Document:

EXHIBIT
10.1

    

    EXECUTION
COPY

    

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated as of
November 8, 2010, between Healthwarehouse.com, Inc., a
Delaware corporation (the “Company”), and the investors
identified on the signature pages hereto (each, an “Investor” and collectively,
the “Investors”).

     

    WHEREAS,
the Company is offering, in a private placement to “accredited investors” (as
such term in defined in Regulation D promulgated under the Securities Act of
1933, as amended (the “Securities Act”)), units (the
“Units”) of up to
349,392 shares of newly created Series B Preferred Stock, $0.001 par value per
share, of the Company (the “Preferred Stock”) and
five-year immediately exercisable warrants (all such warrants being the “Warrants”) to purchase shares
of common stock, $0.001 par value per share, of the Company (the “Common Stock”), at an exercise
price of $3.00 per share, in the form attached hereto at Exhibit A;

     

    WHEREAS,
each Unit will be offered at a purchase price of $9.45 per Unit (the “Per Unit Purchase Price”) and
will consist of (i) one share of Preferred Stock and (ii) a Warrant to purchase
2.6993 shares of Common Stock. The Preferred Stock shall have the other rights,
preferences, and privileges set forth in the Certificate of Designation attached
hereto as Exhibit
B (the “Certificate of
Designation”);

     

    WHEREAS,
the Company is also offering, in a private placement, to certain of the
Investors, 7% secured convertible promissory notes under the terms of a Loan and
Security Agreement of even date herewith (the “Loan Agreement”);

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Investor, and each Investor, severally
and not jointly, desires to purchase from the Company certain securities of the
Company, as more fully described in this Agreement.

     

    NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:

     

    ARTICLE
1

     

    DEFINITIONS

    

    1.1     
    Definitions.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section 1.1: 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Action” means any action,
suit, inquiry, notice of violation, proceeding (including any partial proceeding
such as a deposition) or investigation pending or threatened in writing against,
or which any executive officer of the Company has actual knowledge of, or
affecting the Company, any Subsidiary or any of their respective properties, or
capital stock, or any officers, directors or key employees of the Company or any
of its Subsidiaries, before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

     

    “Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144.

     

    “Belgium Subsidiaries” means
Ion Networks Holding N.V. and Ion Networks, N.V. (each an entity organized under
the laws of Belgium)

     

    “Board of Directors” or “Board” means the Board of
Directors of the Company.

     

    “Business Day” means any day
except Saturday, Sunday and any day which is a federal legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other governmental action to close.

     

    “Closing” means the closing of
the purchase and sale of the Units pursuant to Section 2.1(a).

     

    “Closing Date” means, with
respect to the Closing, the Business Day immediately following the date on which
all of the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied or
waived, or such other date as the parties may agree, provided that such
conditions continue to be so satisfied or waived on such Business
Day.

     

    “Commission” means the
Securities and Exchange Commission.

     

    “Common Stock Equivalents”
means any securities of the Company or any Subsidiary which entitle the holder
thereof to acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.

     

    “Company Unit Deliverables” has
the meaning set forth in Section 2.2(a).

     

    “Company Note Deliverables” has
the meaning set forth in Section 2.2(b).

     

    “Company Shares” means the
shares of Preferred Stock issued to the Investors by the Company pursuant to
this Agreement, including any securities into which such shares of Preferred
Stock may hereafter be reclassified or changed.

     

    “Company’s IP” has the meaning set
forth in Section 3.1(r).

    
      
         

      

      
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    “Confidential Information”
means trade secrets, confidential information and know-how (including but not
limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance
specifications, support documentation, drawings, specifications, designs,
business and marketing plans, and customer and supplier lists and related
information).

     

    “Conversion Shares” means the
shares of Common Stock issuable upon conversion of the Preferred Stock
(including the conversion of Preferred Stock issuable upon conversion of the
Convertible Notes or issuable as a PIK dividend on the Preferred
Stock).

     

    “Convertible Notes” means the
7% secured convertible promissory notes issued by the Company and Old HW to HWH
and [Lloyd Miller] under the Loan Agreement.

     

    “Delaware Courts” means the
state and federal courts sitting in the City of Wilmington, State of
Delaware.

     

    “Disclosure Letter” means any
of the disclosures hereto containing information relating to the Company
pursuant to Article III and other provisions hereof that has been provided to
the Investors on the date hereof, attached as Exhibit C
hereto.

     

    “Disclosure Materials” has the
meaning set forth in Section 3.1(h).

     

    “Effective Date” means the date
that the Registration Statement filed pursuant to Section 2.2, 2.3, or 2.4 of
the Investors’ Rights Agreement (as applicable) is first declared effective by
the Commission.

     

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended

     

    “GAAP” means U.S. generally
accepted accounting principles.

     

    “HWH” means HWH Lending, LLC, a
Delaware limited liability company.

     

     “Infringe” has the meaning set
forth in Section 3.1(r).

     

    “Intellectual Property” shall
mean any or all of the following and all rights in, arising out of, or
associated therewith:  (a) all United States, international and
foreign registered patents and applications therefor and all underlying patent
rights, reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof; (b) all inventions (whether patentable or
not), ideas, processes, invention disclosures, improvements, trade secrets,
proprietary information, know-how, technology, improvements, discoveries,
technical data, customer lists, proprietary processes and formulae, all source
and object code, algorithms, architectures, structures, display screens,
layouts, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records; (c) all copyrights, copyrights registrations and
applications therefor, copyrightable material including derivative works,
revisions, transformations and adaptations, material that is subject to
non-copyright disclosure protections, and all other works of authorship and
designs (whether or not copyrightable), and all other rights corresponding
thereto throughout the world; (d) all trade names, logos, trade dress, common
law trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world; (e) domain names; (f) web sites and
related content; (g) intellectual property rights acquired by license or
agreement; (h) damages or benefits derived from any action arising out of or
related to the foregoing, including laws controlling computer and Internet
rights; (i) all manuals, documentation and materials relating to the above; and
(j) any equivalent rights to any of the foregoing anywhere in the
world.

    
      
         

      

      
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    “Investment Amount” means, with
respect to each Investor, the Investment Amount indicated on such Investor’s
signature page to this Agreement.

     

    “Investor Deliverables” has the
meaning set forth in Section 2.2(c).

     

    “Investor Party” has the
meaning set forth in Section 4.6.

     

    “Investors’ Rights Agreement”
means the Investors’ Rights Agreement, dated as of the date of this Agreement,
among the Company and the Investors, in the form of Exhibit D
hereto.

     

    “License Agreements” has the meaning set
forth in Section 3.1(r).

     

    “Lien” means any lien, charge,
pledge, encumbrance, security interest, preemptive or similar rights, right of
first refusal or other restrictions of any kind, other than restrictions on the
transfer of securities arising under federal or state securities laws and
regulations.

     

     “Material Adverse
Effect” means any of (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material adverse
effect on the operations (including the results thereof), assets, liabilities
(actual or contingent), business, property, or condition (financial or
otherwise) of the Company or any Subsidiary taken as a whole, or (iii) a
material adverse impairment to the Company’s ability to perform on a timely
basis its obligations under any Transaction Document.

     

    “Old HW” means the Company’s
wholly owned subsidiary, Hwareh.com, Inc., a Delaware corporation.

     

    “Person” means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

    

    “Principal Market” means the
National Association of Securities Dealers, Inc. OTC Bulletin
Board.

     

    “Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

     

    “Registrable Securities” has
the meaning set forth in the Investors’ Rights Agreement.

     

    “Registration Statement” means
a registration statement meeting the requirements set forth in the Investors’
Rights Agreement and covering the resale by the Investors of the Registrable
Securities (as defined therein) to the extent provided for
therein.

    
      
         

      

      
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    “Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

    “SEC Reports” has the meaning
set forth in Section 3.1(h).

     

    “Securities” means,
collectively, the Company Shares, the Convertible Notes, the Conversion Shares,
the Warrants, and the Units.

     

    “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 of Regulation SHO and
include all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers having the effect of hedging the securities
or investment made under this Agreement.

     

    “Subsidiary” means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, a majority of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the Board of
Directors or other governing body of such corporation, partnership, joint
venture or other legal entity; provided, however, that with respect to the
Company, “Subsidiary” shall not include the Belgium Subsidiaries.

     

    “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00 p.m., New York City
time).

     

    “Trading Market” means
whichever of the New York Stock Exchange, the NYSE Amex Equities, the Nasdaq
Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the
Principal Market on which the Common Stock is listed or quoted for trading on
the date in question.

     

    “Transaction Documents” means
this Agreement, the Investors’ Rights Agreement, the Warrants, the
Indemnification Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

     

    “Warrant” has the meaning set
forth in the Preamble to this Agreement.

     

    “Warrant Shares” mean the
shares of Common Stock issuable upon the exercise of the Warrants being sold
under this Agreement.

    
      
         

      

      
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    ARTICLE
2

    PURCHASE
AND SALE

     

    2.1          Closing.  Subject
to the terms and conditions set forth in this Agreement and the Loan Agreement,
at the Closing, the Company shall issue and sell to the Investors, and the
Investors shall, severally and not jointly, purchase from the Company an
aggregate of 349,392 Units and Convertible Notes in the aggregate principal
amount of $1,000,000.  The Closing shall take place at the offices of
Andrews Kurth LLP (“Andrews”), 111 Congress
Avenue, Suite 1700, Austin, Texas 78701 on the Closing Date, or at such other
location or time as the parties may agree.

     

    2.2       
  Closing
Deliveries.

     

    (a)           At
the Closing, the Company shall deliver or cause to be delivered to each Investor
that is purchasing Units the following (the “Company Unit
Deliverables”):

     

    (i)          a
stock certificate representing such number of Company Shares equal to the
portion of such Investor’s Investment Amount invested at the Closing divided by
the Per Unit Purchase Price, registered in the name of such
Investor;

     

    (ii)         a
certificate evidencing the formation and good standing of the Company and Old
HW, issued by the Secretary of State of the State of Delaware, each as of a date
within ten (10) days of the Closing Date;

     

    (iii)        a
certified copy of (i) the Certificate of Incorporation, as amended, of the
Company (the “Certificate of
Incorporation”) and (ii) the Certificate of Incorporation, as amended, of
Old HW, each as certified by the Secretary of State of the State of Delaware, as
of a date within ten (10) days of the Closing Date;

     

    (iv)        evidence
of the filing of the Certificate of Designation with the Secretary of State of
the State of Delaware;

     

    (v)         a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3.1(c) as
adopted by the Company’s board of directors in a form reasonably acceptable to
such Investor, (ii) the Certificate of Incorporation and (iii) the Bylaws, each
as in effect at the Closing;

     

    (vi)         a
Warrant, registered in the name of such Investor pursuant to which such Investor
shall have the right to acquire the number of shares of Common Stock equal to
the number of Company Shares issuable to such Investor pursuant to Section
2.2(a)(i) multiplied by 2.6993;

     

    (vii)        the
Investors’ Rights Agreement and any other Transaction Documents which the
Company is required to execute hereunder, duly executed by the
Company;

     

    (viii) 
     the legal opinion of Company Counsel in
substantially the form previously provided to the Investors, addressed to the
Investor;

    
      
         

      

      
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    (ix)        
the certificates set forth in Section 5.1 of this Agreement; and

     

    (x)        
 such other documents relating to the transactions contemplated by this
Agreement as such Investor or its counsel may reasonably request.

     

    (b)           At
the Closing, in addition to the Company Unit Deliverables, the Company shall
deliver or cause to be delivered to each Investor that is purchasing a
Convertible Note under the Loan Agreement (the “Company Note
Deliverables”):

     

    (i)         
 A Convertible Note in the principal amount and in the form described in
the Note Agreement, duly executed by the Company and Old HW; and

     

    (ii)        
 A Warrant, registered in the name of such Investor pursuant to which such
Investor shall have the right to acquire the number of shares of Common Stock
equal to 28,563.8 for each $100,000 of principal of such Investor’s Convertible
Note.

     

    (c)           At
the Closing, each Investor shall deliver or cause to be delivered to the Company
the following (the “Investor
Deliverables”):

     

    (i)         
 the portion of its Investment Amount invested at the Closing, in United
States dollars, by (A) wire transfer of immediately available funds to an
account designated in writing by the Company for such purpose attached hereto at
Exhibit E, (B)
cancellation or conversion of indebtedness of the Company and/or Old HW, or (C)
combination of such methods; and

     

    (ii)         the
Investors’ Rights Agreement, duly executed by such Investor.

     

    ARTICLE
3

     

    REPRESENTATIONS
AND WARRANTIES

     

    3.1      
   Representations and
Warranties of the Company.  The Company hereby represents and
warrants to, and agrees with, each Investor as of the Closing Date (except for
representations and warranties which speak as of a later date), that, except as
set forth in the Disclosure Letter, which disclosures shall be deemed to be part
of the representations and warranties made hereunder, the following
representations are true, correct, and complete.  The Disclosure
Letter shall be arranged in Sections corresponding to the numbered and lettered
Sections and Subsections contained in this Article 3 and the
disclosures in any Section or Subsection of the Disclosure Letter shall qualify
other Sections and Subsections of this Article 3 only to the
extent that it is reasonably apparent from a reading of the disclosure that such
disclosure is applicable to such other Sections and Subsections.  For
purposes of all representations and warranties any reference to the Company’s
“knowledge” or “awareness” or any similar term shall be deemed to relate to the
knowledge after reasonable inquiry of Lalit Dhadphale, the Company’s President
and Chief Executive Officer, Patrick E. Delaney, the Company’s Chief Financial
Officer and Treasurer, and Ronald W. Ferguson, the Company’s principal
pharmacist.

    
      
         

      

      
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    (a)           Subsidiaries.  

     

    (i)           The
Company has no direct or indirect Subsidiaries other than as specified on Schedule 3.1(a) of the
Disclosure Letter.  Except as set forth on Schedule 3.1(a) of the
Disclosure Letter, the Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any and all Liens, and all
the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

     

    (ii)           The
Belgium Subsidiaries are both non-operating, inactive entities, and have no
assets or liabilities (contingent or otherwise).

     

    (b)           Organization and
Qualification.  The Company and each Subsidiary are duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted and as
presently proposed to be conducted, except in each case as would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.  Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  The Company and each Subsidiary are duly qualified to
conduct its respective businesses and are in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.

     

    (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby, including, without limitation, the issuance of the
Securities and the reservation for issuance and issuance of the Conversion
Shares and the Warrant Shares issuable upon exercise of the Warrants, have been
duly authorized by all necessary corporate action on the part of the Company and
no consent or further corporate action is required by the Company, its Board of
Directors or its stockholders in connection therewith.  Each
Transaction Document has been duly executed by the Company and, when delivered
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, and except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

    
      
         

      

      
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    (d)           No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) assuming the consents set forth on Schedule 3.1(e) of the
Disclosure Letter are obtained, conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse
Effect.

