-Termination Exercise
Period (but in no event later than the expiration date of the term of such Award
as set forth in the Award Agreement), exercise the portion of the Grantee’s
Award that was vested at the date of such termination or such other portion of
the Grantee’s Award as may be determined by the Administrator.  The
Grantee’s Award Agreement may provide that upon the termination of the Grantee’s
Continuous Service for Cause, the Grantee’s right to exercise the Award shall
terminate concurrently with the termination of Grantee’s Continuous
Service.  In the event of a Grantee’s change of status from Employee
to Consultant, an Employee’s Incentive Stock Option shall convert automatically
to a Non-Qualified Stock Option on the day three (3) months and one day
following such change of status.  To the extent that the Grantee’s
Award was unvested at the date of termination, or if the Grantee does not
exercise the vested portion of the Grantee’s Award within the Post-Termination
Exercise Period, the Award shall terminate.  If Applicable Laws allow
for a shorter or longer Post-Termination Exercise Period, the Award may be
exercised following the termination of a Grantee’s Continuous Service only to
the extent provided in the Award Agreement.

     

    (c)           Disability of
Grantee.  To the extent required under Applicable Laws, in the
event of termination of a Grantee’s Continuous Service as a result of his or her
Disability, such Grantee may, but only within twelve (12) months from the date
of such termination (or such longer period as specified in the Award Agreement
but in no event later than the expiration date of the term of such Award as set
forth in the Award Agreement), exercise the portion of the Grantee’s Award that
was vested at the date of such termination; provided, however, that if such
Disability is not a “disability” as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Non-Qualified Stock
Option on the day three (3) months and one day following such
termination.  To the extent that the Grantee’s Award was unvested at
the date of termination, or if Grantee does not exercise the vested portion of
the Grantee’s Award within the time specified herein, the Award shall
terminate.  If Applicable Laws allow for a shorter or longer
Post-Termination Exercise Period upon a Grantee’s Continuous Service as a result
of Disability, the Award may be exercised following the termination of a
Grantee’s Continuous Service only to the extent provided in the Award
Agreement.

     

    
      
        
           

        

        
          14

          
            

          

        

        
           

        

      

    

    

    (d)           Death of
Grantee.  To the extent required under Applicable Laws, in the
event of a termination of the Grantee’s Continuous Service as a result of his or
her death, or in the event of the death of the Grantee during the
Post-Termination Exercise Period or during the twelve (12) month period
following the Grantee’s termination of Continuous Service as a result of his or
her Disability, the Grantee’s estate or a person who acquired the right to
exercise the Award by bequest or inheritance may exercise the portion of the
Grantee’s Award that was vested as of the date of termination, within twelve
(12) months from the date of death (or such longer period as specified in the
Award Agreement but in no event later than the expiration of the term of such
Award as set forth in the Award Agreement).  To the extent that, at
the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate
or a person who acquired the right to exercise the Award by bequest or
inheritance does not exercise the vested portion of the Grantee’s Award within
the time specified herein, the Award shall terminate.  If Applicable
Laws allow for a shorter or longer Post-Termination Exercise Period upon a
termination of the Grantee’s Continuous Service as a result of his or her death,
the Award may be exercised following the termination of a Grantee’s Continuous
Service only to the extent provided in the Award Agreement.

     

    (e)           Extension if Exercise
Prevented by Law.  Notwithstanding the foregoing, if the
exercise of an Award within the applicable time periods set forth in this
Section 8 is prevented by the provisions of Section 9 below, the Award
shall remain exercisable until one (1) month after the date the Grantee is
notified by the Company that the Award is exercisable, but in any event no later
than the expiration of the term of such Award as set forth in the Award
Agreement.

     

    9.           Conditions Upon Issuance of
Shares.

     

    (a)           If
at any time the Administrator determines that the delivery of Shares pursuant to
the exercise, vesting or any other provision of an Award is or may be unlawful
under Applicable Laws, the vesting or right to exercise an Award or to otherwise
receive Shares pursuant to the terms of an Award shall be suspended until the
Administrator determines that such delivery is lawful and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.  The Company shall have no obligation to effect any
registration or qualification of the Shares under federal or state
laws.

     

    (b)           As
a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any Applicable
Laws.

     

    
      
        
           

        

        
          15

          
            

          

        

        
           

        

      

    

    

    10.           Adjustments Upon Changes in
Capitalization.  Subject to any required action by the
stockholders of the Company and Section 11 hereof, the number of Shares covered
by each outstanding Award, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan, the exercise or purchase price of each
such outstanding Award, the maximum number of Shares with respect to which
Awards may be granted to any Grantee in any calendar year, as well as any other
terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar transaction affecting
the Shares, (ii) any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company, or (iii) 
any other transaction with respect to Common Stock including a corporate merger,
consolidation, acquisition of property or stock, separation (including a
spin-off or other distribution of stock or property), reorganization,
liquidation (whether partial or complete) or any similar transaction; provided,
however that conversion of any convertible securities of the Company shall not
be deemed to have been “effected without receipt of
consideration.”  In the event of any distribution of cash or other
assets to stockholders other than a normal cash dividend, the Administrator
shall also make such adjustments as provided in this Section 10 or substitute,
exchange or grant Awards to effect such adjustments (collectively
“adjustments”).  Any such adjustments to outstanding Awards will be
effected in a manner that precludes the enlargement of rights and benefits under
such Awards.  In connection with the foregoing adjustments, the
Administrator may, in its discretion, prohibit the exercise of Awards or other
issuance of Shares, cash or other consideration pursuant to Awards during
certain periods of time. Except as the Administrator determines, no issuance by
the Company of shares of any class, or securities convertible into shares of any
class, shall affect, and no adjustment by reason hereof shall be made with
respect to, the number or price of Shares subject to an Award.

     

    11.           Corporate Transactions and
Changes in Control.

     

    (a)           Termination of Award to
Extent Not Assumed in Corporate Transaction.  Effective upon
the consummation of a Corporate Transaction, all outstanding Awards under the
Plan shall terminate.  However, all such Awards shall not terminate to
the extent they are Assumed in connection with the Corporate
Transaction.

     

    (b)           Acceleration of Award Upon
Corporate Transaction or Change in Control.

     

    (i)           Corporate
Transaction.  Except as provided otherwise in an individual
Award Agreement, in the event of a Corporate Transaction and:

     

    (A)           for
the portion of each Award that is Assumed or Replaced, then such Award (if
Assumed), the replacement Award (if Replaced), or the cash incentive program (if
Replaced) automatically shall become fully vested, exercisable and payable and
be released from any repurchase or forfeiture rights (other than repurchase
rights exercisable at Fair Market Value) for all of the Shares (or other
consideration) at the time represented by such Assumed or Replaced portion of
the Award, immediately upon termination of the Grantee’s Continuous Service if
such Continuous Service is terminated by the successor company or the Company
without Cause within twelve (12) months after the Corporate Transaction;
and

     

    

    
      
        
           

        

        
          16

          
            

          

        

        
           

        

      

    

    

    (B)           for
the portion of each Award that is neither Assumed nor Replaced, such portion of
the Award shall automatically become fully vested and exercisable and be
released from any repurchase or forfeiture rights (other than repurchase rights
exercisable at Fair Market Value) for all of the Shares (or other consideration)
at the time represented by such portion of the Award, immediately prior to the
specified effective date of such Corporate Transaction, provided that the
Grantee’s Continuous Service has not terminated prior to such
date.  For Awards that have an exercise feature, the portion of the
Award that is not Assumed shall terminate under subsection (a) of this Section
11 to the extent not exercised prior to the consummation of such Corporate
Transaction.

     

    (ii)           Change in
Control.  Except as provided otherwise in an individual Award
Agreement, following a Change in Control (other than a Change in Control which
also is a Corporate Transaction) and upon the termination of the Continuous
Service of a Grantee if such Continuous Service is terminated by the Company or
Related Entity without Cause within twelve (12) months after a Change in
Control, each Award of such Grantee which is at the time outstanding under the
Plan automatically shall become fully vested and exercisable and be released
from any repurchase or forfeiture rights (other than repurchase rights
exercisable at Fair Market Value), immediately upon the termination of such
Continuous Service.

     

    (c)           Effect of Acceleration on
Incentive Stock Options.  Any Incentive Stock Option
accelerated under this Section 11 in connection with a Corporate
Transaction or Change in Control shall remain exercisable as an Incentive Stock
Option under the Code only to the extent the $100,000 dollar limitation of
Section 422(d) of the Code is not exceeded.

     

    12.           Effective Date and Term of
Plan.  The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company.  It shall continue in effect for a term of ten (10) years
unless sooner terminated.  Subject to Section 17 below, and
Applicable Laws, Awards may be granted under the Plan upon its becoming
effective.

     

    13.           Amendment, Suspension or
Termination of the Plan.

     

    (a)           The
Board may at any time amend, suspend or terminate the Plan; provided, however,
that no such amendment shall be made without the approval of the Company’s
stockholders to the extent such approval is required by Applicable Laws, or if such amendment would
lessen the stockholder approval requirements of Section 4(b)(vi) or this
Section 13(a).

     

    (b)           No
Award may be granted during any suspension of the Plan or after termination of
the Plan.

     

    (c)           No
suspension or termination of the Plan (including termination of the Plan under
Section 12, above) shall adversely affect any rights under Awards already
granted to a Grantee.

     

    
      
        
           

        

        
          17

          
            

          

        

        
           

        

      

    

    

    14.           Reservation of
Shares.

     

    (a)           The
Company, during the term of the Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     

    (b)           The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.

     

    15.           No Effect on Terms of
Employment/Consulting Relationship.  The Plan shall not confer
upon any Grantee any right with respect to the Grantee’s Continuous Service, nor
shall it interfere in any way with his or her right or the right of the Company
or a Related Entity to terminate the Grantee’s Continuous Service at any time,
with or without Cause, and with or without notice.  The ability of the
Company or any Related Entity to terminate the employment of a Grantee who is
employed at will is in no way affected by its determination that the Grantee’s
Continuous Service has been terminated for Cause for the purposes of this
Plan.