     

    (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Investors’ Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of Sale
of Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filings required in accordance with Sections 4.4 (and any related
amendments to, or related prospectus supplements to, the Company’s outstanding
registration statements), and (v) those set forth on Schedule 3.1(e) of the
Disclosure Letter.  The Company and its Subsidiaries are
unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant
to this Section 3.1(e).

     

    (f)           Issuance of the
Securities.  The Company Shares, the Warrants, the Conversion
Shares and the Warrant Shares have been duly authorized and, when issued and
paid for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens other than
those imposed under the Transaction Documents or applicable federal and state
securities laws and those created or imposed by an Investor. The Company has
reserved from its duly authorized capital stock the Securities issuable pursuant
to this Agreement, including the Company Shares, the Conversion Shares and the
Warrant Shares.  When issued pursuant to the terms of the Company
Shares and the Warrants, the Conversion Shares and the Warrant Shares will be
validly issued, fully paid and non-assessable and free from all Liens other than
those imposed under the Transaction Documents or applicable federal and state
securities laws and those created or imposed by an Investor, with the holders
being entitled to all rights accorded to a holder of Preferred Stock or Common
Stock, as the case may be.  Subject to the accuracy of the
representations and warranties of the Investors in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
Securities Act.

    
      
         

      

      
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    (g)           Capitalization.  As
of the date hereof, the authorized capital stock of the Company (without giving
effect to the transactions contemplated by this Agreement) consists of (i)
1,000,000 shares of preferred stock, $0.001 par value per share, of which (A)
200,000 shares are designated as Series A Preferred Stock, and of which as of
the date hereof, no shares are issued and outstanding, and (B) 625,000 shares
are designated as Preferred Stock, and of which as of the date hereof, no shares
are issued and outstanding, and (ii) 50,000,000 shares of Common Stock, of which
as of the date hereof, (U) 10,278,934 shares are issued and outstanding, (V)
2,276,062 shares are reserved for issuance pursuant to the conversion of
Preferred Stock into Common Stock,  (W) no shares are reserved for
issuance pursuant to the conversion of Series A Preferred Stock into Common
Stock, (X) 2,906,425 shares are reserved for issuance pursuant to the Company’s
equity incentive plans under which (I) options to purchase 1,971,300 shares are
issued and outstanding  and (II) 935,125 shares remain available for
grant, (Y) 643,750 shares are reserved for issuance pursuant to warrants
exercisable for shares of Common Stock (subject to increase to cover the
anti-dilution provisions associated therewith); and (Z) 144,618 shares are
reserved for issuance pursuant to notes convertible into shares of Common
Stock.  All of such outstanding shares have been issued in compliance
with all applicable federal and state securities laws and are duly authorized
and have been, or upon issuance will be, validly issued, fully paid and
nonassessable. Except as specified in Section 3.1(g) of the
Disclosure Letter, no securities of the Company are entitled to
preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as specified
in Section 3.1(g) of
the Disclosure Letter, there are no outstanding options, notes,
obligations, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of capital stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of capital stock,
or securities or rights convertible or exchangeable into shares of capital
stock. Except as specified in Section 3.1(g) of the
Disclosure Letter, the issue and sale of the Securities will not,
immediately or with the passage of time, obligate the Company to issue shares of
capital stock or other securities to any Person (other than the Investors) and
will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities (including,
without limitation, under any anti-dilution or similar
provisions).

    
      
         

      

      
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    (h)           SEC Reports; Financial
Statements.  The Company is required to file reports pursuant
to the Exchange Act and is not a voluntary reporting company.  Except
with respect to the timeliness of the filing of the Company’s Form 10-Q for its
fiscal quarter ended June 30, 2009, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
under the Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, since May 14, 2009 (the foregoing materials and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being collectively referred to
herein as the “SEC
Reports” and, together with the Disclosure Letter, the “Disclosure Materials”) on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  The Company has made available to the Investors or their
respective representatives true, correct and complete copies of each of the SEC
Reports not available on the EDGAR system (if any).  As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.  The financial statements of the
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing (or
amendment, as applicable).  Such financial statements have been
prepared in accordance with GAAP, applied on a consistent basis, during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments or which will not be material, either
individually or in the aggregate.  The Company does not currently have
any unresolved comment letter outstanding with the Commission.

     

    (i)           Tax Status. The
Company and each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply,
except in each case as would not reasonably be expected to have a Material
Adverse Effect. The Company and each of its Subsidiaries tax returns are not
currently being audited by any tax authority of any
jurisdiction.    Except as specifically disclosed in Section 3.1(i) of the
Disclosure Letter, there are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.

     

    (j)           Material Changes;
Undisclosed Events, Liabilities or Developments. Since the date of the
unaudited financial statements included in the Company’s most recent Quarterly
Report on Form 10-Q (“2010
10-Q”), except as specifically disclosed  in Section 3.1(j) of the
Disclosure Letter, (i) there has been no event, occurrence or development
that has had or that would reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, (v) the Company has not sold any assets outside of the ordinary course of
business, (vi) the Company has not made any material capital expenditures and
(vi) the Company has not issued any equity securities to any officer, director
or Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for confidential
treatment of information.  Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do
so.  To the Company’s knowledge, no event, liability, fact,
circumstance, occurrence or development has occurred or exists, or is reasonably
expected to occur or exist, with respect to the Company or its Subsidiaries or
their respective business, properties, operations, assets or condition
(financial or otherwise) which has had or could reasonably be expected to result
in a Material Adverse Effect that has not been publicly disclosed at least one
Trading Day prior to the date that this representation is made.

    
      
         

      

      
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    (k)          Litigation.  There
is no Action which (i) may adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents against the
Company or the Securities or (ii) except as specifically disclosed in the
Company’s Annual Report on Form 10-K for the Year ended December 31, 2009 (the
“2009 10-K”) and 2010
10-Q, would, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof (in his or her capacity as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the 2009 10-K and 2010 10-Q. There has not been, and to the
knowledge of the Company, there is not pending any investigation by the
Commission involving the Company or any current or former director or officer of
the Company (in his or her capacity as such).  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.  Except as specified in Section 3.1(k) of the
Disclosure Letter, (i) neither the Company nor any Subsidiary is or,
since May 14, 2009, has been the subject of an investigation by any federal,
state or local governmental agency and (ii) there are no claims, actions, suits
or proceedings pending or threatened against or involving the Company or its
Subsidiaries, or any assets of the Company or its Subsidiaries, that are
reasonably likely to result in a claim for damages in excess of
$50,000.

     

    (l)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.  The Company does not have any knowledge that any of its
current executive officers or directors intends to leave their position with the
Company in the future.  Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good.  No executive officer (as defined in
Rule 501(f) of the Securities Act) of the Company or any of its Subsidiaries has
notified the Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Subsidiary. No executive officer of the
Company or any of its Subsidiaries is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and its Subsidiaries are and have been in
compliance with all U.S. federal, state and local laws and regulations relating
to employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

    
      
         

      

      
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    (m)         Employee
Benefits.

     

    (i)           Section 3.1(m) of the
Disclosure Letter sets forth a complete
list of each and every pension, profit-sharing, savings, retirement, employment,
consulting, severance pay, termination, executive compensation, incentive
compensation, deferred compensation, bonus, stock purchase, stock option,
phantom stock or other equity-based compensation, change-in-control, retention,
salary continuation, vacation, sick leave, disability, death benefit, group
insurance, hospitalization, medical, dental, life (including all individual life
insurance policies as to which the Company or any Subsidiary is the owner, the
beneficiary, or both), Code Section 125 “cafeteria” or “flexible” benefit,
employee loan, educational assistance or fringe benefit plan, program,
arrangement or agreement, whether written or oral, including, without
limitation, any (i) “employee benefit plan” as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or (ii) other employee
benefit plans, agreements, programs, policies, arrangements or payroll
practices, whether or not subject to ERISA (including any funding mechanism
therefor) under which any current or former officer, director, employee, leased
employee, consultant or agent (or their respective beneficiaries) of the
Company, any Subsidiary or any ERISA Affiliate has any present or future right
to benefits or that is sponsored or maintained by the Company, any Subsidiary or
any ERISA Affiliate or with respect to which the Company, any Subsidiary or any
ERISA Affiliate has made or is required to make payments, transfers or
contributions (an “Employee
Benefit Plan”).  For purposes of this Section 3.1(m), the term
“ERISA Affiliate” means
any trade or business (whether or not incorporated) that, together with the
Company or any Subsidiary, is treated as a single employer under the provisions
of Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended (the “Code”).

     

    (ii)       
  Each Employee Benefit Plan has been and is currently administered in
compliance with its constituent documents and all requirements (including but
not limited to reporting and disclosure requirements) of ERISA, the Code and any
other law applicable to such Employee Benefit Plan.  Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter, or an opinion letter on which the
Company may rely, from the IRS to the effect that the Employee Benefit Plan
satisfies the requirements of Section 401(a) of the Code and that its related
trust is exempt from taxation under Section 501(a) of the Code, and there are no
facts or circumstances that could reasonably be expected to cause the loss of
such qualification or the imposition of any liability, penalty or tax under
ERISA, the Code or any other applicable law.  Except for routine
claims for benefits, no actions by any person or governmental body have been
filed against any Employee Benefit Plan, the Company, or any Subsidiary and no
such actions have been threatened with respect to any Employee Benefit
Plan.  Neither the Company, any Subsidiary nor, to the knowledge of
the Company, any other “party in interest” or “disqualified person” with respect
to any Employee Benefit Plan has engaged in any non-exempt “prohibited
transaction” as defined in Section 406 of ERISA or Section 4975 of the Code
involving such Employee Benefit Plan that, individually or in the aggregate,
could reasonably be expected to subject the Company or any Subsidiary to any
liability for any tax or penalty imposed by Section 4975 of the Code or Section
501, 502 or 510 of ERISA.  To the knowledge of the Company, no
fiduciary has any liability for breach of fiduciary duty or any other failure to
act or comply with the requirements of ERISA, the Code or any other applicable
laws in connection with the administration or investment of the assets of any
Employee Benefit Plan.

    
      
         

      

      
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    (iii)         There
are no unfunded obligations of the Company or any Subsidiary under any Employee
Benefit Plan.  All contributions and premium payments required to have
been made under the terms of any Employee Benefit Plan, or in accordance with
ERISA, the Code or other applicable law, have been timely made.  Any
and all employee contributions withheld from payroll have been timely and fully
contributed to the appropriate Employee Benefit Plan as required by its
constituent documents, ERISA, the Code and applicable law.  Neither
the Company, any Subsidiary nor any ERISA Affiliate is required to make any
payments or contributions to any Employee Benefit Plan pursuant to any
collective bargaining agreement or any applicable labor relations
law.

     

    (iv)        Neither
the Company, any Subsidiary nor any ERISA Affiliate maintains, contributes, or
has any liability with respect to, or has since May 14, 2009, maintained,
contributed or had any liability, with respect to any Employee Benefit Plan
(including, for such purpose, any “employee benefit plan” as defined in Section
3(3) of ERISA that the Company or an ERISA Affiliate previously maintained or
contributed to within such preceding six years) that is, or has
been:  (i) subject to Title IV of ERISA or Section 412 of the Code;
(ii) maintained by more than one employer within the meaning of Section 413(c)
of the Code; (iii) subject to Sections 4063 or 4064 of ERISA; (iv) a
“multiemployer plan” as defined in Section 4001(a)(3) of ERISA; (v) a “multiple
employer welfare arrangement” as defined in Section 3(40) of ERISA; or (vi) an
“employee pension benefit plan” as defined in Section 3(2) of ERISA that is not
intended to be qualified under Section 401(a) of the Code.

     

    (v)        
Neither the Company nor any Subsidiary has ever maintained or contributed to any
Employee Benefit Plan providing or promising any post-termination health or
other non-retirement benefits to any former officer, director, employee, leased
employee, consultant or agent (or their respective beneficiaries) of the
Company, any Subsidiary or any ERISA Affiliate of the Company, other than health
care continuation coverage, at the maximum applicable premium permitted to be
charged by the Company or any Subsidiary (as applicable), required under
Section 4980B of the Code, or Section 601 of the
ERISA.  

     

    (vi)         Neither
the Company nor any Subsidiary has received services from any individual whom
the Company any such Subsidiary did not treat as a common-law employee,
including any individual treated as a leased employee or as an independent
contractor, but who should have been treated as a common-law
employee.  Each individual, if any, who has constituted a leased
employee of the Company or any Subsidiary, as defined under Section 414(n) of
the Internal Revenue Code of 1986, as amended, has been properly treated as such
for all applicable purposes.

    
      
         

      

      
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    (vii)        Each
Employee Benefit Plan that is a "nonqualified deferred compensation plan" as
defined in Section 409A(d)(1) of the Code has been operated in compliance with
Section 409A of the Code.

     

    (n)   
      Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (except to the extent such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, ordinance, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to pharmaceutical sales and the sale, distribution or advertising
of over-the- counter drugs, medications or nonprescription supplements and
products, taxes, pollution, environmental protection, occupational health and
safety, use of patient specific information (Health Insurance Portability and
Accountability Act of 1996), product quality and safety
or employment and labor matters, the default under or violation of which would
have a Material Adverse Effect.

     

    (o)          Environmental
Compliance.   The Company and its Subsidiaries (i) have at
all times had and now has all environmental approvals,  consents,
licenses, permits and orders required to conduct the businesses in which it has
been or is now engaged and (ii) have at all times been and is now in compliance
in all material  respects with all applicable environmental laws.
There are no claims, actions, suits or proceedings pending or threatened against
or involving the Company or its Subsidiaries, or any assets of the Company or
its Subsidiaries, under any of the environmental laws (whether by reason of any
failure to comply with any of the environmental laws or
otherwise).  No decree, judgment or order of any kind under any of the
environmental laws has been entered against the Company or its Subsidiaries.
There are no facts, conditions or situations, whether now or heretofore
existing, that could form the basis for any claim against, or result in any
liability of, the Company or its Subsidiaries under any of the environmental
laws.

     

    (p)          Regulatory Permits.
The Company and the Subsidiaries possess all certificates, authorizations,
licenses and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective businesses as
described in the SEC Reports and as presently proposed to be conducted,
including, but not limited to, all licenses and permits relating to
pharmaceutical sales and the sale, distribution or advertising of over the
counter drugs, medications or nonprescription supplements, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization, license
or permit.

     

    (q)          Title to
Assets.  The property and assets that the Company and the
Subsidiaries own are free and clear of all Liens, except for Liens disclosed on
Schedule 3.1(q) of the
Disclosure Letter, statutory Liens for the payment of current taxes that
are not yet delinquent and Liens that arise in the ordinary course of business
and to not materially impair such ownership or use of such property or assets.
With respect to property leased by the Company and the Subsidiaries, the Company
and the Subsidiaries are in compliance with such leases and, to the Company’s
knowledge, hold a valid leasehold interest free of any Liens other than those of
the lessors of such property or assets. The Company and the Subsidiaries do not
own any real property.

     

    
      
         

      

      
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    (r)           Intellectual
Property.

     

    (i)           Section 3.1(r) of the
Disclosure Letter accurately sets forth all material Intellectual
Property that is owned and/or used in the business of the Company and its
Subsidiaries, viewed as a whole, as presently conducted or as proposed to be
conducted except for Commercial Software (defined below) (“Company’s IP”). No
Intellectual Property other than the Company’s IP is material to the business of
the Company or any of its Subsidiaries as presently conducted or as presently
proposed to be conducted. The Company or one of its Subsidiaries has the valid
right to use or is the sole and exclusive owner of all right, title and interest
in and to Company’s IP (with no breaks in the chain of title thereof) free and
clear of, to its knowledge, any claim, security interest, lien, pledge, option,
charge or encumbrance of any kind whatsoever except as disclosed in Section 3.1(r) of the
Disclosure Letter.  The Company’s IP has not been used or
enforced or failed to be used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of Company’s material
rights in and to Company’s IP.

     

    (ii)
         The Company has not
transferred any rights or interest in, or granted any exclusive license with
respect to, any of the Company’s IP to any third party.

     

    (iii)         All
of the Company’s IP owned by the Company is currently in compliance in all
material respects with all legal requirements (including timely filings, proofs
and payments of fees) and is valid and enforceable.  None of the
Company’s IP which is necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any pending or
threatened cancellation, dispute or litigation of which the Company is
aware.  No patent of the Company or its Subsidiaries has been or is
now involved in any interference, reissue, re-examination or opposition
proceeding.

     

    (iv)         All
of the licenses and sublicenses and consent, royalty or other agreements
concerning Company’s IP which are necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is a
party or by which any of their assets are bound (other than  generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license, collectively
“Commercial Software”)
(collectively, “License
Agreements”) are valid and binding obligations of the Company or its
Subsidiaries that are parties thereto and, to the Company’s knowledge, the other
parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which, to the Company’s knowledge, will result in a material
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default by the Company or any of its Subsidiaries under any such
License Agreement.

    
      
         

      

      
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    (v) 
        The Company and its Subsidiaries
own or have the valid right to use all of the Intellectual Property that is
necessary for the operation of the Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be
conducted.  The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use as the Company’s IP.

     

    (vi)         The
conduct of the Company’s and its Subsidiaries’ businesses as currently conducted
does not, to the Company’s knowledge, infringe or otherwise impair or conflict
with (collectively, “Infringe”) any Intellectual
Property rights of any third party or any confidentiality obligation owed to a
third party, and, to the Company’s knowledge, the Company’s IP which are
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted are
not being Infringed by any third party.  There is no litigation or
order pending or outstanding or, to the Company’s knowledge, threatened or
imminent, that seeks to limit or challenge or that concerns the ownership, use,
validity or enforceability of any of the Company’s IP or, to the Company’s
knowledge, the Company’s and its Subsidiaries’ use of any Intellectual Property
or Confidential Information owned by a third party, and, to the Company’s
knowledge, there is no valid basis for the same.

     

    (vii)        The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Company’s IP which is necessary for the conduct of Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted.

     

    (s)           Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged.  The Company has no reason to believe that it will not be
able to renew its and the Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business on terms consistent in all material
respects with market for similar size companies as the Company and its
Subsidiaries for the lines of business of the Company and its Subsidiaries at a
cost that would not have a Material Adverse Effect.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for.  The Company currently maintains directors and
officers liability insurance with coverage of no less than $5 million and errors
and omissions coverage of no less than $2 million, each in a form satisfactory
to the Investors.  The Company currently maintains key person term
life insurance on the life of Lalit Dhadphale (with the Company as sole
beneficiary) of no less than $2 million in a form satisfactory to the
Investors.

    
      
         

      

      
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    (t)           Transactions With Affiliates
and Employees. None of the officers, directors or employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for ordinary course services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, which in each case is required to
be disclosed in the SEC Reports and has not been so disclosed.

     

    (u)          Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in compliance with all
provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable
to it as of the Closing Date.  The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any
differences.  The Company’s disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were not deemed effective
as of the end of the period covered by the Company’s most recently filed
periodic report under the Exchange Act (such date, the “Evaluation
Date”).  The Company’s certifying officers have evaluated the
Company’s controls and procedures as of the Evaluation Date.  The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, the Company has begun to institute
changes to its system of internal control over financial reporting (as such term
is defined in the Exchange Act) that will significantly strengthen, or is
reasonably likely to strengthen, the Company’s internal control over financial
reporting.  Since the Evaluation Date, neither the Company nor any of
its Subsidiaries has received any written notice or correspondence from any
accountant relating to any potential material weakness in any part of the system
of internal accounting controls of the Company or any of its Subsidiaries. Additionally, the
Company is not in violation of any of the rules, regulations or requirements of
the Principal Market and has no knowledge of any facts or circumstances that
could reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.

     

    (v)          [RESERVED]

     

    (w)         Certain
Fees.  Except as set forth on Section 3.1(w) of the
Disclosure Letter, no brokerage or finder’s fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement.  The Investors shall
have no obligation with respect to any fees or with respect to any claims (other
than such fees or commissions owed by an Investor pursuant to written agreements
executed by such Investor which fees or commissions shall be the sole
responsibility of such Investor) made by or on behalf of other Persons for fees
of a type contemplated in this Section 3.1(w) that may be due in connection with
the transactions contemplated by this Agreement.

     

    
      
         

      

      
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    (x)           Certain Registration
Matters. Assuming the accuracy of the Investors’ representations and
warranties set forth in Section 3.2(b)-(e), no registration under the Securities
Act is required for the offer and sale of the Units by the Company to the
Investors under the Transaction Documents.   Except as specified
in the Investors’ Rights Agreement and in Section 3.1(x) of the
Disclosure Letter, no Person has any rights (including “piggy-back”
registration rights) to cause the Company to effect the registration under the
Securities Act or any state securities laws of any securities of the Company
that have not been satisfied.

     

    (y)          Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, since May 14,
2009, received notice from any Trading Market to the effect that the Company is
not in compliance with the listing or maintenance requirements thereof, except
that the Company did receive notice from FINRA with respect to the timeliness of
the filing of the Company’s Form 10-Q for its fiscal quarter ended June 30,
2009.  The Company is, and has no reason to believe that it will not
in the foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or
quoted.  The issuance and sale of the Securities under the Transaction
Documents does not contravene the rules and regulations of the Trading Market on
which the Common Stock is currently listed or quoted, and no approval of the
stockholders of the Company thereunder is required for the Company to issue and
deliver to the Investors the Securities contemplated by Transaction
Documents.

     

    (z)           Investment
Company.  The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company,”
an Affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” within the meaning of the Investment Company Act of
1940, as amended.

     

    (aa)        Application of Takeover
Protections.  The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or would become applicable to any of the
Investors as a direct result of the transactions contemplated by this Agreement,
including without limitation, the Company’s issuance of the Securities to the
Investors.  The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Stock or a change in control of the Company.

     

    (bb)       No Additional
Agreements.  The Company does not directly or indirectly have
any agreement or understanding with any Investor with respect to the
transactions contemplated by the Transaction Documents other than as specified
in the Transaction Documents and the Disclosure Materials.

    
      
         

      

      
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    (cc)        Acknowledgment.  The
Company acknowledges and agrees that no Investor makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Sections 3.2.

     

    (dd)        Off Balance Sheet
Arrangements. There is no transaction, arrangement or other relationship
between the Company or any of its Subsidiaries and an unconsolidated or other
off balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed.

     

    (ee)        U.S. Real Property Holding
Corporation. The Company is not, and has never been, a U.S. real property
holding corporation within the meaning of Section 897 of the Code and the
Company shall so certify upon the request of any Investor.

     

    (ff)         Foreign Corrupt
Practices.  Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee, except in each case as
would not have a Material Adverse Effect.

     

    (gg)       No General
Solicitation.  Neither the Company nor any Person acting on
behalf of the Company has offered or sold any of the Units by any form of
general solicitation or general advertising.  The Company has offered
the Units for sale only to the Investors and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

     

    (hh)       Accountants.  The
Company’s accounting firm is set forth in the SEC Reports.  To the
knowledge and belief of the Company, such accounting firm: (i) is a registered
public accounting firm as required by the Exchange Act and (ii) shall express
its opinion with respect to the financial statements to be included in the
Company’s Annual Report for the year ending December 31, 2010.

     

    (ii)          Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities or (ii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company.

     

    (jj)          Commitments and
Contracts. The Company has publicly disclosed in the SEC Reports filed
prior to the date hereof true, correct and complete copies of any material
contract or agreement (within the meaning of Item 601 of Regulation S-K) to
which the Company or its Subsidiary is currently a party or by which the Company
or its Subsidiary or any of their respective properties or assets are currently
bound.

    
      
         

      

      
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    (kk)        Disclosure.  The
Company understands and confirms that each of the Investors will rely on the
foregoing representations in effecting transactions in securities of the
Company.  All disclosure furnished by the Company to the Investors in
this Agreement and the Disclosure Letter to this Agreement regarding the
Company, its Subsidiaries, the Belgium Subsidiaries and their business and the
transactions contemplated hereby, is true and correct and does 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.

     

    3.2          Representations and
Warranties of the Investors.  Each Investor hereby, for itself
and for no other Investor, represents and warrants to the Company as
follows:

     

    (a)          Organization;
Authority.  Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Investor.  Each of this Agreement and the Investors’ Rights Agreement
has been duly executed by such Investor, and when delivered by such Investor in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Investor, enforceable against it in accordance with its
terms, except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, and except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

     

    (b)          Investment
Intent.  Such Investor understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities laws and is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time.  Such
Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.

     

    (c)          Investor
Status.  At the time such Investor was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
any Warrants, it will be an “accredited investor” as defined in Rule 501(a)
under the Securities Act. Such Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Investor is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

    
      
         

      

      
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    (d)          General Solicitation.
Such Investor is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.

     

    (e)          Access to
Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment.  Neither such inquiries nor any other investigation
conducted by or on behalf of such Investor or its representatives or counsel
shall modify, amend or affect such Investor’s right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction
Documents.

     

    (f)   
       Certain Trading Activities
and Confidentiality. Other than consummating the transactions
contemplated hereunder, such Investor has not engaged, nor has such Investor
directed any Person to act on its behalf to engage, in any transactions in the
securities of the Company (including, without limitations, any Short Sales
involving the Company’s securities or “locking-up” borrowing with respect to any
of the Company’s securities) since the earlier to occur of (1) the time that
such Investor was first contacted by the Company or any other Person regarding
an investment in the Company and (2) the 30th day
prior to the date of this Agreement.  Other than to other Persons
party to this Agreement (and their respective representatives and advisors),
such Investor has maintained the confidentiality of all disclosures made to it
in connection with this transaction (including the existence and terms of this
transaction).

     

    (g)          Independent Investment
Decision. Such Investor has independently evaluated the merits of its
decision to purchase Securities pursuant to this Agreement, and such Investor
confirms that it has not relied on the advice of any other Investor’s business
and/or legal counsel in making such decision.

     

    (h)          Reliance.  Such
Investor understands and acknowledges that: (i) the Securities are being offered
and sold to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and the Company
will rely upon the accuracy and truthfulness of, the foregoing representations
and such Investor hereby consents to such reliance.

    
      
         

      

      
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    (i)           Residency.  Such
Investor is a resident of the jurisdiction set forth immediately below such
Investor’s name on the signature pages hereto.

     

    The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

     

    ARTICLE
4

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1          Reasonable Best
Efforts.  Each party shall use its commercially reasonable best
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 5.1 and 5.2 of this Agreement.

     

    4.2          Transfer
Restrictions.

     

    (a)          Sales of Securities.
Notwithstanding any other provision of this Article 4, each Investor covenants
that the Securities may be disposed of only pursuant to an effective
registration statement under, and in compliance with the requirements of, the
Securities Act, or pursuant to an available exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act, and in
compliance with any applicable state, federal or foreign securities
laws.  In connection with any transfer of any Securities other than
pursuant to an effective registration statement, to the Company, to an Affiliate
of an Investor or in connection with a pledge as contemplated in Section 4.2(d),
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, at the transferor’s expense, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act; provided, however, no such
opinion shall be required in connection with a transfer made in compliance with
Rule 144 (provided that the transferor provides the Company with reasonable
assurances (in the form of seller and broker representation letters) that such
securities may sold pursuant to such rule).

     

    (b)          Legends.  Certificates
evidencing the Securities shall bear any legend as required by the “blue sky”
laws of any state and a restrictive legend in substantially the following form
(and, with respect to Securities held in book-entry form, the Company or its
transfer agent will record such a legend on the share register), until such time
as they are not required under Section 4.1(c) or applicable law:

     

     THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT (PROVIDED
THAT THE TRANSFEROR PROVIDES THE COMPANY WITH REASONABLE ASSURANCES (IN THE FORM
OF SELLER AND BROKER REPRESENTATION LETTERS) THAT THE SECURITIES MAY BE SOLD
PURSUANT TO SUCH RULE).  NO REPRESENTATION IS MADE BY THE ISSUER AS TO
THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
FOR RESALES OF THESE SECURITIES

    
      
         

      

      
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    (c)          Register. The Company
shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of
Securities), a register for the Securities in which the Company shall record the
name and address of the Person in whose name the Securities have been issued
(including the name and address of each transferee) and the number of Conversion
Shares issuable upon conversion of the Preferred Stock and the number of Warrant
Shares issuable upon exercise of the Warrants held by such Person. The Company
shall keep the register open and available at all times during business hours
for inspection of any Investor or its legal representatives.