     

    16.           No Effect on Retirement and
Other Benefit Plans.  Except as specifically provided in a
retirement or other benefit plan of the Company or a Related Entity, Awards
shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Company or a Related Entity, and
shall not affect any benefits under any other benefit plan of any kind or any
benefit plan subsequently instituted under which the availability or amount of
benefits is related to level of compensation.  The Plan is not a
“Retirement Plan” or “Welfare Plan” under the Employee Retirement Income
Security Act of 1974, as amended.

     

    17.           Stockholder
Approval.  Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted.  Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws.  Any Award
exercised before stockholder approval is obtained shall be rescinded if
stockholder approval is not obtained within the time prescribed, and Shares
issued on the exercise of any such Award shall not be counted in determining
whether stockholder approval is obtained.

     

    18.           Information to
Grantees.  To the extent required by Applicable Laws, the
Company shall provide to each Grantee, during the period for which such Grantee
has one or more Awards outstanding, copies of financial statements at least
annually.  The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.

     

    19.           Unfunded
Obligation.  Grantees shall have the status of general
unsecured creditors of the Company.  Any amounts payable to Grantees
pursuant to the Plan shall be unfunded and unsecured obligations for all
purposes, including, without limitation, Title I of the Employee Retirement
Income Security Act of 1974, as amended.  Neither the Company nor any
Related Entity shall be required to segregate any monies from its general funds,
or to create any trusts, or establish any special accounts with respect to such
obligations.  The Company shall retain at all times beneficial
ownership of any investments, including trust investments, which the Company may
make to fulfill its payment obligations hereunder.  Any investments or
the creation or maintenance of any trust or any Grantee account shall not create
or constitute a trust or fiduciary relationship between the Administrator, the
Company or any Related Entity and a Grantee, or otherwise create any vested or
beneficial interest in any Grantee or the Grantee’s creditors in any assets of
the Company or a Related Entity. The Grantees shall have no claim against the
Company or any Related Entity for any changes in the value of any assets that
may be invested or reinvested by the Company with respect to the
Plan.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    20.           Construction.  Captions
and titles contained herein are for convenience only and shall not affect the
meaning or interpretation of any provision of the Plan.  Except when
otherwise indicated by the context, the singular shall include the plural and
the plural shall include the singular.  Use of the term “or” is not
intended to be exclusive, unless the context clearly requires
otherwise.

     

    21.           Nonexclusivity of The
Plan.  Neither the adoption of the Plan by the Board, the
submission of the Plan to the stockholders of the Company for approval, nor any
provision of the Plan will be construed as creating any limitations on the power
of the Board to adopt such additional compensation arrangements as it may deem
desirable, including, without limitation, the granting of Awards otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.

     

     

    19Exhibit
      10.1

     

    PURCHASE
      AGREEMENT

     

    THIS
      PURCHASE AGREEMENT (“Agreement”) is made as of the 30th
      day of
      June, 2008 by and among NEXMED,
      INC.,
      a
      Nevada corporation (the “Company”), and the Purchasers set forth on the
      signature page affixed hereto (each a “Purchaser” and collectively the
“Purchasers”).

     

    Recitals

    

    A. The
      Company and the Purchasers are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by Section
      4(2) under the Securities Act of 1933, as amended; 

     

    B. The
      Purchasers wish to purchase, and the Company wishes to sell and issue to the
      Purchasers, upon the terms and subject to the conditions stated in this
      Agreement an aggregate of $5.75 million in principal amount of the Company’s 7%
      Convertible Notes due December 31, 2011 in the form attached hereto as
Exhibit
      A
      (the
“Notes”), which Notes shall be convertible into shares of common stock of the
      Company, $0.001 par value per share (the “Common Stock”), in accordance with the
      terms of the Notes, in such amounts as are set forth on the signature page
      attached hereto and executed by each such Purchaser, for an aggregate purchase
      price of $5.75 million; and

     

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

     

    In
      consideration of the mutual promises made herein and for other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

     

    1.  Definitions.
      In
      addition to those terms defined above and elsewhere in this Agreement, for
      the
      purposes of this Agreement, the following terms shall have the meanings here
      set
      forth:

     

    1.1. “Affiliate”
means,
      with respect to any Person, any other Person which directly or indirectly
      controls, is controlled by, or is under common control with, such Person, where
      “control”
means
      the possession, direct or indirect, of the power to direct or cause the
      direction of the management and policies of a Person, whether through the
      ownership of voting securities, by contract or otherwise.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    1.2. “Agreements”
means
      this Agreement, the Registration Rights Agreement, the Subsidiary Guaranty,
      the
      Mortgage and the Notes.

     

    1.3. The
      “Company”
shall
      refer to the Company (as defined in the first paragraph hereof) together with
      its subsidiaries wherever applicable (including without limitation with respect
      to all representations of the Company unless the context otherwise
      requires).

    

    1.4. “Closing”
means
      the consummation of the transactions contemplated by this Agreement, and
“Closing Date” means the date of such Closing.

    

    1.5. “Convertible
      Securities”
means
      any convertible securities, warrants, options or other rights to subscribe
      for
      or to purchase or exchange for, shares of Common Stock.

    

    1.6. “Material
      Adverse Effect”
means
      a
      material adverse effect on the (i) condition (financial or otherwise), business,
      assets or results of operations of the Company; (ii) ability of the Company
      to
      perform any of its material obligations under the terms of the Agreements;
      or
      (iii) material rights and remedies of a Purchaser under the terms of the
      Agreements.

    

    1.7. “Mortgage”
means
      the Mortgage, Security Agreement and Assignment of Leases and Rents, in the
      form
      attached hereto as Exhibit
      C,
      executed by the Operating Subsidiary in favor of the Purchasers, securing the
      Company’s obligations under the Notes.

    

    1.8. “Notes”
shall
      have meaning set forth in the recitals to this Agreement.

    

    1.9. “Operating
      Subsidiary”
means
      NexMed (U.S.A.), Inc., a Delaware corporation which is wholly-owned by the
      Company.

    

    1.10. “Participation
      Percentage”
means
      the product of (a) 20% multiplied by (b) a fraction, the numerator of which
      equals the then aggregate outstanding principal amount of all Notes and the
      denominator of which equals the original aggregate principal amount of all
      Notes.

    

    1.11. “Person”
means
      an individual, corporation, partnership, limited liability company, trust,
      business trust, association, joint stock company, joint venture, pool,
      syndicate, sole proprietorship, unincorporated organization, governmental
      authority or any other form of entity not specifically listed
      herein.

    

    1.12. “SEC”
means
      the U.S. Securities and Exchange Commission.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    1.13. “SEC
      Filings”
means
      the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
      2006 and all other reports filed by the Company pursuant to the 1934 Act since
      December 31, 2006.

    

    1.14. “Securities”
means
      the Notes and Underlying Shares.

    

    1.15. “Subsidiary
      Guaranty”
means
      the Subsidiary Guaranty, in the form attached hereto as Exhibit
      D,
      executed by the Operating Subsidiary in favor of the Purchasers, guaranteeing
      the Company’s obligations under the Notes.

    

    1.16. “Underlying
      Shares”
means
      the shares of Common Stock issued or issuable upon conversion of, as payment
      for
      interest or accreted amounts under, or otherwise pursuant to, the
      Notes.

    

    1.17. “Variable
      Rate Transaction”
means
      a
      transaction in which the Company issues or sells, or agrees to issue or sell,
      Common Stock or Convertible Securities in which the applicable sale, conversion,
      exercise or exchange price or rate may directly or indirectly effectively be
      reduced, reset or repriced based upon future events or occurrences, future
      trading prices or quotations, or future issuances of Common Stock or Convertible
      Securities (including such resets effected directly or indirectly by the
      issuance of additional securities), including an “equity line” transaction but
      excluding standard provisions for rights of first refusal on additional
      financings and standard anti-dilution provisions including weighted-average
      anti-dilution provisions substantially similar to those set forth in the Notes
      which are contained in Convertible Securities.

    

    1.18. “1933
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

    

    1.19. “1934
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    

    2.Purchase
      and Sale of the Notes.
      Subject
      to the terms and conditions of this Agreement and on the basis of the
      representations and warranties made herein, each of the Purchasers hereby
      severally, and not jointly, agrees to purchase, and the Company hereby agrees
      to
      sell and issue to each of the Purchasers, the principal amount of Notes set
      forth on such Purchaser’s signature page attached hereto and as indicated
      herein. Each Purchaser’s aggregate purchase price (the “Purchase Price”) for the
      Notes to be purchased hereunder is set forth on such Purchaser’s signature page
      attached hereto.

     

    
      
        
        

      

      
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    3.Closing.

     

    3.1. Closing
      Procedure.
      The
      Company shall promptly deliver to Purchasers’ counsel, Peter J. Weisman, P.C.,
      in trust, Notes registered in the names of the Purchasers as indicated on the
      signature pages to this Agreement, representing all of the Notes, with
      instructions that such Notes are to be held in escrow for release to the
      Purchasers only upon payment of the Purchase Price to the Company and
      confirmation of receipt by the Company or its counsel. Upon receipt by counsel
      to the Purchasers of the Notes and the execution and/or delivery of such other
      documents contemplated hereby to be executed and/or delivered on or prior to
      the
      Closing, each Purchaser shall promptly cause a wire transfer in same day funds
      to be sent to the account of the Company as instructed in writing by the
      Company, in an amount representing the Purchase Price. On the date the Company
      receives such funds, the Notes shall be released to the Purchasers (and such
      date shall be deemed the “Closing Date”). 