     

    (d)          Transfer Agent
Instructions. The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at The Depository Trust Company
(“DTC”) (if DTC is then
offered by the Company and its transfer agent and such Securities qualify for
deposit with DTC in accordance with its rules), registered in the name of each
Investor or its respective nominee(s), for the Securities in such amounts as
specified from time to time by each Investor to the Company upon conversion of
the Company Shares or exercise of the Warrants. The Company represents and
warrants that no instruction other than the irrevocable instructions to its
transfer agent referred to in this Section 4.2(d) will be given by the Company
to its transfer agent with respect to the Securities and that the Securities
shall otherwise be freely transferable on the books and records of the Company,
as applicable, and to the extent provided in this Agreement and the other
Transaction Documents, except as it may reasonably determine are necessary to
comply or to ensure compliance with those applicable laws that are enacted or
modified after the Closing. If an Investor effects a sale, assignment or
transfer of the Securities in accordance with the terms of the Transaction
Documents, the Company shall permit the transfer and shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC (if DTC is then offered by the Company and
its transfer agent and such Securities qualify for deposit with DTC in
accordance with its rules) in such name and in such denominations as specified
by such Investor to effect such sale, transfer or assignment. In the event that
such sale, assignment or transfer involves Securities sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144 (provided that in the case of a sale, transfer or assignment under
Rule 144 the foregoing is not an “affiliate” of the Company or any of its
Subsidiaries (as defined in Rule 144)), the transfer agent shall issue such
Securities to the Investor, assignee or transferee, as the case may be, without
any restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to an Investor. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations
under this Section 4.2(d) will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of any provisions of this Section
4.2(d), that an Investor shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.  Any fees (with
respect to the transfer agent, counsel to the Company or otherwise) associated
with the issuance of an opinion or the removal of any legends on any of the
Securities shall be borne by the Investor.  Certificates evidencing
the Securities will contain the legend set forth in Section 4.2(b) hereof, the
Investor Rights Agreement or Warrant, as the case may be.

    
      
         

      

      
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    The Company acknowledges and agrees
that an Investor may from time to time pledge, and/or grant a security interest
in some or all of the Securities in accordance with all applicable federal and
state securities laws pursuant to a bona fide margin agreement in connection
with a bona fide margin account and, if required under the terms of such
agreement or account, such Investor may transfer pledged or secured Securities
to the pledgees or secured parties.  Such a pledge or transfer would
not be subject to approval or consent of the Company and no legal opinion of
legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in connection
with a subsequent transfer by the pledgee or secured party following default by
such Investor or otherwise.  No notice shall be required of such
pledge. At the appropriate Investor’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities.

     

    (e)          Certificates
evidencing the Securities shall not contain any legend at such time as an
Investor has provided reasonable evidence to the Company (including any
customary broker’s or selling stockholder’s letters but expressly excluding an
opinion of counsel other than with respect to clauses (iii) or (iv) below),
that: (i) there has been a sale of such Securities pursuant to an effective
registration statement (including the Registration Statement(s)), (ii) there has
been a sale of such Securities pursuant to Rule 144 (assuming the transferor is
not an Affiliate of the Company), (iii) in connection with a sale, assignment or
other transfer (other than under Rule 144) provided that, upon request of the
Company, such Investor provides the Company with an opinion of counsel to such
Investor, in a reasonably acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the Securities Act or (iv) if such legend is not
required under applicable requirements of the Securities Act (including, without
limitation, controlling judicial interpretations and pronouncements issued by
the Commission). Following such time as restrictive legends are not required to
be placed on certificates representing Securities pursuant to the preceding
sentence, the Company will, no later than three (3) Trading Days following the
delivery by an Investor to the Company or the Company’s transfer agent of a
certificate representing Securities containing a restrictive legend and the
foregoing evidence (and opinion if applicable), deliver or cause to be delivered
to such Investor a certificate representing such Securities that is free from
all restrictive and other legends or credit the balance account of such
Investor’s or such Investor’s nominee with DTC (if DTC is then offered by the
Company and its transfer agent and such Securities qualify for deposit with DTC
in accordance with its rules) with a number of shares of Securities equal to the
number of shares represented by the certificate so delivered by such Investor
(the date by which such certificate is required to be delivered to such Investor
or such shares were required to be credited to such Investor’s account with DTC
(as the case may be) pursuant to the foregoing is referred to herein as the
“Required Delivery
Date”). The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section, except as it may reasonably determine are
necessary or appropriate to comply or to ensure compliance with those applicable
laws that are enacted or modified after the Closing.  Each Investor
acknowledges that the Company was previously an “issuer” described in Rule
144(i)(1)(i).  Notwithstanding any other provision of this Agreement
to the contrary, the Company shall not be required to remove the restrictive
legend from any certificate representing the Securities except in connection
with an actual sale of the Securities pursuant to Rule 144(i)(2) or as otherwise
permitted by applicable law.

    
      
         

      

      
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    (f)           Acknowledgement.  Each
Investor hereunder acknowledges its primary responsibilities under the
Securities Act and accordingly will not sell or otherwise transfer the
Securities or the Conversion Shares or any interest therein without complying
with the requirements of the Securities Act.  Except as otherwise
provided below, while the Registration Statement remains effective, each
Investor hereunder may sell the Conversion Shares in accordance with the plan of
distribution contained in the Registration Statement and if it does so it will
comply therewith and with the related prospectus delivery requirements unless an
exemption therefrom is available or unless the Securities are sold pursuant to
Rule 144.  Each Investor, severally and not jointly with the other
Investors, agrees that if it is notified by the Company in writing at any time
that the Registration Statement registering the resale of the Conversion Shares
is not effective or that the prospectus included in such registration statement
no longer complies with the requirements of Section 10 of the Securities
Act, the Investor will refrain from selling such Conversion Shares until such
time as the Investor is notified by the Company that such registration statement
is effective or such prospectus is compliant with Section 10 of the
Securities Act, unless such Investor is able to, and does, sell such Conversion
Shares  pursuant to an available exemption from the registration
requirements of Section 5 of the Securities Act.

     

    4.3          Form D and Blue
Sky.  The Company agrees to timely file a Form D with respect
to the Securities as required under Regulation D of the Securities
Act.  The Company shall, on, before or after the Closing Date, take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to, qualify the Securities for sale to the Investors
at the Closing pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to
the Investors on or prior to the Closing Date.  The Company shall make
all necessary filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing Date.

     

    4.4          Furnishing of
Information.  Until the earliest of the time that (i) no
Investor owns Securities or (ii) the Warrants have expired (the “Reporting Period”), has
occurred, the Company covenants to maintain the registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would no longer require or otherwise permit such
termination. Without limiting any of the Company’s obligations under the
Investors’ Rights Agreement, during the Reporting Period, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Securities under Rule
144. Without limiting any of the Company’s obligations under the Investors’
Rights Agreement, the Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell the Securities without
registration under the Securities Act, including without limitation, within the
requirements of the exemption provided by Rule 144.

    
      
         

      

      
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    4.5          Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Investors, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market in a manner that would require stockholder approval of the sale
of the securities to the Investors.

     

    4.6          Survival of Company
Representations and Indemnification of Investors.

     

    (a)          The
representations and warranties of the Company contained in Section 3.1 and the
covenant contained in Section 4.10 hereof shall survive the Closing until 30
days after the Company files its Annual Report on Form 10-K for its fiscal year
ending December 31, 2011; provided, however, that claims with respect (i) to
fraud and (ii) breaches of the representations and warranties contained in
Sections 3.1(b) through 3.1(g), and 3.1(i) hereof (collectively, the “Core Representations”), shall
survive until the expiration of the applicable statute of limitations. Claims
for indemnification for Losses pursuant to this Section 4.6 by an Investor Party
relating to breaches of representations and warranties of the Company or a
breach of the covenant contained in Section 4.10, if not otherwise resolved by
the parties, must be asserted by the Investor Party commencing a legal action
with respect thereto prior to the expiration of the applicable survival period,
or the claim for Losses will be extinguished at the expiration of the applicable
survival period.

     

    (b)          In
addition to the indemnity provided in the Investors’ Rights Agreement, but
subject to the limitations contained in this Section 4.6, the Company will
indemnify and hold each Investor and its directors, officers, stockholders,
partners, employees, members and direct or indirect investors and any of
the foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (each, an “Investor Party”) harmless from
any and all losses, liabilities, obligations, claims, contingencies, damages,
costs, expenses, actions, causes of action, suits, penalties and fees, including
all judgments, amounts paid in settlements, court costs and reasonable
out-of-pocket attorneys’ fees and costs of investigation (collectively, “Losses”) that any such
Investor Party may suffer or incur as a result of, arising out of or relating to
(i) any misrepresentation, breach or inaccuracy of any representation or
warranty, or (ii) any breach of any covenant, obligation or agreement, made by
the Company in any Transaction Document.  In addition to the indemnity
contained herein, the Company will reimburse each Investor Party for its
reasonable out-of-pocket legal and other expenses (including the reasonable
out-of-pocket cost of any investigation, preparation and travel in connection
therewith) as incurred in connection therewith, as promptly as practicable after
such expenses are incurred and invoiced

    
      
         

      

      
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    (c)          Notwithstanding
anything contained in this Agreement to the contrary, in no event shall the
Company be liable for Losses pursuant to clause (i) of Section 4.6(b) hereof or
pursuant to clause (ii) of Section 4.6 hereof with respect to the covenant
contained in Section 4.10 hereof, until the aggregate amount of Losses of all
Investor Parties exceeds $50,000 (the “Basket”), and then the Company
shall only be liable for the amount of such excess Losses; provided, however,
that the limitation contained in this Section shall not apply to Losses arising
out of or resulting from fraud or any breach of any Core
Representation.

     

    (d)          All
remedies, either under the Transaction Documents, by law, or otherwise afforded
to any party, shall be cumulative and not alternative and are in addition to all
other rights and remedies a party may have, including any right to equitable
relief and any right to sue for damages as a result of a breach of this
Agreement.  Without limiting the foregoing, no exercise of a remedy
shall be deemed an election excluding any other
remedy.  Notwithstanding the provisions of this Section 4.6(d), claims
by an Investor Party for damages or any alternative remedy relating to any
misrepresentation, breach or inaccuracy of any representations or warranties of
the Company, or breach of the covenant contained in Section 4.10 hereof (i) must
be asserted prior to the expiration of the applicable survival period and in the
same manner and subject to the same exceptions as provided in Section 4.6(a) for
claims for indemnification for Losses, and (ii) shall be subject to the Basket
on the same terms and subject to the same exceptions as provided in Section
4.6(c) for claims for indemnification for Losses.

     

    4.7          [RESERVED]

     

    4.8          Listing of
Securities. The Company shall promptly secure the listing of all of the
Registrable Securities upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents on such exchange or automated quotation system or another Trading
Market. The Company shall use reasonable best efforts to maintain the Common
Stock’s authorization for quotation on the Principal Market. The Company agrees,
(i) if the Company applies to have the Common Stock traded on any other Trading
Market, it will include in such application the Company Shares, the Conversion
Shares and the Warrant Shares, and will take such other action as is necessary
or desirable to cause the Company Shares, the Conversion Shares and the Warrant
Shares to be listed on such other Trading Market as promptly as possible, and
(ii) it will use reasonable best efforts to take all action that it believes is
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and to comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
applicable Trading Market; provided that no such action
need be taken with respect to the Company’s Preferred Stock if Stockholder
Approval has been obtained by the Stockholder Approval Deadline. Neither the
Company nor any of its Subsidiaries shall take any action which it believes
could be reasonably expected to result in the delisting or suspension of the
Common Stock (and if required to be listed by this Section 4.8, the Preferred
Stock) on any Trading Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section
4.8.

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    4.9          Use of
Proceeds.  The Company will use the net proceeds from the sale
of the Units hereunder (the “Net Proceeds”) for working
capital purposes, including the payment of accrued trade payables and accrued
expenses incurred in the ordinary course of the Company’s
business.   Schedule 4.9 attached to this Agreement shall list
each trade payable, accrued expense, debt, and other item in existence on the
Closing Date that exceeds $25,000 and that the Company intends to pay from the
Net Proceeds.  The Company will not use the Net Proceeds to pay any
Company debt in existence on the Closing Date, or to redeem any Common Stock or
Equivalents, or any other debt or equity securities of the Company, any of its
Subsidiaries, or the Belgium Subsidiaries except as provided on Schedule
4.9.

     

    4.10        Conduct of Business.
The business of the Company, its Subsidiaries, and the Belgium Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

     

    4.11        Prohibited Actions.
The Company shall not without the prior consent of an Investor knowingly enter
into any transaction or take any other action which would create any liability
under Section 16(b) of the Exchange Act, or the rules promulgated thereunder by
the Commission, on the part of such Investor as a consequence of having
purchased the Securities under this Agreement.

     

    ARTICLE
5

    CONDITIONS
PRECEDENT TO CLOSINGS

     

    5.1          Conditions Precedent to the
Obligations of the Investors to Purchase Securities.  The
obligation of each Investor to acquire the Securities at the Closing are subject
to the satisfaction, or waiver by such Investor, at or before each the Closing,
of each of the following conditions:

     

    (a)           Representations and
Warranties. The representations and warranties of the Company contained
herein shall be true and correct in all material respects as of the Closing Date
as though made on and as of such date (except for representations and warranties
(i) that speak of a specific date, which shall be true and correct as of such
specified date or (ii) that are qualified by materiality or Material Adverse
Effect, which shall be true and correct in all respects). Such Investor shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Investor;

     

    (b)           Performance.  The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the
Closing.  Such Investor shall have received a certificate, executed by
the Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Investor;

     

    (c)           No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
 

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    (d)           No Suspensions of Trading in
Common Stock; Listing. Trading in the Common Stock shall not have been
suspended (or threatened to be suspended) by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on a Trading
Market. The Common Stock shall be designated for quotation or listed on the
Principal Market and any required approval of the Principal Market to list the
Company Shares and the Warrant Shares shall have been obtained by the
Company;

     

    (e)           Company
Deliverables.  The Company shall have delivered the Company
Unit Deliverables in accordance with Section 2.2(a), and if applicable the
Company Note Deliverables in accordance with Section 2.2(b).

     

    (f)      
     Consents and
Approvals. The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, any of those required by the Principal
Market;

     

    (g)           Certificate of
Designation. The Certificate of Designation shall have been filed with
the Secretary of State of the State of Delaware and shall have become
effective.

     

    (h)           Background
Checks.  The Investors shall have caused to be conducted
background checks on Lalit Dhadphale, Patrick E. Delaney, Norman Corn, and
Ronald W. Ferguson, and the results from such background checks shall be
reasonably acceptable to the Investors (the “Background
Checks”).

     

    (i)       
    [RESERVED]

     

    (j)      
     Board
Constitution.  The Board shall be comprised of five directors,
of which at least three directors shall be serving, with the fourth and fifth
directorships to be filled as soon as practicable following Closing, one of
which shall be the Preferred Director (as such term is defined in the Investor
Rights Agreement).

     

    (k)           Insurance. The
Company shall have obtained (i) directors and officers liability insurance with
coverage of not less than $5 million and (ii) errors and omissions insurance
with coverage of not less than $2 million, each as reasonably acceptable to the
Investors.

     

    (l)       
    Indemnification
Agreement.  The Company and the Preferred Director shall have
executed and delivered an Indemnification Agreement substantially in the form
attached hereto as Exhibit F; provided,
that if the Preferred Director has not been designated at the time of Closing,
the Indemnification Agreement may be delivered at the time of such
designation.

     

    (m)          Bylaws.  The
Company shall have amended its Bylaws substantially in the form attached hereto
as Exhibit
G.

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    5.2          Conditions Precedent to the
Obligations of the Company to Sell Securities.  The obligation
of the Company to sell the Units at the Closing is subject to the satisfaction,
or waiver by the Company, at or before the Closing, of each of the following
conditions:

     

    (a)           Representations and
Warranties.  The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date;

     

    (b)           Performance.  Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;

     

    (c)           No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents; and

     

    (d)           Investor
Deliverables. Each Investor shall have delivered its Investor
Deliverables in accordance with Section 2.2(c).

     

    ARTICLE
6

    MISCELLANEOUS

     

    6.1          Fees and Expenses.
Each party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of the Agreement; provided,
however, that the Company shall, at the Closing, reimburse the  fees
of and expenses of Andrews, as counsel to HWH , not to exceed $25,000 (the
“HWH  Counsel
Fee”); and provided further that  fees of counsel to the
Company in connection with the negotiation, execution, delivery and performance
of this Agreement and the transactions contemplated hereby shall not exceed
$50,000.  At the Closing, in order to offset the obligations owed by
the Company under this Section 6.1, HWH  shall withhold the HWH
Counsel Fee from payment of their aggregate Investment Amount and shall, on
behalf of the Company wire the HWH  Counsel Fee directly to
Andrews.

     

    6.2          Entire Agreement. The
Transaction Documents, together with the exhibits, schedules and the Disclosure
Letter thereto, contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such subject
matter, which the parties acknowledge have been merged into such documents,
exhibits and schedules. The Company confirms that, except for the investment in
the Securities as set forth in this Agreement, no Investor has made any
commitment or promise or has any other obligation to provide any financing to
the Company or otherwise.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    6.3          Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section 6.4 prior to 6:30 p.m. (New York City time) on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 6.4 on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service (with next day delivery specified), or (d) upon actual receipt by the
party to whom such notice is required to be given. The address for such notices
and communications shall be as follows:

     

    
      
        
          
            
              
                
                  
                    	
                            If to the
Company:

                          	 	
                            HealthWarehouse.com,
      Inc.

                            100
      Commerce Boulevard,

                            Cincinnati,
      OH  45140

                            Facsimile:  (513)
      618-0925

                            Attn:  Chief
      Executive Officer

                          
	 	 	 
	
                            With copies to:

                          	 	
                            Kohnen
      & Patton LLP

                            201
      East Fifth Street, Suite 800,

                            Cincinnati,
      OH 45202

                            Facsimile:
      (513) 381-5823

                            Attn:  Mark
      J. Zummo, Esq.

                          
	 	 	 
	
                            If to an
Investor:

                          	 	
                            To
      the address set forth under such Investor’s name on the signature pages
      hereof, ,

                          
	 	 	 
	
                            With a copy to (with respect to
      notices sent to HWH):

                          	 	
                            Andrews
      Kurth LLP

                            111
      Congress Avenue

                            Suite
      1700

                            Austin,
      TX  78701

                            Attn:  Edward
      A. Gilman,
Esq.

                          

                  

                

              

            

          

        

      

    

    
       

      Or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.

    

     

    6.4          Amendments; Waivers.
No provision of any Transaction Document may be waived, modified or amended
except in a written instrument signed by the Company and the Investors holding a
majority of the Securities, provided that any party shall have the right to
provide a waiver with regards to itself.  Any such amendment,
modification or waiver effected in accordance hereto shall be binding upon each
Investor and each future holder of all Securities of such
Investor.  No waiver of any default with respect to any provision,
condition or requirement of any Transaction Document shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No such amendment or waiver (unless given
pursuant to the foregoing provisos) shall be effective to the extent that it
applies to less than all of the holders of the Securities then
outstanding.

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    

     

    6.5          Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.  This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.

     

    6.6          Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns.  The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Investors. Any Investor may assign any or all of
its rights under this Agreement and the other Transaction Documents to any
Person to whom such Investor assigns or transfers any Securities, provided such
assignee or transferee agrees in writing to be bound, with respect to the
assigned or transferred Securities, by the provisions hereof that apply to the
“Investors,” in which event such assignee or transferee shall be deemed to be an
Investor hereunder with respect to such assigned rights.

     

    6.7          No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.6 (as to each Investor
Party).

     

    6.8          Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law
thereof.  Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the Delaware Courts. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such Delaware Court, or that such
Proceeding has been commenced in an improper or inconvenient
forum.  Each party hereto hereby irrevocably waives personal service
of process and consents to process being served in any such Proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.  If either party
shall commence a Proceeding to enforce any provisions of a Transaction Document,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its reasonable out-of-pocket attorneys’ fees and other reasonable
out-of-pocket costs and expenses incurred with the investigation, preparation
and prosecution of such Proceeding.

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

    6.9          Survival.  Except
as provided in Section 4.6 hereof, the representations, warranties, agreements
and covenants contained herein shall survive the Closing and the delivery of the
Securities.  Each Investor shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

     

    6.10        Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.

     

    6.11        Severability. If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

     

    6.12        Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any
Investor exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Investor may rescind or withdraw, in its
sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

     

    6.13        Replacement of
Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. If a replacement certificate or instrument
evidencing any Securities is requested due to a mutilation thereof, the Company
may require delivery of such mutilated certificate or instrument as a condition
precedent to any issuance of a replacement.

     

    6.14        Remedies. In addition
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, each of the parties hereto will be entitled to
specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.  The
Company therefore agrees that the Investors shall be entitled to specific
performance and temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
any other type of security.

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

    6.15        Payment Set
Aside. To the extent that the Company makes a payment or payments to
any Investor pursuant to any Transaction Document or an Investor enforces
or exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     

    6.16        Independent Nature of
Investors’ Obligations and Rights.  The obligations of each
Investor under the Transaction Documents are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document.  The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor.  It is expressly understood and
agreed that each provision contained in this Agreement and in each other
Transaction Document is between the Company and an Investor, solely, and not
between the Company and the Investors collectively and not between and among
Investors.

     

    6.17        Delivery of
Securities.  Notwithstanding anything contained in this
Agreement or any other Transaction Document to the contrary, unless otherwise
directed in writing by the applicable Investor, the Company shall, and shall
cause its agents and representatives to, deliver all of such Investor’s
Securities purchased pursuant to this Agreement (and all securities which are
issuable to the Investor pursuant to the terms of this Agreement or any other
Transaction Document) to the address for delivery of Securities set forth on
such Investor’s signature page to this Agreement, and copies of the certificates
representing such securities shall be sent to such Investor to the address of
such Investor as set forth on such Investor’s signature page to this
Agreement.

     

    6.18        Legal
Representation.  Each Investor acknowledges that (a)
HWH  has retained Andrews in connection with the Agreement and the
transactions contemplated hereby, (b) the interests of HWH  may not
necessarily coincide with the interests of the other Investors, (c) Andrews does
not represent any Investor other than HWH  and (d) each Investor has
had the opportunity to consult with its own counsel and has not relied on
Andrews for legal counsel in connection with the Agreements or the transactions
contemplated hereby and thereby.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

    6.19        Conversion and Termination
of Indebtedness.

    (a)           By
executing and delivering this Agreement, the Company and each Investor making
payment of the purchase price for the Units and/or a Convertible Note to be
purchased by such Investor, in whole or in part, by cancellation or conversion
of indebtedness listed on Exhibit H (the “Indebtedness” and such
Investor, a “Conversion
Investor”), agree that (i) all of the Indebtedness shall convert into
Units and a Convertible Note at the Closing as set forth on such Conversion
Investor’s signature page hereto, and (ii) the shares of Preferred Stock, the
Convertible Note and the Warrant representing Warrant Shares set forth on such
Conversion Investor’s signature page hereto are issued in full discharge and
satisfaction of the Indebtedness held by such Conversion Investor.

     

    (b)           Other
than each Conversion Investor’s right to receive the shares of Preferred Stock,
the Convertible Note and the Warrant representing Warrant Shares set forth on
such Conversion Investor’s signature page hereto at the Closing, each Conversion
Investor hereby waives any and all demands, claims, suits, actions, causes of
actions, proceedings, assessments and rights in respect of the each of the
Indebtedness, including, without limitation, (i) any principal or interest
payments due as of the date hereof in excess of the amounts to be converted into
Units and a Convertible Note, if any, (ii) any right to notice of the
conversion of the Indebtedness and (iii) any rights arising from any past or
present default or event of default under the Indebtedness.  Each
Conversion Investor  hereby represents and warrants that, immediately
prior to the Closing, the Indebtedness set forth on Exhibit H represents
all debt of the Company held by such Conversion Investor.  Each
Conversion Investor hereby agrees to promptly take any further action and to
execute any and all additional documents or instruments requested by the Company
to terminate any liens, guarantees, lock-up agreements or other security
interests that have arisen in connection with the Indebtedness, if any, and
authorizes the Company to terminate UCC financing statements relating to the
Indebtedness; provided, however, nothing
provided herein shall prevent the Investors purchasing Convertible Notes from
taking all such actions allowed by or set forth in the Loan Agreement necessary
or permissible in order to perfect the security interests provided under the
Loan Agreement.

     

    (c)           The
Conversion Investors agree to deliver the original instruments evidencing the
Indebtedness (the “Indebtedness
Instrument”) to the Company for cancellation at the Closing or a lost
note affidavit.  Until such time as a Conversion Investor has
delivered its original Indebtedness Instrument to the Company for cancellation,
such Conversion Investor and its assigns, shall at all times indemnify and hold
harmless the Company, its directors, officers, employees or agents and any
person acting on behalf of or at the request of the Company, together with any
successors and assigns of any of the foregoing, from and against any and all
claims, actions and suits, whether groundless or otherwise, and from and against
any and all losses, damages, judgments, costs, counsel fees, expenses and
liabilities whatsoever, which any of such indemnitees at any time shall or may
sustain or incur (A) by reason of any claim which may be made in respect of such
original Indebtedness Instrument, and (B) by reason of payment for or transfer,
exchange or delivery of such original Indebtedness Instrument.  Each
Conversion Investor hereby represents and warrants to the Company that it is the
sole owner of all right, title and interest in and to the Indebtedness
Instrument, described as held by such Conversion Purchaser on Exhibit
H.

     

    6.20       Further Assurances.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated
hereby.

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

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

     

    
      
        	 
      	
                “COMPANY”

              
	 
      	 
      
	 
      	
                HealthWarehouse.com,
      Inc.

              
	 
      	 
      
	 
      	
                /s/ Lalit Dhadphale

              
	 
      	
                Name:   Lalit
      Dhadphale

              
	 
      	
                Title:  President
      and Chief Executive Officer

              

      

    

     

    [remainder of page intentionally left
blank; signature pages for Investors follow]

     

    
      Company
Signature Page to Securities Purchase Agreement

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	
                                    “INVESTOR”:

                                  
	 
      	 
      
	 
      	
                                    HWH
      LENDING LLC

                                  
	 
      	 
      	 
      
	 
      	
                                    By:

                                  	
                                    /s/ Gary Singer

                                  
	 
      	Name:  Gary
      Singer
	 
      	Title:  President  

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    
      Investor
Address for Notices:

      

      Investor’s
Tax Identification Number:

      

      
        
          
            
              
                	
                        Investment
      Amount:

                      	 	$	2,050,879	 
	 
      	 	 	 	 
	
                        Preferred
      Stock Purchased:

                      	 	 	164,114	 
	 
      	 	 	 	 
	
                        Convertible
      Note Purchased:

                      	 	$	500,000	 
	 
      	 	 	 	 
	
                        Number
      of Warrant Shares to be represented by  Warrant:

                      	 	 	585,808	 

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

    
      
        
          
            
              
                
                  	 
      	
                          “INVESTOR”:

                        
	 
      	 
      
	 
      	
                          MILFAM
      I L.P.

                        
	 
      	
                          By:  Milfam
      LLC

                        
	 
      	
                          Its:  General
      Partner

                        
	 
      	 
      	 
      
	 
      	
                          By:

                        	
                          /s/ Lloyd I. Miller, III

                        
	 
      	Name:
      Lloyd I. Miller, III
	 
      	Title: Manager

                

              

            

          

        

         

        
          
            
              
                	
                        Investor
      Address for Notices:

                      	 	 	 
	 
      	 	 	 
	
                        Investor’s
      Tax Identification Number:

                      	 	 	 
	 
      	 	 	 
	
                        Investment
      Amount:

                      	 	$	2,050,879	 
	 
      	 	 	 	 
	
                        Preferred
      Stock Purchased:

                      	 	 	164,114	 
	 
      	 	 	 	 
	
                        Convertible
      Note Purchased:

                      	 	$	500,000	 
	 
      	 	 	 	 
	
                        Number
      of Warrant Shares to be represented by  Warrant:

                      	 	 	585,808	 

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

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

    
      

      
        
          
            
              
                
                  	 
      	
                          “INVESTOR”:

                        
	 
      	 
      
	 
      	
                          JANICE
      MARRA

                        
	 
      	 
      
	 
      	
                          /s/ Janice
      Marra                                           

                        
	 
      	
                          Name:  Janice
      Marra

                        
	 
      	
                          Title:  

                        

                

              

            

          

        

      

      

      
        
          
            
              	
                      Investor
      Address for Notices:

                    	 	 	 
	 
      	 	 	 
	
                      Investor’s
      Tax Identification Number:

                    	 	 	 
	 
      	 	 	 
	
                      Investment
      Amount:

                    	 	$	100,000	 
	 
      	 	 	 	 
	
                      Preferred
      Stock Purchased:

                    	 	 	10,582	 
	 
      	 	 	 	 
	
                      Number
      of Warrant Shares to be represented by  Warrant:

                    	 	 	28,564	 

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    
      

      
        
          	 
      	
                  “INVESTOR”:

                
	 
      	 
      
	 
      	
                  DAVID
      S. OROS

                
	 
      	
                  MARLA
      T. OROS

                
	 
      	 
      
	 
      	
                  /s/ Davis S. Oros

                
	 
      	
                  Name:
      David S. Oros

                
	 
      	 
      
	 
      	
                  /s/ Marla T. Oros

                
	 
      	
                  Name:
      Marla T. Oros

                
	 
      	 
      

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        	
                                Investor
      Address for Notices:

                              	 	 	 
	 	 	 	 
	
                                Investor’s
      Tax Identification Number:

                              	 	 	 
	 	 	 	 
	
                                Investment
      Amount:

                              	 	$	100,000	 
	 	 	 	 	 
	
                                Preferred
      Stock Purchased:

                              	 	 	10,582	 
	 	 	 	 	 
	
                                Number
      of Warrant Shares to be represented by  Warrant:

                              	 	 	28,564EXHIBIT
10.2

     

    LOAN AND SECURITY
AGREEMENT

     

    This
LOAN AND SECURITY
AGREEMENT is dated as of November 9, 2010, by and between
Healthwarehouse.com, Inc., a Delaware corporation (“Parent”),
HWAREH.com, Inc., a Delaware corporation (“Subsidiary”
and, with Parent, each a “Borrower”
and collectively, the “Borrowers”),
HWH Lending LLC, a Delaware limited liability company (“HWH”), and
Milfam I L.P., a Georgia limited partnership (“MIL”) each
as lender (“Lender”
and collectively, the “Lenders”).