     

    3.2. Closing
      Date Deliveries.

     

    (a) On
      the
      Closing Date, the Company shall deliver to the Purchasers:

     

    (i) Notes
      in
      the form attached as Exhibit A;

    

    (ii) The
      executed Registration Rights Agreement in the form attached as Exhibit
      B;

    

    (iii) The
      executed Subsidiary Guaranty in the form attached as Exhibit D and the executed
      and acknowledged Mortgage in the form attached as Exhibit C, in each case
      executed by the Operating Subsidiary;

    

    (iv) An
      originally executed satisfaction and release, in proper form for recording
      in
      the applicable recording office in New Jersey, evidencing the satisfaction
      of
      all outstanding obligations which are secured by a mortgage and/or security
      interest in the Mortgaged Property (as defined in the Mortgage) and the release
      of all currently existing mortgages and security interests in the Mortgaged
      Property;

    

    (v) The
      opinion(s) of counsel referred to in Section 7.5 below; and

    

    (vi) An
      officer’s certificate in form and substance reasonably satisfactory to the
      Purchasers and the Purchasers’ counsel, executed by an officer of the Company
      and the Operating Subsidiary, certifying as to satisfaction of applicable
      closing conditions, incumbency of signing officers, the true, correct and
      complete nature of the Certificate of Incorporation and By-laws, good standing
      and authorizing resolutions, in each case of the Company and the Operating
      Subsidiary.

    

    
      
        
        

      

      
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    (b) On
      the
      Closing Date, the Purchasers shall deliver to the Company:

     

    (i) The
      Purchase Price set forth on the Purchasers’ signature page hereto;
      and

    

    (ii) The
      executed Registration Rights Agreement.

    

    4.Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Purchasers that:

     

    4.1. Organization,
      Good Standing and Qualification.
      The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the jurisdiction of its incorporation and has all
      requisite corporate power and authority to carry on its business as now
      conducted and own its properties. The Company is duly qualified to do business
      as a foreign corporation and is in good standing in each jurisdiction in which
      the conduct of its business or its ownership or leasing of property makes such
      qualification or licensing necessary unless the failure to so qualify would
      not
      be reasonably likely to result in a Material Adverse Effect. All of the
      Company’s subsidiaries are listed by name and jurisdiction on Schedule
      4.1
      attached
      hereto. All subsidiaries are wholly-owned by the Company. The Operating
      Subsidiary is a wholly-owned subsidiary of the Company and owns all the
      Mortgaged Property (as defined in the Mortgage).

     

    4.2. Authorization.
      The
      Company has full power and authority and has taken all requisite action on
      the
      part of the Company, its officers, directors and stockholders necessary for
      (i)
      the authorization, execution and delivery of the Agreements, (ii) authorization
      of the performance of all obligations of the Company hereunder and thereunder,
      and (iii) the authorization, issuance (or reservation for issuance) and delivery
      of the Securities. The Agreements constitute the legal, valid and binding
      obligations of the Company, enforceable against the Company in accordance with
      their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability, relating
      to or affecting creditors’ rights generally.

     

    
      
        
        

      

      
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    4.3. Capitalization.
      Set
      forth on Schedule
      4.3
      hereto
      is (a) the authorized capital stock of the Company on the date hereof; (b)
      the
      number of shares of capital stock issued and outstanding on the date hereof;
      (c)
      the number of shares of capital stock issuable pursuant to the Company’s stock
      plans; and (d) the number of shares of capital stock issuable and reserved
      for
      issuance pursuant to securities (other than the Notes) exercisable for, or
      convertible into or exchangeable for any shares of capital stock. All of the
      issued and outstanding shares of the Company’s capital stock have been duly
      authorized and validly issued and are fully paid and nonassessable, except
      to
      the extent that the failure of the foregoing to be true and correct would not
      have a Material Adverse Effect. Except as set forth on Schedule
      4.3,
      no
      Person is entitled to preemptive or similar statutory or contractual rights
      with
      respect to any securities of the Company. Except as set forth on Schedule
      4.3,
      there
      are no outstanding warrants, options, convertible securities or other rights,
      agreements or arrangements of any character under which the Company is or may
      be
      obligated to issue any equity securities of any kind, and except as contemplated
      by this Agreement or set forth on Schedule 4.3, the Company is not currently
      in
      negotiations for the issuance of any equity securities of any kind. Except
      as
      set forth on Schedule
      4.3,
      the
      Company has no knowledge of any voting agreements, buy-sell agreements, option
      or right of first purchase agreements or other agreements of any kind among
      any
      of the securityholders of the Company relating to the securities of the Company
      held by them. Except as set forth on Schedule
      4.3,
      the
      Company has not granted any Person the right to require the Company to register
      any securities of the Company under the 1933 Act, whether on a demand basis
      or
      in connection with the registration of securities of the Company for its own
      account or for the account of any other Person.

     

    4.4. Valid
      Issuance.
      As of
      the Closing, the Company has reserved a sufficient number of shares of Common
      Stock for the issuance upon conversion of, as payment for interest on or
      repayment of principal of, and otherwise pursuant to, the Notes. The Notes
      and
      Underlying Shares are duly authorized, and such Securities, when issued in
      accordance herewith and, in respect of the Underlying Shares issued pursuant
      to
      the terms of the Notes, will be validly issued, fully paid, non-assessable
      and
      free and clear of all encumbrances and restrictions, except for restrictions
      on
      transfer imposed by applicable securities laws. The number of shares to be
      reserved hereunder shall be determined without regard to any restrictions on
      beneficial ownership contained in the Agreements.

     

    4.5. Consents.
      The
      execution, delivery and performance by the Company of the Agreements and,
      subject to the truth and accuracy of the representations made by the Purchasers
      in Sections 5 of this Agreement, the offer, issuance and sale of the Securities,
      require no consent of, action by or in respect of, or filing with, any Person,
      governmental body, agency, or official, other than filings that have been made
      pursuant to applicable state securities laws and post-sale filings pursuant
      to
      applicable state and federal securities laws and the requirements of the Nasdaq
      Stock Market, which the Company undertakes to file within the applicable time
      periods. The Company has been verbally advised by the FINRA that the discussions
      with the Company and the review by the FINRA of the executed term sheet
      describing the transactions contemplated hereby should cause the FINRA to
      conclude that the transactions contemplated hereby should not be integrated
      with
      any prior offering or issuance of securities by the Company (subject to the
      FINRA’s review of the final transaction documents for the transactions
      contemplated hereby).

     

    
      
        
        

      

      
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    4.6. Delivery
      of SEC Filings; Business.
      The SEC
      Filings represent all filings required of the Company pursuant to the 1934
      Act
      since December 31, 2006. The SEC Filings complied as to form in all material
      respects with the requirements of the 1934 Act and did not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading. The Company is engaged only in
      the
      business described in the SEC Filings and the SEC Filings contain a complete
      and
      accurate description of the business of the Company in all material respects.
      The Company has not provided to any Purchaser (i) any information required
      to be
      filed under the 1934 Act that has not been so filed or (ii) any material
      nonpublic information.

     

    4.7. Use
      of
      Proceeds.
      The
      proceeds of the sale of the Securities hereunder shall be used by the Company
      for working capital and general corporate purposes and to pay off in full the
      approximately $3 million in debt outstanding to Twin Rivers Associates LLC
      (“Twin Rivers Debt”) which is currently secured by the mortgage on the Mortgaged
      Property (as defined in the Mortgage) which is to be released at
      Closing.

     

    4.8. No
      Material Adverse Change.
      Since
      December 31, 2007, except as disclosed and described in the Company’s Annual
      Report on Form 10-K for the fiscal year ended December 31, 2007 and the
      Company’s Form 10-Q filed with the SEC for the fiscal quarter ending March 31,
      2008, or any other reports filed by the Company subsequent to such Form 10-K
      pursuant to the 1934 Act and filed at least ten (10) days prior to the date
      hereof, there has not been:

     

    (i) any
      change in the consolidated assets, liabilities, financial condition or operating
      results of the Company from that reflected in the financial statements included
      in the Company’s Form 10-K for the fiscal year ended December 31, 2007, except
      changes in the ordinary course of business which have not had, in the aggregate,
      a Material Adverse Effect;

    

    (ii) any
      declaration or payment of any dividend, or any authorization or payment of
      any
      distribution, on any of the capital stock of the Company, or any redemption
      or
      repurchase of any securities of the Company;

    

    (iii) any
      material damage, destruction or loss, whether or not covered by insurance,
      to
      any assets or properties of the Company or any of its subsidiaries;

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    (iv) any
      waiver by the Company of a material right or of a material debt owed to
      it;

    

    (v) any
      satisfaction or discharge of any lien, claim or encumbrance or payment of any
      obligation by the Company, except in the ordinary course of business and which
      is not material to the assets, properties, financial condition, operating
      results or business of the Company taken as a whole (as such business is
      presently conducted and as it is proposed to be conducted) and except for the
      Twin Rivers Debt to be repaid upon Closing;

    

    (vi) any
      material change or amendment to a material contract or arrangement by which
      the
      Company or any of its assets or properties is bound or subject;

    

    (vii) any
      material labor difficulties or labor union organizing activities with respect
      to
      employees of the Company;

    

    (viii) any
      transaction entered into by the Company other than in the ordinary course of
      business; or

    

    (ix) any
      other
      event or condition of any character that may have a Material Adverse
      Effect.

    

    4.9. Registration
      Statements; Material Contracts.

     

    (a) During
      the preceding two years, each registration statement and any amendment thereto
      filed by the Company pursuant to the 1933 Act, as of the date such statement
      or
      amendment became effective, complied as to form in all material respects with
      the 1933 Act and did not contain any untrue statement of a material fact or
      omit
      to state any material fact required to be stated therein or necessary in order
      to make the statements made therein, in light of the circumstances under which
      they were made, not misleading; and each prospectus filed pursuant to Rule
      424(b) under the 1933 Act, as of its issue date and as of the closing of any
      sale of securities pursuant thereto did not contain any untrue statement of
      a
      material fact or omit to state any material fact required to be stated therein
      or necessary in order to make the statements made therein, in the light of
      the
      circumstances under which they were made, not misleading.