     

    RECITALS

     

    WHEREAS, Borrowers desire that
Lenders extend loans to Borrowers, the proceeds of which will be used by
Borrowers for working capital purposes;

     

    WHEREAS, Borrowers desire to
secure their Obligations under the Loan Documents by granting to Lenders a Lien
upon all of the Collateral of Borrowers; and

     

    WHEREAS,
pursuant to a Securities Purchase Agreement dated as of the date hereof (the
“Securities
Purchase Agreement”), Parent is also offering, in a private placement to
the Lenders, among other investors, units consisting of shares of newly created
Series B Preferred Stock of Parent Company and five-year immediately exercisable
warrants to purchase shares of common stock of Parent, at an exercise price of
$3.00 per share.

     

    NOW, THEREFORE, in consideration of
the premises and the agreements, provisions and covenants herein contained,
Borrowers and Lenders agree as follows:

     

    SECTION
1

     

    DEFINITIONS

     

    1.1          Certain Defined
Terms.  The
following terms used in this Agreement shall have the following
meanings:

     

    “Accounts”
means all of each Borrowers’ now existing and future accounts (as defined in the
UCC).

     

    “Affiliate”
means any Person (other than a Lender): (a) directly or indirectly controlling,
controlled by, or under common control with any Borrower; (b) directly or
indirectly owning, controlling or holding five percent (5%) or more of any
equity interest in any Borrower; (c) five percent (5%) or more of whose
voting stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by any Borrower; or (d)
which has a senior executive officer who is also a senior executive officer of
any Borrower.  For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling”,
“controlled
by” and “under common
control with”) means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or other equity interest, or
by contract or otherwise.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    “Agreement”
means this Loan and Security Agreement as amended, restated, supplemented or
otherwise modified from time to time.

     

    “Asset
Disposition” means the disposition, in any transaction or series of
related transactions, whether by sale, lease (including any disposition in
connection with a sale-lease back or synthetic lease transaction), transfer,
loss, damage, destruction, condemnation or otherwise, of all, or substantially
all, of the assets of any Borrower (whether such assets are now owned or
hereafter acquired) or which has the effect of selling or otherwise disposing of
the whole or a major part of the business or operations of any Borrower, in each
case, whether or not consideration therefore consists of cash, securities or
other assets owned by the acquiring Person, except where such disposition is
made to an Affiliate of such Borrower.

     

    “Borrower”
has the meaning assigned to that term in the preamble to this
Agreement.

     

    “Business
Day” means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York, or is a day on which
banking institutions located in such state are permitted to be
closed.

     

    “Capitalized
Lease” means: (a) any lease of property, real or personal, if the then
present value of the minimum rental commitment thereunder should, in accordance
with GAAP, be capitalized on a balance sheet of Borrower, and (b) any other such
lease, the obligations under which are capitalized on the balance sheet of any
Borrower.

     

    “Capital
Stock” means any and all capital stock, membership, partnership or other
equity interests of each Borrower.

     

    “Change of
Control” means  at any time, (i) the current shareholders of
any Borrower shall cease to beneficially own and control, directly or indirectly
on a fully diluted basis, fifty-one percent (51%) of the issued and outstanding
Common Stock of such Borrower or (ii) any Person or group other than the current
shareholders of any Borrower shall have the right to elect a majority of the
seats on such Borrowers’ board of directors, but excluding any changes resulting
from bona fide venture capital financing and public offerings of Capital
Stock.

     

    “Closing
Date” means November ___, 2010.

     

    “Collateral”
means, collectively, any and all assets of any Borrower on which a Lien in favor
of Lenders has been created and/or granted to secure the Obligations under the
Loan Documents.

     

    “Commission”
means the Securities and Exchange Commission.

     

    “Confidential
Information” has the meaning assigned to that term in Section
8.14.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    “Default”
means a condition, act or event that, after notice or lapse of time or both,
would constitute an Event of Default.

     

    “Documents of
Title” means all present and future documents (as defined in the UCC),
and any and all warehouse receipts, bills of lading, shipping documents, chattel
paper, instruments and similar documents, all whether negotiable or not and all
goods and Inventory relating thereto and all cash and non-cash proceeds of the
foregoing.

     

    “Employee Benefit
Plan” means any employee benefit plan within the meaning of Section 3(3)
of ERISA which (a) is maintained for employees of any Borrower or any ERISA
Affiliate or (b) has at any time within the preceding six (6) years been
maintained for the employees of any Borrower and/or any current or former ERISA
Affiliate.

     

    “EPA” shall
mean the United States Environmental Protection Agency and any governmental body
or agency succeeding to the functions thereof.

     

    “Equipment”
means all equipment, whether now owned or hereafter acquired (as defined in the
UCC), including, without limitation (whether or not included in the UCC
definition of “equipment”), all furniture, furnishings, fixtures, machinery,
motor vehicles, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof and all additions, accessories, motors, engines, and accessions
thereto and replacements therefor and all cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.

     

    “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any successor statute and all rules and regulations promulgated
thereunder.

     

    “ERISA
Affiliate” as applied to any Borrower and its Subsidiaries, means any
Person who is a member of a group which is under common control with such
Borrower and its Subsidiaries, who together with such Borrower and its
Subsidiaries is treated as a single employer within the meaning of Section
414(b) and (c) of the IRC.

     

    “Event of
Default” means any of the events set forth in Section 7.1.

     

    “GAAP”
means generally accepted accounting principles in effect from time to time in
the United States, applied on a consistent basis.

     

    “General
Intangibles” means all of each Borrowers’ “general intangibles” as
defined in the UCC, now owned or hereafter acquired, including, without
limitation (whether or not included in the UCC definition of “general
intangibles”), all of such Borrowers’ then owned or existing and future acquired
or arising general intangibles and causes of action and all other intangible
personal property of such Borrower of every kind and nature, including, without
limitation, Intellectual Property, corporate or other business records,
inventions, designs, plans, specifications, trade secrets, goodwill, computer
software, customer lists, licenses, franchises, tax refund claims, reversions or
any rights thereto and any other amounts payable to such Borrower from any
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, and business interruption, property, casualty or any similar
type of insurance and any proceeds thereof, and all cash and non-cash proceeds
(as defined in the UCC) of any and all of the foregoing.

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    “Governmental
Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

     

    “Indebtedness”
means without duplication, with respect to each Borrower: (a) all obligations of
Borrower for borrowed money, (b) all obligations of Borrower evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of Borrower upon
which interest charges are customarily paid, (d) all obligations of Borrower
under conditional sale or other title retention agreements relating to property
acquired by Borrower, (e) all obligations of Borrower in respect of the deferred
purchase price of property or services (excluding current accounts payable
incurred in the ordinary course of business and excluding installments of
premiums payable with respect to policies of insurance contracted for in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by Borrower,
whether or not the Indebtedness secured thereby has been assumed, (g) all
guaranties or endorsements by Borrower of others, (h) all obligations under
Capitalized Leases of Borrower attributable to the payment of principal, (i) all
obligations, contingent or otherwise, of Borrower as an account party in respect
of letters of credit and letters of guaranty, and (j) all obligations,
contingent or otherwise, of Borrower in respect of bankers’
acceptances.

     

    “Intellectual
Property” means all present and future (a) designs, patents, patent
rights and applications therefor, licenses rights, fees, and royalties with
respect thereof; (b) trademarks, service marks, trade names and
registrations and applications therefore, licenses, fees and royalties with
respect thereof; (c) copyrights, renewals and all applications and registrations
therefor, licenses, fees and royalties with respect thereof, (d) software or
computer programs, trade secrets, methods, processes, know-how, drawings,
specifications, and descriptions, and (e) all memoranda, notes and records with
respect to any research and development, whether now owned or hereafter
acquired, (f) all goodwill associated with any of the foregoing described in
subsections (a) – (e), and proceeds of all of the foregoing, including, without
limitation, proceeds of insurance policies thereon.

     

    “Inventory”
means, with respect to each Borrower, all “inventory”
as defined in the UCC including, without limitation (whether or not included in
the UCC definition of “inventory”), all of Borrowers’ then owned or existing and
future acquired or arising:  (a) inventory, merchandise, goods and
other personal property intended for sale or lease or for display or
demonstration; (b) inventory and any portion thereof that may be returned,
rejected, reclaimed or repossessed by either Lenders or Borrower; (c) work in
process; (d) raw materials and other materials and supplies, goods, incidentals,
packaging materials and labels of every nature and description used or which
might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of the foregoing or otherwise used
or consumed in the conduct of business; (e) documents evidencing, and
General Intangibles relating to, any of the foregoing; and (f) all cash and
non-cash proceeds (as defined in the UCC) of any and all of the
foregoing.

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    “Investment
Property” means a security, whether certificated or uncertificated,
security entitlement, securities account, commodity contract or commodity
account.

     

    “IRC” means
the Internal Revenue Code of 1986, as amended from time to time, and any
successor statute and all rules and regulations promulgated
thereunder.

     

    “Lender”
has the meaning assigned to that term in the preamble to this
Agreement.

     

    “Liabilities”
shall have the meaning given that term in accordance with GAAP and shall include
all Indebtedness.

     

    “Lien”
means any lien (whether statutory or otherwise), mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, charge or encumbrance of
any kind, whether voluntary or involuntary (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).

     

    “Loan”
means the unpaid balance of the Loan made pursuant to Section 2.1.

     

    “Loan
Documents” means this Agreement, the Notes, the Securities Purchase
Agreement and all other instruments, documents, guaranties and agreements
executed by or on behalf of either Borrower and delivered concurrently herewith
or at any time hereafter to or for Lenders in connection with the Loan or any
other transaction contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time.

     

    “Material Adverse
Effect” means, with respect to each Borrower, a material adverse effect
upon (a) the businesses, operations, properties, assets or condition (financial
or otherwise) of Borrower, (b) the ability of Borrower to perform its
obligations under any Loan Document to which it is a party, (c) the value of the
Collateral, or (d) the ability of any Lender to enforce or collect any of the
Obligations.

     

    “Maturity
Date” has the meaning assigned to such term in Section 2.3.

     

    “Note”
means each of the 7% Senior Secured Convertible Promissory Notes of Borrowers,
in the form attached hereto as Exhibit A, evidencing the Loans made by the
Lenders to Borrowers pursuant to Section 2.1 hereof and any amendment and
restatement thereof.

     

    “Obligations”
means all obligations (including the full and faithful discharge of each and
every term, condition, agreement, representation and warranty now or hereafter
made by Borrowers under the Loan Documents), liabilities and indebtedness of
every nature of Borrowers’ from time to time owed to Lenders under the Loan
Documents including the principal amount of the Loan and accrued and unpaid
interest, now and/or from time to time hereafter owing, due or
payable.

     

    “Permitted
Encumbrances” means the following types of Liens:

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    (A)           Liens
securing the Obligations;

     

    (B)           Liens
for taxes, assessments or other governmental charges the payment of which is not
yet due and payable or is being contested in good faith and by appropriate
proceedings promptly initiated and diligently conducted, and a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, provided, that such liens shall have no effect on the priority of the
Liens in favor of Lenders or the value of the assets in which Lenders have such
Liens and a stay of enforcement of any such Liens shall be in
effect;

     

    (C)           Liens
imposed by law, such as carrier’s, warehousemen’s, mechanic’s, materialmen’s and
other similar Liens arising in the ordinary course of business and securing
obligations (other than Indebtedness for borrowed money) that are not overdue by
more than thirty (30) days or are being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, and a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefore, and, in the case of judgment Liens that have
been stayed or bonded, a reserve or other appropriate provision, if any, as
required by GAAP shall have been made therefor;

     

    (D)           Liens
arising under Capitalized Leases or securing purchase money Indebtedness in
favor of a seller of Equipment, if and only if the Lien is confined to the
property and improvements and the proceeds of the Equipment so
purchased;

     

    (E)           deposits
and pledges of cash securing (i) obligations incurred in respect of workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits, (ii) the performance of bids, tenders, leases (if the leases permit
granting Lenders a security interest), contracts (other than for the payment of
money) and statutory obligations or (iii) obligations on surety or appeal bonds,
but only to the extent such deposits or pledges are incurred or otherwise arise
in the ordinary course of business and secure obligations not past
due;

     

    (F)           easements,
zoning restrictions and similar encumbrances on real property and minor
irregularities in the title thereto that do not (i) secure obligations for the
payment of money or (ii) materially adversely impair the value of such property
or its use by Borrower in the normal conduct of its business; and

     

    (G)           other
Liens permitted to be incurred by Borrowers pursuant to the terms of this
Agreement or any other Loan Document.

     

    “Permitted
Indebtedness” means (i) Borrowers’ indebtedness to Lenders under this
Agreement or any of the other Loan Documents; (ii) Borrowers’ outstanding
Indebtedness as of the date of this Agreement as listed on Schedule 4.9 of the
Securities Purchase Agreement; (iii) indebtedness to trade creditors incurred in
the ordinary course of business on ordinary trade terms and accrued expenses
incurred in the ordinary course of business; (iv) indebtedness (including
Capitalized Leases) incurred for the purpose of financing all or any part of the
acquisition costs of Equipment; and (v) any extension, renewal or refinancing of
the indebtedness described in clause (iv) above, provided that the principal
amount and interest rate on such indebtedness may not be
increased.

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    “Person”
means and includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

     

    “Restricted
Payment” means: (a) any redemption or repurchase of Capital Stock or
Indebtedness of any Borrower now or hereafter outstanding, or the issuance of a
notice of an intention to do any of the foregoing; provided, however, that
repayment of Indebtedness in the ordinary course of business consistent with
past practice shall not be considered a Restricted Payment hereunder; or (b) any
payment made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of the Capital Stock of
any Borrower now or hereafter outstanding.

     

    “Securities
Act” means the Securities Act of 1933, as amended.

     

    “Subsidiary”
means, if applicable, with respect to any Person, any corporation, association
or other business entity of which more than fifty percent (50%) of the total
voting power of shares of stock, membership interests (or equivalent ownership
or controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person (or
any of its other Subsidiaries).

     

    “Taxes”
means all federal, state, municipal and other governmental taxes, levies,
charges, claims and assessments, and all interest, penalties and similar
liabilities relating thereto, which are or may be due by Borrowers with respect
to its business, operations, Collateral or otherwise.

     

    “UCC” means
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, as amended from time to time, and any successor statute.

     

    1.2           Accounting
Terms.  For
purposes of this Agreement, all accounting terms not otherwise defined herein
shall have the meanings assigned to such terms in conformity with
GAAP.

     

    1.3           Other Definitional
Provisions.  Any
of the terms defined in Section 1.1 may,
unless the context otherwise requires, be used in the singular or the plural
depending on the reference.  In this Agreement, words importing any
gender include the other genders; the words “including,” “includes” and
“include” shall be deemed to be followed by the words “without limitation”;
except as otherwise indicated (e.g., by references to agreements “as in effect
as of the date hereof” or words to that effect), references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and
regulations.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

    SECTION
2

     

    LOAN AND
COLLATERAL

     

    2.1           Loan.  Subject
to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrowers set forth herein and in the other
Loan Documents, each Lender agrees to make a Loan to Borrowers in the principal
amount of Five Hundred Thousand Dollars ($500,000), for an aggregate amount of
Loans issued hereunder equal to One Million Dollars ($1,000,000), subject to and
on the terms and conditions set forth herein.

     

    2.2           Closing Date
Loans.  On
the Closing Date, and subject to the conditions set forth in Section 3.1(A)
through Section
3.1(D) hereof, each Lender shall advance to Borrowers a Loan in an amount
equal to Five Hundred Thousand Dollars ($500,000).

     

    2.3           Notes.  Each
Loan made by a Lender to Borrowers pursuant hereto will be evidenced by a Note
to be executed by Borrowers before or concurrently with Lender’s disbursement of
such Loan.

     

    2.4           Payments.  The
principal amount of and all accrued and unpaid interest on each Loan hereunder
shall be due and payable in full on the date that is set forth in the Notes (the
“Maturity
Date”).

     

    2.5           Notice of Accrued
Interest.  Following
each calendar month, Borrowers shall prepare a Statement of Interest indicating
the amount of interest accrued under each outstanding Note during such calendar
month, and the aggregate amount of interest accrued under each outstanding Note
since the date of issuance thereof (the “Interest
Statement”).  Borrowers shall deliver the Interest Statement to
Lenders within seven days following the end of the prior calendar
month.

     

    2.6           Use of
Proceeds.  The
proceeds of the Loans shall be used by Borrowers for working capital purposes,
and as provided in Schedule 4.9 to the Securities Purchase
Agreement.

     

    2.7           Interest Rate of
Interest.  Interest shall accrue on each Loan outstanding from
time to time at a rate equal to seven percent (7%) per annum.

     

     (B)           Computation and Payment of
Interest.  Interest on each Loan shall be compounded on the
first day of each calendar year hereafter, beginning on January 1, 2011, and
shall be computed on the basis of a 360-day year for the actual number of days
elapsed in the period during which it accrues.  In computing interest,
the date of funding of the Loan shall be included and the date of payment of
each Loan shall be excluded.  Interest shall be payable as set forth
in Section 2.4 above.

     

    2.8           Payments and Prepayments
Manner and Time of
Payment.  All payments made by Borrowers with respect to the
Obligations shall be made by wire transfer in United States Dollars to each
Lender’s account, without deduction, defense, setoff or
counterclaim.  Lenders shall wire the Loans to Borrowers as provided
in Exhibit E of the Securities Purchase Agreement, annexed hereto.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

     

     (B)           Payments on Business
Days.  Whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, the payment may be made on
the next succeeding Business Day and such extension of time shall be included in
the computation of the amount of interest or fees due hereunder.

     

     (C)           Prepayment.  Borrowers
shall only have the right to prepay, without penalty or premium, all or any
portion of the outstanding balance of the Loans with the advance written consent
of Lenders at least fifteen (15) days prior to such prepayment.

     

     (D)           Mandatory
Repayment.  In the event of the occurrence of an Event of
Default, or (ii) a Change of Control of either Borrower, then the outstanding
balance of the Loans plus accrued and unpaid interest and all other amounts then
due and owing hereunder or under any other of the Loan Documents, shall be due
and payable.

     

    2.9           Grant of Security
Interest.  To
secure the payment and performance of the Obligations, including all renewals,
extensions, restructurings and refinancings of any or all of the Obligations,
each Borrower hereby assigns and grants to each Lender, a continuing first
priority Lien, subject only to Permitted Encumbrances, in and to all right,
title and interest of such Borrower in all assets and properties of such
Borrower, whether now owned or existing or hereafter acquired or arising and
regardless of where located, including the proceeds thereof (all being
collectively referred to as the “Collateral”), and including, without
limitation, the following property of each Borrower:

     

     
(i)          Accounts;

     
(ii)         Deposit Accounts (as
defined in the UCC);

     
(iii)        Documents of
Title;

     
(iv)        Equipment;

     
(v)         General
Intangibles;

     
(vi)        Inventory;

     
(vii)       Investment Property;
and

     
(viii)      Intellectual Property.

     

    Each
Borrower represents, warrants and covenants that the security interest granted
herein is and shall at all times continue to be a first-priority security
interest in the Collateral (subject only to Permitted Liens that may have
superior priority to Lenders’ Lien under this Agreement).  If any
Borrower shall acquire a commercial tort claim, such Borrower shall notify
Lenders in a writing signed by such Borrower of the general details thereof and
grant to Lenders in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement.

     

    2.10         Preservation of Collateral
and Perfection of Security Interests Therein.  Each
Borrower shall, at any Lender’s reasonable request, at any time and from time to
time, execute and deliver to such Lender within ten (10) days of such request,
such financing statements, documents and other agreements and instruments and do
such other acts and things as Lender may deem reasonably necessary in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender (free and clear of all other Liens, claims and
rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Encumbrances) to secure payment of the Obligations,
and in order to facilitate the collection of the Collateral.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

       

    

    2.11         Possession of Collateral and
Related Matters.  Until
an Event of Default has occurred and is continuing, each Borrower shall have the
right, except as otherwise provided in this Agreement, in the ordinary course of
such Borrower’s business, to (a) sell or lease any  Inventory normally
held by such Borrower for any such purpose, (b) use and consume any raw
materials, work-in-process or other materials normally held by such Borrower for
such purpose, or (c) dispose of any obsolete or excess equipment in the ordinary
course of business; provided, however, that a sale in the ordinary course of
business shall not include any transfer or sale in satisfaction, partial or
complete, of any debt owed by such Borrower.

     

    2.12         Release of Security
Interests.  If
this Agreement is terminated, Lenders’ Lien shall continue until the Obligations
are repaid in full in cash.  Upon the indefeasible payment and
satisfaction in full of the Obligations, Lenders shall release all liens and
security interests granted by Borrowers by execution and/or delivery of
appropriate documentation, including, but not limited to, UCC termination
statements, (A) within three (3) Business Days of such payment or (B)
concurrently with such payment if Borrowers give three (3) Business Days advance
notice of such payment.

     

    SECTION
3

     

    CONDITIONS TO
LOAN

     

    3.1           Conditions.  The
obligations of each Lender to make a Loan on the Closing Date are subject to
satisfaction or waiver of each of the conditions set forth below:

     

     (A)           Closing
Deliveries.  Lenders shall have received this Agreement,
executed by Borrowers, and the Notes, all executed by Parent and/or Subsidiary,
as applicable.

     

     (B)           Security
Interests.  Lenders shall have received reasonably satisfactory
evidence that all security interests and Liens granted to Lenders pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute valid first-priority Liens on the Collateral, with priority over all
other Liens subject only to Permitted Encumbrances.

     

     (C)           Representations and
Warranties.  The representations and warranties contained
herein shall be true, correct and complete in all material respects on and as of
the Closing Date to the same extent as though made on and as of that date,
except for any representation or warranty limited by its terms to a specific
date.

     

     (D)           No Event of
Default.  No Event of Default has occurred or is
continuing.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

       

    

    SECTION
4

     

    BORROWERS’ REPRESENTATIONS
AND WARRANTIES

     

    To induce
Lenders to enter into this Agreement, and to make the Loans, each Borrower
represents and warrants to each Lender that the following statements are true,
correct and complete in all material respects with respect to Borrower making
such representation or warranty as of the date hereof.  Such
representations and warranties, and all other representations and warranties
made by such Borrower herein or in the other Loan Documents, shall survive the
execution and delivery of this Agreement and the closing contemplated
hereby:

     

    4.1           Authority.  Borrower
is a corporation duly organized, validly existing and in good standing, under
the laws of the State of Delaware.  Borrower has the power and
authority to own its properties and assets and to transact the business in which
is it engaged and presently proposes to engage, and has obtained all necessary
and material governmental authorizations, consents and licenses in connection
therewith.  Borrower has all requisite legal and corporate power and
authority and has obtained all approvals and consents necessary to enter into
the Loan Documents and to carry out and perform its obligations under the terms
hereof and thereof.  Borrower’s execution, delivery and performance of
this Agreement and the additional Loan Documents will not violate, or conflict
with or constitute a default under, the terms of Borrower’s charter or Bylaws or
any statute, regulation, ordinance, rule of law, agreement, contract, mortgage,
indenture, bond, bill, note, judgment, order or decree of any court or
arbitrator to which Borrower is a party or other instrument or writing binding
upon Borrower or to which Borrower is subject.

     

    4.2           Due Authorization; Binding
Obligation.  All
corporate action on the part of Borrower, its officers and directors necessary
for Borrower’s authorization, execution and delivery of, and the performance of
all Borrower’s obligations under, this Agreement and other Loan Documents has
been taken.  Borrower has duly executed and delivered this
Agreement.  This Agreement constitutes a valid and legally binding
obligation of Borrower, enforceable in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.  The
Notes when executed and delivered in accordance with the terms of this
Agreement, will constitute valid and legally binding obligations of Borrower
and/or Parent as applicable, enforceable in accordance with their terms, except
as enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.

     

    4.3           Governmental
Consents.  No
consent, approval, order, or authorization of or registration, qualification,
designation, declaration or filing with, any Governmental Authority is required
on the part of Borrower to enable Borrower to execute, deliver and perform its
obligations under this Agreement or the Notes.

     

    4.4           Representations and Warrants
under Securities Purchase Agreement.  The
representations and warranties of the Borrowers set forth in Article 3 to the
Securities Purchase Agreement shall be deemed to be incorporated by reference
into this Section 4 as if made by the Borrowers in this Section 4 and are hereby
deemed to be made by Borrowers in this Agreement.

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

       

    

    4.5           Full
Disclosure.  No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to Lenders, as of the date such
representation, warranty, or other statement was made, taken together with all
such written certificates and written statements given to Lenders, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading.

     

    SECTION
5

     

    LENDER’S REPRESENTATIONS AND
WARRANTIES

     

    To induce
Borrowers to enter into this Agreement, each Lender represents and warrants,
severally and not jointly, to Borrowers that the following statements are true,
correct and complete in all material respects on and as of the Closing
Date.

     

    5.1           Authorization of Borrowing;
No Conflict.  The
Lender has the power and authority to enter into this Agreement and the other
Loan Documents.  The execution, delivery and performance of the Loan
Documents by the Lender will have been duly authorized by all necessary
action.  The execution, delivery and performance of the Loan Documents
by the Lender and the consummation of the transactions contemplated by this
Agreement and the other Loan Documents by the Lender, do not contravene and will
not be in contravention of any applicable law, organizational documents of
Lender or any agreement or order by which it or any of its property is
bound.  This Agreement and the other Loan Documents, including the
Notes, when executed and delivered, are and will be, the legally valid and
binding obligations of the Lender, enforceable against the Lender in accordance
with their respective terms except as the enforceability thereof may be limited
by applicable bankruptcy, insolvency, moratorium or other similar laws effecting
the enforcement of creditors rights generally and subject to any equitable
principles limiting the right to obtain specific performance of any such
obligation.

     

    5.2           Investment Purposes;
Accredited Investor.  The
Lender (a) is acquiring the Notes for investment purposes only, for its own
account, and not as nominee or agent for any other Person, and not with a view
to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) understands and acknowledges that the Notes
have not been registered under the Securities Act or any other securities laws,
(c) is not an “affiliate” (as defined in Rule 144 under the Securities Act) of
the Parent, (d) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment,
(e) is an “accredited investor” within the meaning of Rule 501 of Regulation D
under the Securities Act, (f) has had the opportunity to ask questions and to
receive answers from Borrowers, and to obtain information necessary to evaluate
the merits and risks of this investment, and (g) understands, acknowledges and
agrees that Notes have not been, and will not be, registered under (and that
Parent has no present intention to register the Notes under) the Act or
applicable state securities laws, and may not be sold or otherwise transferred
by the Lender to a United States person unless they have been registered under
the Act and applicable U.S. state securities laws or are sold or transferred in
a transaction exempt therefrom.

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

       

    

    SECTION
6

     

    COVENANTS

     

    Each
Borrower covenants and agrees that until payment and performance in full of all
Obligations hereunder unless Borrower has received the prior written consent of
Lenders, Borrower shall perform all covenants in this Section 6.

     

    6.1           Indebtedness and
Liabilities.  Borrower
shall not directly or indirectly create, incur, assume, guaranty, or otherwise
become or remain directly or indirectly liable, on a fixed or contingent basis,
with respect to any Indebtedness senior to or pari passu with the Obligations
except: (a) the Obligations; (b) Capital Leases and purchase money financing for
Equipment entered into in the ordinary course of business (if the leases permit
granting Lenders a security interest); (c) trade payables and normal accruals in
the ordinary course of business not yet due and payable or with respect to which
Borrower is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that Borrower has
established adequate reserves therefor, if appropriate under GAAP, (d) Permitted
Indebtedness and (e) up to $1,000,000 of Indebtedness pursuant to a working
capital line of credit provided by a lender acceptable to Lenders for which
Lenders hereby agree to enter into a subordination agreement in a form
reasonably acceptable to Lenders pursuant to which Lenders will agree to
subordinate their security interest in certain investory and accounts receivable
of the Borrowers in favor of the lender(s) under such working captial line of
credit.

     

    6.2           Transfers, Liens and Related
Matters Transfers.  Borrower
shall not sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any option with respect to any of the Collateral or other assets,
except that Borrower may (i) sell Inventory and dispose of obsolete or excess
Equipment in the ordinary course of business; and (ii) make other Asset
Dispositions in the ordinary course of business.

     

     (B)           Liens.  Except
for Permitted Encumbrances, Borrower shall not directly or indirectly create,
incur or assume (or agree to create, incur or assume) or permit to exist any
Lien on or with respect to any of the Collateral or other assets or any
proceeds, income or profits therefrom.