     

    (b) Except
      as
      set forth on Schedule
      4.3
      hereto,
      there are no agreements or instruments currently in force and effect that
      constitute a warrant, option, convertible security or other right, agreement
      or
      arrangement of any character under which the Company is or may be obligated
      to
      issue any material amounts of any equity security of any kind, or to transfer
      any material amounts of any equity security of any kind.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    4.10. Form
      S-3 Eligibility.
      The
      Company is currently eligible to register the resale of its Common Stock on
      a
      registration statement on Form S-3 under the 1933 Act.

     

    4.11. No
      Conflict, Breach, Violation or Default; Compliance with Law.
      The
      execution, delivery and performance of the Agreements by the Company and the
      issuance and sale of the Securities will not conflict with or result in a breach
      or violation of any of the terms and provisions of, or constitute a default
      under (i) the Company’s Articles of Incorporation (including any certificates of
      designation) or the Company’s Bylaws, both as in effect on the date hereof
      (copies of which have been provided to the Purchasers before the date hereof),
      or (ii) except where it would not have a Material Adverse Effect, (A) any
      statute, rule, regulation or order of any governmental agency or body or any
      court, domestic or foreign, having jurisdiction over the Company or any of
      its
      properties, or (B) any agreement or instrument to which the Company is a party
      or by which the Company is bound or to which any of the properties of the
      Company is subject. Except where it would not have a Material Adverse Effect,
      the Company (i) is not in violation of any statute, rule or regulation
      applicable to the Company or its assets, (ii) is not in violation of any
      judgment, order or decree applicable to the Company or its assets, and (iii)
      is
      not in breach or violation of any agreement, note or instrument to which it
      or
      its assets are a party or are bound or subject. The Company has not received
      notice from any Person of any claim or investigation that, if adversely
      determined, would render the preceding sentence untrue or
      incomplete

     

    4.12. Tax
      Matters.
      The
      Company has timely prepared and filed all tax returns required to have been
      filed by the Company with all appropriate governmental agencies and timely
      paid
      all taxes owed by it, in each case taking into account permitted extensions.
      The
      charges, accruals and reserves on the books of the Company in respect of taxes
      for all fiscal periods are adequate in all material respects, and there are
      no
      material unpaid assessments against the Company nor, to the knowledge of the
      Company, any basis for the assessment of any additional taxes, penalties or
      interest for any fiscal period or audits by any federal, state or local taxing
      authority except such as which are not material. All material taxes and other
      assessments and levies that the Company is required to withhold or to collect
      for payment have been duly withheld and collected and paid to the proper
      governmental entity or third party when due. There are no tax liens or claims
      pending or threatened against the Company or any of its respective assets or
      property. There are no outstanding tax sharing agreements or other such
      arrangements between the Company and any other corporation or
      entity.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    4.13. Title
      to Properties and Securities.
      Except
      as disclosed in the SEC Filings, the Company has, or will at or prior to Closing
      have, good and marketable title to all real properties and all other properties
      and assets owned by it, in each case free from liens, encumbrances and defects
      that would materially affect the value thereof or materially interfere with
      the
      use made or currently planned to be made thereof by them; and except as
      disclosed in the SEC Filings, the Company holds any leased real or personal
      property under valid and enforceable leases with no exceptions that would
      materially interfere with the use made or currently planned to be made thereof
      by them. Except as disclosed in the SEC Filings, the Operating
      Subsidiary owns all the Mortgaged Property (as defined in the Mortgage) free
      and
      clear of all liens, claims, encumbrances and defects except those that would
      not
      individually or in the aggregate materially affect the value thereof or
      materially interfere with the use made or currently planned to be made thereof.
      The Company (excluding its subsidiaries) does not own any assets other than
      the
      securities of each of its wholly-owned subsidiaries and does not engage in
      any
      operating activities other than acting as a holding company of the securities
      of
      such subsidiaries. All of the Company’s operating assets and properties
      (including without limitation all Equipment, as defined in the Mortgage) are
      owned or leased by the Operating Subsidiary, except for the Company’s
      intellectual property rights which are entirely owned by NexMed Holdings, Inc.,
      a Delaware corporation (“Holdings”), which is wholly-owned subsidiary of the
      Company, and except for assets located outside the United States, which are
      entirely owned by NexMed International Limited, a corporation which is organized
      under the laws of the British Virgin Islands and which is wholly-owned
      subsidiary of the Company (“International”). Holdings does not engage in any
      activities except for holding the intellectual property rights of the Company,
      and International and its two subsidiaries do not engage in any business or
      activities in the United States. 

     

    4.14. Certificates,
      Authorities and Permits.
      The
      Company possesses adequate certificates, authorities or permits issued by
      appropriate governmental agencies or bodies necessary to conduct the business
      now operated by it and has not received any notice of proceedings relating
      to
      the revocation or modification of any such certificate, authority or permit
      that, if determined adversely to the Company, would individually or in the
      aggregate have a Material Adverse Effect.

     

    4.15. No
      Labor Disputes.
      Except
      as disclosed in the SEC Filings, no material labor dispute with the employees
      of
      the Company exists or, to the knowledge of the Company, is
      imminent.

     

    
      
        
        

      

      
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    4.16. Intellectual
      Property.
      The
      Company owns or possesses adequate rights or licenses to the inventions,
      know-how, patents, patent rights, copyrights, trademarks, trade names, licenses,
      approvals, governmental authorizations, trade secrets confidential information
      and other intellectual property rights (collectively, “Intellectual Property
      Rights”), free and clear of all liens, security interests, charges,
      encumbrances, equities and other adverse claims, necessary to conduct the
      business now operated by it, or presently employed by it, and presently
      contemplated to be operated by it, and the Company has not received any notice
      of infringement of or conflict with asserted rights of others with respect
      to
      any Intellectual Property Rights except as disclosed in the SEC Filings. Except
      as set forth on Schedule 4.16 hereto or as disclosed in the SEC Filings, none
      of
      the Company's Intellectual Property Rights have expired or terminated, or are
      expected to expire or terminate within three years from the date of this
      Agreement, except where such expirations or termination would not result, either
      individually or in the aggregate, in a Material Adverse Effect. To the knowledge
      of the Company, the Company’s patents and other Intellectual Property Rights and
      the present activities of the Company do not infringe any patent, copyright,
      trademark, trade name or other proprietary rights of any third party where
      such
      infringement may cause a Material Adverse Effect on the Company, and there
      is no
      claim, action or proceeding being made or brought against, or to the Company's
      knowledge, being threatened against, the Company regarding its Intellectual
      Property Rights, and the Company is unaware of any facts or circumstances which
      might give rise to any of the foregoing. The Company has no knowledge of the
      material infringement of its Intellectual Property Rights by third parties
      and
      has no reason to believe that any of its Intellectual Property Rights is
      unenforceable, and the Company is unaware of any facts or circumstances which
      might give rise to any of the foregoing. The Company has taken commercially
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of its intellectual properties.

     

    4.17. Mortgage
      Representations.
      All of
      the representations and warranties contained in the Mortgage are true and
      correct as of the date hereof.

     

    4.18. Litigation.
      Except
      as disclosed in the SEC Filings, there are no pending actions, suits or
      proceedings against or affecting the Company or any of its properties that,
      if
      determined adversely to the Company, would individually or in the aggregate
      have
      a Material Adverse Effect or would materially and adversely affect the ability
      of the Company to perform its obligations under the Agreements, or which are
      otherwise material in the context of the sale of the Securities; and to the
      Company’s knowledge, no such actions, suits or proceedings are threatened or
      contemplated.

     

    4.19. Financial
      Statements.
      The
      financial statements included in each SEC Filing present fairly and accurately
      in all material respects the consolidated financial position of the Company
      as
      of the dates shown and its consolidated results of operations and cash flows
      for
      the periods shown, and such financial statements have been prepared in
      conformity with generally accepted accounting principles applied on a consistent
      basis. Except as set forth in the financial statements of the Company included
      in the SEC Filings filed prior to the date hereof, the Company has no
      liabilities, contingent or otherwise, except those which individually or in
      the
      aggregate are not material to the financial condition or operating results
      of
      the Company.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    4.20. Insurance
      Coverage.
      The
      Company maintains in full force and effect insurance coverage that the Company
      reasonably believes to be adequate against all liabilities, claims and risks
      against which it is customary for comparably situated companies to
      insure.

     

    4.21. Compliance
      with Nasdaq Continued Listing Requirements.
      The
      Company is in compliance with all applicable Nasdaq Capital Market continued
      listing requirements. There are no proceedings pending or to the Company’s
      knowledge threatened against the Company relating to the continued listing
      of
      the Company’s Common Stock on the Nasdaq Capital Market and the Company has not
      received any notice of, nor to the knowledge of the Company is there any basis
      for, the delisting of the Common Stock from the Nasdaq Capital
      Market.

     

    4.22. Brokers
      and Finders.
      Neither
      the Purchasers nor the Company shall have any liability or responsibility for
      the payment of any commission or any finder, agent, broker or consultant fee
      to
      any third party in connection with or resulting from this agreement or the
      transactions contemplated by this Agreement by reason of any agreement of or
      action taken by the Company, and the Company shall not pay any such commission
      or fee.

     

    4.23. No
      General Solicitation.
      Neither
      the Company nor any Person acting on its behalf has conducted any general
      solicitation or general advertising (as those terms are used in Regulation
      D
      promulgated under the 1933 Act) in connection with the offer or sale of any
      of
      the Securities.

     

    4.24. No
      Integrated Offering.
      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
      adversely affect reliance by the Company on Section 4(2) of the 1933 Act for
      the
      exemption from registration for the transactions contemplated hereby or would
      require registration of the Securities under the 1933 Act. After consultation
      with FINRA and/or the Nasdaq Stock Market, the Company does not believe that
      the
      offer and sale of the Securities and the transactions contemplated hereby
      requires any stockholder approval by the Company, including without limitation
      pursuant to the rules of the Nasdaq Stock Market.