     

     (C)           No Pledge
Restrictions.  Borrower shall not enter into or assume any
agreement (other than the Loan Documents and any document evidencing or
governing Permitted Indebtedness) restricting the creation or assumption of any
Lien upon any of its properties or assets, whether now owned or hereafter
acquired.

     

    6.3           Restricted
Payments.  Borrower
shall not directly or indirectly declare, order, pay, make or set apart any sum
for any Restricted Payment, except as expressly permitted in this Agreement or
any other Loan Document; provided, however, that Borrower may repay the
Indebtedness listed on Schedule 4.9 to the Securities Purchase
Agreement.

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

       

    

    6.4           Restriction on Fundamental
Changes.  Borrower
shall not: (a) undergo a Change of Control; or (b) except with thirty (30) days
prior written notice to Lenders, change its jurisdiction of incorporation, type
of organization (as defined in the UCC) tax, charter or other organizational
number, or its legal name; or (c) acquire by purchase or otherwise all or
substantially all of the assets of, or stock or other evidence of beneficial
ownership, of any Person or any business division of any Person without Lenders’
prior written consent; or (d) merge into or consolidate with any other Person,
except that any Subsidiary of Borrower may merge into or consolidate with
Borrower or any other wholly-owned Subsidiary of Borrower; or (e) liquidate,
wind up their affairs or undergo any dissolution; or (f) acquire the capital
stock of any other Person for investment purposes.  Furthermore,
Borrower shall not take any action that could result in the sale of all or
substantially all of Borrower’s assets, or the sale, lease or other disposition
of any of Borrower’s assets (including the grant of any exclusive distribution
rights or other exclusive rights to Borrower’s Intellectual Property) outside
the ordinary course of business.

     

    6.5           Conduct of
Business.  Borrower
shall not engage in any business other than businesses of the type engaged in by
Borrower on the Closing Date and any businesses reasonably related thereto
without the prior consent of each Lender which consent shall not be unreasonably
withheld, conditioned or delayed.

     

    6.6           Charter
Documents.  Borrower
shall not (by merger, consolidation or otherwise) amend or otherwise modify its
certificate of incorporation or bylaws, except as contemplated in the Securities
Purchase Agreement.

     

    6.7           Redemption.  Borrower
shall not redeem, repurchase or otherwise acquire for value (or pay into or set
aside for a sinking fund for such purpose) any shares of Common Stock or options
to purchase capital stock of Parent other than the repurchase of stock from
employees, stockholders or other service providers pursuant to agreements to
repurchase such stock at cost in connection with the termination of such
employee, stockholder or other service provider providing services to Borrower,
and the contribution of stock by a stockholder pursuant to an agreement to
contribute stock.

     

    6.8           Proceeds.  The
proceeds of the Loan shall be used in accordance with Section 2.6.

     

    SECTION
7

     

    DEFAULT, RIGHTS AND
REMEDIES

     

    7.1           Event of
Default.  “Event of
Default” means the occurrence or existence of any one or more of the
following with respect to either or both Borrowers:

     

     (A)           Payment.  Failure
to make payment of any of the Obligations when due, and such failure shall not
be remedied within ten (10) Business Days of the applicable due date;
or

     

     (B)           Involuntary Bankruptcy;
Appointment of Receiver, etc.  (1) A court enters a decree or
order for relief with respect to Borrower or any of its properties in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (2) Subject
to Section 7.1(D), the
continuance of any of the following events for sixty (60) days unless dismissed
or discharged:  (a) an involuntary case is commenced against Borrower,
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or (b) a decree or order of a court for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Borrower or over all or a substantial part of its property,
is entered; or (c) an interim receiver, trustee or other custodian is appointed
without the consent of Borrower for all or a substantial part of the property of
any Borrower; or
 

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

     (C)          Voluntary Bankruptcy;
Appointment of Receiver, etc.  (1) An order for relief is
entered with respect to Borrower or its properties or Borrower commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consent to the entry of an order for relief in an
involuntary case or to the conversion of an involuntary case to a voluntary case
under any such law or consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of their
property; or (2) Borrower makes any assignment for the benefit of creditors; or
(3) the board of directors of Borrower adopts any resolution or otherwise
authorizes action to approve any of the foregoing actions; or

     

     (D)          Dissolution.  Any
order, judgment or decree is entered against Borrower decreeing the dissolution
or split up of Borrower and such order remains undischarged or unstayed for a
period in excess of sixty (60) days; or

     

     (E)          Covenant
Default.

     

     
(a)           Borrower
violates any covenant in Section
6; or

     

     
(b)           Borrower
fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan
Document, and as to any default (other than those specified in this Section 7) under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure the default within ten (10) days after Borrower becomes aware of the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default.  Grace periods provided under
this section shall not apply, among other things, to any covenants set forth in
subsection (a) above; or

     

     (F)           Judgments.  One
or more final, non-appealable judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least $25,000 (not
covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower and shall
remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after
the entry thereof; or

     

     (G)           Misrepresentations.  Borrower
or any of Borrower’s officers or directors makes any representation, warranty,
or other statement now or later in this Agreement, any Loan Document or in any
writing delivered to Lenders or to induce Lenders to enter this Agreement or any
Loan Document, and such representation, warranty, or other statement is
incorrect in any material respect when made.

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

       

    

    7.2           Acceleration.  Upon
the occurrence of any Event of Default, all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Borrower.

     

    7.3           Remedies.  If
any Event of Default shall have occurred and be continuing, in addition to and
not in limitation of any rights or remedies available to any Lender at law or in
equity, any Lender may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC (whether or
not the UCC applies to the affected Collateral).

     

    SECTION
8

     

    MISCELLANEOUS

     

    8.1           Assignment.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the respective successors, assigns, heirs, beneficiaries and representatives of
Borrowers and Lenders; provided, however, that neither party hereto may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of the other party and any prohibited assignment shall be
void.

     

    8.2           Amendments and
Waivers.  No
amendment, modification, termination or waiver of any provision of this
Agreement or of the other Loan Documents, or consent to any departure by any
Borrower therefrom or any of the terms, conditions, or provisions thereof, shall
be effective unless the same shall be in writing and signed by Lenders and
Borrowers.  Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given.

     

    8.3           Notices.  Unless
otherwise specifically provided herein, all notices shall be in writing
addressed to the respective party as set forth below and may be personally
served, telecopied or sent by overnight courier service or United States mail
and shall be deemed to have been given: (a) if delivered in person, when
delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m.  Eastern standard time
or, if not, on the next succeeding Business Day; (c) if delivered by overnight
courier, two (2) days after delivery to such courier properly addressed; or (d)
if by U.S.  Mail, four (4) Business Days after depositing in the
United States mail, with postage prepaid and properly addressed.

     

    
      
        
          	
                  If
      to
      Borrowers:           
      

                	
                  Healthwarehouse.com,
      Inc.

                  100
      Commerce Blvd.

                  Cincinnati,
      OH 45140

                  Attention:  Lalit
      Dhadphale

                  Facsimile:  1-866-821-3784

                

        

         

        
          
             

          

          
            -16-

            
              

            

          

          
             

          

        

         

        	
                If
      to HWH:           
      

              	
                HWH
      Lending LLC

                2200
      Fletcher Ave., 5th Floor

                Fort
      Lee, NJ 07024

              
	 
      	
                Attention:  Gary
      Singer

              
	 
      	
                Facsimile:  (201)
      224-2762

              
	 
      	 
      
	
                If
      to MIL:           
      

              	
                Milfam
      I L.P.

                4550
      Gordon Drive

                Naples,
      FL  34102

              
	 
      	
                Attention:  Lloyd
      I. Miller, III

              
	 
      	
                Facsimile:

              
	 
      	 
      

      

    

     

     

     

     

     

     

     

     

     

     

     

     

    or to
such other address as the party addressed shall have previously designated by
written notice to the serving party, given in accordance with this Section
8.3.

     

    8.4           Survival of Warranties and
Certain Agreements.

     

     (A)           All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery hereof and
thereof.  Such representations and warranties have been or will be
relied upon by Lenders regardless of any investigation made by Lenders or on
their behalf and notwithstanding that Lenders may have had notice or knowledge
of any breach of a representation or warranty, and shall continue in full force
and effect as long as any Obligation shall remain outstanding.

     

     (B)           This
Agreement and the Loan Documents shall remain in full force and effect until
such time as the Obligations have been indefeasibly paid and satisfied in full,
at which time this Agreement shall be terminated.  Notwithstanding the
foregoing, this Agreement and the Loan Documents shall continue to be effective
or be automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Obligations is rescinded or must otherwise be
restored or returned by Lenders as a preference, fraudulent conveyance or
otherwise, all as though such payment had not been made.

     

    8.5           Indulgence Not
Waiver.  No
failure or delay on the part of any Lender in the exercise of any power, right
or privilege shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

     

    8.6           Entire
Agreements.  This
Agreement, the Notes, and the other Loan Documents referred to herein embody the
final, entire agreement among the parties hereto and supersede any and all prior
commitments, agreements, representations, and understandings, whether written or
oral, relating to the subject matter hereof and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.  There are no oral agreements among
the parties hereto.

     

    8.7           Severability.  The
invalidity, illegality or unenforceability in any jurisdiction of any provision
in or obligation under this Agreement or the other Loan Documents shall not
affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement, or the other Loan Documents or
of such provision or obligation in any other jurisdiction.

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

       

    

    8.8           Headings.  Section
and subsection headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.

     

    8.9           APPLICABLE
LAW.  THIS
AGREEMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING
UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED SOLELY AND EXCLUSIVELY IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

     

    8.10         CONSENT TO
JURISDICTION.  EACH
PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SOLE AND EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF
NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE NOTES, THE WARRANTS OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED SOLELY AND EXCLUSIVELY IN SUCH
COURTS.  EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTES, THE WARRANTS, THE OTHER LOAN DOCUMENTS OR THE
OBLIGATIONS.  IF ANY PARTY HERETO PRESENTLY IS, OR IN THE FUTURE
BECOMES, A NONRESIDENT OF THE STATE OF NEW YORK, EACH PARTY HERETO HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO SUCH PERSON, AT SUCH PERSON’S ADDRESS AS SET
FORTH IN SECTION 8.3 HEREOF OR AS MOST RECENTLY NOTIFIED BY SUCH PERSON IN
WRITING PURSUANT TO SECTION 8.3 AND SERVICE SO MADE SHALL BE COMPLETE TEN (10)
DAYS AFTER THE SAME HAS BEEN POSTED AS AFORESAID.

     

    8.11         WAIVER OF JURY
TRIAL.  EACH
PARTY HERETO HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE TERM NOTES
OR THE OTHER LOAN DOCUMENTS.  EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE TERM NOTES
AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS.  EACH PARTY HERETO FURTHER WARRANTS
AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

     

    8.12         Construction.  Each
Borrower and each Lender acknowledges that it has had the benefit of legal
counsel of its own choice and has been afforded an opportunity to review this
Agreement and the other Loan Documents with its legal counsel and that this
Agreement and the other Loan Documents shall be construed as if jointly drafted
by Borrowers and Lenders.

     

    8.13         Counterparts;
Effectiveness.  This
Agreement and any amendments, waivers, consents, or supplements may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one and
the same instrument.  This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties
hereto.  Delivery of an executed counterpart of a signature page to
this Agreement, any amendments, waivers, consents or supplements, or to any
other Loan Document by facsimile or email shall be as effective as delivery of a
manually executed counterpart thereof.

     

    8.14         Confidentiality.  For
the purposes of this Section 8.14, “Confidential
Information” means all financial and other information delivered to
Lenders by or on behalf of Borrowers in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is proprietary in
nature or that is clearly marked or labeled (or otherwise adequately identified)
as being confidential information of any Borrower, provided, that such
term does not include information that (a) was publicly known prior to the time
of such disclosure, (b) subsequently becomes publicly known through no act
or omission by any Lender or any Person acting on its behalf, (c) otherwise
becomes publicly known other than through disclosure by any Borrower, or (d)
constitutes financial statements delivered hereunder that are otherwise publicly
available.  Lenders will maintain the confidentiality of such
Confidential Information in accordance with commercially reasonable procedures
adopted by Lenders in good faith to protect confidential information of third
parties delivered to them; provided, that a Lender may deliver or disclose
Confidential Information to:

     

    (i)           its
directors, officers, employees, agents, attorneys and affiliates, to the extent
such disclosure reasonably relates to the administration of the Loan, and
further provided that each such recipient of Confidential Information agrees in
writing provided to any Borrower, to keep such information
confidential;

     

    (ii)
         its financial advisors and
other professional advisors who are advised to hold confidential the
Confidential Information; or

     

    (iii)        any
other Person (including auditors and other regulatory officials) to which such
delivery or disclosure may be necessary or appropriate (A) to comply with any
applicable law, rule, regulation or order, (B) in response to any subpoena,
examination, or other legal process, (C) in connection with any litigation to
which Lender is a party.

     

    8.15         Time of
Essence.  Time
is of the essence for the performance of all Obligations set forth in this
Agreement.

     

    [This
space intentionally left blank – signature page follows.]

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    

    Witness
the due execution hereof by the respective duly authorized officers of the
undersigned as of the date first written above.

    

    
      
        
          	
                  HWH:

                	
                  HWH
      Lending LLC

                
	 
      	 
      
	 
      	
                  By:     
      

                	
                  /s/
      Gary Singer

                
	 
      	
                  Name:  Gary
      Singer

                  Title:  President

                
	 
      	 
      
	
                  MIL:

                	
                  Milfam
      I, L.P.

                
	 
      	 
      
	 
      	
                  By:  Milfam
      LLC

                
	 
      	
                  its
      General Partner

                
	 
      	 
      
	 
      	
                  By:     
      

                	
                  /s/
      Lloyd I. Miller, III

                
	 
      	
                  Name:  Lloyd
      I. Miller, III

                  Title:  Manager

                
	 
      	 
      
	
                  PARENT:

                	
                  Healthwarehouse.com,
      Inc.

                
	 
      	 
      
	 
      	
                  By:     
      

                	
                  /s/
      Lalit Dhadphale

                
	 
      	
                  Name:  Lalit
      Dhadphale

                  Title:  President
      & CEO

                
	 
      	 
      
	
                  SUBSIDIARY:

                	
                  HWAREH.com,
      Inc.

                
	 
      	 
      
	 
      	
                  By:     
      

                	
                  /s/ Lalit Dhadphale

                
	 
      	
                  Name:  Lalit
      Dhadphale

                  Title:  President
      & CEO

                

        

      

    

     

    
      Signature
Page to Loan and Security Agreement

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