     

    4.25. Disclosures.
      No
      representation or warranty made by the Company under any section hereof and
      no
      written information furnished by the Company to the Purchasers or any authorized
      representative of the Purchasers, pursuant to the Agreements or in connection
      therewith, contains any untrue statement of a material fact or omits to state
      a
      material fact necessary in order to make the statements contained herein and
      therein, in light of the circumstances under which the statements were made,
      not
      misleading.

     

    
      
        
        

      

      
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    5. Representations
      and Warranties of the Purchaser.
      Each of
      the Purchasers hereby severally, and not jointly, represents and warrants to
      the
      Company as to itself only that:

     

    5.1. Organization
      and Existence.
      The
      Purchaser is a validly existing corporation, partnership or limited liability
      company and has all requisite corporate, partnership or limited liability
      company power and authority to invest in the Securities pursuant to this
      Agreement.

     

    5.2. Authorization.
      The
      execution, delivery and performance by the Purchaser of this Agreement and
      the
      Registration Rights Agreement have been duly authorized and this Agreement
      and
      the Registration Rights Agreement will each constitute the valid and legally
      binding obligation of the Purchaser, enforceable against the Purchaser in
      accordance with their terms, subject to bankruptcy, insolvency, fraudulent
      transfer, reorganization, moratorium and similar laws of general applicability,
      relating to or affecting creditors’ rights generally.

     

    5.3. Purchase
      Entirely for Own Account.
      The
      Securities to be received by the Purchaser hereunder will be acquired for the
      Purchaser’s own account, not as nominee or agent, and not with a view to the
      resale or distribution of any part thereof in violation of securities laws,
      and
      the Purchaser has no present intention of selling, granting any participation
      in, or otherwise distributing the same in violation of securities laws. The
      Purchaser is not a registered broker dealer or an entity engaged in the business
      of being a broker dealer.

     

    5.4. Investment
      Experience.
      The
      Purchaser acknowledges that it can bear the economic risk and complete loss
      of
      its investment in the Securities and has such knowledge and experience in
      financial or business matters and in private placement transactions of companies
      similar to the Company so that it is capable of evaluating the merits and risks
      of the purchase contemplated hereby.

     

    5.5. Disclosure
      of Information.
      The
      Purchaser has had an opportunity to receive documents related to the Company
      and
      to ask questions of and receive answers from the Company regarding the Company,
      its business and the terms and conditions of the offering of the Securities
      and
      has received and read the SEC Filings filed via EDGAR at least five days prior
      to the date hereof. Neither such inquiries nor any other due diligence
      investigation conducted by the Purchaser shall modify, amend or affect the
      Purchaser’s right to rely on the Company’s representations and warranties
      contained in this Agreement or made pursuant to this Agreement.

     

    5.6. Restricted
      Securities.
      The
      Purchaser understands that the Securities are characterized as “restricted
      securities” under the U.S. federal securities laws inasmuch as they are being
      acquired from the Company in a transaction not involving a public offering
      and
      that under such laws, applicable state laws and applicable regulations such
      securities may be resold without registration under the 1933 Act only in certain
      limited circumstances.

     

    
      
        
        

      

      
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    5.7. Legends.

     

    (a) It
      is
      understood that, until such time as certificates evidencing the Underlying
      Shares are required to be issued without legends pursuant paragraph (b) below,
      certificates evidencing the Securities may bear one or all of the following
      legends or legends substantially similar thereto:

     

    (i) “The
      shares represented by this certificate may not be transferred without (i) the
      opinion of counsel reasonably satisfactory to the corporation that such transfer
      may lawfully be made without registration under the Securities Act of 1933
      or
      qualification under applicable state securities laws; or (ii) such registration
      or qualification.”

    

    (ii) If
      required by the authorities of any state in connection with the issuance of
      sale
      of the Securities, the legend required by such state authority.

    

    (b) Upon
      registration for resale pursuant to the Registration Rights Agreement or upon
      the first anniversary of the Closing Date (and the holder thereof confirming
      that it is not an affiliate of the Company), the Company shall promptly cause
      certificates evidencing the Underlying Shares previously issued to be replaced
      with certificates (or issue original certificates if not previously issued)
      which do not bear such restrictive legends, and all Underlying Shares
      subsequently issued shall not bear such restrictive legends. In addition, in
      the
      event of any sales of Underlying Shares by the holder thereof pursuant to Rule
      144(b)(1)(i) under the 1933 Act prior to the first anniversary of the Closing
      Date, the Company shall promptly cause certificates evidencing such Underlying
      Shares previously issued to be replaced with certificates (or issue original
      certificates if not previously issued) which do not bear such restrictive
      legends. In the event that the Company does not issue new, unlegended
      certificates in replacement of the legended certificates as required under
      this
      Section 5.7 within 10 business days of a written request to do so, or if any
      subsequently issued Underlying Shares are issued with restrictive legends when
      unlegended certificates are required under this Section 5.7, the Company shall
      be liable to the Purchaser (or subsequent holder thereof) for damages in an
      amount of $500 cash for each such day beyond the replacement date (or issuance
      date, in the case of newly converted Notes) that such unlegended certificates
      are not issued and delivered to the Purchaser or subsequent holder.

     

    5.8. Accredited
      Investor.
      The
      Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D,
      as amended, under the 1933 Act.

     

    
      
        
        

      

      
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    5.9. No
      General Solicitation.
      The
      Purchaser did not learn of the investment in the Securities as a result of
      any
      public advertising or general solicitation. 

    

    6. Closing
      Documents.
      The
      parties acknowledge and agree that part of the inducement for the Purchasers
      to
      enter into this Agreement is the Company’s execution and delivery of the
      Registration Rights Agreement and the execution and delivery of the Subsidiary
      Guarantee and the Mortgage by the Operating Subsidiary. The parties acknowledge
      and agree that on or prior to the Closing, the Registration Rights Agreement,
      the Subsidiary Guarantee and the Mortgage will be duly executed and delivered
      by
      the parties thereto.

     

    7. Covenants
      and Agreements of the Company.

     

    7.1. Rule
      144.
      Until
      such time that the Purchasers no longer own any Notes, the Company covenants
      to
      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 1934 Act even if the Company is not then subject to
      the
      reporting requirements of the 1934 Act. As long as any Purchaser owns Notes,
      if
      the Company is not required to file reports pursuant to the 1934 Act, it will
      prepare and furnish to such Purchaser and make publicly available in accordance
      with Rule 144(c) such information as is required for the Purchaser to sell
      the
      Securities under Rule 144. The Company further covenants that it will take
      such
      further action as any holder of Notes may reasonably request, to the extent
      required from time to time to enable such Person to sell the Underlying Shares
      without registration under the Securities Act within the requirements of the
      exemption provided by Rule 144. So long as any Notes are outstanding, the
      Company shall cause itself to be subject to the reporting requirements of
      Section 13 or 15(d) of the 1934 Act and file all reports required to be filed
      thereunder. The Company agrees that, for purposes of determining the holding
      period under Rule 144 of the 1933 Act for Underlying Shares issued upon
      conversion of the Notes, the holding period of such Underlying Shares shall
      be
      tacked to the holding period of the Notes. 

    

    7.2. Limitation
      on Transactions.

     

    (a) So
      long
      as any of the Notes remain outstanding, without the prior written consent of
      the
      holders of a majority-in-interest of the Notes (which consent may be withheld
      in
      such holders’ discretion), the Company shall not issue or sell or agree to issue
      or sell any securities in a Variable Rate Transaction, provided,
      however,
      that
      without such consent, the Company may issue or sell for cash any securities
      in a
      Variable Rate Transaction so long as the total number of shares of Common Stock
      issued and/or agreed to be issued in the aggregate for all such transactions
      (determined as if all such securities as of their issuance are deemed fully
      converted, exercised and exchanged into Common Stock without regard to
      limitations or restrictions contained therein) represents less than seven
      percent (7%) of the total number of the Company’s issued and outstanding shares
      of Common Stock as of the closing date of any such transaction.

     

    
      
        
        

      

      
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    (b) 
      So long
      as any Notes remain outstanding, the Company and the Operating Subsidiary shall
      not directly or indirectly, create, incur, assume or permit or suffer to exist
      any lien, mortgage, security interest or encumbrance (other than statutory
      liens
      imposed by law incurred in the ordinary course of business for sums not yet
      delinquent or being contested in good faith, if such reserve or other
      appropriate provision, if any, as shall be required by GAAP shall have been
      made
      in respect thereof) upon any of the Mortgaged Property (as defined in the
      Mortgage) except for those created by the Mortgage and shall not directly or
      indirectly sell, transfer or lease any of the Mortgaged Property, subject to
      Section 7.2(c) below.

     

    (c) Notwithstanding
      anything contained herein or the other Agreements, the Company or the Operating
      Subsidiary may sell the Mortgaged Property in its entirety at any time after
      December 31, 2009, provided
      that
      (i) upon
      or prior to such sale, the Company shall deposit into escrow for the benefit
      of
      the Purchasers an amount of cash equal to (x) the aggregate then outstanding
      principal amount of all Notes, plus (y) all Accreted Amounts (as defined in
      the
      Notes) accrued to date thereon, plus (z) all Accreted Amounts scheduled to
      accrue under the Notes from such date through the Maturity Date (as defined
      in
      the Notes) (“Escrow Funds”), which Escrow Funds shall secure all obligations
      under the Notes, and (ii) thereafter the Purchasers may at any time and from
      time to time demand immediate repayment of all or part of the amounts (including
      principal and Accreted Amounts) then outstanding and accrued under the Notes,
      which repayment shall be made from the Escrow Funds. In the event that the
      Company shall be required to deposit Escrow Funds in escrow pursuant to this
      Section 7.2(c), an independent escrow agent (the “Escrow Agent”) mutually
      acceptable to the Company and the Purchasers shall be appointed to hold such
      Escrow Funds in escrow pursuant to an escrow agreement on terms mutually
      acceptable to the Company and the Purchasers (the “Escrow Agreement”). The
      Escrow Agreement shall provide that each Purchaser may make any demand of
      repayment as contemplated in clause 7.2(c)(ii) above directly to the Escrow
      Agent, whereupon such repayment shall be made to such Purchaser from such Escrow
      Funds. Upon deposit of the Escrow Funds into escrow, the Company shall, and
      shall cause the Operating Subsidiary to, execute and deliver in favor of the
      Purchasers a control agreement in form and substance reasonably acceptable
      to
      the Purchasers and such other agreements and documents to ensure that (1) the
      Purchasers have a first priority security interest in and lien on such Escrow
      Funds, (2) to the extent possible such Escrow Funds may not be released except
      as set forth in such Escrow Agreement, and (3) to the extent possible such
      Escrow Funds will not be subject to any claims by any of the Company’s or
      Operating Subsidiary’s creditors. The deposit of the Escrow Funds into escrow
      and the creation of a security interest therein in accordance with the terms
      of
      this Section 7.2(c) shall be a condition precedent to any sale of the Mortgaged
      Property and neither the Company nor the Operating Subsidiary shall effectuate
      any such sale unless and until such condition has been satisfied. To the extent
      any principal amount of Notes and/or Accreted Amounts is converted into shares
      of Common Stock pursuant to the terms of the Notes, an amount of cash equal
      to
      such principal amount and/or Accreted Amounts may be released to the Company.
      For clarification purposes (1) following any such sale of the Mortgaged Property
      the Notes shall remain outstanding and in full force and effect in accordance
      with the terms set forth therein, except for the Purchasers right to repayment
      upon demand as set forth above, (2) the Company (and the Operating Subsidiary
      pursuant to the Subsidiary Guarantee) shall remain liable under the Notes in
      accordance with the terms thereof notwithstanding the escrow contemplated
      hereby, and (3) Escrow Funds remaining in escrow after no Notes remain
      outstanding shall be returned to the Company. 

     

    
      
        
        

      

      
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    7.3. Right
      of the Purchasers to Participate in Future Transactions.
      So long
      as any Notes remain outstanding, the Purchasers will have a right to participate
      in any sales of any of the Company’s securities in a capital raising transaction
      on the terms and conditions set forth in this Section 7.3, provided
      that
      this Section 7.3 shall not apply with respect to any capital raising transaction
      with an effective Per Share Selling Price per share of Common Stock in excess
      of
      $1.00 occurring after February 28, 2010. During such period, the Company shall
      give ten (10) business days advance written notice to the Purchasers prior
      to
      any non-public offer or sale of any of the Company's equity securities or any
      securities convertible into or exchangeable or exercisable for such securities
      in a capital raising transaction by providing to the Purchasers a comprehensive
      term sheet containing all significant business terms of such a proposed
      transaction. The Purchasers shall have the right (pro rata in accordance with
      the Purchasers’ participation in this offering) to participate in such
      transaction by purchasing in such transaction an amount of the identical
      securities issued in such transaction equal to up to the Participation
      Percentage of the aggregate amount of such securities issued to the Purchasers
      and such other investors together for the same consideration and on the same
      terms and conditions as such third-party sale. If, subsequent to the Company
      giving notice to a Purchaser hereunder but prior to the Purchaser exercising
      its
      rights hereunder, the terms and conditions of the third-party sale are changed
      from that disclosed in the comprehensive term sheet provided to such Purchaser,
      the Company shall be required to provide a new notice to the Purchaser hereunder
      and the Purchasers shall have the right to exercise their rights to purchase
      the
      identical securities in such transaction on such changed terms and conditions
      as
      provided hereunder. The rights and obligations of this Section 7.3 shall in
      no
      way diminish the other rights of the Purchaser pursuant to this Section 7.
      Notwithstanding anything to the contrary contained herein, the number of shares
      of Common Stock that may be acquired by any Purchaser pursuant to any capital
      raising transaction as described in this Section 7.3 shall not exceed a number
      that, when added to the total number of shares of Common Stock deemed
      beneficially owned by such Purchaser (other than by virtue of the ownership
      of
      securities or rights to acquire securities that have limitations on the
      Purchaser’s right to convert, exercise or purchase similar to the limitation set
      forth herein), together with all shares of Common Stock deemed beneficially
      owned by the Purchaser’s “affiliates” (as defined in Rule 144 of the 1933 Act)
      that would be aggregated for purposes of determining whether a group under
      Section 13(d) of the 1934 Act, exists, would exceed 9.9% of the total issued
      and
      outstanding shares of the Common Stock.

     

    
      
        
        

      

      
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    7.4. No
      Integration.
      Neither
      the Company nor any of its Affiliates, nor any Person acting on its or their
      behalf, shall directly or indirectly make any offers or sales of any securities
      or solicit any offers to buy any securities under circumstances that would
      cause
      the loss of the 4(2) exemption under the Securities Act for the transactions
      contemplated hereby. Subject to any consent or approval rights of the Purchasers
      hereunder, in the event the Company contemplates an offering of its equity
      or
      debt securities within six months following the Closing Date, the Company agrees
      that it shall notify the Purchasers of such offering (without providing any
      material non-public information to any Purchaser without its prior approval),
      and upon the reasonable request of Purchasers purchasing at least 75% in
      principal amount of the Notes hereunder, the Company shall first disclose the
      terms and conditions and other relevant facts of such proposed transaction
      to
      Nasdaq and obtain from Nasdaq its verbal advice (subject to the FINRA’s review
      of the executed transaction documents for such transaction) that such
      transaction should not be integrated with the offering which is the subject
      of
      this Agreement for purposes of the Nasdaq rules requiring shareholder approval
      of the issuance of 20% or more of an issuer’s outstanding common stock. In the
      event the Company fails to obtain such advise, then the Company shall not issue
      or sell any such securities without the prior written consent of Purchasers
      purchasing at least 75% in principal amount of the Notes hereunder, provided
      that the Company may sell or issue securities without such consent if (i) it
      obtains prior shareholder approval for such sale or issuance in compliance
      with
      the NASD Manual rules, (ii) such sale or issuance is to a pharmaceutical company
      in connection with a strategic transaction and not primarily as a capital
      raising transaction, so long as the Company has not affirmatively been notified
      (orally or in writing) by Nasdaq that it is reasonably likely to treat such
      sale
      or issuance as being integrated with the transactions contemplated under this
      Agreement, or (iii) none of the Notes are then outstanding, so long as the
      Company has not affirmatively been notified (orally or in writing) by Nasdaq
      that it is reasonably likely to treat such sale or issuance as being integrated
      with the transactions contemplated under this Agreement. In the event that
      the
      transactions contemplated under this Agreement are deemed integrated with any
      other transaction(s) by the FINRA, then the Company shall as soon as possible
      seek the approval of its stockholders and take such other action to authorize
      the issuance of the full number of Underlying Shares and the full amount of
      securities issued and/or to be issued in such other transaction.

     

    
      
        
        

      

      
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    7.5. Opinion
      of Counsel.
      On or
      prior to the Closing Date, the Company will deliver to the Purchasers the
      opinions of legal counsel to the Company substantially in the form and substance
      reasonably acceptable to the Purchasers.

     

    7.6. Reservation
      of Common Stock issuable upon Conversion of Notes.
      The
      Company hereby agrees at all times to reserve and keep available out of its
      authorized but unissued shares of Common Stock, solely for the purpose of
      providing for the full conversion of Notes (including payment and repayment
      of
      interest and principal thereon), such number of shares of Common Stock as shall
      from time to time equal the number of shares sufficient to permit the full
      conversion of Notes (including payment and repayment of interest and principal
      thereon) in accordance with the terms of the Notes. All calculations pursuant
      to
      this paragraph shall be made without regard to restrictions on beneficial
      ownership.

     

    7.7. Reports.
      For so
      long as the Purchasers beneficially own the Notes, the Company will furnish
      to
      the Purchasers the following reports, each of which shall be provided to the
      Purchasers by air mail or reputable international courier (within one week
      of
      filing with the SEC, in the case of SEC filings), to the extent not filed on
      and
      available at that time via EDGAR:

     

    (a) Quarterly
      Reports.
      As soon
      as available and in any event within 45 days after the end of each fiscal
      quarter of the Company, the Company’s quarterly report on Form 10-Q or, in the
      absence of such report, consolidated balance sheets of the Company as at the
      end
      of such period and the related consolidated statements of operations,
      stockholders’ equity and cash flows for such period and for the portion of the
      Company’s fiscal year ended on the last day of such quarter, all in reasonable
      detail and certified by the Company to have been prepared in accordance with
      generally accepted accounting principles, subject to year-end and audit
      adjustments.

     

    (b) Annual
      Reports.
      As soon
      as available and in any event within 90 days after the end of each fiscal year
      of the Company, the Company’s Form 10-K or, in the absence of a Form 10-K,
      consolidated balance sheets of the Company as at the end of such fiscal year
      and
      the related consolidated statements of earnings, stockholders’ equity and cash
      flows for such year, all in reasonable detail and accompanied by the report
      on
      such consolidated financial statements of an independent certified public
      accountant selected by the Company and reasonably satisfactory to the
      Purchaser.

     

    
      
        
        

      

      
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    (c) Securities
      Filings.
      As
      promptly as practicable and in any event within five days after the same are
      issued or filed, copies of (i) all notices, proxy statements, financial
      statements, reports and documents as the Company shall send or make available
      generally to its stockholders or to financial analysts, and (ii) all periodic
      and special reports, documents and registration statements (other than on Form
      S-8) which the Company furnishes or files, or, to the extent also delivered
      to
      the Company, any officer or director of the Company (in such person’s capacity
      as such) furnishes or files with the SEC.

     

    (d) Other
      Information.
      Such
      other information relating to the Company as from time to time may reasonably
      be
      requested by any Purchaser provided the Company produces such information in
      its
      ordinary course of business, and further provided that the Company, solely
      in
      its own discretion, determines that such information is not confidential in
      nature and disclosure to the Purchaser would not be harmful to the Company
      or
      violate any rules or regulations of the SEC or the Nasdaq Stock
      Market.

     

    7.8. Press
      Releases.
      Any
      press release or other publicity concerning this Agreement or the transactions
      contemplated by this Agreement shall be submitted to the Purchasers for comment
      at least two (2) business days prior to issuance, unless the release is required
      to be issued within a shorter period of time by law or pursuant to the rules
      of
      the NASDAQ Stock Market or a national securities exchange. The Company shall
      issue a press release concerning the fact and material terms of this Agreement
      within one business day of the Closing.

     

    7.9. No
      Conflicting Agreements.
      The
      Company will not take any action, enter into any agreement or make any
      commitment that would conflict or interfere in any material respect with the
      obligations to the Purchasers under the Agreements.

     

    7.10. Insurance.
      For so
      long as any Purchaser beneficially owns any of the Securities, the Company
      shall
      have in full force and effect (a) insurance reasonably believed by the Company
      to be adequate on all assets and activities, covering property damage and loss
      of income by fire or other casualty, and (b) insurance reasonably believed
      to be
      adequate protection against all liabilities, claims and risks against which
      it
      is customary for companies similarly situated as the Company to
      insure.

     

    7.11. Compliance
      with Laws.
      So long
      as the Purchasers beneficially own any Securities, the Company will use
      reasonable efforts to comply with all applicable laws, rules, regulations,
      orders and decrees of all governmental authorities, except to the extent
      non-compliance (in one instance or in the aggregate) would not have a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    7.12. Listing
      of Underlying Shares and Related Matters.
      The
      Company hereby agrees, promptly following the Closing of the transactions
      contemplated by this Agreement, to take such action to cause the Underlying
      Shares to be listed on the Nasdaq Capital Market as promptly as possible
      following the Closing but no later than the effective date of the registration
      contemplated by the Registration Rights Agreement. The Company further agrees
      that if the Company applies to have its Common Stock or other securities traded
      on any other principal stock exchange or market, it will include in such
      application the Underlying Shares and will take such other action as is
      necessary to cause such Common Stock to be so listed. For so long as any Notes
      remain outstanding, the Company will take all action necessary to continue
      the
      listing and trading of its Common Stock on the Nasdaq Stock Market, the New
      York
      Stock Exchange or the American Stock Exchange (collectively, “Approved
      Markets”), and will comply in all respects with the Company’s reporting, filing
      and other obligations under the bylaws or rules of such exchange or market,
      as
      applicable, to ensure the continued eligibility for trading of the Underlying
      Shares thereon.

     

    7.13. Corporate
      Existence.
      So long
      as any Notes remain outstanding, the Company shall maintain its corporate
      existence, except in the event of a merger, consolidation or sale of all or
      substantially all of the Company’s assets, as long as the surviving or successor
      entity in such transaction (a) assumes the Company’s obligations hereunder and
      under the agreements and instruments entered into in connection herewith,
      regardless of whether or not the Company would have had a sufficient number
      of
      shares of Common Stock authorized and available for issuance in order to fulfill
      its obligations hereunder and effect the conversion (including payment on)
      in
      full of all Notes outstanding as of the date of such transaction; (b) has no
      legal, contractual or other restrictions on its ability to perform the
      obligations of the Company hereunder and under the agreements and instruments
      entered into in connection herewith; and (c)(i) is a publicly traded corporation
      whose common stock and the shares of capital stock issuable upon conversion
      of
      the Notes are (or would be upon issuance thereof) listed for trading on an
      Approved Market or (ii) if not such a publicly traded corporation, then the
      buyer agrees that it will, at the election of the Purchasers, purchase such
      Purchasers’ Securities at a price equal to the greater of (a) 110% of the
      Purchase Price of such Securities or (b) the fair market value of such
      Securities on an as-converted basis based on the closing price immediately
      preceding such transaction or the redemption date, whichever is
      greater.

     

    7.14. Insurance
      Endorsement.
      The
      Company agrees that on or prior to August 31, 2008, it shall deliver to the
      Purchasers (or their counsel) each of (a) an original endorsement to the
      Company’s Commercial General Liability Insurance Policy/Umbrella Liability
      Insurance Policy naming the Purchasers as additional insureds, and (b) an
      original Standard New Jersey Mortgagee Non-Contribution Clause endorsement
      to
      the Company’s “all risk” property insurance policy for the Mortgaged Property in
      favor of the Purchasers.

     

    
      
        
        

      

      
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    8. Survival.
      All
      representations, warranties, covenants and agreements contained in this
      Agreement shall be deemed to be representations, warranties, covenants and
      agreements as of the date hereof and shall survive the execution and delivery
      of
      this Agreement and terminate upon expiration of the applicable statute of
      limitations.

     

    9. Miscellaneous.

     

    9.1. Successors
      and Assigns.
      This
      Agreement may not be assigned by a party hereto without the prior written
      consent of the other parties hereto which consent may not be unreasonably
      withheld or delayed, except that without the prior written consent of the
      Company, but after notice duly given, a Purchaser may assign its rights and
      delegate its duties hereunder in whole or in part to an Affiliate or to any
      Person to which such Purchaser has transferred or assigned all or part of its
      Notes in accordance with the terms of the Notes, provided in each case that
      such
      Affiliate, transferee or assignee acknowledges in writing to the Company that
      the representations and warranties contained in Section 5 hereof shall apply
      to
      such Affiliate, transferee or assignee. The terms and conditions of this
      Agreement shall inure to the benefit of and be binding upon the respective
      permitted successors and assigns of the parties. Nothing in this Agreement,
      express or implied, is intended to confer upon any party other than the parties
      hereto or their respective successors and assigns any rights, remedies,
      obligations, or liabilities under or by reason of this Agreement, except as
      expressly provided in this Agreement.

     

    9.2. Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. This Agreement may be executed by facsimile.

     

    9.3. Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    9.4. Notices.
      Unless
      otherwise provided, any notice required or permitted under this Agreement shall
      be given in writing and shall be deemed effectively given only by delivery
      to
      each party to be notified by (i) personal delivery, (ii) telex or telecopier,
      provided it is sent with electronic confirmation of complete transmittal, or
      (iii) an internationally recognized overnight air courier, addressed to the
      party to be notified at the address as follows, or at such other address as
      such
      party may designate by ten days’ advance written notice to the other
      party:

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Company:

    

    NexMed,
      Inc.

    89
      Twin
      Rivers Drive

    East
      Windsor, NJ 08520 

    Fax:
      (609) 426-0340

    Attention:
      Chief Financial Officer

    

    With
      a
      copy to:

    

    Katten
      Muchin Rosenman LLP

    575
      Madison Avenue 

    New
      York,
      New York 10022

    Fax:
      (212) 940-6557

    Attention:
      Robert Kohl, Esq.

    

    If
      to the
      Purchasers, to the addresses set forth on the signature
      pages hereto.

    

    Any
      notice or other communication or deliveries hereunder shall be deemed delivered
      (i) upon receipt, if delivered personally, (ii) if sent by facsimile, upon
      receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or
      on
      the first Business Day following such receipt if received on a Business Day
      after 5:00 p.m. (Eastern Time) or (iii) two (2) Business Days following deposit
      with an internationally recognized overnight courier service.

    

    9.5. Expenses.

     

    (a) The
      parties hereto shall pay their own costs and expenses in connection herewith,
      except that the Company shall pay to Tail Wind Advisory and Management Ltd.
      (“TWAM”) a non-refundable sum equal to $45,000 as and for legal and due
      diligence expenses incurred in connection herewith, $25,000 of which has been
      previously paid and the balance of which shall be paid upon
      Closing.

     

    (b) The
      Company shall pay the costs of all title, UCC, judgment, lien and similar
      searches in connection with the Mortgage, and shall pay all title insurance
      premiums on the Mortgaged Property in connection with Purchasers’ title
      insurance policy (updated through the Closing Date). The Company shall also
      pay
      all costs and expenses hereafter incurred in amending, implementing, perfecting,
      collecting, defending, declaring and enforcing and otherwise relating to the
      Purchasers’ rights and security interests in the Mortgaged Property hereunder or
      under the Notes or any other instrument or agreement delivered in connection
      herewith or therewith, including, but not limited to, searches and filings
      after
      the date hereof (provided that the Company shall not be responsible for any
      costs and expenses incurred by the Purchasers in connection with the
      negotiation, execution and delivery of the Mortgage or any other Agreements,
      except as may be provided above or elsewhere herein or therein). For
      clarification, the costs payable by the Company pursuant to this Section 9.5(b)
      are in addition to the sum payable to TWAM pursuant to Section 9.5(a) above.
      

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    9.6. Amendments
      and Waivers.
      Any
      term of this Agreement may be amended and the observance of any term of this
      Agreement may be waived (either generally or in a particular instance and either
      retroactively or prospectively), only with the written consent of the Company
      and 75% in interest of the Purchasers, provided, however, that any such
      amendment or waiver effected in accordance with this paragraph shall be binding
      upon each holder of any Securities purchased under this Agreement at the time
      outstanding, each future holder of all such securities, and the
      Company.

     

    9.7. Severability.
      If one
      or more provisions of this Agreement are held to be unenforceable under
      applicable law, such provision shall be excluded from this Agreement and the
      balance of this Agreement shall be interpreted as if such provision were so
      excluded and shall be enforceable in accordance with its terms.

     

    9.8. Entire
      Agreement.
      This
      Agreement, including the Exhibits and Schedules hereto, and the Registration
      Rights Agreement, the Notes and other documents contemplated hereby constitute
      the entire agreement among the parties hereof with respect to the subject matter
      hereof and thereof and supersede all prior agreements and understandings, both
      oral and written, between the parties with respect to the subject matter hereof
      and thereof.

     

    9.9. Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained. 

     

    9.10. Applicable
      Law.
      This
      Agreement shall be governed by, and construed in accordance with, the laws
      of
      the State of New York without regard to principles of conflicts of
      laws.

     

    9.11. Remedies.

     

    (a) The
      Purchasers shall be entitled to specific performance of the Company’s
      obligations under the Agreements.

     

    (b) The
      Company on the one hand, and each Purchaser severally and not jointly on the
      other hand, shall indemnify the other and hold it harmless from any loss, cost,
      expense or fees (including attorneys’ fees and expenses) arising out of any
      breach of any representation, warranty, covenant or agreement in any of the
      Agreements, or arising out of the enforcement of this Section 9.11.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    9.12. Jurisdiction.
      The
      parties hereby agree that all actions or proceedings arising directly or
      indirectly from or in connection with this Agreement or the other Agreements
      shall be litigated only in the Supreme Court of the State of New York or the
      United States District Court for the Southern District of New York located
      in
      New York County, New York, except for actions or proceedings arising directly
      or
      indirectly from or in connection with the Mortgage, which may be litigated
      in
      the applicable court(s) in New Jersey. The parties consent to the jurisdiction
      and venue of the foregoing courts and consent that any process or notice of
      motion or other application to either of said courts or a judge thereof may
      be
      served inside or outside the State of New York or the Southern District of
      New
      York by registered mail, return receipt requested, directed to the party being
      served at its address set forth in this Agreement (and service so made shall
      be
      deemed complete three (3) days after the same has been posted as aforesaid)
      or
      by personal service or in such other manner as may be permissible under the
      rules of said courts. The Company and the Purchasers hereby waive any right
      to a
      jury trial in connection with any litigation pursuant to this Agreement or
      the
      other Agreements.

     

    9.13. Like
      Treatment of Purchasers and Holders.
      Neither
      the Company nor any of its affiliates shall, directly or indirectly, pay or
      cause to be paid any consideration (immediate or contingent), whether by way
      of
      interest, fee, payment for the redemption, conversion or exercise of the
      Securities, or otherwise, to any Purchaser or holder of Securities, for or
      as an
      inducement to, or in connection with the solicitation of, any consent, waiver
      or
      amendment of any terms or provisions of the Agreements, unless such
      consideration is required to be paid to all Purchasers or holders of Securities
      bound by such consent, waiver or amendment. The Company shall not, directly
      or
      indirectly, redeem any Securities unless such offer of redemption is made pro
      rata to all Purchasers or holders of Securities, as the case may be, on
      identical terms. For clarification purposes, this provision constitutes a
      separate right granted to each Purchaser by the Company and negotiated
      separately by each Purchaser, 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.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    9.14. Actions
      of Purchasers.
      The
      obligations of each Purchaser hereunder and under the documents contemplated
      hereby are several and not joint with the obligations of any other Purchaser,
      and no Purchaser shall in any way be responsible for the performance of the
      obligations of any other Purchaser under any such document. Nothing contained
      herein or in any other document contemplated hereby, and no action taken by
      any
      Purchaser pursuant hereto or thereto, shall be deemed to constitute any of
      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 hereby or thereby. Each Purchaser confirms that it has
      independently participated in the negotiation of the transaction contemplated
      hereby with the advice of its own counsel and advisors. 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 any other
      document contemplated hereby, and it shall not be necessary for any other
      Purchaser to be joined as an additional party in any proceeding for such
      purpose. Notwithstanding anything herein to the contrary, the actions and
      obligations of the Purchasers hereunder shall at all times be considered several
      and not
      joint,
      and the Purchasers are not, under any circumstances, agreeing to act jointly
      with respect to the Securities or any of their actions or obligations under
      the
      Agreements, and shall not constitute a “group” under the 1934 Act. Each
      Purchaser acknowledges that no other Purchaser has acted as agent for such
      Purchaser in connection with making its investment hereunder and that no other
      Purchaser will be acting as agent of such Purchaser in connection with
      monitoring its investment hereunder. 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 Agreements, and it
      shall not be necessary for any other Purchaser to be joined as an additional
      party in any proceeding for such purpose. The Company has elected to provide
      all
      Purchasers with the same terms and Agreements for the convenience of the Company
      and not because it was required or requested to do so by the
      Purchasers.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    9.15. Collateral
      Agent.
      The
      Purchasers hereby appoint The Tail Wind Fund Ltd. as “Collateral Agent” under
      the Mortgage. The Collateral Agent may be removed, and a successor Collateral
      Agent may be appointed, by a majority-in-interest of holders of the Notes,
      and
      any Collateral Agent may resign from such position upon thirty days prior notice
      to the Company (which shall constitute notice to the Operating Subsidiary)
      and
      the holders of Notes. If a successor Collateral Agent does not take such
      position within 30 days after the retiring Collateral Agent resigns or is
      removed, the retiring Collateral Agent or a majority-in-interest of the holders
      of the Notes may petition any court of competent jurisdiction for the
      appointment of a successor Collateral Agent. The Collateral Agent will act
      or
      refrain from acting based on the direction of a majority-in-interest of holders
      of the Notes, and may take any action or refrain from taking any action as
      provided in the Mortgage as it shall determine in its reasonable judgment and
      discretion. With respect to any monies or property held by, or expended by,
      the
      Collateral Agent on behalf of the holders of the Notes, such amounts shall
      be
      allocated pro rata based on the principal amount of Notes outstanding. The
      Collateral Agent shall be reimbursed by the holders of Notes for all reasonable
      expenses incurred in connection with acting as Collateral Agent under the
      Mortgage (provided that this shall in no way affect any liability of the
      Operating Subsidiary or the Company under the Mortgage). The Collateral Agent
      may refuse to perform any duty or exercise any right or power unless it receives
      indemnity satisfactory to it against any loss, liability or expense. No implied
      covenants or obligations shall be read into this Agreement or the Mortgage
      against Collateral Agent. Except for Collateral Agent's own willful misconduct,
      bad faith or gross negligence, the Collateral Agent (i) may rely and/or act
      upon
      any written instrument, document or request believed by the Collateral Agent
      in
      good faith to be genuine and to be executed and delivered by the proper
      person(s), and may assume in good faith the authenticity, validity and
      effectiveness thereof and shall not be obligated to make any investigation
      or
      determination as to the truth and accuracy of any information contained therein,
      and (ii) shall not be responsible for the acts or omissions of the other parties
      hereto or holders of Notes. In consideration of its acceptance of the
      appointment as the Collateral Agent, each of the Purchasers (and any subsequent
      holder of the Notes) jointly and severally agree to indemnify the Collateral
      Agent against, and hold the Collateral Agent harmless from, all costs, damages,
      expenses (including reasonable attorney's fees and disbursements) and
      liabilities that the Collateral Agent may incur or sustain in connection with
      serving as Collateral Agent under the Mortgage, unless such costs, damages,
      expenses and liabilities are caused by the Collateral Agent's own willful
      misconduct, bad faith or gross negligence.

    

    [REMAINDER
      OF PAGE INTENTIONALLY BLANK]

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      parties have executed this Agreement as of the date first above
      written.

    

      
        	
                The
                  Company:

              	
                NEXMED,
                  INC.

              
	 	 
	 	
                By:
                  /s/ Vivian
                  Liu                                                              

              
	 	
                Name:
                  Vivian Liu

              
	 	
                Title:  
                  Chief Executive Officer

              

      

    

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              The
                Purchasers: 

            
	 	 
	 	
              THE
                TAIL WIND FUND LTD.

            
	 	
              By:       
                TAIL WIND ADVISORY AND

            
	 	
                           
                MANAGEMENT LTD., as

            
	 	
                           
                investment manager

            

    

    

    
      	 	
                            By:/s/
                David
                Crook                                                

            
	 	
                           
                Name: David Crook

            
	 	
                           
                Title:   CEO

            

    

     

    
      
        	
                Aggregate
                  Purchase Price:

              	
                $4,750,000

              
	
                Principal
                  Amount of Notes:

              	
                $4,750,000

              

      

       

    

    
      	
              Resident:
                

            	
              BVI

            
	 	 
	
              Address
                for Notices:

            	
              The
                Tail Wind Fund Ltd.

            
	 	
              c/o
                Tail Wind Advisory and Management Ltd.

            
	 	
              Attn:
                David Crook

            
	 	
              77
                Long Acre

            
	 	
              London
                WC2E 9LB UK

            
	 	
              Facsimile:
                44-207- 420 3819

            
	 	
              Email:
                dcrook@tailwindam.com

            
	 	 
	 	
              with
                a copy to:

            
	 	 
	 	
              Peter
                J. Weisman, P.C.

            
	 	
              153
                East 53rd
                Street, 29th
                Floor

            
	 	
              New
                York, NY 10022

            
	 	
              Telephone:
                212-433-1368

            
	 	
              Facsimile:
                212-433-1361

            
	 	
              Email:
                pweisman@pweisman.com

            

    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    
      
        	 	
                SOLOMON
                  STRATEGIC HOLDINGS, INC.

              
	 	 
	 	
                By:/s/
                  Andrew P.
                  MacKellar                                    

              
	 	
                            
                  Name: Andrew P. MacKellar

              
	 	
                            
                  Title:   Director

              
	 	 
	
                Aggregate
                  Purchase Price:

              	
                $1,000,000

              
	
                Principal
                  Amount of Notes:

              	
                $1,000,000

              
	 	 
	
                Resident:
                  

              	
                BVI

              
	 	 
	
                Address
                  for Notices:

              	
                Solomon
                  Strategic Holdings, Inc.

              
	 	
                c/o
                  Andrew P. MacKellar (Director)

              
	 	
                Greenlands

              
	 	
                The
                  Red Gap

              
	 	
                Castletown

              
	 	
                IM9
                  1HB

              
	 	
                British
                  Isles

              
	 	
                Telephone:
                  +011 (44) 1624 824171

              
	 	
                Facsimile:   
                  +011 (44) 1624 824191

              
	 	 
	 	
                with
                  a copy to:

              
	 	 
	 	
                Peter
                  J. Weisman, P.C.

              
	 	
                153
                  East 53rd
                  Street, 29th
                  Floor

              
	 	
                New
                  York, NY 10022

              
	 	
                Telephone:
                  212-433-1368

              
	 	
                Facsimile:
                  212-433-1361

              
	 	
                Email:
                  pweisman@pweisman.com

              

      

    

     

    
      
        
        

      

      
        30

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